M/s McML Systems Private Limited , Bangalore V. Assistant Commissioner of Income Tax Circle-4(1)(2), Bangalore

ITA 452/BANG/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5006 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 06-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C H SU NDAR RAO CIT BENGALURU
• Assessee Lawyers: K R VASUDEVAN
• Keywords: Business income; Depreciation; Rectification of order; Question of law; Revised return; Unabsorbed depreciation; TDS
• Section: 43B; 143(3); 115JB; 143(1); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N. V. VASUDEVAN, VICE PRESIDENT AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER I TA NOS. 452 TO 454 /BANG/201 9 ASSESSMENT YEAR S : 20 0 8 - 09 TO 201 0 - 1 1 M/S. MCML SYSTEMS PVT. LTD., C9, KSSIDC INDUSTRIAL ESTATE, YELAHANKA NEW TOWN, BENGALURU 560 064. PAN : A ACCM 1613 N VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 4(1)(2), BENGALURU. APPELLANT RESPONDENT ASSESSEE BY : SHRI. K. R. VASUDEVAN, ADVOCATE REVENUE BY : SHRI. C. H. SUNDAR RAO, CIT (DR)(ITAT), BENGALURU DATE OF HEARING : 0 9 . 0 7 .201 9 DATE OF PRONOUNCEMENT : 21 . 0 8 .201 9 O R D E R PER BENCH: THESE THREE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF CIT(A)-4, BENGALURU, DATED 28.11.2018 FOR ASSESSMENT YEAR 2008-09; DATED 24.11.2018 FOR ASSESSMENT YEAR 2009-10 AND DATED 22.11.2018 FOR ASSESSMENT YEAR 2010-11. AS THE ISSUES INVOLVED IN THESE APPEALS ARE SIMILAR, THEY WERE HEARD TOGETHER AND WE DEEM IT APPROPRIATE TO DISPOSE THEM OFF BY WAY OF THIS COMBINED ORDER, IN SERIATIM, FOR THE SAKE OF CONVENIENCE. ITA NOS. 452 TO 454/BANG/2019 PAGE 2 OF 24 ASSESSEES APPEAL IN ITA NO.452/BANG/2019 FOR ASSESSMENT YEAR 2008-09 2.1 THE ASSESSEE COMPANY IS ENGAGED IN THE ACTIVITY OF PROVIDING SIGNALING SOLUTIONS TO THE RAILWAYS. FOR ASSESSMENT YEAR 2008-09, THE ASSESSEE FILED ITS RETURN OF INCOME ON 01.10.2008 DECLARING LOSS OF RS.(-) 2,02,01,133/- UNDER NORMAL PROVISIONS, AFTER CLAIMING DEDUCTION UNDER SECTION 10A OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AND BOOK PROFITS UNDER SECTION 115JB OF THE ACT AMOUNTING TO RS.4,98,44,075/-. THE ASSESSEE SUBSEQUENTLY FILED A REVISED RETURN ON 19.01.2009 TO CLAIM CREDIT FOR TDS. THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 11.03.2010 AND THE CASE WAS SELECTED FOR SCRUTINY FOR THIS ASSESSMENT YEAR. THE ASSESSMENT WAS CONCLUDED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 25.03.2010, WHEREIN THE ASSESSEES INCOME WAS DETERMINED AT RS.34,13,815/- ON ACCOUNT OF VARIOUS ADDITIONS / DISALLOWANCES AND AFTER ALLOWING DEDUCTION OF RS.6,17,15,259/- UNDER SECTION 10A OF THE ACT, AS CLAIMED IN THE RETURN OF INCOME FILED. 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT DATED 25.03.2010 FOR ASSESSMENT YEAR 2008-09, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A), BANGALORE; WHO DISPOSED OFF THE APPEAL VIDE ORDER DATED 27.07.2016 ALLOWING THE ASSESSEE PARTIAL RELIEF. THEREUPON, THE ASSESSING OFFICER (AO) PASSED ORDER DATED 28.09.2016 GIVING EFFECT TO THE CIT(A) ORDER; WHEREIN THE AO HAS GRANTED DEDUCTION UNDER SECTION 10A OF THE ACT ONLY TO THE EXTENT OF RS.6,01,85,562/-. AGAINST THIS ORDER OF THE AO GIVING EFFECT TO THE CIT(A)S ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A)-4, BANGALORE; WHO DISMISSED THE ASSESSEES APPEAL VIDE THE IMPUGNED ORDER DATED 28.11.2018; THEREBY UPHOLDING THE DECISION OF THE AO IN RESTRICTING THE DEDUCTION ALLOWABLE TO THE ASSESSEE UNDER SECTION 10A OF THE ACT TO RS.6,01,85,562/-. ITA NOS. 452 TO 454/BANG/2019 PAGE 3 OF 24 3. THE GROUNDS RAISED IN THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2008-09 ARE AS UNDER:- 1. THE LEARNED CIT (A) HAS ERRED IN NOT ADJUDICATING ON THE ISSUE RAISED IN THE APPEAL, WHICH WAS THE WRONG COMPUTATION OF DEDUCTION U/S 10A OF THE ACT AND NON-ALLOWANCE OF CARRIED FORWARD LOSSES. 2. THE LEARNED CIT(A) ERRED IN DISMISSING THE ISSUES APPEALED AGAINST BY PLACING RELIANCE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE CIT VS VS. HIMAT SINGIKE, 286 ITR 255, WITHOUT APPRECIATING THAT THE ISSUE APPEAL AGAINST WAS THE QUANTUM OF DEDUCTION U/S 10A AND NOT WHETHER DEDUCTION U/S 10A IS ALLOWABLE, WHEN THE A.0 HAS HIMSELF ALLOWED THE DEDUCTION. 3. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE FACTS OF THE CASE OF CIT VS VS. HIMAT SINGIKE (SUPRA) ARE DISTINGUISHABLE FROM THE FACTS OF THE APPELLANT IN THAT THERE WAS ONLY ONE STPI UNIT IN THAT CASE WHEREAS THE APPELLANT HAD BOTH STPI AND NON-STPI UNITS 4. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS YOKOGAWA, 341 ITR 385 IS SQUARELY APPLICABLE TO THE FACTS OF THE APPELLANT'S CASE, WHICH HAS BEEN SINCE CONFIRMED BY THE HON'BLE SUPREME COURT 5. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE SETTLED LEGAL POSITION IS THAT THE DEDUCTION U/S 10A FOR THE STPI UNIT HAS TO BE GRANTED WITHOUT ADJUSTING THE LOSS OF THE NON-STPI UNIT. 6. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT IT IS SETTLED POSITION OF LAW THAT DEDUCTION U/S 10A HAS TO BE GRANTED ON THE ASSESSED INCOME, INCLUDING THE ADDITIONS MADE TO THE INCOME DURING THE SCRUTINY ASSESSMENT 7. THAT THE APPELLANT CRAVES LEAVE TO ADD TO AND/OR TO ALTER, AMEND, RESCIND MODIFY THE GROUNDS HEREIN ABOVE OR PRODUCE FURTHER DOCUMENTS BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL.' ITA NOS. 452 TO 454/BANG/2019 PAGE 4 OF 24 4. GROUND NOS.1 AND 7 (SUPRA), BEING GENERAL IN NATURE, NO ADJUDICATION IS CALLED FOR THEREON. 5. GROUND NOS.2 TO 5 COMPUTATION OF DEDUCTION UNDER SECTION 10A OF THE ACT 5.1 IN THESE GROUNDS (SUPRA) RAISED IN RESPECT TO THE COMPUTATION OF DEDUCTION UNDER SECTION 10A OF THE ACT AND NON-ALLOWANCE OF CARRY FORWARD LOSSES, IT IS CONTENDED THAT THE CIT(A) ERRED IN NOT ADJUDICATING THE ISSUE IN APPEAL AND IN NOT FOLLOWING THAT THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. YOKOGAWA INDIA LTD., WHICH IS SQUARELY APPLICABLE TO THE FACTS OF THE CASE ON HAND. 5.2.1 BEFORE US, THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT THE CIT(A) ERRED BOTH ON LAW AND FACTS ON THE ISSUE OF COMPUTATION OF DEDUCTION UNDER SECTION 10A OF THE ACT. THE LEARNED AR SUBMITS THAT THE ASSESSEE IN THE CASE ON HAND HAD BOTH STPI UNIT AND NON-STPI UNIT. WHILE THERE WAS A PROFIT IN THE STPI UNIT, THERE WAS A LOSS IN THE NON-STPI UNIT. IN THE ORDER OF ASSESSMENT, THE AO MADE VARIOUS ADDITIONS / DISALLOWANCES WHEREBY THE TOTAL INCOME OF THE ASSESSEE WAS HIGHER FIGURE THAN THE RETURNED INCOME; BUT, HOWEVER, ALLOWED THE ASSESSEE DEDUCTION UNDER SECTION 10A OF THE ACT ONLY TO THE EXTENT OF RS.6,17,15,259/-, AS WAS CLAIMED IN THE RETURN OF INCOME. ON APPEAL, THE CIT(A) ALLOWED THE ASSESSEE PARTIAL RELIEF. THE AO, WHILE GIVING EFFECT TO THE ORDER OF CIT(A) DATED 27.07.2016, HAS COMBINED THE PROFITS / LOSSES OF BOTH STPI AND NON-STPI UNITS AND COMPUTED THE TOTAL INCOME. THIS HAD THE EFFECT OF ADJUSTING THE LOSS OF THE NON-STPI UNIT AGAINST THE PROFIT OF THE STPI UNIT. CONSEQUENTLY, THE DEDUCTION ALLOWED UNDER SECTION 10A OF THE ACT WAS COMPUTED AT RS.6,01,85,562/- AFTER ADJUSTING THE LOSS OF THE NON-STPI UNIT AGAINST THE PROFIT OF THE STPI UNIT. ITA NOS. 452 TO 454/BANG/2019 PAGE 5 OF 24 5.2.2 IN THE APPEAL BEFORE THE CIT(A), THE ASSESSEE CONTENDED THAT THE DEDUCTION UNDER SECTION 10A OF THE ACT HAS TO BE COMPUTED BEFORE ADJUSTING THE LOSSES OF THE NON-STPI UNIT AND IN THIS REGARD PLACED RELIANCE ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. YOKOGAWA INDIA LTD., IN 341 ITR 385 (KAR). THE CIT(A), HOWEVER, PLACED RELIANCE ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF HIMAT SINGKE SEIDE LTD., VS. CIT (286 ITR 255) (KAR) WHEREIN IT WAS HELD THAT UNABSORBED DEPRECIATION AND THE BUSINESS LOSS OF THE SAME UNIT BROUGHT FORWARD FROM EARLIER YEARS HAVE TO BE SET-OFF AGAINST THE PROFITS BEFORE COMPUTING THE EXEMPT PROFITS. THE CIT(A) OBSERVED THAT THE FACTS OF THE CASE ON HAND ARE DIFFERENT AND DISTINGUISHABLE FROM THAT OF YOKOGAWA INDIA LTD., (SUPRA) BUT SIMILAR TO THOSE IN THE CASE OF HIMAT SINGKE SEIDE LTD., (SUPRA) AND WENT ON TO HOLD THAT THE LOSSES OF ONE UNIT CAN BE SET-OFF AGAINST THE PROFITS OF OTHER UNITS. 5.2.3 THE LEARNED AR FOR THE ASSESSEE CONTENDS THAT THE CIT(A) HAS GOT BOTH THE FACTS AND THE LEGAL POSITION WRONG. ACCORDING TO THE LEARNED AR, IT CAN BE SEEN FROM THE IMPUGNED ORDER OF CIT(A) ITSELF THAT THE DECISION IN THE CASE OF HIMAT SINGKE SEIDE LTD., (SUPRA) WAS ON THE ISSUE OF UNABSORBED DEPRECIATION AND BUSINESS LOSS OF THE SAME TYPE OF UNITS; WHEREAS THE DECISION IN THE CASE OF YOKOGAWA INDIA LTD., (SUPRA) WAS ON THE ISSUE OF ADJUSTMENT OF LOSSES OF NON-STPI UNITS WITH THE PROFITS OF STPI UNITS. AS THE ASSESSEE HAS BOTH STPI AND NON-STPI UNITS, IT WAS SUBMITTED THAT THE JUDGMENT RENDERED IN THE CASE OF YOKOGAWA INDIA LTD., (SUPRA) IS SQUARELY APPLICABLE TO THE ASSESSEE IN THE CASE ON HAND. IT WAS FURTHER SUBMITTED THAT THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF YOKOGAWA INDIA LTD., (SUPRA) HAS BEEN AFFIRMED BY THE DECISION OF THE HONBLE APEX COURT IN CIVIL APPEAL NO.8498 OF 2013 DATED 16.12.2016. IN SUPPORT OF HIS CONTENTIONS, THE LEARNED AR SUBMITTED THE COMPUTATION OF DEDUCTION UNDER SECTION 10A OF THE ACT, WHEREIN THE PROFIT / LOSS OF THE STPI AND NON-STPI UNITS HAVE BEEN SEPARATELY COMPUTED. ITA NOS. 452 TO 454/BANG/2019 PAGE 6 OF 24 5.3 PER CONTRA, THE LEARNED DR FOR REVENUE SUBMITTED THAT THERE ARE SOME CONTRADICTIONS IN THE IMPUGNED ORDER OF THE CIT(A) CAUSING CONFUSION AND THEREFORE THE MATTER MAY BE REMANDED TO THE FILE OF THE CIT(A) FOR PROPER EXAMINATION AND VERIFICATION OF FACTS. 