SUREPREP (INDIA) P.LTD, MUMBAI V. ITO WD 8(3)(2), MUMBAI

ITA 5855/MUM/2014

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 5632 (ITAT-MUMBAI)
• Duration Of Justice: 9 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: E
• Next Hearing Date: 24-08-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 18-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMRUDHI DHANANJAY HANDE
• Keywords: Depreciation; Transfer pricing; International transaction; Unabsorbed depreciation; CHAPTER IV
• Section: 143(3); 10B; 80IA; 80IC; 80IC; 72

Judgement Text

आयकर अपीलीय अिधकरण मुंबई पीठ “ई ”, मुंबई पीठ 炈ी िवकास अव瀡थी, 瀈याियक सद瀡य एवं 炈ी गगन गोयल, लेखाकार सद瀡य के सम楹 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “E ”, MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI GAGAN GOYAL, ACCOUNTANT MEMBER आअसं.2243/मुं/2013 (िन.व.2009-10) ITA NO. 2243/MUM/2013(A.Y. 2009-10) आअसं .5523/मुं/2013 (िन.व.2010-11) ITA NO. 5523/MUM/2013(A.Y. 2010-11) आअसं .5855/मुं/2014 (िन.व.2011-12) ITA NO. 5855/MUM/2014(A.Y. 2011-12) M/s. Sureprep (India) Private Limited, 4 th Floor, Dhantak Plaza, Makwana Road, Marol, Andheri(E), Mumbai – 400 034. PAN: AAHCS-9039-H ...... अपीलाथ牸 /Appellant बनाम Vs. The Income Tax Officer, Ward 8(3)(2), 2 nd Floor, Aaykar Bhavan, M.K.Road, Mumbai – 400 020. ..... 灹ितवादी/Respondent अपीलाथ牸 獧ारा/ Appellant by : Shri Dalpat Shah & Ms. Arti Shah 灹ितवादी 獧ारा/Respondent by : Ms. Samrudhi Dhananjay Hande & Shri P.D. Chougule सुनवाई क琉 ितिथ / Date of hearing : 25/08/2023 घोषणा क琉 ितिथ / Date of pronouncement : 03/11/2023 आदेश आदेशआदेश आदेश/ ORDER PER VIKAS AWASTHY, JM: These three appeals by the assessee for assessment years 2009-10, 2010-11 and 2011-12 are taken up together for adjudication as the issues involved in these appeals are identical. The appeal of assessee for assessment year 2009-10 is directed against the order of Commissioner of Income Tax (Appeals)-18, Mumbai [ in short ‘the CIT(A)’ ], dated 02/01/2013, 2 ITA NO. 2243/MUM/2013(A.Y. 2009-10) ITA NO. 5523/MUM/2013(A.Y. 2010-11) ITA NO. 5855/MUM/2014(A.Y. 2011-12) the appeal of assessee for assessment year 2010-11 is directed against the order of CIT(A) dated 01/05/2013 and the appeal of assessee for assessment year 2011-12 is against the order of CIT(A) dated 18/08/2014. These appeals are decided in seriatim of assessment years. ITA NO. 2243/MUM/2013(A.Y. 2009-10) 2. The assessee has raised the following grounds in appeal: “1. The learned Commissioner of Income Tax (Appeals) has erred in law as well as on facts of the case in confirming the action of the learned Income Tax Officer of disallowing claim of exemption of Rs. 24,21,614/- u/s 10A of the Income Tax Act, 1961 within the meaning of the Section 10A(7) r.w.s. 801 A(8) and (10) of the IT Act, 1961. 2. The learned Commissioner of Income Tax (Appeals), has erred in law and on facts of the case in confirming the action of the learned Income Tax officer in holding that unabsorbed depreciation of preceding years are liable to be treated as current years depreciation and accordingly same is required to be set off against the profits of the undertaking before computing exemption allowable u/s 10A of the IT act, 1961 and erred in re-computing the profits of the business as laid down in Chapter IV-D and to allow deduction u/s 10A of the IT Act, 1961. 3. The learned Commissioner of Income Tax (Appeals), has erred in law and on facts of the case in confirming the action of the learned Income tax officer in holding that AY 2004-05 is the first year of exemption u/s 10A of the IT Act, 1961 and consequently erred in holding that AY 2009-10 is sixth year of claim of exemption u/s 1OA of the IT Act, 1961.” 