M/s. Tata Technologies Ltd., Pune V. Additional Commissioner of Income-tax,

ITA 2114/PUN/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93769 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 20-05-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 02-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Business income; Depreciation; Wholly owned subsidiary; Bad and doubtful debts; Revenue expenditure; Capital expenditure
• Section: 80HHC; 234B; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE: SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO S. 18 & 19 /PN/201 2 ASSESSMENT YEAR S : 20 0 4 - 05 & 2005 - 06 TATA TECHNOLOGIES LIM ITED, PLOT NO. 25, PUNE INFOTECH PARK, HINJEWADI, PUNE-411057 VS. JOINT COMMISSIONER OF INCOME TAX, RANGE-10, PUNE (APPELLANT) (RESPONDENT) PAN NO. AAAC T3092N ITA NOS. 36 & 37 /PN/2012 ASSESSMENT YEARS : 2004 - 05 & 2005 - 06 JOINT COMMISSIONER OF INCOME TAX (OSD), CIRCLE-1(2), PUNE VS. TATA TECHNOLOGIES LTD., TELCO PREMISES, PIMPRI, PUNE-411018 (APPELLANT) (RESPONDENT) PAN NO. AAACT3092N ITA NOS. 2114 & 2115/PN/2013 ASSESSMENT YEAR S : 2007 - 08 & 2008 - 09 TATA TECHNOLOGIES LIMITED, PLOT NO. 25, PUNE INFOTECH PARK, HINJEWADI, PUNE-411057 VS. ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-1, PUNE (APPELLANT) (RESPONDENT) PAN NO. AAACT3092N ITA NO. 2083/PN/2013 ASSESSMENT YEAR : 2008 - 09 DY. COMMISSIONER OF INCOME TAX, CIRCLE-1(2), PUNE VS. TATA TECHNOLOGIES LTD., 25, PUNE INFOTECH PARK, HINJEWADI, PUNE-411057 (APPELLANT) (RESPONDENT) PAN NO. AAACT3092N ASSESSEE BY: SHRI RAJENDRA AGIWAL REVENUE BY: SHRI B.C. MALAKAR DATE OF HEARING : 20-05-2015 DATE OF PRONOUNCEME NT : 29-05-2015 2 ORDER PER VIKAS AWASTHY, JM:- THESE ARE SEVEN SET OF APPEALS AGAINST THE ORDER OF COM MISSIONER OF INCOME TAX (APPEALS)-V, PUNE FOR THE ASSESSMENT YEARS 2004-05, 2005-06, 2007-08 AND 2008-09. FOUR APPEALS HAVE BEEN FILED BY THE ASSESSEE AND THREE APPEALS ARE BY THE REVENUE. THE A SSESSEE HAS FILED ITA NO. 18/PN/2012 ASSAILING THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) DATED 24-10-2011 FOR THE ASSESSMENT YEAR 2004 -05. THE REVENUE HAS FILED CROSS APPEAL IN ITA NO. 36/PN/2012. IN ITA NO. 19/PN/2012 FILED BY THE ASSESSEE, THE ORDER OF COMMISSIONE R OF INCOME TAX (APPEALS) DATED 24-10-2011 FOR THE ASSESSMENT YEAR 2005-06 IS UNDER CHALLENGE. THE REVENUE HAS ALSO FILED CROSS APPEAL IN ITA NO. 37/PN/2012. IN ITA NO. 2114/PN/2013, THE ASSESSEE HAS IMPUGNED THE ORDER OF CIT(A) DATED 29-08-2013 FOR THE ASSESSMENT YEA R 2007-08. IN ITA NO.2115/PN/2013 THE ASSESSEE HAS ASSAILED THE ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS)-I, PUNE DATED 29-08- 2013 FOR THE ASSESSMENT YEAR 2008-09. THE REVENUE HAS FILED CROSS A PPEAL FOR THE SAME ASSESSMENT YEAR IN ITA NO. 2083/PN/2013. 2. IN THE APPEALS FILED BY THE ASSESSEE, THE ISSUES RAISED IN ALL THE APPEALS ARE COMMON. SIMILARLY, IN THE APPEALS OF THE REVEN UE, THE GROUNDS OF APPEAL FOR ALL THE IMPUGNED ASSESSMENT YEARS ARE COMMON. SINCE, THE ISSUES RAISED IN THE APPEALS AND THE FACTS IN ALL THE APPEALS ARE SIMILAR, THE APPEALS ARE TAKEN UP TOGETHER FOR ADJUDI CATION. THE ISSUES RAISED BY THE ASSESSEE IN ITS APPEALS ARE AS UNDER: 1. DISALLOWANCE OF SOFTWARE EXPENDITURE BY HOLDING IT AS CAPITA L IN NATURE. 3 2. DISALLOWANCE OF DEDUCTION ON AMORTISED LEASE PREMIUM EXPENDITURE, LANDSCAPING AND DEVELOPMENT CHARGES. 3. DISALLOWANCE OF PROVISION FOR EXPENDITURE IN RESPECT OF BENEFIT UNDER BHAVISHYA KALYAN YOJANA (BKY) AN EMPLOYEE WELFARE SCHEME. 4. DISALLOWANCE OF PROVISION FOR MEDI-CLAIM INSURANCE COVERAGE SCHEME. 5. DISALLOWANCE OF DEDUCTION CLAIMED U/S. 35D IN RELATION TO EXPENDITURE INCURRED FOR INCREASING AUTHORIZED SHARE CAPITAL. 6. DISALLOWANCE OF ENTRANCE FEE PAID TO POONA CLUB. 7. DISALLOWANCE OF DEDUCTION U/S. 80HHE OF THE ACT. 8. REALLOCATION OF EXPENDITURE BETWEEN SOFTWARE TECHNOLOGY PA RK (STP) AND NON-STP UNIT. 9. RE-COMPUTATION OF DEDUCTION U/S. 10A OF THE ACT. 10. LEVY OF INTEREST U/S. 234B AND 234C. 3. THE GIST OF GROUNDS RAISED BY THE REVENUE IN APPEALS FOR THE IMPUGNED ASSESSMENT YEARS IS AS UNDER: 1. EXPENDITURE FOR OBTAINING LICENSE TO USE SOFTWARE HELD AS R EVENUE EXPENDITURE WHEREAS IT SHOULD HAVE BEEN HELD AS CAPITAL IN NATURE. 2. DELETING OF DISALLOWANCE U/S. 14A OF THE ACT. 3. ENHANCED DEDUCTION U/S. 10A WITH RESPECT TO DISALLOWANCE OF EXPENDITURE-TRAVELLING AND CONVEYANCE, DEPRECIATION ETC. 4. DISALLOWANCE OF TAXES AND EMPLOYEES COST PAID IN KOREA. 4. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE IS IN THE BUSINESS OF INFORMATION TECHNOLOGY SUPP ORT, SAP IMPLEMENTATION, CAD/CAM CONSULTANCY, TRADING IN SOFTWARE AN D 4 HARDWARE, NETWORKING SOLUTIONS, I.T. TRAINING ETC. IN ITS R ETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEARS THE ASSESSEE HAS CLAIMED DEDUCTION U/S. 80HHE AND U/S. 80G. THE ASSESSEE HAS ALS O CLAIMED EXEMPTION U/S. 10A OF THE ACT. DURING THE COURSE OF SCRU TINY ASSESSMENT IN THE IMPUGNED ASSESSMENT YEARS THE ASSES SING OFFICER MADE CERTAIN DISALLOWANCES/ADDITIONS IN THE INCOME RETURN B Y THE ASSESSEE. AGGRIEVED BY THE ASSESSMENT ORDERS, THE ASSESSEE PRE FERRED APPEALS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) FOR THE RESPECTIVE ASSESSMENT YEARS. THE COMMISSIONER OF INCOME TAX (APPEALS) PARTLY ACCEPTED THE APPEALS OF THE ASSESSEE. AGAINST T HE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS) BOTH THE ASSESSEE A ND THE REVENUE HAVE COME IN APPEAL BEFORE THE TRIBUNAL. 5. FIRST, WE WILL TAKE UP THE APPEALS OF THE ASSESSEE FOR AD JUDICATION. SHRI RAJENDRA AGIWAL APPEARING ON BEHALF OF THE ASSESSEE FILED PAPER BOOK CONTAINING CASE LAWS WITH CERTAIN DOCUMENTS IN SUPPO RT OF HIS SUBMISSIONS. THE LD. AR CONTENDED THAT THE FIRST ISSUE RAIS ED IN APPEALS RELATE TO DISALLOWANCE OF SOFTWARE EXPENDITURE. THE SAME H AS BEEN ADJUDICATED IN ASSESSEES OWN CASE IN ITA NO. 1345/PN/2 011 FOR THE ASSESSMENT YEAR 2001-02 DECIDED ON 27-02-2015. THE T RIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. SHRI B.C. MALAKAR REPRESENTING THE DEPARTMENT PLACED RELIA NCE ON THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON THE ISSUES. 