5.4.1 WE HAVE CONSIDERED THE RIVAL CONTENTIONS / SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD; INCLUDING THE JUDICIAL PRONOUNCEMENTS CITED / RELIED ON. THE UNDISPUTED FACTS, AS BORNE OUT FROM THE RECORD, ARE THAT THE ASSESSEE HAS BOTH STPI AND NON-STPI UNITS; WHICH HAS BEEN NOTED BY THE CIT(A) IN HIS ORDER. THE ISSUE OF WHETHER OR NOT THE LOSSES OF THE NON-STPI UNITS CAN BE SET-OFF AGAINST THE PROFITS OF STPI UNIT HAS BEEN DECIDED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF YOKOGAWA INDIA LTD., IN ITS JUDGMENT IN 341 ITR 385) (KAR) WHEREIN IT WAS HELD THAT THE LOSSES OF NON-STPI UNIT CANNOT BE SET OFF AGAINST THE PROFITS OF STPI UNITS FOR THE COMPUTATION OF DEDUCTION UNDER SECTION 10A OF THE ACT. THE AFORESAID DECISION OF THE HONBLE KARNATAKA HIGH COURT (SUPRA) HAS BEEN UPHELD BY THE HONBLE APEX COURT IN THE CASE OF CIT VS. YOKOGAWA INDIA LTD., VIDE CIVIL APPEAL NO.8498 OF 2013 DATED 16.12.2016; AND IN THIS CONTEXT WE EXTRACT, HEREUNDER, THE RELEVANT PORTION AT PARAGRAPHS 16 TO 18 THEREOF:- ITA NOS. 452 TO 454/BANG/2019 PAGE 7 OF 24 ITA NOS. 452 TO 454/BANG/2019 PAGE 8 OF 24 5.4. 2 RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE HONBLE APEX COURTS IN THE CASE OF CIT VS. YOKOGAWA INDIA LTD., (SUPRA), WHEREIN THE SETTLED ITA NOS. 452 TO 454/BANG/2019 PAGE 9 OF 24 POSITION IN LAW IS LAID OUT, WE ALSO HOLD THAT THE LOSSES AND UNABSORBED DEPRECIATION OF THE NON-STPI UNITS SHALL NOT BE ADJUSTED AGAINST THE PROFITS OF THE STPI UNIT FOR THE PURPOSES OF COMPUTATION OF THE DEDUCTION UNDER SECTION 10A OF THE ACT TO BE ALLOWED TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. CONSEQUENTLY, GROUND NOS. 2 TO 5 OF THE ASSESSEES APPEAL ARE ALLOWED. 6. GROUND NO.6 : DEDUCTION UNDER SECTION 10A OF THE ACT ON ASSESSED INCOME 6.1.1 IN THIS GROUND (SUPRA), THE ASSESSEE ASSAILS THE ORDER OF THE CIT(A) IN NOT APPRECIATING THAT IT IS SETTLED POSITION OF LAW THAT DEDUCTION UNDER SECTION 10A OF THE ACT HAS TO BE GRANTED ON THE ASSESSED INCOME; WHICH INCLUDES THE ADDITIONS MADE TO THE RETURNED INCOME. 6.1.2 THE LEARNED AR FOR THE ASSESSEE SUBMITTED THAT IN ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2009-10, THE ASSESSEE HAD CLAIMED DEDUCTION OF RS.6,17,15,259/- UNDER SECTION 10A OF THE ACT. IN THE ORDER OF ASSESSMENT DATED 25.03.2010 FOR ASSESSMENT YEAR 2009-10, THE AO HAD MADE VARIOUS ADDITIONS / DISALLOWANCES, WHEREBY THE ASSESSEES BUSINESS INCOME HAD INCREASED; BUT HOWEVER ALLOWED THE ASSESSEE DEDUCTION UNDER SECTION 10A OF THE ACT TO THE EXTENT OF RS.6,17,15,259/- AS CLAIMED BY THE ASSESSEE IN THE RETURN OF INCOME FILED. IN THE ORDER DATED 28.09.2016 GIVING EFFECT TO THE ORDER OF THE CIT(A), THE AO HAD COMPUTED THE DEDUCTION UNDER SECTION 10A OF THE ACT AFRESH; AFTER SETTING OFF THE LOSSES OF THE NON-STPI UNITS AGAINST THE PROFITS OF THE STPI UNITS. ACCORDING TO THE LEARNED AR, IT IS SETTLED PRINCIPLE THAT DEDUCTION UNDER SECTION 10A OF THE ACT HAS TO BE COMPUTED ON THE ENHANCED ASSESSED BUSINESS INCOME; INCLUDING THE ADDITIONS MADE TO THE RETURNED BUSINESS INCOME; AND IN THIS REGARD PLACED RELIANCE ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GEM PLUS JEWELLERY INDIA LTD., (2011) 330 ITR 175 (BOM) ITA NOS. 452 TO 454/BANG/2019 PAGE 10 OF 24 AND OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. M PACT TECHNOLOGY SERVICES LTD., IN ITA NO.228/2013 DATED 11.07.2018. 6.2 PER CONTRA, THE LEARNED DR FOR REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6.3.1 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD; INCLUDING THE JUDICIAL PRONOUNCEMENTS CITED. WE FIND FROM THE IMPUGNED ORDER OF ASSESSMENT THAT THE AO HAS MADE CERTAIN ADDITIONS / DISALLOWANCES, THEREBY INCREASING THE BUSINESS PROFITS OF THE ASSESSEE. IT IS HOWEVER SEEN THAT THE AO HAS ALLOWED THE DEDUCTION UNDER SECTION 10A OF THE ACT ONLY TO THE EXTENT CLAIMED BY THE ASSESSEE IN THE RETURN OF INCOME. ON APPEAL, THE CIT(A) REJECTED THE CONTENTIONS OF THE ASSESSEE. 