Column Software Technologies Pvt. Ltd., Pune V. Deputy Commissioner of Income-tax,

ITA 1524/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1556 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 18-07-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 01-08-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Keywords: Business income; Depreciation; Opportunity of being heard; Competent authority; Reason to believe; Unabsorbed depreciation; Reassessment proceedings
• Section: 143(3); 10B; 10

Judgement Text

] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE , !', $ % BEFORE SHRI VIKAS AWASTHY, JM AND SHRI PRADIP KUMAR KEDIA, AM ITA NO.1524/PN/2014 ASSESSMENT YEAR : 2010-11 COLUMN SOFTWARE TECHNOLOGIES PVT. LTD., 301/302, SR. NO.101/1, BHUSARI COLONY, PAUD ROAD, PUNE 411 038. PAN : AACCC8915D . APPELLANT VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(1), PUNE. . RESPONDENT / APPELLANT BY : SHRI KISHOR PHADKE / RESPONDENT BY : SHRI HITENDRA NINAWE / DATE OF HEARING : 19.07.2016 / DATE OF PRONOUNCEMENT: 20.07.2016 & / ORDER PER PRADIP KUMAR KEDIA, AM : THE CAPTIONED APPEAL FILED BY THE ASSESSEE IS AGAIN ST THE ORDER OF CIT(A)-IT/TP, PUNE DATED 05.06.2014 RELATING TO ASS ESSMENT YEAR 2010-11 PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). 2. BRIEFLY STATED, THE RELEVANT FACTS ARE THAT THE ASSESSEE IS A DOMESTIC COMPANY ENGAGED IN THE BUSINESS OF SOFTWARE CONSULT ANCY RESEARCH, DEVELOPMENT & TESTING OF SOFTWARE AND OTHER TECHNIC AL SERVICES RELATED TO SOFTWARE ETC.. THE ASSESSEE HAS TWO UNDERTAKINGS, ONE OF THE UNDERTAKING IS A 100% EOU REGISTERED WITH SOFTWARE TECHNOLOGIES PARK S OF INDIA (STPI) AND SECOND IS A DOMESTIC UNIT. THE EOU UNIT PROVIDES S OFTWARE DEVELOPMENT SERVICES & INFORMATION TECHNOLOGY ENABLED SERVICES (ITES) ETC. AND OTHER UNIT PROVIDES TECHNICAL STAFFING SERVICES TO INFORMATION TECHNOLOGY COMPANIES. 2 ITA NO.1524/PN/2014 THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING A TOTAL LOSS OF RS.25,51,606/-. THE ASSESSEE INTER-ALIA CLAIMED DEDUCTION UNDER SECTION 10B OF THE ACT AT RS.49,60,935/- IN RESPECT OF PROFITS ARISING FROM E OU UNIT.. THE ASSESSING OFFICER DENIED THE AFORESAID DEDUCTION CLAIMED UNDE R SECTION 10B OF THE ACT. HE OBSERVED THAT IN VIEW OF THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. REGENCY CREATIONS LTD., 27 TAXM ANN.COM 322, THE BENEFIT UNDER SECTION 10B IS AVAILABLE ONLY TO 100 EXPORT O RIENTED UNIT (EOU) WHICH IS SO APPROVED BY THE BOARD APPOINTED BY THE CENTRA L GOVERNMENT IN EXERCISE OF POWERS CONFERRED UNDER SECTION 14 OF IDAR ACT, 1 951. THE PRE-CONDITIONS THAT GOVERN UNITS SETUP UNDER STP SCHEME, AS IS THE CASE OF THE ASSESSEE, ARE DIFFERENT FROM THOSE THAT GOVERN THE UNITS SETUP AS 100% EOUS AND SO APPROVED BY THE BOARD. THE ASSESSING OFFICER OBSER VED THAT FOR CLAIMING DEDUCTION UNDER SECTION 10B, THE ASSESSEE SHOULD BE 100% EOU AS SPECIFIED UNDER EXPLANATION 2(IV) TO SECTION 10B OF THE ACT. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS NOT OBTAINED THE APPROV AL FROM THE DEVELOPMENT COMMISSIONER CONCERNED. HENCE, DEDUCTION UNDER SEC TION 10B IS NOT PERMISSIBLE IN LAW. THE ASSESSING OFFICER WITHOUT PREJUDICE TO THE TOTAL DENIAL OF CLAIM UNDER SECTION 10B, ALSO REFUSED TO ENTERTA IN THE CLAIM OF DEDUCTION UNDER SECTION 10B WITHOUT SETTING-OFF OF LOSSES ON OTHER UNITS OUTSIDE THE AMBIT OF SECTION 10A/10B OF THE ACT. THE ASSESSING OFFIC ER NOTED THAT THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 10B AT RS.49,60 ,935/- BEFORE SETTING-OFF OF LOSSES OF NON 10B UNIT AT RS.25,51,606/-. THE A SSESSING OFFICER TOOK THE VIEW THAT WHILE COMPUTING THE TOTAL INCOME OF AN AS SESSEE, LOSS EMANATING FROM NON 10B UNIT ALSO IS REQUIRED TO BE FIRST SET- OFF AND ONLY RESULTANT PROFIT AFTER SUCH SET-OFF IS ONLY ELIGIBLE FOR DEDUCTION U NDER SECTION 10B OF THE ACT. 3. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), TH E ASSESSEE RAISED AN ALTERNATE CLAIM OF DEDUCTION ON THE AFORESAID AMOUN T UNDER SECTION 10A OF THE ACT. THE ASSESSEE TOOK THE PLEA THAT CLAIM MADE UN DER SECTION 10B IS ALSO ELIGIBLE FOR DEDUCTION UNDER SECTION 10A IN THE ALT ERNATIVE, IF THE DEDUCTION IS NOT ALLOWED UNDER SECTION 10B OF THE ACT. 3 ITA NO.1524/PN/2014 3.1 THE CIT(A) DID NOT CONCUR WITH THE CLAIM OF THE ASSESSEE. AS REGARDS THE CLAIM OF THE ASSESSEE UNDER SECTION 10A RAISED IN THE ALTERNATE, THE CIT(A) NOTED THAT DEDUCTION UNDER SECTION 10A IS AVAILABLE TO UNITS ESTABLISHED TO FREE TRADE ZONE, WHEREAS DEDUCTION UNDER SECTION 10B IS AVAILABLE TO UNITS APPROVED BY THE COMPETENT AUTHORITY. THE CIT(A) NO TED THAT THE APPROVAL LETTER ISSUED BY THE STPI, PUNE EXHIBITS THAT ASSES SEES UNIT IS LOCATED AT KARVE NAGAR, PUNE WHICH DOES NOT FALL UNDER FREE TRADE ZO NE FOR THE PURPOSE OF CLAIMING DEDUCTION UNDER SECTION 10A OF THE ACT. H E, ACCORDINGLY, DECLINED TO ACCEPT THE CLAIM OF DEDUCTION BOTH UNDER SECTION 10 A AND SECTION 10B OF THE ACT. 3.2 AS REGARDS THE SET-OFF OF LOSSES OF NON-ELIGIBL E UNITS AGAINST THE PROFITS OF UNITS ELIGIBLE FOR DEDUCTION, THE CIT(A) RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF HIMASINGKA SEI DE LTD. VS. CIT, CIVIL APPEAL NO.1501 OF 2008 DATED 19.09.2013 WHEREIN THE ISSUE WAS DECIDED IN FAVOUR OF THE REVENUE. HE ACCORDINGLY CONCLUDED TH AT THERE IS NO ERROR ON THE PART OF THE ASSESSING OFFICER IN GRANTING SET-OFF O F BROUGHT FORWARD UNABSORBED DEPRECIATION AND LOSS OF INELIGIBLE UNIT BEFORE GRA NTING THE DEDUCTION UNDER SECTION 10B OF THE ACT. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE THE TRIBUNAL. 5. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE REPRODUCED HEREUNDER :- 1. THE LEARNED DCIT CIRCLE 1(1) ('AO'), PUNE ERRED IN LAW AND ON FACTS AND LEARNED CIT(A)-IT/TP ERRED IN CONFIRMING TOTAL INCO ME OF THE ASSESSEE AT RS. 1,03,05,360/- AGAINST ASSESSEE'S RETURNED LOSS OF RS. 25,28,165/-. 2. THE LEARNED CIT(A) - IT/TP, PUNE ERRED IN LAW AN D ON FACTS IN CONFIRMING DCIT -CIRCLE 1(1) DECISION OF DISALLOWING CLAIM OF DEDUCTION U/S 10-B, OF THE ITA, 1961, AMOUNTING TO RS. 49,60,935; ON THE A NALOGY THAT STPI UNDERTAKING OF THE APPELLANT IS NOT AN ELIGIBLE UND ERTAKING AS PER EXPLANATION-2(IV) OF SECTION 10B OF THE ITA, 1961. 4 ITA NO.1524/PN/2014 3. ALTERNATIVELY AND WITHOUT PREJUDICE TO GROUND NO . 2; THE LEARNED AO ERRED IN LAW AND ON FACTS AND LEARNED CIT(A)IT/TP, PUNE E RRED IN NOT APPRECIATING THAT THE APPELLANT'S STP UNDERTAKING I S ELIGIBLE FOR DEDUCTION U/S 10A OF THE ITA, 1961. 4. THE LEARNED CIT(A) - IT/TP, PUNE ERRED IN LAW AN D ON FACTS IN CONFIRMING AO'S DECISION THAT THE DEDUCTION U/S 10B SHOULD BE ALLOWED AFTER SET-OFF OF LOSSES OF OTHER BUSINESS UNITS / UNDERTAKINGS. 5. THE APPELLANT CRAVES LEAVE TO ADD / MODIFY / ALT ER / DELETE ALL / ANY OF THE GROUNDS OF APPEAL. 6. THE LD. AUTHORIZED REPRESENTATIVE (AR) FOR THE A SSESSEE, SHRI KISHOR PHADKE SUBMITTED THAT GROUND NO.1 IS GENERAL IN NAT URE. 6.1 AS REGARDS GROUND NO.2, SEEKING RELIEF UNDER SE CTION 10B OF THE ACT, HE SUBMITTED THAT THE DEDUCTION UNDER SECTION 10B AS C LAIMED BY THE ASSESSEE HAS BEEN DENIED ON THE BASIS OF DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF REGENCY CREATIONS LTD. (SUPRA). HE, HOWEVE R, IN THE SAME VAIN SUBMITTED THAT SIMILAR DEDUCTIONS HAVE BEEN CLAIMED IN THE EARLIER YEARS BY THE ASSESSEE AND ACCEPTED BY THE REVENUE. THEREFORE, T HE ASSESSEE WAS UNDER BONA-FIDE BELIEF THAT IT IS ENTITLED TO DEDUCTION U NDER SECTION 10B AS CLAIMED. 