5.1 THE ASSESSEE HAS PURCHASED COMPUTER SOFTWARE FOR IT S DAILY OPERATION. THE ASSESSEE HAS CLAIMED THE EXPENDITURE INC URRED ON ACQUIRING LICENSE TO USE COMPUTER SOFTWARE AS REVENUE EX PENDITURE. THE 5 ASSESSING OFFICER HELD THAT THE EXPENDITURE INCURRED ON OB TAINING LICENCE TO USE COMPUTER SOFTWARE HAS RESULTED IN AN ENDURING BE NEFIT. THE ASSESSEE HAS MADE PAYMENT IN LUMP SUM AND EXPENDITURE HAS BEEN INCURRED TO INCREASE THE PROFIT EARNING CAPACITY. THE ASS ESSING OFFICER CONCLUDED THAT THE EXPENDITURE IS CAPITAL IN NATURE. THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER ANALYZING VARIOUS COMPUTER SOFTWARE PURCHASED DURING THE RELEVANT PERIOD PARTLY ACCEPTED T HE APPEAL OF THE ASSESSEE. THE COMMISSIONER OF INCOME TAX (APPEALS) SEGREG ATED THE EXPENDITURE INCURRED ON ACQUIRING COMPUTER SOFTWARE BASE D ON THE LOGIC AND REASONING GIVEN BY HIM IN HIS ORDER FOR THE ASSESSMEN T YEAR 2001- 02. 5.2 WE OBSERVE THAT THE ISSUE RAISED IN THE PRESENT SET OF APPEALS, IS IDENTICAL TO THE ONE ADJUDICATED BY THE CO-ORDINATE BENC H IN ITA NO. 1345/PN/2011 (SUPRA). THE TRIBUNAL HELD THAT THE EXPEND ITURE ON ACQUIRING COMPUTER SOFTWARE AS REVENUE IN NATURE. THE R ELEVANT EXTRACT OF THE FINDINGS OF THE TRIBUNAL ARE REPRODUCED HERE-IN-BELOW: 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF SOFTWAR E DEVELOPMENT AND PROVISIONS OF SOFTWARE SERVICES. AS PER THE AS SESSEE, THE RANGE OF SERVICES INCLUDED IT CONSULTANCY, TRANSFER OF SAP LI CENSES, SAP IMPLEMENTATION AND MAINTENANCE, PROVIDING NETWORKING SO LUTIONS, CAD/CAM ENGINEERING AND DESIGN CONSULTANCY WITH A FOC US ON THE AUTOMOTIVE SECTOR. DURING THE YEAR UNDER CONSIDERAT ION, THE ASSESSEE HAD INCURRED EXPENDITURE ON SOFTWARE AMOUN TING TO RS.37,81,284/-. THE ASSESSEE HAD GIVEN THE BREAK-UP OF T HE SOFTWARE EXPENSES BEFORE THE CIT(A) IN TABULATED FOR M, WHICH WERE REPRODUCED AT PAGES 9 TO 11 OF THE APPELLATE ORDER. THE FIRST EXPENDITURE INCURRED BY THE ASSESSEE WAS ON ACCOUNT OF ANNUAL SUBSCRIPTION CHARGES OF RS.73,920/- WHICH HAS BEEN ALLOW ED AS AN EXPENDITURE BY THE CIT(A), AGAINST WHICH, THE REVENUE HAS NOT FILED ANY APPEAL. THE SECOND SET OF EXPENDITURES WERE CLA IMED TO BE FOR SPECIFIC PURPOSES I.E. SPECIFIC PROJECTS UNDERTAKEN BY THE ASSESSEE IN 6 THE ORDINARY COURSE OF CARRYING ON ITS BUSINESS. THE ASSESSEE HAD SPENT RS.4,000/-ON PURCHASING OF STUDY MATERIAL I.E. CISC O INTERNETWORKING CD MICROLAN. ANOTHER EXPENDITURE OF RS.2,29,725/- WAS INCURRED ON EXCISE PACKAGE SOFTWARE WHICH WAS A LSO CLAIMED TO BE FOR SAID PURPOSE FOR IMPLEMENTING AT TATA MOTORS. BOTH THESE EXPENDITURES WERE HELD TO BE CAPITAL BY THE CIT(A). 13. THE HONBLE BOMBAY HIGH COURT IN CIT VS. RAYCHEM R PG LTD. (SUPRA) WHILE CONSIDERING THE ISSUE OF ALLOWABILITY OF E XPENDITURE INCURRED ON SOFTWARE, HAS LAID DOWN THE PROPOSITION THAT WHERE THE IMPUGNED SOFTWARE DOES NOT FORM PART OF FIXED PROFIT MAKING APPARATUS OF THE ASSESSEE, THEN THE SAME IS TO BE ALLO WED AS REVENUE EXPENDITURE. WHERE THE SOFTWARE PACKAGE FAC ILITATES THE ASSESSEE IN TRADING OPERATIONS OR ENABLING THE MANA GEMENT TO CONDUCT ASSESSEES BUSINESS MORE EFFICIENTLY OR MORE PROFITABLY AND HENCE, THE SAID EXPENDITURE IS REVENUE EXPENDITURE. THE VIEW OF THE TRIBUNAL IN THE CASE WAS UPHELD BY THE HONBLE BOMBAY H IGH COURT (SUPRA). 14. IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE BOM BAY HIGH COURT IN CIT VS. RAYCHEM RPG LTD. (SUPRA), WHERE THE EX PENDITURE HAS BEEN INCURRED FOR FACILITATING THE BUSINESS AND WHICH DOES NOT FORM PART OF PROFIT MAKING APPARATUS, THEN THE SOFT WARE EXPENDITURE IS TO BE ALLOWED AS REVENUE EXPENDITURE. THE EXPENDITU RE INCURRED BY THE ASSESSEE TOTALING RS.2,33,725/- HAS BEEN INCURR ED IN THE ORDINARY COURSE OF CARRYING ON THE BUSINESS AND DOE S NOT FORM PART OF ITS PROFIT MAKING APPARATUS, HENCE, THE SAID EXPE NDITURE IS DULY ALLOWABLE AS REVENUE EXPENDITURE IN THE HANDS OF THE ASSESS EE. 15. THE NEXT SET OF EXPENDITURE INCURRED BY THE ASS ESSEE WAS ON ACQUISITION OF LICENSE TO USE THE SOFTWARE, BUT THERE IS NO ACQUISITION OF OWNERSHIP RIGHTS OF THE SOFTWARE. THE ASSESSEE HAD INCURRED EXPENDITURE OF RS.12,56,870/- ON THE ACQUISITION OF WIN DCHILL SOFTWARE WHICH IS A PDM SOFTWARE PURCHASED FOR DEVE LOPING RESOURCES AND PROVIDING CUSTOMIZATION AND IMPLEMENTAT ION SERVICES TO CUSTOMERS. ANOTHER EXPENDITURE OF RS.16,86,394/- WA S INCURRED FOR THE ACQUISITION OF FLEXIBLE PRO-ENGINEER SOFTWARE, WH ICH WAS ADMITTEDLY, FIRST TIME ACQUISITION AND WAS ACQUISITION O F RIGHTS TO RUN THE SAID SOFTWARE. THE WINDCHILL SOFTWARE WAS UPGRAD ED REGULARLY 7 AND SIMILARLY, THE OTHER SOFTWARE FLEXIBLE PRO-ENGINEER SOFTWARE WAS ALSO UPGRADED REGULARLY. THE FUNCTIONALITY TEST L AID DOWN BY THE SPECIAL BENCH OF DELHI TRIBUNAL IN AMWAY INDIA ENTE RPRISES VS. DCIT (SUPRA) IS TO BE APPLIED FOR DETERMINING THE NA TURE OF EXPENDITURE TO BE CAPITAL OR REVENUE. WHERE THE ASSES SEE HAD INCURRED EXPENDITURE ON SOFTWARE WHICH HAS BEEN ACQUIR ED TO FACILITATE THE SMOOTH FUNCTIONING OF DAY-TO-DAY BUSIN ESS OPERATIONS OF THE ASSESSEE AND WHICH DO NOT FORM PART OF ITS P ROFIT MAKING APPARATUS, THEN THE EXPENDITURE IS ALLOWABLE AS REVENUE EXPENDITURE IN THE HANDS OF THE ASSESSEE. ACCORDING LY, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE EXPENDITURE OF RS.1 2,56,870/- AND RS.16,86,394/- AS REVENUE EXPENDITURE. 16. FURTHER THE ASSESSEE HAD INCURRED THE EXPENDITU RE ON THE UNDER-MENTIONED ITEMS:- SR NO DESCRIPTION AMOUNT (RS.) 1 FIREWALL 4.1 CD 96,000 2 MS OFFICE 2000 19,800 3 MACROMEDIA FLASH & FIREWORKS FOR WEBSITE DESIGN 39,500 4 UPGRADATION COST OF 15 R/3 MYSAP LICENSES FOR TTL 3,75,075 17. THE AFORESAID EXPENDITURE INCURRED BY THE ASSES SEE WAS THE ACQUISITION OF SOFTWARE PROGRAMMES WHICH IN TURN, WE RE UTILIZED TO CONDUCT DAY-TO-DAY BUSINESS ACTIVITIES MORE EFFICIENT LY. FURTHER, THE EXPENDITURE INCURRED ON UPGRADATION OF THE SYSTEM I .E. CONVERSION FROM R3 SOFTWARE TO MYSAP LICENSE WAS REQUIRED AT R EGULAR INTERVALS AND SUCH UPGRADATION WAS TO GAIN OPERATIONAL EFFICIEN CY IN THE AREAS OF THE SALES, DISTRIBUTION AND PRODUCTION PLANN ING. SINCE THE EXPENDITURE HAD BEEN INCURRED TO FACILITATE EFFICIEN CY IN THE BUSINESS RESULTING IN MORE PROFITABILITY, THE SAID EXPENDITURE IS TO BE ALLOWED AS REVENUE EXPENDITURE. THE GROUND OF APPEAL NO.1 RAI SED BY THE ASSESSEE IS THUS, ALLOWED. 