6.3.2 WE FIND THAT COURTS AND TRIBUNALS HAVE CONSISTENTLY HELD THAT THE PLAIN CONSEQUENCE OF THE DISALLOWANCE / ADD BACK THAT IS MADE BY THE AO, IS AN INCREASE IN THE BUSINESS PROFITS OF THE ASSESSEE. THE VIEW OF THE CIT(A), THAT IN COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE ACT THE ADDITION MADE RESULTING IN AN INCREASE OF BUSINESS PROFITS OUGHT TO BE IGNORED, IS NOT TENABLE. NO STATUTORY PROVISION TO THAT EFFECT HAVING BEEN MADE, THE PLAIN CONSEQUENCE OF THE DISALLOWANCE MADE BY THE AO MUST FOLLOW AND THE DEDUCTION UNDER SECTION 10A OF THE ACT SHOULD BE ALLOWED ON THE ENHANCED ASSESSED INCOME. THIS PRINCIPLE HAS BEEN REITERATED BY THE HONBLE KARNATAKA HIGH COURT IN ITS DECISION IN THE CASE OF CIT VS. M/S. M. PACT TECHNOLOGY SERVICES PVT. LTD., IN ITA NO.228/2013 ITA NOS. 452 TO 454/BANG/2019 PAGE 11 OF 24 DATED 11.07.2018 WHEREIN AT PARAS 5 TO 7 THEREOF, THE HONBLE COURT HAS HELD AS UNDER: 5. IN SO FAR AS THE SUBSTANTIAL QUESTION OF LAW NOS.5 AND 6 ARE CONCERNED, LEARNED COUNSEL FOR THE REVENUE SUBMITTED THAT THE ITAT IN ITS ORDER DATED DATE OF JUDGMENT 11-07-2018 I.T.A.NO.228/2013 COMMISSIONER OF INCOME TAX & ANR. VS. M/S. M PACT TECHNOLOGY SERVICES PVT. LTD. 21.12.2012 HAS RECORDED THE FINDINGS, THE RELE*NT PORTION OF WHICH IS EXTRACTED BELOW FOR READY REFERENCE:- 14. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDERED THEIR RIVAL CONTENTIONS, WE FIND THAT THE DISALLOWANCE U/S 4OA (IA) IS TO BE MADE OF THE EXPENSES INCURRED AND CLAIMED BY THE ASSESSEE BUT BEFORE THE PAYMENT OF WHICH, THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE. THE GENUINENESS OF THE EXPENDITURE IS NOT IN DISPUTE. THE DISPUTE IS WHETHER TDS WAS TO BE MADE BEFORE MAKING THE PAYMENT. WITHOUT GOING INTO THE NATURE OF THE TRANSACTION, WE ARE INCLINED TO ACCEPT THE ALTERNATE PLEA OF THE ASSESSEE THAT THE DISALLOWANCE OF THE EXPENDITURE WOULD AUTOMATICALLY ENHANCE THE TAXABLE INCOME OF THE ASSESSEE AND THE ASSESSEE IS ELIGIBLE FOR THE DEDUCTION U/S LOA OF THE INCOME-TAX ACT ON THE ENHANCED INCOME. THUS, THIS GROUND OF APPEAL IS ALLOWED'. 6. THE RELEVANT PORTION OF THE CIRCULAR NO.37/2016 DATED 02.11.2016 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES, DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, RELATING TO THE SUBJECT: DATE OF JUDGMENT 11-07-2018 I.T.A.NO.228/2013 COMMISSIONER OF INCOME TAX & ANR. VS. M/S. M PACT TECHNOLOGY SERVICES PVT. LTD. CHAPTER VI-A DEDUCTION ON ENHANCED PROFITS, IS QUOTED HEREUNDER: 'THE ISSUE OF THE CLAIM OF HIGHER EDUCATION ON THE ENHANCED PROFITS HAS BEEN A CONTENTIOUS ONE. HOWEVER, THE COURTS HAVE GENERALLY HELD THAT IF THE EXPENDITURE DISALLOWED IS RELATED TO THE BUSINESS ACTIVITY AGAINST WHICH THE CHAPTER VI-A DEDUCTION HAS BEEN CLAIMED, THE DEDUCTION NEEDS TO BE ALLOWED ON THE ENHANCED PROFITS. SOME ILLUSTRATIVE CASES UPHOLDING THIS VIEW ARE AS FOLLOWS: ITA NOS. 452 TO 454/BANG/2019 PAGE 12 OF 24 [I] IF AN EXPENDITURE INCURRED BY ASSESSEE FOR THE PURPOSE OF DEVELOPING A HOUSING PROJECT WAS NOT ALLOWABLE ON ACCOUNT OF NON- DEDUCTION OF TDS UNDER LAW, SUCH DISALLOWANCE WOULD ULTIMATELY INCREASE ASSESSEE'S PROFITS FROM BUSINESS OF DEVELOPING HOUSING PROJECT. THE ULTIMATE PROFITS OF ASSESSEE AFTER ADJUSTING DISALLOWANCE UNDER SECTION 4ORALLIA] OF THE ACT WOULD QUALIFY FOR DEDUCTION UNDER SECTION 8OIB OF THE ACT. THIS VIEW WAS TAKEN BY THE COURTS IN THE FOLLOWING CASES: [A] INCOME-TAX OFFICER-WARD 5[1] 1KEVAL CONSTRUCTION, TAX APPEAL NO.443 OF DATE OF JUDGMENT 11-07-2018 I.T.A.NO.22 8 / 2 013 COMMISSIONER OF INCOME TAX & ANR. VS. M/S. M PACT TECHNOLOGY SERVICES PVT. LTD. 2012, DECEMBER 10 2012, GUJARAT HIGH COURT [B] COMMISSIONER OF INCOME-TAX-IV, NAGPUR VS. SUNIL VISHWAMBHARNATH TIWARI, 2015, BOMBAY HIGH COURT [II] IF DEDUCTION UNDER SECTION 40A[3] OF THE ACT IS NOT ALLOWED, THE SAME WOULD HAVE TO BE ADDED TO THE PROFITS OF THE UNDERTAKING ON WHICH THE ASSESSEE WOULD BE ENTITLED FOR DEDUCTION UNDER SECTION 8O-IB OF THE ACT.' 7. APPLYING THE SAME ANALOGY, IT CAN BE HELD THAT IF DEDUCTION U/S. 4O[A][IA] OF THE ACT IS NOT ALLOWED, THE SAME WOULD HAVE BEEN TO BE ADDED TO THE PROFITS OF THE UNDERTAKING ON WHICH THE ASSESSEE WOULD BE ENTITLED FOR DEDUCTION U/S. LOA OF THE ACT. THIS VIEW IS FORTIFIED BY THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF 'COMMISSIONER OF INCOME TAX V. GEM PLUS JEWELLERY INDIA LTD.,' [2011] 33O ITR 175 [BOM] , WHEREIN IT IS HELD THUS: DATE OF JUDGMENT 11-07-2018 I.T.A.NO.228/2013 COMMISSIONER OF INCOME TAX & ANR. VS. M/S. M PACT TECHNOLOGY SERVICES PVT. LTD. '13. BY REASON OF THE JUDGMENT OF THE SUPREME COURT IN COMMISSIONER OF INCOME TAX V. ALOM EXTRUSIONS LIMITED [2009] 319 ITR 306 THE EMPLOYER'S CONTRIBUTION WAS LIABLE TO BE ALLOWED, SINCE IT WAS DEPOSITED BY THE DUE DATE FOR THE FILING OF THE RETURN. THE PECULIAR POSITION, HOWEVER, AS IT OBTAINS IN THE PRESENT CASE ARISES OUT OF THE FACT THAT THE DISALLOWANCE WHICH WAS EFFECTED BY THE ASSESSING OFFICER HAS NOT, THE COURT IS INFORMED, BEEN CHALLENGED BY THE ASSESSEE. AS