Deputy Commissioner of Income tax, Circle-11(2), Bangalore V. M/s Celstream Technolgoies P Ltd, Bangalore

ITA 1344/BANG/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95285 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 31-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Keywords: Capital asset; Business income; Depreciation; Carry forward of business losses; Retrospective amendment; Question of law; Unabsorbed depreciation; Revenue expenditure; Capital expenditure
• Section: 143(3); 80HHC; 10B; 147; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER A ND SHRI G.MANJUNATHA , ACCOUNTANT MEMBER ITA NO S . 1344 & 1345 /BANG/201 4 (ASSESSMENT YEAR: 20 06 - 07 ) A ND ITA NO S . 1346 & 1347/BANG/201 4 (ASSESSMENT Y EAR: 2007 - 08 ) DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 11(2), BANGALORE. APPELLANT VS. M/S.CELSTREAM TECHNOLOGIES PVT. LTD. NO.29A, 2 ND CROSS PHASE I, ELECTRONIC CITY, BANGALORE - 560100. PAN:AABCC3210G RESPONDENT APPELLANT BY: DR. P.K.SRIHARI, ADDL.CIT(DR). RESPONDENT BY: SHRI CHAVALI NARAYAN, CA. DATE OF HEARING : 08/ 1 0/2015. DATE OF PRONOUNCEMENT: 16 / 1 0/2015. O R D E R PER VIJAY PAL RAO, JM : THESE FOUR APPEALS BY THE REVENUE ARE DIRECTED AGAINST THE TWO SEPARATE ORDERS OF THE CIT(A) DATED 25/6/2014 FOR THE ASSESSMENT YEARS 2006 - 07 AND 2007 - 08. THE REVENUE HAS FILED TWO APPEALS EACH FOR THESE TWO ASSESSMENT YEARS. THE APPEALS FOR THE ASSESSMENT YEAR 2006 - 07 IS ARISING FROM THE ORIGINAL ITA NO S . 1344 TO 1347/ BANG/2014 M/S.CELSTREAM TECHNOLOGIES P.LTD. PAGE 2 OF 19 ASSESSMENT ORDER P ASSED U/S 143(3) AS WELL AS THE ASSESSMENT ORDER PASSED BY THE AO IN PURSUANT TO THE ORDER OF THE CIT PASSED U/S 263 WHEREAS FOR THE ASSESSMENT YEAR 2007 - 08, THESE TWO APPEALS ARE ARISING FROM THE ORIGINAL ASSESSMENT PASSED U/S 143(3) AS WELL AS THE RE - ASS ESSMENT ORDER PASSED U/S 147 READ WITH SEC.143(3) OF THE IT ACT,1961. 3. FIRST, WE TAKE UP THE APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2006 - 07 WHEREIN COMMON GROUNDS ARE RAISED BY THE REVENUE. THE GROUNDS RAISED IN ITA NO.1344/BANG/2014 ARISING FROM THE ASSESSMENT ORDER PASSED PURSUANT TO THE REVISION ORDER PASSED BY THE CIT U/S 263 ARE AS UNDER: 1) THE ORDER OF THE CIT (A) IS OPPOSED TO AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2) THE CIT(A) ERRED IN DELETING THE AO TO FOL LOW THE RATIO LAID DOWN BY THE HON'BLE COURT IN THE CASE OF TATA ELXSI LIMITED 349 ITR 98 AND EXCLUDE THE DATA LINK CHARGES OF RS.1,94,39,480/ - FROM THE TOTAL TURNOVER ALSO WHILE COMPUTING THE DEDUCTION U/S IOA OF THE I.T. ACT, WITHOUT APPRECIATING THE FACT THAT THERE IS NO PROV ISION III SECTION 1 OA THAT SUCH EXPENSES SHOULD BE REDUCED FROM THE TOTAL TURNOVER ALSO, AS CLAUSE(IV) OF THE EXPLANATION TO SECTION 10A PROVIDES THAT SUCH EXPENSES ARE TO BE REDUCED ONLY FROM THE EXPORT TURNOVER ALSO. 3) THE CIT(A) ERRED IN NOT APPRECIATIN G THE FACT THAT THE JURISDICTIONAL 1 - UGH COURT'S DECISION IN THE CASE OF TATA ELXSI LIMITED 349 ITR 98 HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND AN APPEAL HAS BEEN FILED BEFORE THE HON'BLE SUPREME COURT. 4) THE CIT(A) ERRED IN DIRECTING THE AO TO FOLLOW TH E RATIO LAID DOWN BY THE HON'BLE COURT IN THE CASE OF YOKOGAWA INDIA LTD. IN 341 ITR 385(KAR) AND ALLOW THE CLAIM OF THE ASSESSEE OF THE DEDUCTION U/S IOA WITHOUT SETTING OFF THE BROUGHT FORWARD BUSINESS LOSS, ITA NO S . 1344 TO 1347/ BANG/2014 M/S.CELSTREAM TECHNOLOGIES P.LTD. PAGE 3 OF 19 WITHOUT APPRECIATING THE FACT THAT THE DECISIO N OF THE KARNATAKA HIGH COURT HAS NOT REACHED FINALITY AS AN SLP HAS BEEN PREFERRED AGAINST THE SAID DECISION. 5) THE CIT(A) ERRED IN DIRECTING THE AO TO ALLOW THE CLAIM OF THE ASSESSEE OF THE DEDUCTION U/S SECTION 1 OA WITHOUT SETTING OFF THE BROUGHT FORWAR D BUSINESS LOSS, RELYING OIL DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF YOKOGAWA INDIA LIMITED WITHOUT APPRECIATING THE FACT THAT THE RELIEF ALLOWED IS A DEDUCTION AND NOT AN EXCLUSION FROM THE TOTAL INCOME WHICH IS ALSO CLARIFIED BY THE BOAR D'S CIRCULAR NO. 7/DV/201 3 AND CONTENTS OF CIRCULAR NO.749 DATED 09.08.2000 AND CIRCULAR NO.7/2003 DATED 05.09.2003. 