8 IN THE ASSESSMENT YEARS UNDER THE APPEAL, THE EXPEND ITURE RELATES TO PURCHASE OF COMPUTER SOFTWARE AND THERE HAS BEEN N O CHANGE IN THE FACTS AND CIRCUMSTANCES. THE LD. DEPARTMENTAL REPRESENT ATIVE HAS ALSO NOT BEEN ABLE TO CONTROVERT THE FINDINGS OF TRIBUNAL. WE A RE OF THE CONSIDERED OPINION THAT THE ISSUE IS SQUARELY COVERED BY THE AFORESAID DECISION OF THE TRIBUNAL. ACCORDINGLY, THIS GROUND OF APPEA L OF THE ASSESSEE IS ALLOWED. 6. THE SECOND ISSUE RAISED IN THE APPEALS IS DISALLOWANCE OF DEDUCTION FOR AMORTISED LEASE PREMIUM EXPENDITURE, LANDSCAP ING AND DEVELOPMENT CHARGES. THE LD. AR OF THE ASSESSEE FAIRLY CO NCEDED THAT THIS ISSUE WAS DECIDED AGAINST THE ASSESSEE IN ITA NO. 13 45/PN/2011 (SUPRA). WE OBSERVE THAT THE TRIBUNAL AFTER CONSIDERING T HE PLEA OF THE ASSESSEE WITH REGARD TO AMORTIZATION OF LEASE HOLD PREMIUM HAS REJECTED THE SAME BY FOLLOWING THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF M/S. DRILLBITS INTERNATIONAL P. LTD. VS. DCIT IN ITA NO. 1361/ PN/2010 FOR ASSESSMENT YEAR 2006-07 DECIDED ON 23-08-2011. RE SPECTFULLY FOLLOWING THE SAME THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 7. THE THIRD AND FOURTH ISSUES RAISED IN THE APPEALS ARE : (I) DISALLOWANCE OF PROVISION FOR EXPENDITURE UNDER BHAVISHYA KALYAN YOJANA (BKY), EMPLOYEES WELFARE SCHEME; AND, (II) DISALLOWANCE OF PROVISION FOR MEDI-CLAIM INSURANCE. THE LD. AR OF THE ASSESSEE SUBMITTED THAT SIMILAR ISSUES W ERE CONSIDERED BY THE TRIBUNAL IN ITA NO. 1345/PN/2011 (SUPRA ) AND THE SAME WERE DECIDED IN FAVOUR OF THE ASSESSEE. ON THE OT HER HAND THE LD. DR SUBMITTED THAT THE ISSUE WITH RESPECT TO BOTH THE S CHEMES HAVE BEEN CONSIDERED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN A SSESSEES OWN 9 CASE FOR THE ASSESSMENT YEAR 2001-02. THE TRIBUNAL HAS REMITTED THE MATTER BACK TO THE ASSESSING OFFICER WITH A DIRECTION TO D ETERMINE THE DEDUCTION ON ACCOUNT OF BKY SCHEME AND MEDI-CLAIM INSURANCE. 7.1 WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. THE ASSESSING OFFICER HAS DISALLOWED THE AMOUNT ON ACCOUNT OF B OTH THE WELFARE SCHEMES BY HOLDING THEM TO BE CONTINGENT IN NATUR E. THE COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE FINDINGS OF AS SESSING OFFICER AND DISMISSED THIS GROUND OF APPEAL. 7.2 WE OBSERVE THAT BOTH THE ISSUES ARE CONSIDERED BY THE TRIBUNAL IN ITA NO. 1345/PN/2011 (SUPRA). THE FINDINGS OF THE CO-ORDIN ATE BENCH ARE AS UNDER: 87. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE A SSESSEE STRESSED BEFORE US THAT THE LIABILITY HAD BEEN WORKED OUT ON THE BASIS OF ACTUARIAL VALUATION AND WHERE THE VALUATION H AS BEEN MADE ON A SCIENTIFIC BASIS, THEN SUCH LIABILITY IS TO BE A LLOWED IN THE HANDS OF THE ASSESSEE AS HELD BY THE HONBLE SUPREME COURT I N ROTORK CONTROLS INDIA (P) LTD. VS. CIT (SUPRA). FURTHER RELIANCE ON WAS PLACED ON THE RATIO LAID DOWN BY THE CHANDIGARH BEN CH OF THE TRIBUNAL IN M/S. GLAXO SMITHKLINE CONSUMER HEALTHCARE L TD. VS. ACIT (SUPRA). ON THE PERUSAL OF THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER YEARS, IT IS APPARENT THAT T HE TRIBUNAL HAS COME TO A FINDING THAT THE LIABILITY OF THE ASSESSEE HAS NOT CRYSTALLIZED IN THE YEAR UNDER CONSIDERATION, SINCE T HE SAID LIABILITY WOULD ONLY ARISE ON THE HAPPENING OF CERTAIN EVENTS WHICH WOULD HAPPEN IN THE FUTURE, HENCE THE LIABILITY IS A CONTIN GENT LIABILITY. THE ISSUE OF THE LIABILITY HAVING BEEN WORKED OUT ON THE BASIS OF AS-15 OR SCIENTIFIC METHOD IS DIFFERENT ASPECT OF THE ISSU E, BUT THE FIRST POINT TO BE CONSIDERED IS THE NATURE OF LIABILITY I.E. WHETHE R IT HAD ARISEN IN THE YEAR UNDER CONSIDERATION OR IT WOULD ARISE ON TH E HAPPENING OF CERTAIN EVENT IN FUTURE. THE FINDING OF THE TRIBUNA L IN THE CASE OF 10 ASSESSEE WAS THAT THE LIABILITY TO PAY UNDER BKY SCHE ME OR MEDICLAIM INSURANCE SCHEME WOULD ONLY ARISE ON THE HA PPENING OF CERTAIN EVENTS IN FUTURE AND CONSEQUENTLY, THE TRIBU NAL CAME TO A FINDING THAT THE LIABILITY HAVING NOT BEEN CRYSTALLIZE D DURING THE YEAR UNDER CONSIDERATION WAS A CONTINGENT LIABILITY AND WA S NOT ALLOWABLE IN THE HANDS OF THE ASSESSEE. WE ARE IN CONF ORMITY WITH THE FINDING OF TRIBUNAL IN THIS REGARD AND APPLYING THE SAME, WE HOLD THAT ASSESSEE IS NOT ENTITLED TO THE CLAIM OF ALLOWA NCE OF PROVISION FOR EXPENDITURE UNDER BKY SCHEME OF RS.54,1 6,204/- AND ALSO THE PROVISION MADE FOR EXPENDITURE IN RESPECT O F MEDICLAIM INSURANCE COVERAGE SCHEME AMOUNTING TO RS.19,53,311/-. HOWEVER, AS HELD BY THE TRIBUNAL, THE ASSESSEE IS ENTITLE D TO CLAIM OF EXPENDITURE IN RESPECT OF BENEFIT PAYABLE TO EX-EM PLOYEES, WHO HAVE RETIRED & FULFILL THE CONDITIONS OF THE SCHEME. REFERENCE IS MADE TO PARAS 46 AND 51 OF THE ORDER OF THE TRIBUNA L (SUPRA). ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DETE RMINE THE DEDUCTION ON ACCOUNT OF BKY SCHEME AND MEDICAL INSUR ANCE SCHEME , IN VIEW THEREOF, THE GROUNDS OF APPEAL NOS.3 AND 4 RA ISED BY THE ASSESSEE ARE THUS, PARTLY ALLOWED. SINCE, THE ISSUE IN PRESENT SET OF APPEALS IS SIMILAR TO THE ONE ALREADY DECIDED BY THE TRIBUNAL, WE REMIT THIS ISSUE BACK T O THE ASSESSING OFFICER WITH A DIRECTION TO DETERMINE THE DEDUCTIO N ON ACCOUNT OF BKY SCHEME AND MEDI-CLAIM INSURANCE IN THE SAME TERMS . ACCORDINGLY, BOTH THE GROUNDS OF APPEAL ARE PARTLY ALLOWED. 