3. The facts of the case as emanating from records are: The assessee is engaged in providing Computer and Information Technology Enabled Services (ITES), more particularly preparation of US tax return and software development in connection there with. The assessee is a subsidiary of Sureprep LLC based in US. The assessee is primarily providing services to Sureprep LLC, its overseas Associated Enterprises(AE). The assessee entered into an agreement with Sureprep LLC. As per the terms of agreement, the 3 ITA NO. 2243/MUM/2013(A.Y. 2009-10) ITA NO. 5523/MUM/2013(A.Y. 2010-11) ITA NO. 5855/MUM/2014(A.Y. 2011-12) assessee is charging $50 per tax return from Sureprep LLC. The assessee is registered with Software Technology Park of India and accordingly the assessee had claimed deduction u/s. 10A of the Income Tax Act, 1961 [in short ‘the Act]. The assessee commenced its business on 01/03/2004, however, the assessee started providing services in F.Y. 2005-06 relevant to A.Y.2006-07. The assessee claimed deduction u/s. 10A of the Act from assessment year 2007-08 onwards. In the impugned assessment year the Assessing Officer restricted assessee’s claim of deduction u/s. 10A of the Act to Nil on the ground that the assessee is charging excessive price from its overseas Associated Enterprise(AE) to claim excessive benefit of deduction u/s. 10A of the Act. Further, the Assessing Officer allowed set off of brought forward business loss and unabsorbed depreciation before computing deduction u/s. 10A of the Act. The Assessing Officer further held that since assessee started business on 01/03/2004, hence, the first year for claiming deduction is assessment year 2004-05. Consequently, assessment year 2009-10 is the sixth year of claim. Aggrieved by the assessment order dated 24/11/2011 passed u/s. 143(3) of the Act, the assessee filed appeal before the CIT(A). Before the First Appellate Authority, the assessee remained unsuccessful, hence, the present appeal. 4. Shri Dalpat Shah appearing on behalf of the assessee submitted that the during the period relevant to the assessment year under appeal the assessee had entered into an international transaction with its AE. No reference was made to Transfer Pricing Officer (TPO) by the Assessing Officer. The Assessing Officer accepted the price charged from its AE hence, made no transfer pricing adjustment. Thereafter, in a self contradictory stand the Assessing Officer 4 ITA NO. 2243/MUM/2013(A.Y. 2009-10) ITA NO. 5523/MUM/2013(A.Y. 2010-11) ITA NO. 5855/MUM/2014(A.Y. 2011-12) held that the assessee has earned extra ordinary profits and invoked the provisions of section 10A(7) r.w.s. 80IA(8) and (10) of the Act to restrict the deduction u/s. 10A of the Act to Nil. The assessee has earned profit of 1.65% on sales. The profits earned by the assessee are not extra ordinary and are normal business profits. The Assessing Officer without rejecting books of account held that the assessee is earning extra ordinary profits. The Assessing Officer compared the price charged by Mannubhai & Co., a third party with the price charged by the assessee and invoked the provisions of section 10A(7) r.w.s. 80IA (8) & (10) of the Act without appreciating the fact that the assessee is operating from Mumbai, where the cost of manpower and rent is very high. To support his argument he placed reliance on : (i) PCIT vs. Harpreet Kaur, 88 taxmann.com 641(Del) (ii)PCIT vs. Kuljeet Singh Kochar, ITA No.390/2017 decided on 24/07/2017 by Hon’ble Delhi High Court. 4.1 In respect of manner of computing deduction u/s. 10A of the Act, the ld. Authorized Representative of the assessee submitted that the Assessing Officer has erred in setting off unabsorbed depreciation of preceding assessment years before allowing deduction u/s. 10A of the Act. As per the provisions of section 10A of the Act amended by the Finance Act, 2000 w.e.f. 01/04/2001, deduction u/s. section 10A is to be allowed first and then the process of computation of profit and loss shall begin. In support of his contention, he placed reliance on the decision in the case of CIT vs. Yokogawa India Ltd., 391 ITR 274(SC). 