6.2 WITH REFERENCE TO GROUND NO.3, THE LD. AR PLEAD ED THAT THE ASSESSEE IN ANY CASE IS ENTITLED TO DEDUCTION UNDER SECTION 10A IN THE ALTERNATIVE FOR WHICH THE NECESSARY CERTIFICATE FROM THE ACCOUNTANT AS PR ESCRIBED HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. THE LD. AR SUBMITTED THAT THE ALTERNATIVE CLAIM OF DEDUCTION UNDER SECTION 10A IS IN SYNC WITH THE CONDITIONS ENUMERATED IN SECTION 10A OF THE ACT. HE RELIED UPON THE DECISIO N OF PUNE BENCH OF THE TRIBUNAL IN THE CASES OF KNOWLEDGE QUEST INFOTECH P VT. LTD. VS. ACIT IN ITA NO.204/PN/2014, ORDER DATED 30.01.2015; CELOXIS TEC HNOLOGIES PVT. LTD. VS. DCIT IN ITA NO.205/PN/2014, ORDER DATED 18.03.2015 AND CLARION TECHNOLOGIES PVT. LTD. VS. DCIT IN ITA NO.2554/PN/2 012, ORDER DATED 30.10.2014 FOR THE PROPOSITION THAT THE ALTERNATE P LEA OF CLAIM OF DEDUCTION UNDER SECTION 10A IS REQUIRED TO BE ENTERTAINED BY THE ASSESSING OFFICER IF THE CONDITIONS LAID DOWN FOR CLAIM OF DEDUCTION UNDER S ECTION 10A ARE FOUND TO BE COMPLIED WITH. 5 ITA NO.1524/PN/2014 6.3 THE LD. AR NEXT SUBMITTED THAT THE PLEA RAISED AS PER GROUND NO.4 IS ALSO SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AS PER THE DECISION OF THE CO- ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S K PIT CUMMINS INFOSYSTEMS LTD. VS. DCIT IN ITA NOS.1508 & 1509/PN/2011, ORDER DATED 30.11.2015. THE LD. AR SUBMITTED THAT THE DECISION OF HONBLE S UPREME COURT IN HIMASINGKA SEIDE LTD. (SUPRA) IS WITH REFERENCE TO OLD PROVISION DEALING WITH EXEMPTION IN DISTINCTION TO DEDUCTION PROVISION PRESENTLY IN VOGUE. THIS DISTINCTION HAS BEEN ADDRESSED BY THE TRIBUNAL DECI SIONS TO CONCLUDE THE ISSUE IN FAVOUR OF ASSESSEE. 7. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE, SHRI HITENDRA NINAWE, ON THE OTHER HAND, SUBMITTED THAT THE DEDUCTION CLAIMED UNDER SECTION 10B HAS BEEN RIGHTLY REJECTED BY THE ASSESSING OFFICER SINCE THE CONDITIONS PRESCRIBED THEREIN HAS NOT BEEN COMPLIED WITH. AS REGARDS THE ALTERNATE PLEA OF THE ASSESSEE FOR CLAIM OF DEDUCTI ON UNDER SECTION 10A, HE RELIED UPON THE ORDER OF THE CIT(A). AS REGARDS GR OUND NO.4 OF THE APPEAL OF THE ASSESSEE ALSO HE RELIED UPON THE ORDER OF THE C IT(A) AND SUBMITTED THAT LOSS FROM ONE UNIT REQUIRES TO BE SET-OFF FROM THE PROFI TS OF OTHER UNITS. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS, ORDERS OF T HE AUTHORITIES BELOW, MATERIAL REFERRED TO US IN THE COURSE OF HEARING AN D CASE LAWS CITED. IN THE INSTANT CASE, THE ASSESSEE HAS CLAIMED DEDUCTION UN DER SECTION 10B IN RESPECT OF ITS ONE OF THE UNDERTAKINGS WHICH IS STATED TO B E 100% EOU REGISTERED WITH STPI. THE ASSESSING OFFICER FOUND THAT THE ASSESSE E IS NOT A 100% EOU WITHIN THE MEANING OF CLAUSE (IV) OF EXPLANATION 2 TO SECTION 10B OF THE ACT AND HAS NOT OBTAINED THE APPROVAL FROM THE DEVELOPM ENT COMMISSIONER CONCERNED. WE OBSERVE THAT THE LD. AR HAS NOT SERI OUSLY EMPHASIZED ITS CLAIM ON ELIGIBILITY OF DEDUCTION UNDER SECTION 10B OF TH E ACT. THE THRUST OF ARGUMENTS OF LD. AR REVOLVED AROUND CLAIM OF DEDUCT ION UNDER SECTION 10A OF THE ACT. THE LD. AR HAS CONTENDED THAT THE ASSESSE E IS ENTITLED TO CLAIM OF DEDUCTION UNDER SECTION 10A IN THE ALTERNATIVE SINC E THE CONDITIONS PRESCRIBED FOR CLAIM OF DEDUCTION UNDER SECTION 10A IS DULY ME T. THE LD. AR CONTENDED 6 ITA NO.1524/PN/2014 THAT THE ARGUMENTS ADVANCED BY THE CIT(A) THAT SECT ION 10A APPLIES ONLY TO UNDERTAKINGS SITUATED IN FREE TRADE ZONE IS FALLA CIOUS. THE LD. AR ADVERTED OUR ATTENTION TO SECTION 10A(2) OF THE ACT AND SUBM ITTED THAT THE SECTION APPLIES TO UNDERTAKINGS WHICH