8. THE FIFTH ISSUE RAISED IN THE APPEALS OF THE ASSESSEE IS DISALLOWANCE OF DEDUCTION U/S. 35D. THE ASSESSEE HAS CLAIMED DEDUCTIO N OF EXPENDITURE INCURRED ON INCREASING IN AUTHORIZED SHARE CA PITAL. THE LD. AR OF THE ASSESSEE FAIRLY ADMITTED THAT THIS ISSUE HAS BE EN DECIDED BY THE TRIBUNAL AGAINST THE ASSESSEE IN ITA NO. 1345/PN/201 1 (SUPRA). THE CO-ORDINATE BENCH OF THE TRIBUNAL WHILE ADJUDICATING TH IS ISSUE HAS PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT O F INDIA IN THE CASE OF BROOKE BOND INDIA LTD. VS. CIT REPORTED AS 225 ITR 798 (SC) AND 11 JUDGEMENT IN THE CASE OF PUNJAB STATE INDUSTRIAL DEVELO PMENT CORPORATION LTD. VS. CIT REPORTED AS 225 ITR 792 (SC). THE TRIBUNAL HELD THAT UNDISPUTEDLY THE EXPENDITURE WAS INCURRED BY THE ASSESSEE FOR INCREASING SHARE CAPITAL THUS IT IS CAPITAL IN NATURE. THUS, THE SAME CANNOT BE CONSIDERED FOR COMPUTING DEDUCTION U/S 35D OF THE ACT. IN THE PRESENT SET OF APPEALS ALSO, IT IS AN ADMITTED POSITION THAT THE EXPENDITURE CLAIMED AS DEDUCTION UNDER SECTION 35D IS WITH RESPECT TO INCREASE IN AUTHORIZED SHARE CAPITAL. RESPECTFULLY FOLLOWING T HE SAME RATIO, THIS GROUND OF THE APPEAL RAISED BY THE ASSESSEE IS DISMISSED. 9. THE SIXTH ISSUE RAISED IN THE APPEALS BY THE ASSESSEE IS DISALLOWANCE OF CORPORATE MEMBERSHIP ENTRANCE FEE PAID TO POONA CLUB. THE CONTENTION OF THE ASSESSEE IS THAT THE EXPENDITURE IS ALLOWABLE SINCE IT IS INCURRED FOR THE PURPOSE OF ITS BUSINESS. THE ASSESS ING OFFICER REJECTED THE CONTENTIONS OF ASSESSEE AND HELD THAT THE EXPENDITURE FOR OBTAINING CORPORATE MEMBERSHIP WILL RESULT INTO ENDURING BEN EFIT TO THE ASSESSEE AND WILL ALSO FURTHER THE BUSINESS PROSPECTS O F THE ASSESSEE. THE EXPENDITURE ON ACQUIRING MEMBERSHIP IS ONE TIME, THERE FORE, THE SAME IS CAPITAL EXPENDITURE. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE FINDINGS OF THE ASSESSING OFFICER AND CONFIR MED THE DISALLOWANCE. 9.1 THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE ASSES SEE IS PROVIDING CORPORATE MEMBERSHIP TO ITS SENIOR EMPLOYEES IN ORDER TO ASSIST THEM WITH THE OPPORTUNITIES TO ESTABLISH BETTER BUSINESS CONTA CTS, THEREBY ENHANCING AND PROMOTING THE BUSINESS OF THE COMPANY. SIN CE, EXPENDITURE INCURRED IS WHOLLY AND EXCLUSIVELY FOR ITS BUSIN ESS THE SAME IS CLAIMED AS REVENUE EXPENDITURE U/S. 37 OF THE ACT. THE LD. AR IN SUPPORT OF HIS SUBMISSIONS PLACED RELIANCE ON THE DECISION OF PUNE 12 BENCH IN ITA NOS. 1812 & 1813/PN/2013 IN THE CASE OF IN TERVALVE (INDIA) LTD. VS. ACIT DECIDED ON 30-04-2015. THE LD. AR FURT HER REFERRED TO THE FULL BENCH DECISION OF HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS. GROZ BECKERT ASIA LIMITED REPORTED A S 351 ITR 196 (FB). ON THE OTHER HAND THE LD. DR SUPPORTED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS). 9.2 WE HAVE HEARD THE SUBMISSIONS OF THE RIVAL SIDES AND E XAMINED THE ORDERS OF THE AUTHORITIES BELOW. WE ARE OF THE VIEW THAT THE THIS ISS UE IS SQUARELY COVERED BY THE FULL BENCH DECISION OF HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS. GROZ BECKERT ASIA LIMITED (SUPRA). THE HON'BLE HIGH COURT HAS HELD THAT THE CORPOR ATE MEMBERSHIP OF THE CLUB WAS OBTAINED FOR RUNNING BUSINESS W ITH A VIEW TO PRODUCE PROFIT. SUCH MEMBERSHIP DID NOT BRING INTO EXIS TENCE AN ASSET OR AN ADVANTAGE FOR ENDURING BENEFIT OF BUSINESS. I T IS AN EXPENDITURE INCURRED FOR THE PERIOD OF MEMBERSHIP AND IS NOT LONG LASTING. BY SUBSCRIBING TO MEMBERSHIP OF A CLUB, NO CAPITA L ASSET WAS CREATED, ONLY, A PRIVILEGE TO USE FACILITIES OF A CLUB, WERE CON FERRED AND THAT TOO FOR A LIMITED PERIOD. 9.3 THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF INTERVALVE (INDIA) LTD. VS. ACIT (SUPRA) AFTER ANALYZING THE CASE LAWS FAR AND AGAINST APPLIED THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LIMITED., REPORTED AS 88 ITR 192 AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE TRIBUNAL HELD THAT THE ENTRANCE FEES OF MEMBERSHIP FOR THE BUSINESS CLUB IS REVEN UE EXPENDITURE. IN THE LIGHT OF ABOVE DECISIONS, WE HOLD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS PAYMENT OF CORPORATE MEMBERSHIP FEE OF THE CLUB FOR ITS EMPLOYEES IS REVENUE EXP ENDITURE. ACCORDINGLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 13 10. THE SEVENTH ISSUE RAISED IN THE APPEALS OF THE ASSES SEE IS DISALLOWANCE OF DEDUCTION U/S. 80HHE OF THE ACT. DURING THE RELEVANT PERIOD THE ASSESSEE HAS CLAIMED DEDUCTION U/S. 80HHE OF THE ACT. THE ASSESSING OFFICER DISALLOWED THE DEDUCTION ON THE GROUND TH AT ASSESSEE HAS CLAIMED DOUBLE BENEFIT OF DEDUCTION/EXEMPTION ON THE SA ME PROFITS. IN FORM NO.10CCAF, THE AUDITORS OF THE ASSESSEE REPORT ED THAT THE EXPORT TURNOVER FOR THE PURPOSE OF THE COMPUTATION OF T HE QUANTUM OF DEDUCTION U/S. 80HHE ALSO INCLUDES EXPORT TURNOVER OF THE UNIT ON WHICH THE ASSESSEE HAS CLAIMED EXEMPTION U/S. 10A OF THE ACT. THE ASSESSING OFFICER HELD THAT ONCE THE PROFITS HAVE BEEN CON SIDERED FOR EXEMPTION U/S. 10A THE SAME PROFITS CANNOT BE CONSIDERED AGAIN FOR COMPUTING DEDUCTION U/S. 80HHE. BY INCLUDING THE EXPORT T URNOVER OF THE UNIT TAKING BENEFIT OF SECTION 10A, THE EXPORT TURNOVE R COMPUTED FOR THE PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION U/S. 80HHE THE ASSESSEE IS CLAIMING DOUBLE BENEFIT OF DEDUCTION/EXEMPTION ON THE SAME PROFITS. THE ASSESSING OFFICER FURTHER HELD THAT FOR THE PUR POSE OF COMPUTING BUSINESS PROFITS AS PER EXPLANATION (D) TO SECTIO N 80HHE, 90% OF RECEIPTS ON ACCOUNT OF ANNUAL MAINTENANCE COST (A MC) ARE ALSO REQUIRED TO BE REDUCED ALONG WITH INTEREST, RENT ETC. TH ESE RECEIPTS DO NOT HAVE ANY ELEMENT OF TURNOVER. 10.1 THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE ISSUE REGARDING ELIGIBILITY OF THE ASSESSEE TO CLAIM DEDUCTION U/S. 80HHE AFTER INCLUSION OF TURNOVER OF THE UNDERTAKING AVAILING THE BENEFIT OF EXEMP TION U/S. 10A WAS CONSIDERED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ITA NO. 1345/PN/2011 FOR ASSESSMENT YEAR 2001-02 (SUPRA). THE TRIBUNAL HELD THAT THE ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION U/S 80HHE ON THE EXPORT TURNOVER OF EOU. 14 10.2 THE SECOND LIMB OF THE ARGUMENT OF THE ASSESSEE IS THAT THE AUTHORITIES BELOW HAVE ERRED IN REDUCING 90% OF AMC INCOME FROM THE TURNOVER WHILE CALCULATING BUSINESS PROFITS AS PER EXPLANA TION (D) TO SECTION 80HHE OF THE ACT. THE CONTENTION OF THE ASSESSE E IS THAT THE AMC ACTIVITIES CARRIED OUT BY THE ASSESSEE ARE PART OF ITS REGULAR BUSINESS ACTIVITY. THE AMC INCLUDES CORRECTIVE AND PREVEN TIVE MAINTENANCE SERVICES. THE SAID SERVICES ARE CARRIED OUT FOR PROPER PERFORMANCE OF SOFTWARE. THE BUSINESS ACTIVITY OF THE