A MATTER OF FACT THE QUESTION OF LAW WHICH IS FORMULATED BY THE REVENUE PROCEEDS ON THE BASIS THAT THE ASSESSED INCOME WAS ENHANCED DUE TO ITA NOS. 452 TO 454/BANG/2019 PAGE 13 OF 24 THE DISALLOWANCE OF THE EMPLOYER'S AS WELL AS THE EMPLOYEES' CONTRIBUTION TOWARDS PROVIDENT FUND /ESIC AND THE ONLY QUESTION WHICH IS CANVASSED ON BEHALF OF THE REVENUE IS WHETHER ON THAT BASIS THE TRIBUNAL WAS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO GRANT THE EXEMPTION UNDER SECTION 10A. ON THIS POSITION, IN THE PRESENT CASE IT CANNOT BE DISPUTED THAT THE NET CONSEQUENCE OF THE DISALLOWANCE OF THE EMPLOYER'S AND THE EMPLOYEE'S CONTRIBUTION IS THAT THE BUSINESS PROFITS HAVE TO THAT EXTENT BEEN ENHANCED. THERE WAS, AS WE HAVE ALREADY NOTED, AN ADD BACK BY THE ASSESSING OFFICER TO THE INCOME. ALL PROFITS OF THE UNIT OF THE ASSESSEE HAVE DATE OF JUDGMENT 11-07-2018 I.T.A.NO.228/2013 COMMISSIONER OF INCOME TAX & ANR. VS. M/S. M PACT TECHNOLOGY SERVICES PVT. LTD., BEEN DERIVED FROM MANUFACTURING ACTIVITY. THE SALARIES PAID BY THE ASSESSEE, IT HAS NOT BEEN DISPUTED, RELATE TO THE MANUFACTURING ACTIVITY. THE DISALLOWANCE OF THE PROVIDENT FUND/ESIC PAYMENTS HAS BEEN MADE BECAUSE OF THE STATUTORY PROVISIONS - SECTION 43B IN THE CASE OF THE EMPLOYER'S CONTRIBUTION AND SECTION 36(V) READ WITH SECTION 2(24)(X) IN THE CASE OF THE EMPLOYEE'S CONTRIBUTION WHICH HAS BEEN DEEMED TO BE THE INCOME OF THE ASSESSEE. THE PLAIN CONSEQUENCE OF THE DISALLOWANCE AND THE ADD BACK THAT HAS BEEN MADE BY THE ASSESSING OFFICER IS AN INCREASE IN THE BUSINESS PROFITS OF THE ASSESSEE. THE CONTENTION OF THE REVENUE THAT IN COMPUTING THE DEDUCTION UNDER SECTION 10A THE ADDITION MADE ON ACCOUNT OF THE DISALLOWANCE OF THE PROVIDENT FUND / ESIC PAYMENTS OUGHT TO BE IGNORED CANNOT BE ACCEPTED. NO STATUTORY PROVISION TO THAT EFFECT HAVING BEEN MADE, THE PLAIN CONSEQUENCE OF THE DISALLOWANCE MADE BY THE ASSESSING OFFICER MUST FOLLOW. THE SECOND QUESTION SHALL ACCORDINGLY STAND ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE.' 6.3.3 THE FACTS OF THE ASSESSEES CASE IN THE PRESENT APPEAL ARE SIMILAR TO THAT OF THE CITED CASE. IN THE CASE ON HAND ALSO, THE ADDITIONS / DISALLOWANCES HAVE LED TO ENHANCEMENT OF THE TAXABLE BUSINESS INCOME OF THE ASSESSEE AND CONSEQUENTLY THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 10A OF THE ACT ON SUCH ENHANCED INCOME. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. M. PACT TECHNOLOGY ITA NOS. 452 TO 454/BANG/2019 PAGE 14 OF 24 SERVICES PVT. LTD., (SUPRA), WE HOLD THAT THE DEDUCTION UNDER SECTION 10A OF THE ACT SHALL BE ALLOWED ON THE ASSESSED INCOME. THE AO IS ACCORDINGLY DIRECTED. CONSEQUENTLY, GROUND NO.6 OF THE ASSESSEES APPEAL IS ALLOWED. 7. IN THE RESULT, THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2008-09 IS ALLOWED. ASSESSEES APPEAL IN ITA NO.453/BANG/2019 FOR ASSESSMENT YEAR 2009-10 8.1 FOR THIS ASSESSMENT YEAR 2009-10; THE ASSESSEE FILED ITS RETURN OF INCOME ON 17.04.2010 DECLARING INCOME OF RS.25,00,689/- UNDER NORMAL PROVISIONS AND BOOK PROFITS OF RS.11,69,69,890/- UNDER MAT PROVISIONS. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS CONCLUDED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 30.12.2011 ACCEPTING THE RETURNED INCOME OF RS.11,69,69,890/-. SUBSEQUENTLY, THE AO PASSED A RECTIFICATION ORDER UNDER SECTION 154 OF THE ACT DATED 09.03.2016, WHEREBY HE ADJUSTED THE LOSSES OF THE NON-STPI UNIT AMOUNTING TO RS.7,84,96,835/- AGAINST THE PROFITS OF THE STPI UNIT AMOUNTING TO RS.20,76,15,242/- AND THEREBY RENDERING THE BUSINESS LOSS AT NIL WITH NO BUSINESS LOSS AVAILABLE FOR BEING CARRIED FORWARD. 8.2 AGGRIEVED BY THE ORDER UNDER SECTION 154 OF THE ACT DATED 09.03.2016 FOR ASSESSMENT YEAR 2009-10, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE CONTENDED THAT THE DEDUCTION UNDER SECTION 10A OF THE ACT HAS TO BE COMPUTED BEFORE ADJUSTING THE LOSSES OF THE NON-STPI UNIT AND IN THIS REGARD PLACED RELIANCE ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. YOKOGAWA INDIA LTD., (341 ITR 385). HOWEVER, THE CIT(A) PLACED RELIANCE ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF HIMAT SINGKE SEIDE LTD., VS. CIT (286 ITR 255) (KAR), WHEREIN IT ITA NOS. 452 TO 454/BANG/2019 PAGE 15 OF 24 WAS HELD THAT UNABSORBED DEPRECIATION AND BUSINESS LOSS OF ANY UNIT BROUGHT FORWARD FROM EARLIER YEARS HAVE TO BE SET OFF AGAINST THE PROFITS OF THE ELIGIBLE UNIT BEFORE COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE ACT. THE CIT(A) HELD THAT THE FACTS OF THE ASSESSEES CASE ARE DIFFERENT AND DISTINGUISHABLE FROM THAT OF YOKOGAWA INDIA LTD., (SUPRA) AND SIMILAR TO THAT OF HIMAT SINGKE SEIDE LTD., (SUPRA) AND HELD THAT THE LOSSES OF ONE UNIT CAN BE SET OFF AGAINST THE PROFITS OF ANOTHER WHILE COMPUTING THE ALLOWABLE DEDUCTION UNDER SECTION 10A OF THE ACT. 9. THE ASSESSEE, BEING AGGRIEVED BY THE ORDER OF CIT(A)-4, BANGALORE, DATED 24.11.2018 FOR ASSESSMENT YEAR 2009-10, HAS FILED THIS APPEAL BEFORE THE TRIBUNAL, WHEREIN IT HAS RAISED THE FOLLOWING GROUNDS:- 1. THE LEARNED CIT(A) ERRED IN NOT ADJUDICATING ON THE ISSUE THAT THE LEARNED A.0 OUGHT NOT TO HAVE REVISED THE DEDUCTION U/S 10A OF THE ACT AND REVISED THE INCOME, BY INVOKING THE PROVISIONS OF SECTION 154 OF THE ACT, AS THE ISSUE WAS NOT A MISTAKE APPARENT FROM RECORD. 