6) THE CIT(A) ERRED IN HOLDING THAT THE FOREIGN EXCHANGE GAIN IS TO BE CONSIDERED TO BE PART OF THE SALE PROCEEDS AND HENCE SHOULD FROM PART OF THE EXPORT TURNOVER BY PLACING RELIANCE ON THE DECISION OF HON'BLE HIGH COURT OF DELHI IN THE CASE OF M/S. BARCO ELECTRONICS SYSTEMS PVT. LTD. (ITA NO. 125/2012) AND THE DECISION OF ITAT, MUM B AI IN THE CASE OF RENAISSANCE J EWELLERY PVT. LTD., [2006] 10 1 I TD 830, WITHOUT APPRECIATING THE FACT THAT THOUGH THE FOREIGN EXCHANGE GAIN IS ATTRIBUTABLE TO EXPORT PROFITS, IT IS NOT DERIVED FROM THE EXPORT OF COMPUTER SOFTWARE. 7) FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS HUMB LY PRAYED THAT THE ORDER OF THE CIT(A) BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 8) THE APPELLATE CRAVES TO AD, TO ALTER, TO AMEND OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL. 4. GROUND NO.1 IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 5. GROUND NOS.2 AND 3 IS REGARDING EXCLUSION OF DATA LINK CHARGES FROM EXPORT TURNOVER AS WELL AS TOTAL TURNOVER WHILE COMPUTING DEDUCTION U/S 10A. ITA NO S . 1344 TO 1347/ BANG/2014 M/S.CELSTREAM TECHNOLOGIES P.LTD. PAGE 4 OF 19 6. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE AS WELL AS THE LEARNED AR OF THE ASSESSEE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE AO, WHILE COMPUTING DEDUCTION U/S 10A, HAS EXCLUDED DATA LINK CHARGES INCURRED IN FOREIGN CURRENCY OF RS.1,94,39,480/ - FROM THE EXPOR T TURNOVER . ON APPEAL, THE CIT(A) HAS DIRECTED THE AO TO EXCLUDE THE SAID AMOUNT FROM TOTAL TURNOVER ALSO BY FOLLOWING THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF ACIT VS. TATA ELXSI (349 ITR 98). IT IS APPARENT THAT THE ISSUE RAI SED IN THE SE GROUNDS IS NOW COVERED BY THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF TATA ELXSI (SUPRA) WHEREIN THE HON BLE HIGH COURT HAS HELD AS UNDER: FROM THE AFORESAID JUDGMENTS, WHAT EMERGES IS THAT. THERE SHOULD BE UNIFORMITY IN THE INGREDIENTS OF BOTH THE NUMERATOR AND SHE DENOMINATOR OF THE FORMULA, SINCE OTHERWISE IT WOULD PRODUCE ANOMALIES OR ABSURD RESULTS. SEC. 10A IS A BENEFICIAL SECTION. IT IS INTENDED TO PROVIDE INCENTIVES TO PROMOTE EXPORTS. THE INCENTIVE IS TO EXEMP T PROFITS RELATABLE TO EXPORTS. IN THE CASE OF COMBINED BUSINESS OF AN ASSESSEE, HAVING EXPORT BUSINESS AND DOMESTIC BUSINESS, THE LEGISLATURE INTENDED TO HAVE A FORMULA TO ASCERTAIN THE PROFITS FROM EXPORT BUSINESS BY APPORTIONING THE TOTAL PROFITS OF THE BUSINESS ON THE BASIS OF TURNOVERS. APPORTIONMENT OF PROFITS ON THE BASIS OF TURNOVER WAS ACCEPTED AS A METHOD OF ARRIVING AT EXPORT PROFITS. IN THE CASE OF S. 80HHC, THE EXPORT PROFIT IS TO BE DERIVED FROM THE TOTAL BUSINESS INCOME OF THE ASSESSEE, WHERE AS IN S. 10A, THE EXPORT PROFIT IS TO BE DERIVED FROM THE TOTAL BUSINESS OF THE UNDERTAKING. EVEN IN THE CASE OF BUSINESS OF AN UNDERTAKING, IT MAY INCLUDE EXPORT BUSINESS AND DOMESTIC BUSINESS, IN OTHER WORDS, EXPORT TURNOVER AND DOMESTIC TURNOVER. THE EX PORT TURNOVER WOULD BE A COMPONENT, OR PART OF A DENOMINATOR, THE OTHER COMPONENT BEING THE DOMESTIC TURNOVER. IN OTHER WORDS, TO THE EXTENT OF EXPORT TURNOVER, THERE WOULD BE A COMMONALITY BETWEEN THE NUMERATOR AND THE DENOMINATOR OF THE FORMULA. IN VIEW OF THE COMMONALITY, THE UNDERSTANDING SHOULD ALSO BE THE SAME. IN OTHER WORDS, IF THE EXPORT TURNOVER IN THE NUMERATOR IS TO BE ARRIVED AT AFTER EXCLUDING CERTAIN EXPENSES, THE SAME SHOULD ALSO BE EXCLUDED IN COMPUTING THE EXPORT TURNOVER AS A COMPONENT OF TOTAL TURNOVER IN THE DENOMINATOR. THE REASON ITA NO S . 1344 TO 1347/ BANG/2014 M/S.CELSTREAM TECHNOLOGIES P.LTD. PAGE 5 OF 19 BEING THE TOTAL TURNOVER INCLUDES EXPORT TURNOVER. THE COMPONENTS OF THE EXPORT TURNOVER IN THE NUMERATOR AND THE DENOMINATOR CANNOT BE DIFFERENT. THEREFORE, THOUGH THERE IS NO DEFINITION OF THE TERM TOTAL T URNOVER IN S. 10A, THERE IS NOTHING IN THE SAID SECTION TO MANDATE THAT, WHAT IS EXCLUDED FROM THE NUMERATOR THAT IS EXPORT TURNOVER WOULD NEVERTHELESS FORM PART OF THE DENOMINATOR. THOUGH WHEN A PARTICULAR WORD IS NOT DEFINED BY THE LEGISLATURE AND AN OR DINARY MEANING IS TO BE ATTRIBUTED TO THE SAME, THE SAID ORDINARY MEANING TO BE ATTRIBUTED TO SUCH WORD IS TO BE IN CONFORMITY WITH THE CONTEXT IN WHICH IT IS USED. WHEN THE STATUTE PRESCRIBES A FORMULA AND IN THE SAID FORMULA, EXPORT TURNOVER IS DEFINED , AND WHEN THE TOTAL TURNOVER INCLUDES EXPORT TURNOVER, THE VERY SAME MEANING GIVEN TO THE EXPORT