ASSE SSEE INCLUDES CAD/CAM CONSULTANCY, INFORMATION TECHNOLOGY SUPPORT ETC. T O ITS CUSTOMERS. THE AMC RECEIPTS ARE INTEGRAL PART OF BUSINES S INCOME AND DOES NOT FALL UNDER THE HEAD INCOME FROM OTHER SOURCES . IN SUPPORT OF HIS SUBMISSIONS THE LD. AR HAS PLACED RELIANCE ON THE DECISIO N OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MOTOR INDUS TRIES CO. LTD. REPORTED AS 331 ITR 79 (KAR.) AND THE JUDGMENT OF THE H ON'BLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. PFIZER LTD. REPORTED AS 330 ITR 6 2 (BOM.). THE LD. AR POINTED OUT THAT THE EXCLUSION OF AMC RE CEIPTS HAVE BEEN DONE BY THE REVENUE ONLY IN THE ASSESSMENT YEAR 2004-05. IN THE EARLIER ASSESSMENT YEARS AND THE SUCCEEDING ASSESSMENT YEARS THE REVENUE HAS NOT RAISED ANY OBJECTION ON INCLUSION OF AMC RECEIPTS. WHEREAS, THE ASSESSEE HAS BEEN CONSISTENTLY SHOWING AM C RECEIPTS UNDER THE HEAD BUSINESS INCOME. THERE HAS BEEN NO CHANGE IN THE BUSINESS OF THE ASSESSEE OR THE ACCOUNTING TREATMENT G IVEN BY THE ASSESSEE TO THE AMC RECEIPTS. 10.3 ON THE OTHER HAND, THE LD. DR VEHEMENTLY DEFENDED T HE FINDINGS OF THE CIT(A). THE LD. DR SUBMITTED THAT THE ASSESSEE IN CLA IMING DOUBLE BENEFIT ON THE EXPORT TURNOVER OF EOU. AFTER HAVING CLAIM ED THE BENEFIT OF SECTION 10A, THE ASSESSEE HAS AGAIN CLAIMED DEDUCTION U/S 80HHE ON SAME PROFITS. THIS IS AGAINST THE SPIRIT OF THE ACT. 15 10.4 WE HAVE HEARD THE SUBMISSIONS OF BOTH THE SIDES AND HAVE EXAMINED THE FINDINGS OF THE AUTHORITIES BELOW ON THIS ISSU E. THE GRIEVANCE OF THE ASSESSEE IN DISALLOWING DEDUCTION U/S 80HH E IS TWO FOLD. THE FIST LIMB OF SUBMISSIONS IS THAT FOR COMPUTING DEDUCT ION U/S 80HHE, THE EXPORT TURNOVER OF THE UNIT ON WHICH BENEFIT O F SECTION 10A HAS BEEN CLAIMED HAS TO BE INCLUDED. WE FIND THAT THIS ISSU E HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A SSESSMENT YEAR 2001-02. THE RELEVANT EXTRACT OF THE ORDER OF THE TRIBU NAL DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE IS AS UNDER: 94. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE IN THE PRESENT APPEAL IS AGAINST THE EXCLUSI ON OF EXPORT TURNOVER OF THE EOU UNIT WHILE COMPUTING THE DEDUCTI ON UNDER SECTION 80HHE OF THE ACT. SIMILAR ISSUE IN RESPECT OF COMPUTATION OF DEDUCTION UNDER SECTION 80HHE OF THE ACT VIS--VIS T HE INCLUSION / EXCLUSION OF THE EXPORT SALES AROSE BEFORE THE TRIBUN AL IN SERUM INSTITUTE OF INDIA LTD. VS. ACIT (SUPRA) AND IT WAS HELD AS UNDE R:- 47. INCLUSION OF THE EXPORT SALES OF THE EOU UNIT IN THE EXPORT TURNOVER, THE NUMERATOR OF THE FORMULA DEVISED FOR COMPUTATION THE ALLOWABLE DEDUCTION U/S 80HHC IS THE MAIN CONTENTIO N OF THE REVENUE. REVENUE HAS TAKEN THE ARGUMENT AGAINST SUC H INCLUSION, WHILE IT PLEADS FOR INCLUSION RELEVANT TURNOVER OF THE EOU UNIT IN THE TOTAL TURNOVER, THE DENOMINATOR IN THE SAID FORMU LA. PER CONTRA, RELYING ON VARIOUS DECISIONS, THE ASSESSEE TAKES TH E STAND THAT THE INCLUSIONS OF EXPORT TURNOVER AND THE TOTAL TURNOVE R OF THE EOU UNIT HAS TO BE DONE IN EXPORT TURNOVER AND TOTAL TURNOVE R IN THE FORMULA. FOR THIS, WE UNDERTAKE TO EXAMINE THE RELEVANT PROV ISIONS TO ADJUDICATE IF SUCH INCLUSIONS ARE PREVENTED OR OTHE RWISE. WE SHALL FIRST TAKE UP THE EXPORT TURNOVER AS DEFINED IN THE ACT. THE EXPRESSION EXPORT TURNOVER IS DEFINED IN THE EXPL ANATION (B) TO SECTION 80HHC OF THE ACT AND THE SAME IS REPRODUCED AS UNDER (B) EXPORT TURNOVER MEANS THE SALE PROCEEDS RECE IVED IN, OR BROUGHT INTO, INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE IN ACCORDANCE WITH CLAUSE (A) OF SUB-SECTI ON (2) OF ANY GOODS OR MERCHANDISE TO WHICH THIS WWW.TAXGURU.I N28 ITA NO.948/PN/2005 ASSESSMENT YEAR:2001-02 SERUM 16 INSTITUTE OF INDIA LTD. SECTION APPLIES AND WHICH A RE EXPORTED OUT OF INDIA, BUT DOES NOT INCLUDE FREIGHT OR INSUR ANCE ATTRIBUTABLE TO THE TRANSPORT OF THE GOODS OR MERCH ANDISE BEYOND THE CUSTOMS STATION AS DEFINED IN THE CUSTOM S ACT, 1962 48. FROM THE ABOVE, THE LEGISLATURE HAS USED THE EX PRESSIONS THE SALE PROCEEDS RECEIVED IN, OR BROUGHT INTO, INDIA B Y THE ASSESSEE AND THE EXPRESSIONS BY THE ASSESSEE DESERVES EMPH ASIS AS IT CONNOTES THAT THE EXPORT TURNOVER SHOULD BE OF AS SESSEE LEVEL. MEANING THEREBY, THE ASSESSEES LEVEL EXPORT TURNO VER NEEDS TO BE CONSIDERED. THE EXPRESSION IS WIDE ENOUGH TO INCLUD E THE EXPORT SALES OF THE EOU UNIT. FURTHER, BY THE USE OF EXP RESSION ANY BEFORE GOODS AND MERCHANDISE ALL THE GOODS AND ME RCHANDISE IS COVERED. HOWEVER, THE RESTRICTION APPLY TO SUCH GOO DS AND MERCHANDISE, WHICH ARE LISTED IN CLAUSE (B) OF SECT ION 80HHC (2) I.E. MINERAL OIL AND MINERALS AND ORES (OTHER THAN PROCES SED MINERALS AND ORES SPECIFIED IN 12TH SCHEDULE TO ACT. 95. THE CIT(A) HAD PLACED RELIANCE ON THE RATIO LAID DOWN BY MUMBAI BENCH OF THE TRIBUNAL IN TATA BP SOLAR INDIA L TD. VS. ACIT REPORTED IN 103 ITD 386 (MUM) (TRIB) IN HOLDING THAT T HE ASSESSING OFFICER WAS CORRECT IN EXCLUDING THE EXPORT TURNOVER WHILE COMPUTING EXEMPTION UNDER SECTION 80HHE OF THE ACT. THE PUNE BENCH OF THE TRIBUNAL IN SERUM INSTITUTE OF INDIA LTD. VS. ACIT IN I TA NO.948/PN/2005, RELATING TO ASSESSMENT YEAR 2001-02, VI DE ORDER DATED 18.01.2012 HAD CONSIDERED THE RATIO LAID DOWN B Y THE MUMBAI BENCH OF THE TRIBUNAL IN TATA BP SOLAR INDIA L TD. VS. ACIT (SUPRA) AND RELIANCE WAS PLACED ON THE RATIO LAID DO WN BY THE HONBLE BOMBAY HIGH COURT IN HINDUSTAN UNILEVER LTD. VS DCIT (2010) 325 ITR 102 (BOM) AND IT WAS HELD THAT THE ASSES SEE WAS ENTITLED FOR INCLUSION OF EXPORT SALES IN THE EXPORT TURNOV ER. 96. FURTHER, SECTION 80HHE (5) OF THE ACT PROVIDES TH AT WHERE A DEDUCTION UNDER SECTION 80HHE OF THE ACT IS CLAIMED AND ALLOWED IN RESPECT OF ELIGIBLE PROFITS, NO DEDUCTION SHALL BE ALLOWED IN R ELATION TO SUCH PROFITS UNDER ANY OTHER PROVISIONS OF THE ACT. IN THE CASE OF THE ASSESSEE, THE ELIGIBLE PROFITS CONSIDERED FOR DEDUCT ION UNDER SECTION 80HHE OF THE ACT EXCLUDED THE PROFITS THAT HAD ALREAD Y BEEN CLAIMED UNDER SECTION 10A OF THE ACT. HENCE, THERE IS NO CASE OF 17 DOUBLE DEDUCTION OF PROFITS BY INCLUDING THE EXPORT T URNOVER OF STP IN THE EXPORT TURNOVER FOR CLAIMING