5 ITA NO. 2243/MUM/2013(A.Y. 2009-10) ITA NO. 5523/MUM/2013(A.Y. 2010-11) ITA NO. 5855/MUM/2014(A.Y. 2011-12) 4.2 In respect of Ground No.3 of appeal, the ld. Authorized Representative of the assessee submitted that undisputedly, the assessee commenced its business from 01/03/2004 i.e. during the period relevant to the assessment year 2004-05, but the assessee set up eligible undertaking in Software Technology Park after issuance of Letter of Permission on 30/03/2005 and after execution of Agreement with STPI Director on 04/04/2005. Thus, the first year of assessee’s claim of deduction u/s. 10A of the Act was assessment year 2006-07. Since, the assessee had incurred loss in F.Y. 2005-06, no deduction u/s. 10A was claimed in A.Y. 2006-07. The assessee made claim of deduction u/s. 10A for the first time in assessment year 2007-08. Consequently, assessment year 2009-10 is the third year of claim. The Assessing Officer erred in holding that, even if assessee has not claimed deduction u/s. 10A of the Act in assessment year 2004-05, 2005-06 and 2006- 07, they would fall within the block of 10 consecutive assessment years. Therefore, assessment year 2009-10 is the 6 th year of claim. In support of his submissions the assessee placed reliance on CBDT Circular No.1/2016 dated 15/02/2016 and following decisions: (i) CIT vs. Deutsche Software Ltd., 92 taxmann.com 169(SC) (ii) CIT vs. P.S.Velusamy, 74 taxmann.com 262 (SC) (iii)CIT vs. Defree Engineering (P) Ltd., 77 taxmann.com 27 (SC) (iv) CIT vs. CheranSpinning Mills (P) Ltd., 76 taxamann.com 28 (SC) 5. Per contra, Ms. Samrudhi Dhananjay Hande representing the Department vehemently defended the impugned order and prayed for dismissing the appeal of assessee. 6 ITA NO. 2243/MUM/2013(A.Y. 2009-10) ITA NO. 5523/MUM/2013(A.Y. 2010-11) ITA NO. 5855/MUM/2014(A.Y. 2011-12) 6. We have heard the submissions made by rival sides and have examined the orders of authorities below. We have also considered the documents and the decisions on which reliance has been placed by ld. Authorized Representative of the assessee in support of his submissions. In ground No.1 of appeal, the assessee has assailed disallowance of assessee’s claim of deduction u/s. 10A of the Act to the exent of Rs.24,21,614/- by invoking provisions of section 10A(7) r.w.s. 80IA(8) and (10) of the Act. 7. The assessee is providing support services to its AE based in US. The assessee is engaged in preparation of US Tax Returns and software development in connection therewith. The assessee has entered into an agreement with its holding company Sureprep LLC for providing the services. The assessee is charging $50 per tax return. The Assessing Officer made no transfer pricing adjustment in respect of international transactions entered into by the assessee with its AE. In other words, the Assessing Officer accepted the arm’s length price of the services provided by the assessee to its overseas AE. The assessee is operating from Software Technology Park (STPI) in Mumbai, hence, eligible for claiming deduction u/s. 10A of the Act. The Assessing Officer accepts the position that the assessee is eligible for deduction u/s 10A of the Act. However, while computing quantum of deduction u/s. 10A of the Act the Assessing Officer invoked the provisions of section 10A(7) r.w.s. 80IA (8) and (10) of the Act. The assessee had applied CUP to benchmark the ALP of the international services provided to its overseas AE. To support its contentions, the assessee had furnished agreement between Sureprep LLC and one M/s. Mannubhai & Co, Ahmedabad, the rate charged by non-AE for preparing US 7 ITA NO. 2243/MUM/2013(A.Y. 2009-10) ITA NO. 5523/MUM/2013(A.Y. 2010-11) ITA NO. 5855/MUM/2014(A.Y. 2011-12) Tax Return was $12 per return. Taking cue from the said agreement the Assessing Officer held that the assessee is charging excessive amount for providing services, hence disallowed the deduction claimed u/s.10A of the Act on the excess amount invoking the provisions of section 10A(7) of the Act. 8. Before proceeding further it would be relevant to refer to the provisions of Section 10A(7) and Section 80IA(8) & (10). The same are extracted herein under: Section 10A(7) : “(7) The provisions of sub-section (8) and sub-section (10) of section 80-IA shall, so far as may be, apply in relation to the undertaking referred to in this section as they apply for the purposes of the undertaking referred to in section 80-IA.” Section 80IA (8) & (10): “(8) Where any goods or services held for the purposes of the eligible business are transferred to any other business carried on by the assessee, or where any goods or services held for the purposes of any other business carried on by the assessee are transferred to the eligible business and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods or services as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of such eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods or services as on that date : Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the eligible business in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. Explanation.