TURNOVER BY THE LEGISLATURE IS TO BE ADOPTED WHILE UNDERSTANDING THE MEANING OF THE TOTAL TURNOVER, WHEN THE TOTAL TURNOVER INCLUDES EXPORT TURNOVER. IF WHA T IS EXCLUDED IN COMPUTING THE EXPORT TURNOVER IS INCLUDED WHILE ARRIVING AT THE TOTAL TURNOVER, WHEN THE EXPORT TURNOVER IS A COMPONENT OF TOTAL TURNOVER, SUCH AN INTERPRETATION WOULD RUN COUNTER TO THE LEGISLATIVE INTENT AND IMPERMISSIBLE. IF THAT WERE THE INTENTION OF THE LEGISLATURE, THEY WOULD HAVE EXPRESSLY STATED SO. IF THEY HAVE NOT CHOSEN TO EXPRESSLY DEFINE WHAT THE TOTAL TURNOVER MEANS THEN, WHEN THE TOTAL TURNOVER INCLUDES EXPORT TURNOVER, THE MEANING ASSIGNED BY THE LEGISLATURE TO THE EXPORT T URNOVER IS TO BE RESPECTED AND GIVEN EFFECT TO, WHILE INTERPRETING THE TOTAL TURNOVER WHICH IS INCLUSIVE OF THE EXPORT TURNOVER. THEREFORE, THE FORMULA FOR COMPUTATION OF THE DEDUCTION UNDER S. 10A, WOULD BE AS UNDER : PROFITS OF THE BUSINESS OF THE UNDERT AKING X EXPORT TURNOVER (EXPORT TURNOVER + DOMESTIC TURNOVER) TOTAL TURNOVER 11. IN THAT VIEW OF THE MATTER, WE DO NOT SEE ANY ERROR COMMITTED BY THE TRIBUNAL IN FOLLOWING THE JUDGMENTS RENDERED IN THE CONTEXT OF S. 80HHC IN INTERPRETING S. 10A W HEN THE PRINCIPLE UNDERLYING BOTH THESE PROVISIONS IS ONE AND THE SAME. THEREFORE, WE DO NOT SEE ANY MERIT IN THESE APPEALS. THE SUBSTANTIAL QUESTION OF LAW FRAMED IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. FOLLOWING THE JUDGMENT OF T HE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF TATA ELXSI (SUPRA), WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE DIRECTIONS OF THE CIT(A) QUA THIS ISSUE.. 7. GROUND NOS.4 & 5 ARE REGARDING COMPUTING DEDUCTION U/S 10A WITHOUT SETTING OFF THE BROUG HT FORWARD LOSS. THE AO, WHILE ITA NO S . 1344 TO 1347/ BANG/2014 M/S.CELSTREAM TECHNOLOGIES P.LTD. PAGE 6 OF 19 COMPLETING THE ASSESSMENT HELD THAT THE LOSS OF 10A UNIT WAS NOT ELIGIBLE TO BE CARRIED FORWARD INITIALLY AND AFTER THE AMENDMENT VIDE FINANCE ACT, 2001 THE LOSS OF 10A UNIT IS NOW ELIGIBLE TO BE CARRIED FORWARD AND SET OFF A GAINST PROFIT OF THE SUBSEQUENT YEAR. THEREFORE, THE AO SET OFF THE BROUGHT FORWARD LOSSES WHILE ALLOWING THE CLAIM OF DEDUCTION U/S 10A BY FOLLOWING THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF HIMATSINGIKE SEIDE LTD. VS. CIT (286 ITR 255). 7.1 ON APPEAL, THE CIT(A) DIRECTED THE AO TO ALLOW DEDUCTION U/S 10A WITHOUT SETTING OFF THE BROUGHT FORWARD LOSS OF THE EARLIER YEAR BY FOLLOWING THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. YOKOGAWA INDIA LTD. (341 ITR 385). 7.2 THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT THE AO HAS FOLLOWED THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF HIMATSINGIKE SEIDE LTD. (SUPRA), T HEREFORE, THE ISSUE IS COVERED BY THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT. HE SUBMITTED THAT THOUGH THERE IS A SUBSEQUENT JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF YOKOGAWA INDIA LTD. (SUPRA), HOWEVER THE EARLIER JUDGMENT IN THE CASE OF HIMATSINGIKE SEIDE LTD. (SUP RA) WAS NEITHER BROUGHT TO THE NOTICE OF THE HON BLE HIGH COURT NOR IT WAS CONSIDERED. HE HAS RELIED UPON THE ORDERS OF THE AO. ITA NO S . 1344 TO 1347/ BANG/2014 M/S.CELSTREAM TECHNOLOGIES P.LTD. PAGE 7 OF 19 7.3 ON THE OTHER HAND, LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT THE ISSUE IS COVERED BY THE SUBSEQUENT JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF YOKOGAWA INDIA LTD. (SUPRA) WHEREIN THE HON BLE HIGH COURT HAS DECIDED THE ISSUE BY CONSIDERING THE PROVISIONS OF SEC.10A AFTER AMENDMENT VIDE FINANCE ACT, 2002 AS WELL AS 2003 WITH RETROSPECTIVE EFFECT FR OM 1/4/2001. THEREFORE, WHEN THERE IS A SUBSEQUENT CHANGE IN THE PROVISIONS OF SEC.10A, THEN THE DECISION WHICH IS BASED ON THE POST AMENDMENT PROVISION IS APPLICABLE IN THE CASE OF THE ASSESSEE. HE HAS SUPPORTED THE ORDER OF THE CIT(A). 7.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THERE IS A JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF HIMATSINGIKE SEIDE LTD. (SUPRA) WHEREIN THIS ISSUE WAS DECIDED IN FAVOUR OF THE REV ENUE. HOWEVER, IT IS PERTINENT TO NOTE THAT THE SAID JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT WAS IN RESPECT OF THE ASSESSMENT YEAR 1994 - 95 WHEREIN UNABSORBED DEPRECIATION AVAILABLE TO THE ASSESSEE WAS PERTAINING TO ASSESSMENT YEAR 1988 - 89 AND CA RRIED FORWARD TO THE YEAR IN QUESTION. THUS THE SAID JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IS BASED ON THE PRE - AMENDED PROVISIONS OF SEC.10A WHEREAS THERE IS A SUBSTANTIAL CHANGE IN THE PROVISIONS OF SEC.10A AN D 10B OF T HE ACT T HEREBY THE NATU RE OF INCENTIVE HAS UNDERGONE A CHANGE FROM EXEMPTION TO DEDUCTION. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE SUBSEQUENT JUDGMENT IN THE CASE OF YOKOGAWA ITA NO S . 1344 TO 1347/ BANG/2014 M/S.CELSTREAM TECHNOLOGIES P.LTD. PAGE 8 OF 19 INDIA LTD. (SUPRA) HAVE DISCUSSED THE AMENDMENT BROUGHT TO THE PROVISIONS OF SECTIONS 10A AND 10B AND THEN DECIDED THE ISSUE IN PARAS.21 TO 23 AND 31 AS UNDER: 21. IT IS IN THIS BACKGROUND THE FINANCE ACT, 2003 WAS INTRODUCED BY INSERTING THE WORDS 'THE YEAR ENDING UPTO THE FIRST DAY OF APRIL, 2001', FOR THAT IN CLS. (1) AND (2) OF SUB - S. (6) RESTRICT ING THE DISALLOWANCE ONLY UPTO THE FIRST DAY OF APRIL, 2001 AND GRANTING THE BENEFIT, OF THOSE PROVISIONS EVEN IN RESPECT OF UNITS TO WHICH SS. 10A AND 10B ARE APPLICABLE. THE FINANCE ACT, 2003, AMENDED THIS SUB - SECTION WITH RETROSPECTIVE EFFECT FROM 1ST A PRIL, 2001 BY LIFTING THE EMBARGO IN THE AFORESAID CLAUSES IN RESPECT OF DEPRECIATION AND BUSINESS LOSS RELATING TO THE ASST. YR. 2001 - 02 ONWARDS. THE AMENDMENT INDICATES THE LEGISLATIVE INTENTION OF PROVIDING THE BENEFIT OF CARRY FORWARD OF DEPRECIATION A ND BUSINESS LOSS RELATING TO ANY YEAR OF THE TAX HOLIDAY PERIOD TO BE SET OFF AGAINST INCOME OF ANY YEAR POST TAX HOLIDAY. THIS IS SUPPORTED BY CIRCULAR NO. 7 OF 2003 [(2003) 184 CTR (ST) 33] WHEREIN THE BOARD HAS STATED THAT THE PURPOSE OF AMENDMENT IS TO ENTITLE AN ASSESSEE TO THE BENEFIT OF CARRY FORWARD OF DEPRECIATION AND LOSS SUFFERED DURING THE TAX HOLIDAY PERIOD. THE CIRCULAR DT. 5TH SEPT., 2003 READS AS UNDER : '20. PROVIDING FOR CARRY FORWARD OF BUSINESS LOSSES AND UNABSORBED DEPRECIATION TO UNITS IN SPECIAL ECONOMIC ZONES AND 100 PER CENT EXPORT ORIENTED UNITS. 20.1 UNDER THE EXISTING PROVISIONS OF SS. 10A AND 10B, THE UNDERTAKINGS OPERATING IN A SPECIAL ECONOMIC ZONE (UNDER S. 10A) AND 100 PER CENT EXPORT ORIENTED UNITS (UNDER S. 10B) ARE NOT PER MITTED TO CARRY FORWARD THEIR BUSINESS LOSSES AND UNABSORBED DEPRECIATION. 20.2 WITH A VIEW TO RATIONALIZE THE EXISTING TAX INCENTIVES IN RESPECT OF SUCH UNITS SUB - S. (6) IN SS. 10A AND 10B HAS BEEN AMENDED TO DO AWAY WITH THE RESTRICTIONS ON THE CARRY FOR WARD OF BUSINESS LOSSES AND UNABSORBED DEPRECIATION. THE AMENDMENTS HAVE BEEN BROUGHT INTO EFFECT RETROSPECTIVELY FROM 1ST APRIL, 2001 AND HAVE BEEN ITA NO S . 1344 TO 1347/ BANG/2014 M/S.CELSTREAM TECHNOLOGIES P.LTD. PAGE 9 OF 19 MADE APPLICABLE TO BUSINESS LOSSES OR UNABSORBED DEPRECIATION ARISING IN THE ASST. YR. 2001 - 02 AND SUBSEQUE NT YEARS.' 22. IT IS INTERESTING TO NOTE THAT SUCH RELAXATION HAS NOT BEEN MADE IN S. 10C WHICH PROVIDES FOR EXEMPTION IN RESPECT OF PROFITS OF CERTAIN UNDERTAKINGS IN NORTH EASTERN REGION. THIS MAKES CLEAR THE LEGISLATIVE INTENTION OF PROVIDING RELAXATION WHEREVER IT DEEMS FIT AND IN THE PRESENT CASE, SUCH RELAXATION HAS BEEN MADE IN S. 10A BUT NOT IN S. 10C. 23. IT IS TO BE NOTED THAT THE AFORESAID AMENDMENT READ WITH THE BOARD CIRCULAR DOES NOT MILITATE AGAINST THE PROPOSITION THAT THE BENEFIT OF RELIEF UNDER THIS SECTION IS IN THE NATURE OF EXEMPTION WITH REFERENCE TO THE COMMERCIAL PROFITS. HOWEVER, IN ORDER TO GIVE EFFECT TO THE LEGISLATIVE INTENTION OF ALLOWING THE CARRY FORWARD OF DEPRECIATION AND LOSS SUFFERED IN RESPECT OF ANY YEAR DURING THE TAX H OLIDAY FOR BEING SET OFF AGAINST INCOME POST TAX HOLIDAY, IT IS NECESSARY THAT THE NOTIONAL COMPUTATION OF BUSINESS INCOME AND THE DEPRECIATION AS PER THE PROVISIONS OF THE ACT SHOULD BE MADE FOR EACH YEAR OF THE TAX HOLIDAY PERIOD. WHILE SO COMPUTING, ATT ENTION WILL HAVE TO BE GIVEN TO PROVISIONS OF SS. 70, 71, 72 AND S. 32(2). THE AMOUNT OF DEPRECIATION AND BUSINESS LOSS REMAINING UNABSORBED AT THE END OF THE TAX HOLIDAY PERIOD SHOULD BE DETERMINED SO THAT THE SAME MAY BE SET OFF AGAINST THE INCOME POST T AX HOLIDAY PERIOD. 