DEDUCTION UNDER SEC TION 80HHE OF THE ACT. 97. WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE DELHI BENCH OF THE TRIBUNAL IN JINDAL EXPORTS (P.) LTD. VS. ACIT REP ORTED IN 31 ITD 217 (1989), WHEREIN IT WAS HELD AS UNDER:- 'THERE IS ONE MORE ASPECT OF THE MATTER SECTION 80H HC DOES NOT MAKE ANY DISTINCTION BETWEEN THE EXPORT TURNOVER FR OM THE FREE TRADE ZONE AND FROM OTHER AREAS. THE REVENUE MAY FE EL THAT ONCE THE ENTIRE INCOME OF THE INDUSTRIAL UNDERTAKING IS EXEMPT UNDER SEC. 10A A FURTHER DEDUCTION UNDER SEC. 80HHC IN RESPECT OF THE SAME TURNOVER MAY GIVE AN UNINTENDED ADVANTAGE TO THE AS SESSEE. IN ACTUAL PRACTICE HOWEVER IT MAY NOT BE SO. IF THE UN DERTAKING INCURS A LOSS, THEN THE ADVANTAGE OR BENEFIT UNDER SEC. 10 A MAY BE ILLUSORY. WHY SHOULD THE ASSESSEE BE DENIED DEDUCTI ON ALLOWABLE UNDER SECTION 80HHC ? THIS IS PARTICULARLY SO WHEN THE GROSS TOTAL INCOME, IN ANY CASE, HAS TO BE A POSITIVE FIGURE BE FORE ANY DEDUCTION UNDER CHAPTER VIA CAN BE ALLOWED. 30. WE ARE OF THE CONSIDERED VIEW THAT DEDUCTION UN DER SEC. 80HHC CANNOT BE DENIED SIMPLY BECAUSE THE INCOME OF THE I NDUSTRIAL UNDERTAKING IS EXEMPT UNDER SEC. 10A. BUT EVEN IF T WO REASONABLE CONSTRUCTIONS OF THE RELEVANT PROVISIONS ARE POSSIB LE, THAT CONSTRUCTION WHICH FAVOURS THE ASSESSEE, MUST BE AD OPTED - CIT V. VEGETABLE PRODUCTS LTD. [1973] 88 ITR 192 (SC)' 98. IN THE ABOVE SAID FACTS AND CIRCUMSTANCES, WE DI RECT THE ASSESSING OFFICER TO INCLUDE THE EXPORT TURNOVER OF THE EOU UNIT WHILE COMPUTING THE DEDUCTION UNDER SECTION 80HHE O F THE ACT. THE GROUND OF APPEAL NO.5 RAISED BY THE ASSESSEE IS THUS, ALLOWE D. THE REVENUE HAS NOT BEEN ABLE TO CONTROVERT THE FINDIN GS OF THE TRIBUNAL. WE, THEREFORE, RESPECTFULLY FOLLOW THE SAME AND DIR ECT THE ASSESSING OFFICER TO INCLUDE THE EXPORT TURNOVER OF EOU WH ILE COMPUTING DEDUCTION 80HHE OF THE ACT. 18 10.5 NOW, WE PROCEED WITH THE SECOND LIMB OF THE SUBMISSIO NS. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS BEEN SHOWING AMC CHARGES IN THE PROFIT AND LOSS ACCOUNT UNDER THE HEAD INCOME FROM SER VICES. A PERUSAL OF THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31-03-2004 WOULD SHOW THAT UNDER THE HEAD INCOME, TH E ASSESSEE HAS THREE SUB HEADS VIZ INCOME FROM SERVICES, SALE OF PRO DUCTS AND OTHER INCOME. UNDER THE HEAD INCOME FROM SERVICES THE ASSESSEE HAS INCLUDED INCOME FROM VARIOUS SERVICES RENDERED BY IT A ND AMC CHARGES. UNDER THE HEAD SALE OF PRODUCTS THE REVENU E GENERATED FROM SALE OF OWN PRODUCTS AND TRADING PRODUCTS IS INCLUDED WHE REAS UNDER THE HEAD OTHER INCOME, INTEREST INCOME, FOREIGN CURRENCY GAIN MISCELLANEOUS INCOME IS RECKONED. IT IS ALSO NOT DISPUTED THAT THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING SIMILAR METHOD OF ACCOUNTING IN RESPECT OF AMC CHARGES FOR THE PAST SEVERAL YEARS, AS W ELL AS, IN THE SUBSEQUENT YEARS. IT IS ALSO NOT DISPUTED THAT THE ASS ESSEE IS PRIMARILY ENGAGED IN PROVIDING I.T. RELATED SERVICES. THEREFORE, BY N O STRETCH OF IMAGINATION THE AMC CHARGES RECEIVED BY THE ASSESSEE CA N BE HELD TO BE INCOME OF THE ASSESSEE UNDER THE HEAD OTHER SOURCES . IN VIEW OF THE ABOVE UNDISPUTED FACTS, WE ARE OF THE CONSIDERED VIEW THA T THE AMC RECEIPTS ARE INTEGRAL PART OF THE BUSINESS INCOME OF THE A SSESSEE. ACCORDINGLY, THIS GROUND IN THE APPEALS OF THE ASSESSEE IS ALLOWED. 11. THE EIGHTH ISSUE RAISED IN THE APPEALS OF THE ASSESSEE IS REALLOCATION OF EXPENSES BETWEEN STP UNIT AND NON-STP UN IT. THE ASSESSEE CLAIMED EXEMPTION U/S. 10A IN RESPECT OF STP UN IT AT HINJEWADI. THE TOTAL CONSULTANCY OFFSHORE INCOME ADMITTE D BY THE ASSESSEE IS RS.8,06,74,660/- AND THE PROFIT ON ACCOUNT OF ITS OFFSHORE ACTIVITIES HAS BEEN ADMITTED BY THE ASSESSEE AS RS.1,80,21 ,965/-. FOR CLAIMING EXEMPTION U/S. 10A, THE ASSESSEE HAS APPORTIONED EXPENSES TO 19 STP UNIT ON CERTAIN BASIS. THE EXPENDITURE RELATES TO : (A) DEPRECIATION ON VEHICLES RS.71,72,724/-, (B) TRAVELLING AND CONVEYANCE RS.4,03,33,670/- AND (C) EXPENSES ON ACCOUNT OF PAYMENT MA DE TO TATA TECHNOLOGY (US), SUBSIDIARY OF ASSESSEE RS.19,13,22,405/-. TH E CONTENTION OF THE ASSESSEE IS THAT OFFSHORE WORK IS CARRIE D OUT BY THE STP UNIT AT HINJEWADI AND THE ONSITE WORK IS UNDERTAKEN BY T HE NON-STP UNIT. THE ACTIVITIES OF STP UNIT MOSTLY CONSTITUTE ENGINEER ING DESIGN SERVICES. THE ACTIVITIES OF THE NON-STP UNIT MOSTLY CONST ITUTE ERP IMPLEMENTATION. THE COMPANY CLAIMED DEDUCTION U/S. 10A OF T HE ACT IN RESPECT OF STP UNIT ALONE. THE ASSESSEE APPORTIONED TH E EXPENSES BETWEEN STP AND NON-STP UNIT ON THE FOLLOWING BASIS: NATURE OF EXPENSE BASIS OF APPORTIONMENT OTHER SALARY COSTS (E.G. GRATUITY, SUPERANNUATION, ETC.) DIRECT SALARY COST EXPENSES LIKE BUS TRANSPORT AND CANTEEN NUMBER OF EMPLOYEES EXPENSES LIKE DEPRECIATION ON BUILDINGS, POWER, WATER, SECURITY AND CONSERVANCY CHARGES AREA OCCUPIED BY STP PREMISES OTHER COMMON EXPENSES TURNOVER FROM RESPECTIVE ACTIVITIES 11.1 THE DEPRECIATION ON VEHICLES HAS BEEN ALLOCATED BY TH E ASSESSEE ON THE BASIS OF TURNOVER. THE REASONS FOR ADOPTING THIS MET HOD OF ALLOCATION BY THE ASSESSEE IS THAT THE DEPRECIATION ON VEHICLES COU LD NOT BE DIRECTLY IDENTIFIED TO EITHER OF THE UNITS AS THE VEHICLES WERE USED FOR THE ENTIRE BUSINESS OF THE ASSESSEE ALTOGETHER. THE ASSESSING OFFICE R REJECTED THE ALLOCATION MODEL. THE ASSESSING OFFICER HELD THAT THE DEPREC IATION SHOULD BE APPORTIONED ON THE BASIS OF ALLOCATION OF VEHICLES TO THE EMPLOYEES OF STP AND NON-STP UNIT. THE VEHICLES IN MOST O F THE CASES HAVE BEEN ASSIGNED TO SPECIFIC EMPLOYEES OF THE ASSESSEE COMPANY. THEREFORE, IT WOULD NOT BE DIFFICULT TO IDENTIFY THE VEHICLES AS SIGNED TO THE 20 EMPLOYEES OF THE STP UNIT AND NON-STP UNIT. THE CIT(A) AC CEPTED THE ASSESSING OFFICERS METHOD OF ALLOCATION OF DEPRECIATION. WE ARE OF THE CONSIDERED VIEW THAT ALLOCATION OF DEPRECIATIO N ON THE BASIS OF TURNOVER IS NOT ACCEPTABLE. THE DEPRECIATION ON VEHICLES CAN BE ALLOWED ON THE BASIS OF USE OF VEHICLES FOR THE SPECIFIC UNIT. VEHICLES ARE ALLOCATED TO THE STAFF OF THE STP AND NON-STP UNIT. THE V EHICLES ALLOCATED TO TWO DIFFERENT UNITS CAN BE IDENTIFIED. DEPRECIATIO N ON THE ASSET UTILIZED FOR A PARTICULAR UNIT HAS TO BE ALLOCATED TO THAT UNIT ALONE. WE DO NOT FIND ANY INFIRMITY IN THE METHOD OF DEPRECIATION ON VEHICLES ADOPTED BY THE AUTHORITIES BELOW. THE SUBMISSIONS OF THE LD. AR ON THIS ISSUE ARE REJECTED. 