MAY BE SITUATED NOT O NLY IN ANY FREE TRADE ZONE BUT ALSO SOFTWARE TECHNOLOGIES PARK OR ANY SPECIAL ECONOMIC ZONE ETC. AS EXPRESSLY PROVIDED IN THE ACT ITSELF. WE TAKE NOTE OF THE ARGUMENT OF THE LD. AR THAT DEDUCTION UNDER SECTION 10A IS NOT RESTRICT ED TO UNITS OR UNDERTAKINGS LOCATED IN FREE TRADE ZONE ONLY. THE BENEFIT OF SE CTION 10A IS AVAILABLE TO UNDERTAKINGS SITUATED IN FREE TRADE ZONE OR ANY ELE CTRONIC HARDWARE TECHNOLOGIES PARK OR SOFTWARE TECHNOLOGIES PARK OR ANY SPECIAL ECONOMIC ZONE AS PROVIDED UNDER SECTION 10A(2) OF THE ACT. WE FIND MERIT IN THE ALTERNATE PLEA OF THE ASSESSEE THAT THE ASSESSEE SH OULD BE GRANTED DEDUCTION UNDER SECTION 10A AS AGAINST THE CLAIM MADE UNDER S ECTION 10B IF THE REQUISITE CONDITIONS AS PROVIDED IN SECTION 10A OF THE ACT IS FOUND TO BE DULY MET WITH. 8.1 THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CA SE OF KNOWLEDGE QUEST INFOTECH PVT. LTD. (SUPRA); CELOXIS TECHNOLOGIES PV T. LTD. (SUPRA) AND CLARION TECHNOLOGIES PVT. LTD. (SUPRA) HAS ALREADY HELD THA T THE CLAIM FOR DEDUCTION UNDER SECTION 10A IN SUBSTITUTION OF SECTION 10B CA NNOT BE DENIED IF THE PRESCRIBED CONDITIONS ARE FOUND TO BE DULY FULFILLE D. THE RELEVANT FINDINGS OF THE TRIBUNAL IN THE CASE OF KNOWLEDGE QUEST INFOTEC H PVT. LTD. (SUPRA) IS REPRODUCED HEREUNDER FOR READY REFERENCE :- 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IN OUR CONSIDERED OPINION, THE APPROACH OF THE LOWER AUTHORITIES IN D EALING WITH ASSESSEES ALTERNATE CLAIM FOR DEDUCTION U/S 10A OF THE ACT IS NOT JUSTI FIED. QUITE CLEARLY, WHEN ASSESSEE FILED ITS RETURN OF INCOME, IT CLAIMED DEDUCTION US 10B OF THE ACT. ONCE IN THE ASSESSMENT ORDER, SUCH A CLAIM WAS DENIED, THE ONLY OCCASION FOR THE ASSESSEE TO PUT-FORTH AN ALTERNATE CLAIM U/S 10A OF THE ACT WAS BEFORE THE CIT(A). THE CIT(A) HAS OBSERVED THAT THE CLAIM NOT HAVING BEEN MADE IN THE RETURN OF INCOME COULD NOT BE ENTERTAINED AT A LATER STAGE. THE AFORESAID APP ROACH OF THE CIT(A), IN OUR VIEW, IS NOT JUSTIFIED HAVING REGARD TO THE PECULIAR FACT S AND CIRCUMSTANCES OF THE PRESENT CASE. IN ITS APPEAL BEFORE THE CIT(A), ASSESSEE ST AKED THE CLAIM FOR DEDUCTION U/S 10A OF THE ACT ALONG WITH THE FILING OF THE PRESCRI BED AUDIT REPORT IN FORM NO.56F. UNDER IDENTICAL CIRCUMSTANCES, THE HONBLE DELHI HI GH COURT IN THE CASE OF CIT VS. VALIANT COMMUNICATION LTD. IN ITA NOS.440 441/201 2 DATED 04.01.2013 CONSIDERED ASSESSEES ALTERNATE CLAIM FOR DEDUCTION U/S 10A OF THE ACT AND DIRECTED 7 ITA NO.1524/PN/2014 THE INCOME-TAX AUTHORITIES TO EXAMINE THE SAME. IN THE CASE OF CLARION TECHNOLOGIES PVT. LTD. (SUPRA), A SIMILAR SITUATION HAS BEEN DEA LT WITH BY THE TRIBUNAL AND THE FOLLOWING DISCUSSION IS RELEVANT :- 16. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS. IN THE PRESENT CASE, IN THE PAST YEARS ASSESSEE HAS BEEN A LLOWED THE CLAIM OF DEDUCTION U/S 10B OF THE ACT. IN THE RETURN OF INC OME FILED FOR THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. 2010-11 ALSO ASSESSEE CLAIMED DEDUCTION U/S 10B OF THE ACT IN RELATION TO THE PROFITS DERIVED F ROM ITS STPI UNIT. THIS CLAIM OF DEDUCTION CAME TO BE DENIED ON THE GROUND THAT THE APPROVAL FROM DIRECTOR, STPI WAS INSUFFICIENT AND THAT THE ASSESS EE WAS REQUIRED TO TAKE APPROVAL FROM THE BOARD APPOINTED FOR THIS PURPOSE BY THE CENTRAL GOVERNMENT, FOLLOWING THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF REGENCY CREATIONS LTD. (SUPRA). IN THE AFO RESAID SITUATION, AT THE TIME OF FILING OF RETURN OF INCOME FOR THE INSTANT ASSESSMENT YEAR, ASSESSEE COULD NOT HAVE ENVISAGED THE DENIAL OF ITS CLAIM OF DEDUCTION U/S 10B OF THE ACT, WHICH WAS BEING ALLOWED IN THE PAST. THE AFORE SAID