31. AS THE INCOME OF 10A UNIT HAS TO BE EXCLUDED AT SOURCE ITSELF BEFORE ARRIVING AT THE GROSS TOTAL INCOME, THE LOSS OF NON 10A UNIT CANNOT BE SET OFF AGAINST THE INCOME OF 10A UNIT UNDER S. 72. THE L OSS INCURRED BY THE ASSESSEE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION HAS TO BE SET OFF AGAINST THE PROFITS AND GAINS IF ANY, OF ANY BUSINESS OR PROFESSION CARRIED ON BY SUCH ASSESSEE. THEREFORE, AS THE PROFITS AND GAINS UNDER S. 10A ARE NOT TO BE INCLUDED IN THE INCOME OF THE ASSESSEE AT ALL, THE QUESTION OF SETTING OFF THE LOSS OF THE ASSESSEE OF ANY PROFITS AND GAINS OF BUSINESS AGAINST SUCH PROFITS AND GAINS OF THE UNDERTAKING WOULD NOT ARISE. SIMILARLY, AS PER S. 72(2), UNABSORBED BUS INESS LOSS IS TO BE FIRST SET OFF AND THEREAFTER UNABSORBED DEPRECIATION TREATED AS CURRENT YEAR S DEPRECIATION UNDER S. 32(2) IS TO BE SET OFF. AS DEDUCTION UNDER S. 10A HAS TO BE EXCLUDED FROM ITA NO S . 1344 TO 1347/ BANG/2014 M/S.CELSTREAM TECHNOLOGIES P.LTD. PAGE 10 OF 19 THE TOTAL INCOME OF THE ASSESSEE, THE QUESTION OF UNABSORBED BUSINESS LOSS BEING SET OFF AGAINST SUCH PROFITS AND GAINS OF THE UNDERTAKING WOULD NOT ARISE. IN THAT VIEW OF THE MATTER, THE APPROACH OF THE ASSESSING AUTHORITY WAS QUITE CONTRARY TO THE AFORESAID STATUTORY PROVISIONS AND THE CIT(A) AS WELL AS THE TRIBUN AL WERE FULLY JUSTIFIED IN SETTING ASIDE THE SAID ASSESSMENT ORDER AND GRANTING THE BENEFIT OF S. 10A TO THE ASSESSEE. HENCE, THE MAIN SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR OF THE ASSESSEES AND AGAINST THE REVENUE. THUS AS IT IS CLEAR FROM THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF YOKOGAWA INDIA LTD. (SUPRA) THAT THE ISSUE HAS BEEN DECIDED BY ANALYSING THE POST AMENDED PROVISIONS OF SECTIONS 10A AND 10B . T HEREFORE, THE SUBSEQUENT DECISION WHICH IS BASED ON THE POST A MENDED PROVISIONS IS APPLICABLE FO R THE YEAR UNDER CONSIDERATION A S A BINDING PRECEDENT. ACCORDINGLY, BY FOLLOWING THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF YOKOGAWA INDIA LTD. (SUPRA), WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE CIT(A) QUA THIS ISSUE. 8. GROUND NO.6 IS REGARDING FOREIGN EXCHANGE GAIN TO BE CONSIDERED AS PART OF THE SALE PROCEEDS FOR THE PURPOSE OF ALLOWING DEDUCTION U/S 10A. IN THE ORIGINAL ASSESSMENT PASSED U/S 143(3) DATED 29/12/2009, THE AO ALLOWED THE CLAIM OF THE ASSESSEE U/S 10 A IN RESPECT OF FOREIGN EXCHANGE GAIN. HOWEVER, SUBSEQUENTLY, THE CIT HAS INVOKED THE PROVISIONS OF SEC.263 AND PASSED THE REVISION ORDER DATED 29/3/2012 WHEREBY SET ASIDE THE ASSESSMENT ORDER ALLOWING THE CLAIM OF DEDUCTION U/S 10A WITHOUT EXAMINING WHETHER THE FOREIGN EXCHANGE GAIN DERIVED BY THE ITA NO S . 1344 TO 1347/ BANG/2014 M/S.CELSTREAM TECHNOLOGIES P.LTD. PAGE 11 OF 19 ASSESSEE IS PART OF PROFIT AND GAIN DERIVED FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE AS PER PROVISIONS OF SEC.10A. ACCORDINGLY, THE CIT DIRECTED THE AO TO MAKE A FRESH ASSESSMENT CONSIDERING ALL THE ISSUES DISCUSSED IN THE REVISION ORDER AND THE PROVISIONS OF SEC.10A OF THE ACT WITH REGARD TO THE COMPUTATION OF CORRECT PROFIT OF THE ASSESSEE FOR THE PURPOSE OF DEDUCTION U/S 10A. IN THE ORDER PASSED PURSUANT TO 263 ORDER, THE AO EXCLUDED FOREIGN EXCHANGE GAIN FROM THE PROFITS ELIGIBLE FOR DEDUCTION U/S 10A. 8.1 ON APPEAL, THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY RECORDING THE FACT THAT FOREIGN EXCHANGE GAIN EARNED BY THE ASSESSEE WAS ON ACCOUNT OF EXPORT OF COMPUTER SOFTWARE AND THEREFORE, THE SAME HAS TO BE TREATED AS BUSINESS INCOME. THE CIT(A) HAS FOLLOWED THE DECISION OF THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF HSBC ELECTRONICS DATA PROCESSING INDIA LTD. VS. DCIT IN ITA NO.1623 & 1 677/HYD/2010 AS WELL AS INFOTECH ENTERPRISES LTD. VS. ADDL.CIT & ANR (63 SOT 23). 8.2 WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE AS WELL AS THE LEARNED AR OF THE ASSESSEE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. SO FAR AS THE FACT RECORDED BY THE CIT(A) THAT FOREIGN EXCHANGE GAIN WAS ON ACCOUNT OF FOREIGN EXCHANGE RECEIVED BY THE ASSESSEE FROM EXPORT OF COMPUTER SOFTWARE IS CONCERNED, THE REVENUE HAS NOT DISPUTED THE SAME AND THEREFORE, IT IS CLEAR THAT FOREIGN EXCHANGE GAIN EARNED BY THE ITA NO S . 