2. THE LEARNED CIT(A) ERRED IN DISMISSING THE ISSUES APPEALED AGAINST BY PLACING RELIANCE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS VS. HIMAT SINGIKE, 286 1TR 255. 3. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE FACTS OF THE CASE OF CIT VS VS. HIMAT SINGIKE (SUPRA) ARE DISTINGUISHABLE FROM THE FACTS OF THE APPELLANT IN THAT THERE WAS ONLY ONE STPI UNIT IN THAT CASE WHEREAS THE APPELLANT HAD BOTH STPI AND NON-STPI UNITS 4. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS YOKOGAWA, 341 ITR 385 IS SQUARELY APPLICABLE TO THE FACTS OF THE APPELLANT'S CASE, WHICH HAS BEEN SINCE CONFIRMED BY THE HON'BLE SUPREME COURT 5. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE SETTLED LEGAL POSITION IS THAT THE DEDUCTION U/S 10A FOR THE STPI UNIT HAS TO BE GRANTED WITHOUT ADJUSTING THE LOSS OF THE NON-STPI UNIT. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD TO AND/OR TO ALTER, AMEND, RESCIND MODIFY THE GROUNDS HEREIN ABOVE OR PRODUCE FURTHER DOCUMENTS BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL.' ITA NOS. 452 TO 454/BANG/2019 PAGE 16 OF 24 10. GROUND NOS.1 AND 6 (SUPRA), BEING GENERAL IN NATURE, NO ADJUDICATION IS CALLED FOR THEREON. 11. GROUND NOS.2 TO 5 DEDUCTION UNDER SECTION 10A OF THE ACT 11.1 THESE GROUNDS (SUPRA) ARE RAISED IN RESPECT TO THE COMPUTATION OF DEDUCTION UNDER SECTION 10A OF THE ACT, WHEREIN IT IS CONTENDED THAT THE CIT(A) ERRED IN NOT APPRECIATING THAT THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF YOKOGAWA INDIA LTD., (341 ITR 385) IS SQUARELY APPLICABLE TO THE FACTS OF THE ASSESSEE IN THE CASE ON HAND. 11.2 WE HAVE, IN THE EARLIER PART OF THIS ORDER, WHILE DEALING WITH THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2008-09, ON THIS VERY SAME ISSUE, AT PARAS 5 TO. 5.4.2 (SUPRA), DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. YOKOGAWA INDIA LTD., IN CIVIL APPEAL NO.8498 OF 2013 DATED 16.12.2016. RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE HONBLE APEX COURT (SUPRA), OUR DECISION RENDERED IN THE CASE ON HAND FOR ASSESSMENT YEAR 2008-09 (SUPRA) WILL HOLD GOOD FOR THIS ASSESSMENT YEAR I.E., 2009-10 ALSO, AND WE THEREFORE HOLD AND DIRECT THAT THE DEDUCTION UNDER SECTION 10A OF THE ACT OF THE STPI UNIT SHALL BE COMPUTED WITHOUT SETTING OFF THE BUSINESS LOSSES AND UNABSORBED DEPRECIATION OF THE NON-STPI UNITS AGAINST THE PROFITS OF THE STPI UNIT. CONSEQUENTLY, GROUND NOS.2 TO 5 OF THE ASSESSEES APPEAL ARE ALLOWED. 12. IN THE RESULT, THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2009-10 IS ALLOWED. ITA NOS. 452 TO 454/BANG/2019 PAGE 17 OF 24 ASSESSEES APPEAL IN ITA NO.454/BANG/2019 FOR ASSESSMENT YEAR 2010-11 13.1 FOR ASSESSMENT YEAR 2010-11, THE ASSESSEE FILED THE RETURN OF INCOME ON 14.10.2010 DECLARING NIL INCOME AND CLAIMED CARRY FORWARD OF CURRENT YEARS BUSINESS LOSSES AMOUNTING TO RS.4,07,07,675/-. THE CASE WAS SELECTED FOR SCRUTINY FOR THIS ASSESSMENT YEAR AND THE ASSESSMENT WAS CONCLUDED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 28.03.2013, WHEREIN THE ASSESSEES INCOME WAS DETERMINED AT RS.11,17,25,709/- AFTER ALLOWING DEDUCTION UNDER SECTION 10A OF THE ACT TO THE EXTENT OF RS.4,83,78,258/- AS AGAINST THE ASSESSEES CLAIM OF RS.14,64,17,262/-. SUBSEQUENTLY, VIDE THE ORDER UNDER SECTION 154 OF THE ACT DATED 30.07.2013, THE ASSESSEES INCOME WAS REVISED TO RS.14,76,34,880/-. ANOTHER RECTIFICATION ORDER PASSED BY THE AO UNDER SECTION 154 OF THE ACT DATED 30.12.2013 WHEREIN THE ASSESSEES INCOME WAS DETERMINED AT RS.2,13,29,399/- AS PER NORMAL PROVISIONS. 