CIRCUMSTANCE CLEARLY ESTABLISHES THE BONAFIDES OF THE REASONS PREVAILING WITH THE ASSESSEE FOR NOT HAVING MADE A CLAIM FOR DEDUCTION U/S 10A OF THE AC T IN THE RETURN OF INCOME. HAVING REGARD TO THE PECULIAR FACTS AND CIRCUMSTANC ES OF THE INSTANT CASE, IN OUR VIEW, THE STAND OF THE REVENUE THAT ASSESSEE CA NNOT BE ALLOWED THE BENEFITS OF SECTION 10A OF THE ACT MERELY BECAUSE T HE PRESCRIBED AUDIT REPORT IN FORM NO.56F WAS NOT FILED IN THE RETURN OF INCOM E, IS QUITE ERRONEOUS. PERTINENTLY, AFTER DENIAL OF DEDUCTION U/S 10B OF T HE ACT IN THE ASSESSMENT ORDER, THE EARLIEST OPPORTUNITY FOR THE ASSESSEE TO STAKE CLAIM FOR DEDUCTION U/S 10A OF THE ACT WAS BEFORE THE CIT(A); AND, THE ASSESSEE MADE THE CLAIM BEFORE THE CIT(A) ALONG WITH THE PRESCRIBED AUDIT R EPORT IN FORM NO.56F. THE HONBLE DELHI HIGH COURT IN THE CASE OF VALIANT COMMUNICATIONS (SUPRA) IN SIMILAR CIRCUMSTANCES HELD THAT THE CLAI M OF THE ASSESSEE FOR DEDUCTION U/S 10A OF THE ACT IS REQUIRED TO BE EXAM INED IN ACCORDANCE WITH LAW. PERTINENTLY, EVEN IN THAT CASE ASSESSEE HAD C LAIMED DEDUCTION U/S 10B OF THE ACT IN THE RETURN OF INCOME, WHICH WAS NOT A LLOWED ULTIMATELY IN THE ABSENCE OF THE UNIT BEING APPROVED BY THE BOARD APP OINTED BY THE CENTRAL GOVERNMENT, WHEREAS THE UNIT WAS ONLY REGISTERED WI TH THE STPI. THE HONBLE DELHI HIGH COURT DIRECTED THE LOWER AUTHORI TIES TO CONSIDER THE CLAIM OF DEDUCTION U/S 10A OF THE ACT IN ACCORDANCE WITH LAW. IN THE PRESENT CASE ALSO, WE FIND NO REASON TO DENY THE ASSESSEE A N OPPORTUNITY TO PUT-FORTH ITS CLAIM FOR DEDUCTION U/S 10A OF THE ACT WITH REG ARD THE PROFITS OF ITS STPI UNIT, SUBJECT OF-COURSE TO THE FULFILLMENT OF THE P RESCRIBED CONDITIONS. 17. SECTION 10A OF THE ACT PROVIDES A DEDUCTION OF SUCH PROFITS AND GAINS DERIVED BY AN UNDERTAKING FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE MANUFACTURED OR PRODUCED BY IT. THE ASSESSEE CLAIMED THAT IT HAS UNDERTAKEN EXPORT OF COMPUTER SOFTWARE MANUFACTURED BY IT AND ITS UNIT IS REGISTERED WITH DIRECTOR, STPI. THE APPROV AL GRANTED BY DIRECTOR, STPI HAS BEEN HELD TO BE A SUFFICIENT COMPLIANCE WI TH REQUIREMENTS OF SECTION 10A(2)(I)(B) OF THE ACT EVEN AS PER THE CBD T VIDE INSTRUCTION NO.1 OF 2006 DATED 31.03.2006. THEREFORE, PRIMA-FACIE THE 100% EOU OF THE ASSESSEE, BEING REGISTERED WITH STPI, IS ELIGIBLE T O STAKE CLAIM FOR DEDUCTION 8 ITA NO.1524/PN/2014 U/S 10A OF THE ACT, PROVIDED THE OTHER CONDITIONS L AID DOWN IN SECTION 10A OF THE ACT ARE SATISFIED. THEREFORE, IN CONFORMITY WI TH THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF VALIANT COM MUNICATIONS (SUPRA), WE DEEM IT FIT AND PROPER TO REMAND THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR VERIFYING THE CLAIM OF THE AS SESSEE FOR DEDUCTION U/S 10A OF THE ACT AS PER LAW. THE ASSESSING OFFICER S HALL CONSIDER THE FORM NO.56F FURNISHED BY THE ASSESSEE BEFORE THE CIT(A) AND SUCH OTHER MATERIAL AND SUBMISSIONS THAT THE ASSESSEE MAY PUT-FORTH IN ORDER TO JUSTIFY ITS CLAIM OF DEDUCTION U/S 10A OF THE ACT. NEEDLESS TO SAY, THE ASSESSING OFFICER SHALL ALLOW A REASONABLE OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE BEFORE ADJUDICATING ON THE CLAIM OF THE ASSESSEE FOR DEDUC TION U/S 10A OF THE ACT IN ACCORDANCE WITH LAW. THUS, ON THE ALTERNATE PLEA A SSESSEE SUCCEEDS. 