1344 TO 1347/ BANG/2014 M/S.CELSTREAM TECHNOLOGIES P.LTD. PAGE 12 OF 19 ASSESSEE WAS PART OF THE EXPORT TURNOVER. THE LEARNED AR OF THE ASSESSEE HAS RELIED UPON THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF RENAISSANCE JEWELLERY PVT. LTD. VS. ITO (101 ITD 830) AS WELL AS THE JUDGMENT OF THE HON BLE D ELHI HIGH COURT IN THE CASE OF BARCO ELECTRONICS SYSTEMS PVT. LTD . IN ITA 125/2012 APART FROM THE DECISIONS RELIED UPON BEFORE THE CIT(A). THUS, THE LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. 8.3 O N THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTATIVE HAS RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT FOREIGN EXCHANGE GAIN EARNED BY THE ASSESSEE CANNOT BE CONSIDERED AS PROFIT AND GAIN FROM EXPORT OF GOODS OR THINGS BUT IT IS ONLY BECAUSE OF FLUCT UATION IN THE RATE OF FOREIGN EXCHANGE GAIN. WE FIND THAT WHEN THE FOREIGN EXCHANGE GAIN IS EARNED IN RESPECT OF EXPORT OF COMPUTER SOFTWARE THEN IT CANNOT PAR TAKE THE CHARACTER OTHER THAN EXPORT TURNOVER OF THE ASSESSEE. THE CIT(A) HAS ALLOWED THE CLAI M OF THE ASSESSEE BY FOLLOWING THE JUDGMENT OF THE HON BLE DELHI HIGH COURT IN THE CASE OF BARCO ELECTRONICS SYSTEMS PVT. LTD . (SUPRA) AS WELL AS VARIOUS DECISIONS OF THIS TRIBUNAL, IN PARAS. 6.3 AND 6.4 AS UNDER: 6.3 I HAVE CONSIDERED THE APPELLANT'S SUBMISSION. AS MENTIONED ABOVE THAT THE APPELLANT COMPANY IS CARRYING ON THE BUSINESS OF DEVELOPMENT AND EXPORT OF COMPUTER SOFTWARE; THE APPELLANT COMPANY HAS TWO SEPARATE UNDERTAKING STPI AND NON STPI UNDERTAKING OPERATING FROM DIFFERENT PLACES. THE STP I UNIT IS SITUATED AT NO. 9 PRESTIGE BLUE - CHIP BLOCK - II, HOSUR ROAD, BANGALORE - 29 AND THIS UNDERTAKING IS ENGAGED IN THE BUSINESS OF ITA NO S . 1344 TO 1347/ BANG/2014 M/S.CELSTREAM TECHNOLOGIES P.LTD. PAGE 13 OF 19 DEVELOPMENT AND EXPORT OF COMPUTER SOFTWARE. THE NON STPI UNDERTAKING SITUATED AT NO. 35& 36 K.NO. 299/256, 1ST FLOOR, N. S. PALYA, BEGUR HOBLI, BANGALORE - 56 AND SAID UNDERTAKING CATERING TO THE DOMESTIC CUSTOMERS. THE APPELLANT SUBMITTED THAT IT HAD RAISED INVOICES IN FOREIGN EXCHANGE FOR THE EXPORTS WHICH WERE RECORDED IN THE BOOKS OF ACCOUNT IN INDIAN RUPEES BY APPLYING TH E CONVERSION RATE APPLICABLE IN THE DATE WHEN THE INVOICES WERE ISSUED EARLIER ON PAYMENTS WERE RECEIVED. THE DIFFERENCE IN EXCHANGE RATE IN THE DATE WHEN THE INVOICE WAS ISSUED AND WHEN THE PAYMENT WAS RECEIVED MADE ADJUSTMENT ENTRIES. THE SAID LOSS/GAIN WAS DULY RECORDED IN THE BOOKS OF ACCOUNT SUCH EXCHANGE GAIN FORMS PART OF EXPORT TURN OVER OF THE APPELLANT. THE RELIANCE IS PLACED ON THE DECISION OF THE HON'BLE HIGH COURT OF DELHI. IN THE CASE OF CIT VS. BARCO ELECTRONICS SYSTEMS PVT. LTD. IN ITA NO. 1 25/2012 AND HON'BLE ITAT MUMBAI IN RENAISSANCE JEWELLERY PVT.; LTD. VS. ITO (2006 101 ITD 830 (MUMBAI - ITAT) WHEREIN IT WAS HELD THAT, THE PROFIT ON ACCOUNT OF FOREIGN EXCHANGE GAIN IS DIRECTLY REFERABLE TO THE ARTICLES AND THINGS EXPORTED BY THE ASSESSEE. SUCH PROFITS ARE, THEREFORE, IN THE SAME AS THE SALE PROCEEDS AND THERE IS NO REASON WHY, DEDUCTION U/S 10A SHOULD NOT BE ALLOWED IN RESPECT OF SUCH EXCHANGE GAIN. THERE IS FORCE IN THE APPELLANT'S SUBMISSION. THE APPELLANT HAS STPI UNDERTAKING ENGAGED THE BUSINESS OF DEVELOPMENT AND EXPORT OF COMPUTER SOFTWARE. SINCE FOREIGN EXCHANGE GAIN WAS ON ACCOUNT OF FLUCTUATIONS OF THE FOREIGN EXCHANGE RECEIVED. FOR DEVELOPMENT AND EXPORT OF COMPUTER SOFTWARE BY THE APPELLANT, THIS HAD TO BE TREATED AS BUSINESS INCO ME AND IT HAD TO BE CONSIDERED AS PROFIT OF THE BUSINESS FOR COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE ACT AS HELD IN THE CASE OF HSBC ELECTRONICS DATA PROCESSING INDIA LTD. VS. DCIT ITA NO.1623 & 1677(HYD) OF 2010 AND INFOTECH ENTERPRISES LTD. VS. ADDL. CIT & ANR (2014) 63 SOT 23 (HYD - 'A' TRIB). 6.4 IN VIEW OF THE FACTS AND AS PER JUDICIAL RULING THE - FOREIGN EXCHANGE GAIN CONSIDERED TO THE PART OF THE SALE PROCEEDS PROCEEDS AND HENCE FORM PART OF THE EXPORT TURNOVER. THEREFORE, APPEAL IN THIS G ROUND IS ALLOWED. NO CONTRARY DECISION HAS BEEN BROUGHT BEFORE US. THEREFORE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE CIT(A) QUA THIS ISSUE. ITA NO S . 