—For the purposes of this sub-section, "market value", in relation to any goods or services, means— (i) the price that such goods or services would ordinarily fetch in the open market; or (ii) the arm's length price as defined in clause (ii) of section 92F, where the transfer of such goods or services is a specified domestic transaction referred to in section 92BA.” 8 ITA NO. 2243/MUM/2013(A.Y. 2009-10) ITA NO. 5523/MUM/2013(A.Y. 2010-11) ITA NO. 5855/MUM/2014(A.Y. 2011-12) “(10) Where it appears to the Assessing Officer that, owing to the close connection between the assessee carrying on the eligible business to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the Assessing Officer shall, in computing the profits and gains of such eligible business for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom:” 9. A perusal of section 10A(7) r.w.s. 80IA(8) would show that the provisions of aforesaid sections would apply where the goods or services of eligible undertaking are transferred to any other business carried on by the assessee or vice versa and consideration for such transfer in either case is not recorded in the books of eligible undertaking at the market value i.e the price at which such goods/services would have ordinarily fetched in the open market. In the instant case, the assessee has charged the price $50 per tax return from its AE based in US. It is not the case that the assessee in order to avail the benefit of section 10A of the Act has transferred the profits from its non-eligible undertaking to eligible undertaking. Thus, one of the essential condition for invoking the provisions of sub-section (8) to section 80IA of the Act is that eligible business and non-eligible business should be carried out by the same assessee. In the instant case, this conditions is not satisfied. On the one hand it is assessee’s eligible undertaking, on the otherhand it is the overseas AE of assessee i.e. a separate entity absolutely distinct from the assessee. Hence, the provisions of section 10A(7) r.w.s. section 80IA(8) are not triggered. 10. Now let us examine the transaction in the present case with reference to provisions of section 10A(7) r.w.s. 80IA(10) of the Act. The aforesaid provisions get attracted where owing to close connection or for any other reason, the 9 ITA NO. 2243/MUM/2013(A.Y. 2009-10) ITA NO. 5523/MUM/2013(A.Y. 2010-11) ITA NO. 5855/MUM/2014(A.Y. 2011-12) assessee having eligible undertaking and any other person have arranged the business transactions between them in a manner which results in more than ordinary profits to the business of assessee in eligible undertaking. In the present case, the Assessing Officer has come to the conclusion that the assessee has earned more than ordinary profits after comparing the price charged by the assessee for preparing the tax return ( i.e. $50 per return) and the price charged by Mannubhai & Co.(i.e. $ 12 per return). The case of the assessee is that the assessee has earned 1.65% profit on sales i.e. Rs.17,18,233/-, hence, the profit earned by the assessee is not an extraordinary profit. The assessee further pointed that it has high cost of manpower, rent, etc. as the assessee is operating from Mumbai, whereas Mannubhai & Co. is operating from Ahmedabad. Be that as it may, apart from the comparable furnished by the assessee for determination of ALP no independent exercise was carried out by the Assessing Officer for the purpose of section 10A(7) of the Act to determine the ‘reasonable price’ for rendering similar services. The Assessing Officer has not made any effort to find out average profit ratio in the industry for providing similar services. After having coming to the conclusion that the price charged