10. FOLLOWING THE AFORESAID PRECEDENT, IN THE PRESE NT CASE ALSO WE FIND NO JUSTIFICATION FOR THE CIT(A) TO HAVE DENIED THE ASS ESSEE TO PUT-FORTH HIS CLAIM FOR DEDUCTION U/S 10A OF THE ACT WITH REGARD TO THE PRO FITS OF STPI UNIT SUBJECT OF-COURSE TO THE FULFILLMENT OF THE PRESCRIBED CONDITIONS. T HEREFORE, IN CONFORMITY WITH THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN THE CA SE OF VALIANT COMMUNICATION LTD. (SUPRA), WE DEEM IT FIT AND PROPER TO REMAND T HE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR VERIFYING THE CLAIM OF THE AS SESSEE FOR DEDUCTION U/S 10A OF THE ACT AS PER LAW. THE ASSESSING OFFICER SHALL CONSID ER THE AUDIT REPORT IN FORM NO.56F FURNISHED BY THE ASSESSEE BEFORE THE CIT(A) AND SUCH OTHER MATERIAL AND SUBMISSIONS WHICH THE ASSESSEE MAY PUT-FORTH IN ORD ER TO JUSTIFY ITS CLAIM FOR DEDUCTION U/S 10A OF THE ACT. NEEDLESS TO SAY, THE ASSESSING OFFICER SHALL ALLOW THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD AN D ONLY THEREAFTER HE SHALL PASS AN ORDER AFRESH ON THIS ASPECT AS PER LAW. THUS, O N THIS ASPECT ASSESSEE SUCCEEDS FOR STATISTICAL PURPOSES. 8.2 FOLLOWING THE PARITY OF REASONING, WE DEEM IT F IT AND PROPER TO REMAND THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICE R FOR VERIFYING THE CLAIM OF THE ASSESSEE FOR DEDUCTION WITH REFERENCE TO SECTIO N 10A OF THE ACT AS PER LAW. THE ASSESSEE SHALL BE ENTITLED A REASONABLE OPPORTU NITY OF BEING HEARD BEFORE THE ASSESSING OFFICER AND SHALL BE ENTITLED TO PLAC E SUCH MATERIAL AND EVIDENCE AS IT MAY BE CONSIDERED NECESSARY AND EXPEDIENT IN THIS REGARD. 8.3 IN THE RESULT, THE GROUND NO.3 IS ALLOWED FOR S TATISTICAL PURPOSES. 9. AS REGARDS THE GROUND NO.4 DEBATING THE CLAIM OF SET-OFF OF BUSINESS LOSSES ARISING FROM NON-ELIGIBLE UNIT AGAINST THE P ROFITS ARISING FROM ELIGIBLE UNIT, WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/ S KPIT CUMMINS 9 ITA NO.1524/PN/2014 INFOSYSTEMS LTD. (SUPRA). THE RELEVANT OPERATIVE P ARA FROM THE DECISION IN THE CASE OF M/S KPIT CUMMINS INFOSYSTEMS LTD. (SUPRA) I S REPRODUCED HEREUNDER FOR READY REFERENCE :- 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. THE ASSESSEE IS ENGAGED IN EXPORT OF SOFTWARE AND IT ENABLED SERVIC ES. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE WAS RUNNING EIGHT UNITS AT DIFFERENT PLACES AND FIVE OF WHICH UNITS HAD DECLARED POSITIVE PROFITS AND THE B ALANCE THREE UNITS DECLARED LOSSES FOR THE CAPTIONED ASSESSMENT YEAR. THE ASSESSEE WA S ENTITLED TO CLAIM DEDUCTION U/S. 10A OF THE ACT IN RESPECT OF EXPORT OF SOFTWARE. T HE ASSESSEE COMPUTED THE DEDUCTION U/S. 10A OF THE ACT BY TREATING EACH OF T HE UNIT AS SEPARATE UNIT/UNDERTAKING AND CLAIMED THE DEDUCTION AT RS.24 ,55,53,914/-. THE LOSSES FROM THREE UNITS AGGREGATING RS.4,55,31,667/- WAS CARRIE D FORWARD TO BE ADJUSTED IN THE SUCCEEDING YEARS. ON THE OTHER HAND THE REVENUE AU THORITIES WERE OF THE VIEW THAT THE LOSSES EARNED BY THE ASSESSEE FROM SEPARATE UNI T HAVE TO BE ADJUSTED AGAINST THE PROFITS EARNED BY THE ASSESSEE IN SEPARATE UNITS AN D AFTER MAKING THIS INTRA-HEAD SET OFF, THE DEDUCTION UNDER SECTION 10A OF THE ACT WER E TO BE ALLOWED TO THE ASSESSEE. IN THIS EXERCISE THE DEDUCTION UNDER SECTION 10A OF THE ACT WAS REDUCED TO RS.20,68,49,064/- AND THERE WERE NIL CARRY FORWARD LOSS IN THE HANDS OF THE ASSESSEE. THE REASON FOR THE SAID ADJUSTMENT BY THE ASSESSING OFFICER AND COMMISSIONER OF INCOME TAX (APPEALS) WAS ON THE SURMISE THAT THE AM ENDMENT BROUGHT TO SECTION 10A OF THE ACT W.E.F. 1 ST APRIL, 2001 UNDER WHICH DEDUCTION FROM INCOME WAS TO BE ALLOWED TO THE ASSESSEE AND NOT ANY EXEMPTION. FUR THER, THE ASSESSING OFFICER REFERRED TO THE PROVISIONS OF SECTION 70(1) AND OBS ERVED THAT THE INTRA-HEAD ADJUSTMENT HAD TO BE MADE BEFORE CLAIMING THE DEDUC TION U/S. 10A OF THE ACT. THE ASSESSEE IS IN APPEAL AGAINST THE SAID ORDER OF ASS ESSING OFFICER, WHICH HAS BEEN UPHELD BY THE COMMISSIONER OF INCOME TAX (APPEALS). 