1344 TO 1347/ BANG/2014 M/S.CELSTREAM TECHNOLOGIES P.LTD. PAGE 14 OF 19 9. FOR THE ASSESSMENT YEAR 2007 - 08, THE REVENUE HAS RAISED THE COMMON GROUNDS AS UNDER: 1. THE ORDER OF THE CIT (A) IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE CIT(A) ERRED IN DELETING THE AO TO FOLLOW THE RATIO LAID DOWN BY THE HON'BLE COURT IN THE CASE OF TATA EIXSI LIMITED 349 ITR 98 AND EXCLUDE THE DATA LINK CHARGES INCURRED IN FOREIGN CURRENCY FROM THE TOTAL TURNOVER ALSO WHILE COMPUTING THE DEDUCTION U/S 10A OF THE I.T. ACT, WITHOUT APPRECIATING THE FACT THAT THERE IS NO PROVISION IN SECTION IOA THAT SUCH EXPENSES SHOULD BE REDUCED FROM THE TOTAL TURNOVER ALSO, AS C LAUSE(IV) OF THE EXPLANATION TO SECTION IOA PROVIDES THAT SUCH EXPENSES ARE TO BE REDUCED ONLY FROM THE EXPORT TURNOVER ALSO. 3. THE CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE JURISDICTIONAL HIGH COURT'S DECISION IN THE CASE OF TATA ELXSI LIMITED 349 ITR 98 HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND AN APPEAL HAS BEEN FILED BEFORE THE HON'BLE SUPREME COURT. 4. THE CIT(A) ERRED IN HOLDING THAT RS.3,84,000/ - IS A REVENUE EXPENDITURE ON THE GROUND THAT THE SUM WAS PAID FOR SERVICES RENDERED AND NOT FOR ACQU IRING THE TRADE MARK WITHOUT APPRECIATING THE FACT THAT THE AMOUNTS WERE PAID TOWARDS REGISTRATION OF THE CEISTREAM LOGO AND TAGLINE WITH THE REGISTRAR OF TRADE MARK AND THE RIGHT ACQUIRED TOWARDS TRADE MARK HAS PROTECTED THE INTEREST THROUGHOUT THE WORLD AND THUS THE EXPENDITURE INCURRED IS CAPITAL IN NATURE. 5. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS HUMBLY PRAYED THAT THE ORDER OF THE CIT(A) BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 6. THE APPELLATE CRA VES TO ADD, TO ALTER, TO AMEND OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL. ITA NO S . 1344 TO 1347/ BANG/2014 M/S.CELSTREAM TECHNOLOGIES P.LTD. PAGE 15 OF 19 10. GROUND NO.1 IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 11. GROUND NOS.2 & 3 ARE IN RESPECT OF EXC LUSION OF DATA LINK CHARGES INCURRED IN FOREIGN CURRENCY FROM EXPORT TURNOVER AS WELL AS TOTAL TURNOVER. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE AS WELL AS THE LEARNED AR OF THE ASSESSEE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THESE GROUNDS ARE COMMON TO GROUND NOS.2 AND 3 FOR ASSESSMENT YEAR 2006 - 07. IN VIEW OF OUR FINDING ON THIS ISSUE FOR THE ASSESSMENT YEAR 2006 - 07, GROUND NOS .2 & 3 OF THE REVENUE S APPEAL ARE DISMISSED. 12. GROUND NO.4 IS REGARDING DISALLOWANCE OF RS.3,84,00 0/ - PAID FOR REGISTRATION OF TRADE MARK BY TR EATING THE SAME AS CAPITAL IN NATURE. THE AO HAS DISALLOWED THE CLAIM OF RS.3,84,000/ - ON THE GROUND THAT THE SAID EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE FOR REGISTRATION OF THE TRADE MARK AND THEREFORE, THE SAME I S CAPITAL IN NATURE. 12.1 ON APPEAL, THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE BY HOLDING THAT THE EXPENDITURE INCURRED BY THE ASSESSEE FOR REGISTRATION OF TRADE MARK IS REVENUE EXPENDITURE . THE CIT(A) HAS FOLLOWED THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. FINLAY MILLS LTD. (20 ITR 475). ITA NO S . 1344 TO 1347/ BANG/2014 M/S.CELSTREAM TECHNOLOGIES P.LTD. PAGE 16 OF 19 12.2 BEFORE US, LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT THE EXPENDITURE IN QUESTION WAS INCURRED BY THE ASSESSEE FOR INITIAL REGISTRATION OF THE TRADE MARK AND THEREFORE, THE SAME IS IN THE NATURE OF COST OF THE TRADE MARK WHICH IS A CAPITAL ASSET OF THE ASSESSEE. HENCE , THE SAID EXPENDITURE IS CAPITAL IN NATURE AND CANNOT BE ALLOWED AS REVENUE EXPENDITURE. HE FURTHER CONTENDED THAT ONLY THE EXPENDITURE FOR RENEWAL OF TRADE MARK CAN BE ALLOWED AS REVENUE EXPENDITURE AND THESE TWO EXPENDITURE - ONE IS INCURRED FOR INITIAL REGISTRATION OF THE TRADE MARK AND ANOTHER FOR RENEWAL OF TRADE MARK REGISTRATION CANNOT BE TREATED ON PARITY. HE HAS RELIED UPON THE ORDER S OF THE AO. 12.3 ON THE OTHER HAND, THE LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT IT IS NOT THE EXPENDITURE INCURRED FOR ACQUIRING ANY TRADE MARK BUT IT WAS EXPENDITURE ON ACCOUNT OF REGISTRATION OF THE ASSESSEE S OWN TRADE MARK . T HEREFORE, THE SAI D EXPENDITURE IS ONLY TO PROTECT THE OWNERSHIP OF THE TRADE MARK WHICH IS ALLOWABLE AS REVENUE EXPENDITURE. HE HAS RELIED UPON THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF FINLAY MILLS LTD. (SUPRA). 12.4 WE HAVE CONSIDERED THE RIVAL SUBMISS IONS AS WELL AS RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE ON THE FACT THAT THE EXPENDITURE OF RS.3,84,000/ - HAS BEEN INCURRED BY THE ASSESSEE FOR THE PURPOSE OF LOGO REGISTRATION OF TRADE MARK AND NAME WITH TAGLINE. THEREFORE, THIS EXPENDITURE HAS BEEN INCURRED ITA NO S . 