by the assessee is excessive, onus is on the Assessing Officer to determine ‘reasonable price’. The Hon'ble Delhi High Court in the case of PCIT vs. Kuljeet Singh Kochar(supra), where the Assessing Officer invoked provisions of section 80IA(8) and (10) of the Act to deny benefit of deduction u/s. 80IC of the Act, on the ground that more than oordinary profits were earned by the assessee, the Hon’ble High Court held: 10 ITA NO. 2243/MUM/2013(A.Y. 2009-10) ITA NO. 5523/MUM/2013(A.Y. 2010-11) ITA NO. 5855/MUM/2014(A.Y. 2011-12) “ 7. This Court is unable to accept the aforesaid submissions. For the purposes of Section 80-IA (10) of the Act, it is not enough for the AO to show that there was a close connection between the Assessee carrying on the eligible business and the other person with whom it has transactions. The AO has to further show that the business between them is so arranged that it produces for the Assessee 'more than the ordinary profits' which might be expected to arise in such eligible business. Section 80-IA (10) of the Act further requires the AO to compute the profits and gains of the eligible business by taking the amount of profits "as may be reasonably deemed to have been derived therefrom” . The adjective "reasonably" carries with it the responsibility of the AO to base his conclusion on some empirical data. 8. In the present case the AO's conclusion that the profits of the Assessee were "more than ordinary" was based on surmises and conjectures. During the course of his submission, Mr Singh sought to suggest that a 40% GP ratio by itself should be taken to be "more than ordinary". Neither the Court nor the CIT(A) or the ITAT can take judicial notice of what percentage of GP ratio should be considered to be 'more than ordinary'. That decision will hinge upon a variety of factors including the line business, the market conditions, the geographical location, the standard practices peculiar to the line of business and so on. To be fair, Mr Singh pointed out that by a subsequent amendment with effect from 1 st April 2013, the legislature has inserted a proviso to Section 80-1A (10) of the Act to acknowledge the complexity of the exercise.” 11. Apart from above, there is another reason to reject Assessing Officer’s action of invoking provisions of section 80IA(10) of the Act. The Assessing Officer on one hand accepted the price charged by the assessee from its overseas AE at arm’s length under transfer pricing mechanism and on the other while computing deduction u/s. 10A of the Act has held the price to be excessive. The Assessing Officer cannot approbate and reprobate in accepting the price charged by the assessee from its AE. The Assessing Officer has either to accept price charged by assessee for all purposes or has to reject the same wholly.There can be no plausible justification for rejecting ALP accepted under Transfer Pricing provisions for the purpose of determination of deduction u/s.10A of the Act. 11 ITA NO. 2243/MUM/2013(A.Y. 2009-10) ITA NO. 5523/MUM/2013(A.Y. 2010-11) ITA NO. 5855/MUM/2014(A.Y. 2011-12) 12. Thus, in light of facts of the instant case, we are of the considered view that Assessing Officer has erred in applying provisions of section 10A(7) r.w.s. 80IA(8) and (10) of the Act in restricting assesssee’s legitimate claim of deduction u/s. 10A of the Act. In the result, assessee succeeds on ground No.1 of the appeal. 13. In ground No.2, the assessee has assailed the findings of the Assessing Officer in holding that unabsorbed depreciation of preceding years is to be set off first against the profits before computing deduction u/s.10A of the Act. It is no more res-integra that deduction u/s. 10A of the Act post amendment by the Finance Act, 2000 w.e.f. 01/04/2001 has become deduction provision. The deduction u/s. 10A has to be computed first before allowing set off of brought forward losses and depreciation. The Hon'ble Apex Court in the case of CIT vs. Yokogawa India Ltd (supra) has explained the provisions of section 10A of the Act after the amendment. The provisions of Section 10A of the Act, as explained by the Hon'ble Apex Court are as under: “ 16. From a