13. UNDOUBTEDLY, AFTER THE AMENDMENT W.E.F. 1 ST APRIL, 2001 UNDER THE PROVISIONS OF SECTION 10A OF THE ACT, THE ASSESSEE IS NOW ENTI TLED TO DEDUCTION. PRIOR TO THE AMENDMENT THE ASSESSEE WAS ENTITLED TO EXEMPTION OF THE SAID INCOME. IN OTHER WORDS THE SAID INCOME DID NOT FORM PART OF THE TOTA L INCOME AND WAS EXCLUDED AT THE ENTITY LEVEL ITSELF. THE QUESTION WHICH ARISES FOR ADJUDICATION IS WHETHER IN VIEW OF THE AMENDED PROVISIONS OF SECTION 10A OF THE ACT, U NDER WHICH DEDUCTION CAN BE CLAIMED BY AN ENTERPRISES, WHETHER THE INTRA HEAD A DJUSTMENT OF LOSSES OF CERTAIN UNITS IS TO BE MADE AGAINST THE PROFITS OF OTHER UN ITS OF THE SAME ASSESSEE, BEFORE COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE AC T. 14. THE HON'BLE BOMBAY HIGH COURT IN HINDUSTAN UNIL EVER LTD. VS. DCIT & ANR. (SUPRA) IN AN APPEAL RELATING TO ASSESSMENT YE AR 2004-05 WHERE REASSESSMENT PROCEEDINGS WERE INITIATED UNDER SECTION 147/148 OF THE ACT ON SEVERAL ISSUES, CONSIDERED THE REASON TO BELIEVE RECORDED BY THE AS SESSING OFFICER WITH REGARD TO SET OFF OF LOSS INCURRED BY UNIT ELIGIBLE FOR DEDUCTION U/S. 10B OF THE ACT. THE ASSESSING OFFICER HAD REOPENED THE ASSESSMENT ON THE SURMISE THAT SINCE THE INCOME OF THE CRAB STICK UNIT WAS EXEMPTED FROM TAX UNDER SECTION 10B, THE LOSS OF THAT UNIT WAS WRONGLY SET OFF AGAINST THE NORMAL BUSINESS INCOME. THE HON'BLE HIGH COURT NOTED THAT AFTER THE SUBSTITUTION OF SECTION 10B OF THE A CT BY THE FINANCE ACT OF 2000, THE PROVISIONS PROVIDED FOR DEDUCTION OF SUCH PROFIT OR GAINS AS WERE DERIVED BY 100% EOU FOR THE PERIOD PRESCRIBED UNDER THAT SECTION. THE HON'BLE HIGH COURT THUS 10 ITA NO.1524/PN/2014 HELD THAT THE BASIS ON WHICH THE ASSESSMENT WAS SOU GHT TO BE REOPENED WAS BELIED BY A PLAIN READING OF THE PROVISIONS AND THE ASSESSING OFFICER WAS IN ERROR IN PROCEEDING ON THE BASIS THAT BECAUSE THE INCOME WAS EXEMPTED, THE LOSS WAS NOT ALLOWABLE. THE HON'BLE HIGH COURT FURTHER CONSIDER ED THAT ALL THE FOUR UNITS OF THE ASSESSEE WERE ELIGIBLE UNDER SECTION 10B, OUT OF WH ICH THREE UNITS HAD RETURNED PROFITS DURING THE COURSE OF THE ASSESSMENT YEAR, W HILE THE CRAB STICK UNIT HAD RETURNED A LOSS. THE HIGH COURT FURTHER HELD THAT THE ASSESSEE WAS ENTITLED TO A DEDUCTION IN RESPECT OF THE PROFITS OF THE THREE EL IGIBLE UNITS WHILE THE LOSS SUSTAINED BY THE FOURTH UNIT COULD BE SET OFF AGAINST THE NOR MAL BUSINESS INCOME. IN THESE CIRCUMSTANCES, THE HON'BLE HIGH COURT HELD THAT THE BASIS ON WHICH THE ASSESSMENT WAS SOUGHT TO BE REOPENED WAS CONTRARY TO THE PLAIN LANGUAGE OF SECTION 10B. 15. THE HON'BLE BOMBAY HIGH COURT IN CIT VS. BLACK & VEATCH CONSULTING PVT. LTD. (SUPRA) ALSO OBSERVED THAT SECTION 10A WAS A P ROVISION WHICH WAS IN THE NATURE OF A DEDUCTION AND NOT AN EXEMPTION. THE HON'BLE HIGH COURT FURTHER HELD THAT THE DEDUCTION UNDER SECTION 10A, IN OUR VIEW, WAS TO BE GIVEN EFFECT TO AT THE STAGE OF COMPUTING THE PROFITS AND GAINS OF BUSINESS. THIS IS ANTERIOR TO THE APPLICATION OF THE PROVISIONS OF SECTION 72 WHICH DEALS WITH THE C ARRY FORWARD AND SET OFF OF BUSINESS LOSSES. THE HON'BLE HIGH COURT HELD THAT THE DEDUCTION UNDER SECTION 10A HAS TO BE GIVEN AT THE STAGE WHEN THE PROFITS AND G AINS OF BUSINESS ARE COMPUTED IN THE FIRST INSTANCE. THE ISSUE BEFORE THE HON'BLE H IGH COURT WAS WITH REGARD TO THE ADJUSTMENT OF BROUGHT FORWARD UNABSORBED DEPRECIATI ON AND LOSS OF THE UNIT, WHICH WERE NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 10A O F THE ACT AND IT WAS HELD THAT THE SAME COULD NOT BE SET OFF AGAINST THE CURRENT PROFI T OF THE ELIGIBLE UNITS WHILE COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE AC T. 16. THE CASE OF THE REVENUE BEFORE US ON THE OTHER HAND IS THAT RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN SYNCO