11.2 AS REGARDS ALLOCATION OF TRAVELLING AND CONVEYANCE EXP ENDITURE IS CONCERNED, THE ASSESSEE HAS ALLOCATED THE SAME ON THE BASIS OF DIRECTLY IDENTIFIABLE EXPENSES DIRECTLY LINKED TO STP UNIT AND NON-ST P UNIT. THE COMMON EXPENSES ARE ALLOCATED ON THE BASIS OF TURNOVER . THE ASSESSING OFFICER HAS ALLOCATED THE TRAVELLING EXPENSES ON THE BASIS OF FOREIGN OFFSHORE ACTIVITIES AND FOREIGN ONSITE ACTIVITIES. IT IS AN AD MITTED POSITION THAT OFFSHORE ACTIVITIES ARE CARRIED OUT BY THE STP UNIT A ND ONSITE WORK IS UNDERTAKEN BY THE NON-STP UNIT. ANY EXPENDITURE RELATIN G TO TRAVELLING AND CONVEYANCE CAN BE FAIRLY ALLOCATED ON THE BASIS OF AC TIVITY BEING CARRIED OUT AT THE RESPECTIVE PLACE OF WORK. AS FAR AS C OMMON EXPENSES ARE CONCERNED THE SAME CAN BE ALLOCATED ON THE BASIS O F TURNOVER. THE ASSESSEE HAS ALLOCATED DIRECTLY IDENTIFIABLE EXPENDITURE ON ACTUAL BASIS TO THE STP AND NON-STP UNIT AND COMMON EXPENSES ON THE BASIS OF TURNOVER. WE DO NOT FIND ANY ERROR IN ALLOCATING OF TRAVEL LING AND CONVEYANCE EXPENDITURE ON ACTUAL DIRECTLY IDENTIFIABLE BA SIS. ACCORDINGLY, THE CONTENTIONS OF THE ASSESSEE ARE ACCEPTED. 21 11.3 THE THIRD EXPENDITURE ALLOCATION OF WHICH HAS BEEN DIS PUTED IS PAYMENTS MADE TO TATA TECHNOLOGY (US). THE ASSESSEE HA S ALLOCATED SELLING AND ADMINISTRATIVE COST FOR BOTH STP AND NON-STP U NITS ON ACTUAL BASIS WHEREAS THE REVENUE HAS REALLOCATED THE EX PENDITURE ON THE BASIS OF REVENUE OF OFFSHORE ACTIVITY AND ONSITE ACTIVITY OF TATA TECHNOLOGY (US). THE ALLOCATION OF ANY EXPENDITURE ON CERT AIN CRITERIA IS DONE, WHERE THE EXPENDITURE INCURRED IS NOT IDENTIFIABLE. WH ERE THE EXPENDITURE CAN BE DULY IDENTIFIED WITH RESPECT TO SEPARA TE UNITS THE ACTUAL EXPENDITURE RELATING TO SUCH UNITS SHOULD BE ACCEP TED. THE QUESTION OF ALLOCATION OF EXPENSES ON THE BASIS OF TURNOVE R/REVENUE OR ANY OTHER CRITERIA DOES NOT ARISE, IN CASE OF IDENTIFIABLE EXP ENDITURE. THE CONTENTION OF THE ASSESSEE IS THAT THE SELLING AND ADMINIS TRATIVE COSTS FOR BOTH THE UNITS WERE IDENTIFIABLE AND ARE INVOICED ON THE BA SIS OF ACTUAL COST INCURRED ON BOTH THE UNITS. SINCE, THE EXPENDITURE ARE IDENTIFIABLE UNIT WISE, AND HAVE BEEN SEPARATELY INVOICED, WE ACCEPT THE CO NTENTION OF THE ASSESSEE. HOWEVER, WE REMIT THE LATTER TWO ISSUES BACK TO THE ASS ESSING OFFICER TO VERIFY THE ALLOCATION OF BOTH EXPENSES ON ABOVE NOTED BASIS. THE ASSESSING OFFICER AFTER AFFORDING OPPORTUNITY OF HEARING TO THE ASSESSEE SHALL ALLOCATE EXPENDITURE TO STP AND NON-STP U NITS. THIS GROUND RAISED IN THE APPEALS OF THE ASSESSEE IS, THUS, PAR TLY ACCEPTED IN AFORESAID TERMS. 12. THE NINTH ISSUE RAISED IN THE APPEALS IS RE-COMPUTATIO N OF DEDUCTION U/S. 10A OF THE ACT. THE ASSESSING OFFICER AFTER REALLOCATION OF CERTAIN EXPENDITURE [DEPRECIATION ON VEHICLES, TRAVELLING AND CONVEYANCE AND PAYMENT TO TATA TECHNOLOGY (US)] HAS RESTRICTED THE CLAIM OF EXEMPTION U/S. 10A IN THE ASSESSMENT YEAR 2004-05 AND 2005-06. 22 SINCE, THE GROUND OF APPEALS OF THE ASSESSEE WITH REGARD TO REALLOCATION OF THE EXPENSES HAS BEEN PARTLY ACCEPTED. WE REMIT TH IS ISSUE BACK TO THE ASSESSING OFFICER FOR RE-COMPUTATION OF EXEMPTION U/S. 10A IN ACCORDANCE WITH THE DIRECTIONS OF THE TRIBUNAL IN RESPECT OF ALLOCATION OF EXPENSES AND IN LINE WITH THE DECISION OF HONBLE BOMBAY HIG H COURT IN THE CASE OF CIT VS. GEM PLUS JEWELLERY INDIA LTD. REPORTED AS 330 ITR 175 (BOM). THIS GROUND OF APPEALS OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 13. THE LAST AND TENTH ISSUE RAISED IN THE APPEALS OF THE ASSESSEE IS LEVY OF INTEREST U/S. 234B AND 234C OF THE ACT. IT IS A WELL SETTLED LAW THAT LEVY OF INTEREST U/S. 234B AND 234C IS MANDATORY AN D CONSEQUENTIAL. ACCORDINGLY, THIS GROUND OF APPEALS OF THE A SSESSEE IS DISMISSED. 14. IN THE RESULT, THE APPEALS OF THE ASSESSEE IN ITA NO . 18/PN/2012 FOR THE ASSESSMENT YEAR 2004-05, ITA NO. 19/PN/2012 FOR THE ASSESSMENT YEAR 2005-06, ITA NO. 2114/PN/2013 FOR THE ASSESSMENT YEAR 2007-08 AND ITA NO. 2115/PN/2013 FOR THE ASSESSM ENT YEAR 2008-09 ARE PARTLY ALLOWED. 15. NOW, WE PROCEED ON TO DECIDE THE APPEALS OF THE REVENUE. THE FIR ST ISSUE RAISED BY THE REVENUE IN ITS APPEAL IS WITH RESPECT TO EXPENDITURE ON COMPUTER SOFTWARE ACQUIRED BY ASSESSEE. THE CONTENT ION OF THE REVENUE IS THAT THE EXPENDITURE ON COMPUTER SOFTWARE H AS BEEN WRONGLY HELD AS REVENUE EXPENDITURE. EXPENDITURE ON ACQUIRING C OMPUTER SOFTWARE IS CAPITAL IN NATURE. THE ASSESSEE HAS ALSO RAIS ED THIS ISSUE IN ITS APPEALS ASSAILING PART DISALLOWANCE OF EXPENDITURE ON ACQ UIRING COMPUTER SOFTWARE. THE ISSUE HAS BEEN DEALT WITH IN DETA IL WHILE 23 DECIDING THE APPEALS OF THE ASSESSEE. THE CONTENTIONS OF THE ASSESSEE HAVE BEEN ACCEPTED AND THE ISSUE HAS BEEN DECIDED IN FA VOUR OF THE ASSESSEE. ACCORDINGLY, THIS GROUND IN THE APPEALS OF THE REVENUE HAS TO FAIL. 16. THE NEXT ISSUE RAISED BY THE REVENUE IN ITS APPEALS R ELATES TO DISALLOWANCE U/S. 14A. THE ASSESSEE HAS MADE INVESTMENT IN SHARES OF TATA TECHNOLOGY (US), A 100% SUBSIDIARY OF THE ASSESSEE. THE ASSESSEE HAS CLAIMED INTEREST EXPENDITURE IN THE ASSESSMENT YEARS 2004-05 AND 2005-06. THE ASSESSING OFFICER HELD THAT THE EXPENDITURE INCURRED FOR EARNING INCOME EXEMPT FROM TAX IS NOT ALLOWABLE UNDER THE PROVISIONS OF SECTION 14A. THE ASSESSING OFFICER ESTIMATED THE DISALLOWAN CE @ 2.5% AND COMPUTED INTEREST ATTRIBUTABLE TO LONG TERM INVESTME NT. THE COMMISSIONER OF INCOME TAX (APPEALS) REVERSED THE FINDINGS OF THE ASSESSING OFFICER ON THE GROUND THAT NO DIVIDEND WAS EARN ED BY THE ASSESSEE FROM THE INVESTMENTS MADE IN TATA TECHNOLOGY (U S). EVEN IF THE ASSESSEE WOULD HAVE EARNED DIVIDEND ON SUCH INVESTM ENT IT IS TAXABLE IN INDIA BEING DIVIDEND EARNED FROM FOREIGN COUNTRY. THEREFORE, THE PROVISIONS OF SECTION 14A OF THE ACT ARE NOT APPLICA BLE. WE ARE IN AGREEMENT WITH THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE. ACCORDINGLY, THIS GROUND IN THE APPEALS OF REVE NUE IS DISMISSED BEING DEVOID OF ANY MERIT. 