13.2 AGGRIEVED BY THE ORDER UNDER SECTION 154 OF THE ACT DATED 30.07.2013 FOR ASSESSMENT YEAR 2010-11, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A)-4, BANGALORE, WHO DISPOSED OFF THE APPEAL VIDE ORDER DATED 31.08.2016 GRANTING RELIEF TO THE ASSESSEE. THEREAFTER, THE AO PASSED AN ORDER DATED 07.11.2016 FOR GIVING EFFECT TO THE CIT(A)S ORDER, WHEREIN HE RESTRICTED THE GRANT OF DEDUCTION UNDER SECTION 10A OF THE ACT TO RS.5,15,20,800/-. AGGRIEVED BY THIS ORDER DATED 07.11.2016, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A); WHICH WAS DISMISSED VIDE ORDER DATED 22.11.2018 AND WHEREBY THE CIT(A) UPHELD THE ORDER OF THE AO IN RESTRICTING THE DEDUCTION UNDER SECTION 10A OF THE ACT TO RS.5,15,20,800/-. ITA NOS. 452 TO 454/BANG/2019 PAGE 18 OF 24 14. AGGRIEVED BY THE ORDER OF THE CIT(A)-4, BENGALURU, DATED 22.11.2018 FOR ASSESSMENT YEAR 2010-11 , THE ASSESSEE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL, WHEREIN IT HAS RAISED THE FOLLOWING GROUNDS:- ITA NOS. 452 TO 454/BANG/2019 PAGE 19 OF 24 15. GROUND NOS.1 AND 8 (SUPRA), ARE GENERAL IN NATURE AND THEREFORE NO ADJUDICATION IS CALLED FOR THEREON. 16. GROUND NOS. 2 TO 5 COMPUTATION OF DEDUCTION UNDER SECTION 10A OF THE ACT BEFORE SET OFF OF LOSSES OF NON-STPI UNIT 16.1.1 THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT THE ISSUE RAISED IN THESE GROUND IS SIMILAR TO THAT RAISED IN ASSESSMENT YEAR 2008-09 AND CONTENDED THAT THE DEDUCTION UNDER SECTION 10A OF THE ACT SHOULD BE COMPUTED WITHOUT SETTING OFF THE LOSSES OF THE NON-STPI UNIT AGAINST THE PROFITS OF THE STPI UNIT. 16.1.2 THE LEARNED AR FURTHER POINTED OUT THAT FOR ASSESSMENT YEAR 2009-10, THE AO HAD PASSED ORDERS UNDER SECTION 154 OF THE ACT ADJUSTING THE BUSINESS LOSSES OF THE NON-STPI UNIT AGAINST THE PROFITS OF THE STPI UNIT AND HELD THAT THERE WAS NO BUSINESS LOSSES TO BE CARRIED FORWARD. IT IS SUBMITTED THAT IF THAT ORDER OF THE AO IS REVERSED, THEN THERE WILL BE BUSINESS LOSSES WHICH WILL BE CARRIED FORWARD TO THIS YEAR AND THEREFORE THE PRINCIPLE ENUNCIATED BY THE HONBLE APEX COURT IN THE CASE OF YOKOGAWA INDIA LTD., (SUPRA) IS APPLICABLE TO THIS YEAR ALSO. 16.2 PER CONTRA, THE LEARNED DR FOR REVENUE SUBMITTED THAT AS PER THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW, THERE WAS NO BROUGHT FORWARD BUSINESS LOSSES, AND THAT THE FACTUAL ASPECTS OF ASSESSEES CLAIM NEED EXAMINATION AND VERIFICATION. 16.3 WE HAVE CONSIDERED THE RIVAL CONTENTIONS / SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD; INCLUDING THE JUDICIAL PRONOUNCEMENTS CITED. WE HAVE IN THE EARLIER PART OF THIS ORDER, WHILE DEALING WITH THE ASSESSEES APPEAL, ON THE VERY SAME ISSUE, AT PARAS 5 TO 5.4.2 (SUPRA), DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. ITA NOS. 452 TO 454/BANG/2019 PAGE 20 OF 24 YOKOGAWA INDIA LTD., IN CIVIL APPEAL NO.8498 OF 2013 DATED 16.12.2016. RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE HONBLE APEX COURT (SUPRA) AND OUR OWN DECISION RENDERED IN THE CASE ON HAND FOR ASSESSMENT YEAR 2008-09 (SUPRA); FOR THIS YEAR I.E., ASSESSMENT YEAR 2010-11 ALSO, WE HOLD AND DIRECT THAT THE DEDUCTION UNDER SECTION 10A OF THE ACT OF THE STPI UNIT SHALL BE COMPUTED WITHOUT SETTING OFF THE LOSSES OF THE NON-STPI UNITS AGAINST THE INCOME OF THE STPI UNIT. CONSEQUENTLY, GROUND NOS.2 TO 5 OF ASSESSEES APPEAL ARE ALLOWED. 17. GROUND NO.6 : DEDUCTION UNDER SECTION 10A OF THE ACT ON ASSESSED INCOME 17.1 IN THIS GROUND (SUPRA), THE ASSESSEE ASSAILS THE ORDER OF THE CIT(A) IN NOT APPRECIATING THAT IT IS SETTLED POSITION OF LAW THAT DEDUCTION UNDER SECTION 10A OF THE ACT HAS TO BE GRANTED ON THE ASSESSED INCOME; WHICH INCLUDES THE ADDITIONS MADE TO THE RETURNED INCOME. 17.2 IN THIS REGARD, THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT IN THE RETURN OF INCOME FILED FOR ASSESSMENT YEAR 2010-11, THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 10A OF THE ACT AMOUNTING TO RS.14,64,17,262/-. IN THE ORDER OF ASSESSMENT FOR ASSESSMENT YEAR 2010-11 DATED 28.03.2013, THE AO HAD MADE ADDITIONS TO THE RETURNED INCOME, BUT HAD NOT ALLOWED DEDUCTION UNDER SECTION 10A OF THE ACT ON SUCH ENHANCED ASSESSED INCOME. IN THE ORDER GIVING EFFECT TO CIT(A)S ORDER, THE AO HAD COMPUTED THE DEDUCTION UNDER SECTION 10A OF THE ACT AFTER ADJUSTING THE LOSSES OF NON-STPI UNITS WITH THE PROFITS OF THE STPI UNIT. ACCORDING TO THE LEARNED AR, IT IS SETTLED PRINCIPLE THAT THE DEDUCTION UNDER SECTION 10A OF THE ACT HAS TO BE COMPUTED ON THE ASSESSED INCOME; RESULTANT AFTER THE ADDITIONS MADE TO THE RETURNED INCOME. IN SUPPORT OF THIS PROPOSITION; RELIANCE WAS PLACED ON THE JUDGMENTS OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GEM PLUS JEWELLERY INDIA LTD., (2011) (330 ITR 175) (BOM) AND OF THE ITA NOS. 452 TO 454/BANG/2019 PAGE 21 OF 24 HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. M PACT TECHNOLOGY SERVICES PVT. LTD., IN ITA NO.228/2013 DATED 11.07.2018. 