INDUSTRIES LT D. VS. ASSESSING OFFICER, INCOME TAX, MUMBAI (SUPRA) IS TO BE APPLIED WHILE C OMPUTING THE DEDUCTION UNDER SECTION 10A OF THE ACT. IN THE FACTS OF THE CASE B EFORE HON'BLE SUPREME COURT THE ASSESSEE HAD CLAIMED DEDUCTION FROM THE PROFITS AND GAINS OF THE BUSINESS UNDER SECTION 80HH R.W.S. 80-I AND 80B OF THE ACT. THE H ON'BLE SUPREME COURT HELD THAT WHILE WORKING OUT GROSS TOTAL INCOME OF THE ASSESSE E, LOSSES SUFFERED BY IT IN EARLIER YEARS HAVE TO BE ADJUSTED AND IF GROSS TOTAL INCOME OF ASSESSEE IS NIL THEN THE ASSESSEE WOULD NOT BE ENTITLED TO DEDUCTION UNDER C HAPTER VI-A. 17. THE AUTHORITIES BELOW HAVE FURTHER PLACED RELIA NCE ON THE PROVISIONS OF SECTION 70(1) FOR THE PROPOSITION OF SET OFF OF LOS S FROM ONE SOURCE AGAINST INCOME FROM ANOTHER SOURCE UNDER THE SAME HEAD OF INCOME. THE PROVISIONS OF SECTION 10A AND 10B OF THE ACT ARE PARA MATERIA. IN SUCH A SIT UATION THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN HINDUSTAN UNILEVER LTD . VS. DCIT & ANR. (SUPRA) ARE TO BE APPLIED. THE HON'BLE HIGH COURT HAD HELD THA T WHERE THREE UNITS OF THE ASSESSEE HAD RETURNED PROFIT DURING THE COURSE OF A SSESSMENT YEAR AND ONE UNIT HAD RETURNED THE LOSS, THE ASSESSEE WAS ENTITLED TO DED UCTION IN RESPECT OF THE PROFITS OF THREE ELIGIBLE UNITS, WHILE THE LOSS SUSTAINED BY T HE FOURTH UNIT COULD BE SET OFF AGAINST NORMAL BUSINESS INCOME. APPLYING THE SAID RATIO TO THE FACTS OF THE PRESENT CASE WE ARE OF THE VIEW THAT THE DEDUCTION U/S. 10A AND 10B ARE UNITS SPECIFIC IN CONTRADICTION TO BE ASSESSEE SPECIFIC. THE ASSESSE E WHILE CLAIMING THE DEDUCTION U/S. 10A OF THE ACT IN RESPECT OF EACH OF ITS UNIT HAS T O SATISFY THE CONDITIONS VIZ-A-VIZ EACH UNIT/UNDERTAKING. EVEN THE QUANTIFICATION OF AMOUNT OF DEDUCTION HAS TO BE WORKED OUT INDEPENDENTLY IN EACH UNIT. THE ASSESSE E BEFORE US HAS FURNISHED ON 11 ITA NO.1524/PN/2014 RECORD THE AUDIT REPORT IN FORM NO. 56F IN RESPECT OF EACH OF THE UNIT AGAINST WHICH IT HAS CLAIMED THE DEDUCTION UNDER SECTION 10A OF T HE ACT. THE QUANTIFICATION OF THE DEDUCTION UNDER SECTION 10A OF THE ACT IS TO BE WOR KED OUT INDEPENDENTLY FOR EACH ELIGIBLE UNIT AND IN CASE AFTER THE DEDUCTION SO CL AIMED UNDER SECTION 10A OF THE ACT, THERE ARE PROFITS IN THE HANDS OF THE ASSESSEE FOR SUCH UNIT THEN THE SAME CAN BE SET OFF AGAINST THE LOSSES, IF ANY, INCURRED BY THE ASS ESSEE IN ANY OTHER UNIT. THERE IS NO MERIT IN FIRST AGGREGATING THE PROFITS OF EACH OF T HE ELIGIBLE UNIT AND SETTING OF THE LOSSES OF OTHER UNITS AND ON THE NET PROFITS, IF AN Y, THE DEDUCTION UNDER SECTION 10A OF THE ACT TO BE COMPUTED. WE FIND SUPPORT FROM THE R ATIO LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN CIT VS. BLACK & VEATCH CONSULT ING PVT. LTD. (SUPRA) WHEREIN IT HAS BEEN HELD THAT THE DEDUCTION UNDER SECTION 1 0A OF THE ACT HAS TO BE GIVEN AT THE STAGE WHEN THE PROFITS AND GAINS OF THE BUSINES S ARE COMPUTED IN THE FIRST INSTANCE. IN VIEW THEREOF WE REVERSE THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN THIS REGARD. 9.1 FOR THE PARITY OF REASONINGS, WE FIND MERIT IN THE PLEA OF THE ASSESSEE. ACCORDINGLY, WE REVERSE THE DECISION OF THE CIT(A) IN THIS REGARD AND ALLOW THE GROUND NO.4 OF THE APPEAL OF THE ASSESSEE. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED ON THIS 20 TH DAY OF JULY, 2016. SD/- SD/- ( VIKAS AWASTHY ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER PUNE ; DATED : 20 TH JULY, 2016. & ' () *+( / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-IT/TP, PUNE; 4) THE CIT-III, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. &, / BY ORDER , ' # //TRUE COPY// $ %& # '( / SR. PRIVATE SECRETARY ) '* , / ITAT, PUNE