17. THE NEXT ISSUE RAISED BY THE REVENUE IN ITS APPEAL FOR ASSESSMENT YEARS 2005-06 AND 2008-09 IS THAT THE COMMISSIONER OF I NCOME TAX (APPEALS) HAS ERRED IN NOT CONSIDERING THE FACT THAT THE E XPENDITURE ON TRAVELLING AND CONVEYANCE INCLUDING FOREIGN OFFSHORE ACTIVITIES AND EXPENDITURE ON DEPRECIATION IS NOT TO BE CONSIDERED FOR E XEMPTION U/S. 10A OF THE ACT. THE REVENUE HAS NOT BEEN ABLE TO SUBS TANTIATE THE 24 GROUND RAISED IN THE APPEAL. WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE. A CCORDINGLY, THIS GROUND OF APPEALS OF THE REVENUE IS DISMISSED BEING DEVOID OF MERIT. 18. THE LAST ISSUE RAISED BY THE REVENUE IN ITS APPEAL FO R THE ASSESSMENT YEAR 2008-09 RELATES TO DELETING OF DISALLOWANC E OF TAXES CLAIMED TO BE PAYMENTS ON ACCOUNT OF VAT, ADVANCE TAX, EMPLOYEE COST ETC. PAID IN KOREA. THE ASSESSING OFFICER MADE DISALLOWANCE O F RS.67,68,686/- U/S. 40(A)(II) R.W. EXPLANATION (1). THE ASSESSING O FFICER HELD THAT AS PER THE PROVISIONS OF SECTION 40(A)(II) NO DEDUCT ION IS TO BE ALLOWED FOR PAYMENT MADE IN THE NATURE OF ANY RATE OR TA X LEVIED ON PROFITS OR GAINS OF ANY BUSINESS OR PROFESSION. IN APPEAL T HE COMMISSIONER OF INCOME TAX (APPEALS) REVERSED THE FINDINGS O F ASSESSING OFFICER WITH THE FOLLOWING OBSERVATIONS: 7.2 THE SUBMISSIONS MADE BY THE APPELLANT ARE CAREFULL Y EXAMINED WITH REFERENCE TO THE FINANCIAL STATEMENTS O F THE APPELLANT FOR THE YEAR UNDER CONSIDERATION AND THE LEGAL POSITI ON AS APPLICABLE TO THE YEAR. THE MAIN CONTENTION OF THE APPELLANT IS THAT THE BRANCH TAXES OF RS.67,68,686/- PAID IN KOREA THROUGH PAEK & CO . WERE DEBITED TO THE PROVISION FOR TAXATION ACCOUNT BELOW T HE LINE IN THE PROFIT & LOSS ACCOUNT AND WAS NEVER CLAIMED AS DEDUC TION IN THE COMPUTATION OF TAXABLE INCOME OF THE APPELLANT. THERE IS MERIT IN THE CONTENTION OF THE APPELLANT. AS NOTICED FROM THE P&L ACCOUNT FOR THE YEAR UNDER CONSIDERATION AND THE MOVEMENT OF THE PR OVISIONS FOR TAXATION ACCOUNT, AS EXTRACTED HEREINABOVE, THE KOREA N TAXES WERE PASSED THROUGH PROVISION FOR TAXATION ACCOUNT, WHICH IS BELOW THE LINE ITEM IN THE P&L ACCOUNT. FOR READY REFERENCE, TH E RELEVANT PORTION OF THE P&L ACCOUNT FILED BY THE APPELLANT FOR THE YEAR IS SCANNED AND REPRODUCED HEREUNDER: PROFIT : (LOSS)/BEFORE TAX 23,652.11 22,289.97 PROVISION FOR TAXATION 4,331.46 1,754.31 CURRENT TAX 1,316.84 492.52 TAX FOR EARLIER YEAR 79.51 -- 25 DEFERRED TAX CHARGE/(CREDIT) 2.77 52.34 FRINGE BENEFIT TAX 91.12 80.46 PROFIT : (LOSS)/AFTER TAX 2,841.22 1,128.99 BALANCE BROUGHT FORWARD FROM PREVIOUS YEAR 1,679.79 1,194.16 ADD : WRITEBACK OF PROVISION FOR DIMINUTION IN VALUE OF INVESTMENT ---- 300.00 PROFIT AVAILABLE FOR APPROPRIATIONS 4,521.01 2,623.15 APPROPRIATIONS IT IS ALSO NOTICED THAT WHILE COMPUTING TAXABLE INCOME, THE APPELLANT HAS CONSIDERED PROFIT AFTER TAX (PAT) OF RS.28,41,21,875 /- AS BASE AND THE PROVISIONS FOR TAXATION AGGREGATING TO RS.14 ,94,95,009/- HAVE BEEN ADDED BACK BY THE APPELLANT. THE RELEVANT P ORTION OF THE STATEMENT OF TOTAL INCOME IS ALSO SCANNED AND REPRODUCED HEREUNDER FOR IMMEDIATE REFERENCES : STATEMENT OF INCOME AMOUNT (RS.) AMOUNT (RS.) INCOME FROM BUSINESS PROFIT AS PER PROFIT AND LOSS ACCOUNT (AFTER TAX) 284,121,876 LESS : INTEREST INCOME CONSIDERED SEPARATELY 19,949,994 ADD : DISALLOWANCES 139,634.693 PROVISION FOR INCOME TAX 276.979 PROVISION FOR DEFERRED TAX 9,112,239 PROVISION FOR FRINGE BENEFIT TAX 471,098 PROVISION FOR WEALTH TAX 2,849 FOREIGN CURRENCY LOSS CAPITALIZED FOR TAX PURPOSE 2 38,248 UNREALISED FOREIGN CURRENCY LOSS OF CAPITAL NATURE DEBITED TO P&L 110,086 LOSS ON SALE/SCRAP OF FIXED ASSETS 70,814,303 DEPRECIATION AS PER COMPANIES ACT 121,260 DONATIONS (14,719,000) U/S.43B FOR LEAVE ENCASHMENT LIABILITY (2,138,692) U/S.43B FOR PERFORMANCE BONUS 10,825,797 UNPAID SUPERANNUATION 1,931,877 PROVISION FOR DOUBTFUL DEBTS 216,681,738 216,681,738 480,853,619 AS COULD BE SEEN FROM THE ABOVE SCANNED IMPRESSION, TH E PROVISION FOR TAXES PAID IN KOREA, WHICH FORM PART OF PROVISI ON FOR INCOME-TAX OF RS.13.96 CRORES WAS NOT CLAIMED AS DEDUCTION IN THE COMPUTATION OF INCOME. WHEN THE AMOUNT PAID TOWARDS KOREAN TAXE S WAS NOT CLAIMED AS DEDUCTION EITHER ON PROVISION BASIS OR ON PAYMENT BASIS, 26 THE AO IS NOT JUSTIFIED IN MAKING THE DISALLOWANCE BY INVOKING THE PROVISIONS OF SEC. 40(A)(II). SIMILARLY, IN THE CASE O F TAX, WITHHELD OF SALARY PAID TO THE EMPLOYEES OF KOREAN BRANCH, NO DED UCTION WAS CLAIMED BY THE APPELLANT AND THEREFORE, QUESTION OF D ISALLOWANCE OF THE TDS DOES NOT ARISE. ACCORDINGLY, THE ADDITION OF R S.67,68,686/- (67,22,378 + 46,308) MADE BY THE AO ON THIS GROUND IS DELETED. 18.1 WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESE NTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. IT IS AN UN-REBUTTED FACT THAT THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION WITH RESPECT TO PAYMENT OF TAX, RATES ETC. IN KOREA. THE ASS ESSEE HAS CREATED PROVISION FOR THE SAME. THE ASSESSEE IN PROFIT & LOSS AC COUNT FOR THE PERIOD RELEVANT TO THE IMPUGNED ASSESSMENT YEAR HAS DE BITED THE PROVISION FOR TAXATION ACCOUNT BELOW THE LINE. THIS FACTUA L FINDINGS HAVE NOT BEEN REFUTED BY THE REVENUE. WE DO NOT FIND ANY INFI RMITY IN THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) ON THIS IS SUE. ACCORDINGLY, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 19. IN THE RESULT, THE THREE APPEALS OF THE REVENUE I.E. IT A NO. 36/PN/2012 FOR THE ASSESSMENT YEAR 2004-05, ITA NO. 37 /PN/2012 FOR THE ASSESSMENT YEAR 2005-06 AND ITA NO. 2083/PN/2013 FOR THE ASSESSMENT YEAR 2008-09 ARE DISMISSED FOR THE REASONS AFORESAID . ORDER PRONOUNCED ON FRIDAY, THE 29 TH DAY OF MAY, 2015 AT PUNE SD/- SD/- (R.K. PANDA) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 29 TH MAY, 2015 RK/SUJEET 27 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - V, PUNE 4 THE CIT - I, PUNE 5 6 THE DR, ITAT, B BENCH, PUNE. GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, PUNE