17.3 PER CONTRA, THE LEARNED DR FOR REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 17.4.1 WE HAVE CONSIDERED THE RIVAL CONTENTIONS / SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD; INCLUDING THE JUDICIAL PRONOUNCEMENTS CITED. WE FIND THAT IN THE ABOVE CITED JUDGMENTS IN THE CASES OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GEM PLUS JEWELLERY INDIA LTD., (SUPRA) AND OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. M PACT TECHNOLOGY SERVICES LTD., (SUPRA), IT HAS BEEN HELD THAT THE ADDITIONS / DISALLOWANCES OF EXPENDITURES TO RETURNED INCOME WOULD AUTOMATICALLY ENHANCE THE TAXABLE INCOME AND THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 10A OF THE ACT ON THE ENHANCED TAXABLE INCOME. WHILE ADJUDICATING THE VERY SAME ISSUE FOR ASSESSMENT YEAR 2008-09 EARLIER IN THIS ORDER AT PARAS 6 TO 6.3.3 (SUPRA), WE HAVE RENDERED SIMILAR FINDINGS. THEREFORE, RESPECTFULLY FOLLOWING THE DECISIONS OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GEM PLUS JEWELLERY INDIA LTD., (SUPRA) AND OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. M. PACT TECHNOLOGY SERVICES LTD., (SUPRA), WE HOLD AND DIRECT THAT THE ASSESSEE IS TO BE ALLOWED DEDUCTION UNDER SECTION 10A OF THE ACT ON THE ASSESSED INCOME I.E., THE ENHANCED TAXABLE INCOME, ARISING OUT OF ADDITIONS MADE AND DISALLOWANCES OF EXPENDITURE. CONSEQUENTLY, GROUND NO.6 OF ASSESSEES APPEAL IS ALLOWED. 18. GROUND NO.7 DEDUCTION UNDER SECTION 10A OF THE ACT EXPENSES TO BE REDUCED FROM BOTH EXPORT TURNOVER AND TOTAL TURNOVER 18.1.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JUDICIAL PRONOUNCEMENT CITED. ITA NOS. 452 TO 454/BANG/2019 PAGE 22 OF 24 THE JURISDICTIONAL HIGH COURT OF KARNATAKA IN THE CASE OF CIT V TATA ELXSI LTD (349 ITR 98) (KAR) HAS HELD THAT WHEN CERTAIN EXPENSES ARE EXCLUDED FROM THE EXPORT TURNOVER FOR THE PURPOSES OF COMPUTING DEDUCTION ADMISSIBLE UNDER THE ACT; LIKE U/S. 10A OF THE ACT, SUCH EXPENSES ARE ALSO TO BE EXCLUDED FROM TOTAL TURNOVER, AS EXPORT TURNOVER IS A PART OF TOTAL TURNOVER. THE DECISION IN THE CASE OF TATA ELXSI LTD (SUPRA) HAS ALSO BEEN FOLLOWED BY THE HON'BLE COURT IN ITS ORDER IN THE CASE OF DCIT V MOTOR INDUSTRIES CO. LTD., (ITA NO. 776/2006, 744/2007 AND 1155/2006 DATED 13.06.2014), HOLDING THAT IF ANY EXPENDITURE IS SOUGHT TO BE REMOVED FROM EXPORT TURNOVER, THEN IT SHOULD ALSO BE REDUCED FROM TOTAL TURNOVER FOR THE PURPOSES OF COMPUTING THE ELIGIBLE DEDUCTION U/S. 10A OF THE ACT. THIS ISSUE IS NO LONGER RES INTEGRA, AND HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST REVENUE BY THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT V. HCL TECHNOLOGIES LTD. (2018) 93 TAXMANN.COM 33 (SC); WHEREIN AT PARAS 19 TO 21, IT HAS BEEN HELD AS UNDER :- '19. IN THE INSTANT CASE, IF THE DEDUCTIONS ON FREIGHT, TELECOMMUNICATION AND INSURANCE ATTRIBUTABLE TO THE DELIVERY OF COMPUTER SOFTWARE UNDER SECTION10A OF THE IT ACT ARE ALLOWED ONLY IN EXPORT TURNOVER BUT NOT FROM THE TOTAL TURNOVER THEN, IT WOULD GIVE RISE TO INADVERTENT, UNLAWFUL, MEANINGLESS AND ILLOGICAL RESULT WHICH WOULD CAUSE GRAVE INJUSTICE TO THE RESPONDENT WHICH COULD HAVE NEVER BEEN THE INTENTION OF THE LEGISLATURE. 20. EVEN IN COMMON PARLANCE, WHEN THE OBJECT OF THE FORMULA IS TO ARRIVE AT THE PROFIT FROM EXPORT BUSINESS, EXPENSES EXCLUDED FROM EXPORT TURNOVER HAVE TO BE EXCLUDED FROM TOTAL TURNOVER ALSO. OTHERWISE, ANY OTHER INTERPRETATION MAKES THE FORMULA UNWORKABLE AND ABSURD. HENCE, WE ARE SATISFIED THAT SUCH DEDUCTION SHALL BE ALLOWED FROM THE TOTAL TURNOVER IN SAME PROPORTION AS WELL. ITA NOS. 452 TO 454/BANG/2019 PAGE 23 OF 24 21. ON THE ISSUE OF EXPENSES ON TECHNICAL SERVICES PROVIDED OUTSIDE, WE HAVE TO FOLLOW THE SAME PRINCIPLE OF INTERPRETATION AS FOLLOWED IN THE CASE OF EXPENSES OF FREIGHT, TELECOMMUNICATION ETC., OTHERWISE THE FORMULA OF CALCULATION WOULD BE FUTILE. HENCE, IN THE SAME WAY, EXPENSES INCURRED IN FOREIGN EXCHANGE FOR PROVIDING THE TECHNICAL SERVICES OUTSIDE SHALL BE ALLOWED TO EXCLUDE FROM THE TOTAL TURNOVER.' 18.1.2 IN THIS LEGAL AND FACTUAL MATRIX OF THE CASE, AS DISCUSSED ABOVE, RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT VS. HCL TECHNOLOGIES L TD. (SUPRA) , WE DIRECT THE AO TO ALLOW ASSESSEE' S CLAIM FOR DEDUCTION UNDER SECTION 10A OF THE ACT. CONSEQUENTLY, THE GROUNDS RAISED BY REVENUE ARE DISMISSED. 19. IN THE RESULT, THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2010-11 IS ALLOWED. 20. TO SUM UP, THE ASSESSEES APPEALS FOR ASSESSMENT YEARS 2008-09 TO 2010-11 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF AUGUST, 2019. SD/ - SD/ - (N. V. VASUDEVAN) VICE PRESIDENT (JASON P BOAZ) ACCOUNTANT MEMBER BANGALORE. DATED: 21 ST AUGUST, 2019. /NS/* ITA NOS. 452 TO 454/BANG/2019 PAGE 24 OF 24 COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.