1344 TO 1347/ BANG/2014 M/S.CELSTREAM TECHNOLOGIES P.LTD. PAGE 17 OF 19 BY THE ASSESSEE FOR REGISTRATION OF I T S EXISTING TRADE MARK AND NOT FOR ACQUIRING ANY NEW TRADE MARK. WHEN THE EXPENDITURE HAS NOT BROUGHT INTO EXISTENCE ANY NEW ASSET AND IT IS ONLY FOR THE PURPOSE OF PROTECTING THE ASSESSEE S OWNERSHIP AN D RIGHT OVER THE TRADE MARK, THEN SAID EXPENDITURE CANNOT PAR TAKE THE CHARACTER OF CAPITAL EXPENDITURE. WE FIND THAT THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF FINLAY MILLS LTD (SUPRA) IS SQUARELY APPLICABLE ON THE FACTS OF THE ASSESSEE S C ASE . THE HON BLE SUPREME COURT HAS OBSERVED IN PARA.4 AS UNDER: 4. IN OUR OPINION, THE CONTENTION URGED ON BEHALF OF THE APPELLANT MUST FAIL. IT IS NOT CONTENDED THAT BY THE TRADE MARKS ACT A NEW ASSET HAS COME INTO EXISTENCE. IT WAS CONTENDED THAT AN ADVANTAGE OF AN ENDURING NATURE HAD COME INTO EXISTENCE. IT WAS ARGUED THAT JUST AS MACHINERY MAY ATTAIN A HIGHER VALUE BY AN IMPLEMENTATION CAUSING GREATER PRODUCTIVE CAPACITY, IN THE PRESENT CASE THE TRADE MARK WHICH EXISTED BEFORE THE TRADE MARKS ACT AC QUIRED AN ADVANTAGE OF AN ENDURING NATURE BY REASON OF THE TRADE MARKS ACT AND THE FEES PAID FOR REGISTRATION THEREUNDER WERE IN THE NATURE OF CAPITAL EXPENDITURE. IN OUR OPINION, THIS ANALOGY IS FALLACIOUS. THE MACHINERY WHICH ACQUIRES A GREATER PRODUCTIV E CAPACITY BY REASON OF ITS IMPROVEMENT BY THE INCLUSION OF SOME NEW INVENTION NATURALLY BECOMES A NEW AND ALTERED ASSET BY THAT PROCESS. SO LONG AS THE MACHINERY LASTS, THE IMPROVEMENT CONTINUES TO THE ADVANTAGE OF THE OWNER OF THE MACHINERY. THE REPLACEM ENT OF A DILAPIDATED ROOF BY A MORE SUBSTANTIAL ROOF STANDS ON THE SAME FOOTING. THE RESULT HOWEVER OF THE TRADE MARKS ACT IS ONLY TWO - FOLD. BY REGISTRATION, THE OWNER IS ABSOLVED FROM THE OBLIGATION TO PROVE HIS OWNERSHIP OF THE TRADE MARK. IT IS TREATED AS PRIMA FACIE PROVED ON PRODUCTION OF THE REGISTRATION CERTIFICATE. IT THUS MERELY SAVES HIM THE TROUBLE OF LEADING EVIDENCE, IN THE EVENT OF A SUIT, IN A COURT OF LAW, TO PROVE HIS TITLE TO THE TRADE MARK. IT HAS BEEN SAID THAT REGISTRATION IS IN THE NAT URE OF COLLATERAL SECURITY FURNISHING THE TRADER WITH A CHEAPER AND MORE DIRECT REMEDY AGAINST INFRINGERS. CANCEL THE REGISTRATION ITA NO S . 1344 TO 1347/ BANG/2014 M/S.CELSTREAM TECHNOLOGIES P.LTD. PAGE 18 OF 19 AND HE HAS STILL HIS RIGHT ENFORCEABLE AT COMMON LAW TO RESTRAIN THE PIRACY OF HIS TRADE MARK. IN OUR OPINION, THIS IS NEITHE R SUCH AN ASSET NOR AN ADVANTAGE SO AS TO MAKE PAYMENT FOR ITS REGISTRATION A CAPITAL EXPENDITURE. IN THIS CONNECTION IT MAY BE USEFUL TO NOTICE THAT EXPENDITURE INCURRED BY A COMPANY IN DEFENDING TITLE TO PROPERTY IS NOT CONSIDERED EXPENSE OF A CAPITAL NA TURE. IN SOUTHERN (H.M. INSPECTOR OF TAXES) VS. BORAX CONSOLIDATED LTD. (1942) 10 ITR (SUPPL) 1 (KB), IT IS STATED THAT WHERE A SUM OF MONEY IS LAID OUT FOR THE ACQUISITION OR THE IMPROVEMENT OF A FIXED CAPITAL ASSET IT IS ATTRIBUTABLE TO CAPITAL, BUT IF N O ALTERATION IS MADE IN THE FIXED CAPITAL ASSET BY THE PAYMENT, THEN IT IS PROPERLY ATTRIBUTABLE TO REVENUE, BEING IN SUBSTANCE A MATTER OF MAINTENANCE, THE MAINTENANCE OF THE CAPITAL STRUCTURE OR THE CAPITAL ASSET OF THE COMPANY. IN OUR OPINION, THE ADVAN TAGE DERIVED BY THE OWNER OF THE TRADE MARK BY REGISTRATION FALLS WITHIN THIS CLASS OF EXPENDITURE. THE FACT THAT A TRADE MARK AFTER REGISTRATION COULD BE SEPARATELY ASSIGNED, AND NOT AS A PART OF THE GOODWILL OF THE BUSINESS ONLY, DOES NOT ALSO MAKE THE E XPENDITURE FOR REGISTRATION A CAPITAL EXPENDITURE. THAT IS ONLY AN ADDITIONAL AND INCIDENTAL FACILITY GIVEN TO THE OWNER OF THE TRADE MARK. IT ADDS NOTHING TO THE TRADE MARK ITSELF. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS THE JUDGMEN T OF THE HON BLE SUPREME COURT, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE CIT(A) QUA THIS ISSUE. 13. IN THE RESULT, THE APPEALS OF THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 16 TH OCTOBER, 201 5 . SD/ - SD/ - (G.MANJUNATHA ) ( VIJAY PAL RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER E KSRINIVASULU ,SPS ITA NO S . 1344 TO 1347/ BANG/2014 M/S.CELSTREAM TECHNOLOGIES P.LTD. PAGE 19 OF 19 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE T RIBUNAL BANGALORE