reading of the relevant provisions of Section 10A it is more than clear to us that the deductions contemplated therein is qua the eligible undertaking of an assessee standing on its own and without reference to the other eligible or non- eligible units or undertakings of the assessee. The benefit of deduction is given by the Act to the individual undertaking and resultantly flows to the assessee. This is also more than clear from the contemporaneous Circular No. 794 dated 9.8.2000 which states in paragraph 15.6 that, "The export turnover and the total turnover for the purposes of sections 10A and 10B shall be of the undertaking located in specified zones or 100% Export Oriented Undertakings, as the case may be, and this shall not have any material relationship with the other business of the assessee outside these zones or units for the purposes of this provision." 17. If the specific provisions of the Act provide [first proviso to Sections 10A(1); 10A (1A) and 10A (4)] that the unit that is contemplated for grant of benefit of deduction is the eligible undertaking and that is also how the contemporaneous Circular of the 12 ITA NO. 2243/MUM/2013(A.Y. 2009-10) ITA NO. 5523/MUM/2013(A.Y. 2010-11) ITA NO. 5855/MUM/2014(A.Y. 2011-12) department (No. 794 dated 09.08.2000) understood the situation, it is only logical and natural that the stage of deduction of the profits and gains of the business of an eligible undertaking has to be made independently and, therefore, immediately after the stage of determination of its profits and gains. At that stage the aggregate of the incomes under other heads and the provisions for set off and carry forward contained in Sections 70, 72 and 74 of the Act would be premature for application. The deductions under Section 10A therefore would be prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving at the total income of the assessee from the gross total income. The somewhat discordant use of the expression "total income of the assessee" in Section 10A has already been dealt with earlier and in the overall scenario unfolded by the provisions of Section 10A the aforesaid discord can be reconciled by understanding the expression "total income of the assessee" in Section 10A as 'total income of the undertaking'. 18. For the aforesaid reasons we answer the appeals and the questions arising therein, as formulated at the outset of this order, by holding that though Section 10A, as amended, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI. All the appeals shall stand disposed of accordingly.” [Emphasized by us] Thus, the Hon'ble Apex Court in explicit terms has held that the deduction u/s. 10A of the Act has to be allowed at the stage of determination of profits and gains of business of an eligible undertaking. 10. The Hon’ble Jurisdictional High Court in CIT vs. Black & Veatch Consulting (P.) Ltd. 20 taxmann.com 727(Bom.) has held that deduction u/s. 10A of the Act in respect of eligible unit has to be allowed prior to setting off of brought forward depreciation & losses. This position was again reiterated in CIT vs. Ganesh Polychem Ltd. 35 taxmann.com 446 (Bom.) 11. In the light of decisions referred above and facts of the case, ground No.2 of appeal is allowed. 12. In ground No.3 of appeal, the assessee has assailed the findings of Assessing Officer that assessment year 2004-05 is the first year of deduction 13 ITA NO. 2243/MUM/2013(A.Y. 2009-10) ITA NO. 5523/MUM/2013(A.Y. 2010-11) ITA NO. 5855/MUM/2014(A.Y. 2011-12) u/s.10A of the Act and consequently, assessment year 2009-10 is the sixth year for claim of deduction u/s. 10A of the Act. The undisputed facts as emanating from records are that the assessee company was incorporated on 21/01/2004. The assessee made an application for registration with Software Technological Park of India (STPI) in 2004. The Letter of Permission to set up STP unit was allowed by the STPI on 30/03/2005 (copy of letter at page-94 of the paper book). In compliance to Letter of Permission, the assessee entered into a Legal Agreement for software exports with Director, STPI, Mumbai on 04/04/2005. The pre condition for setting up export unit in STP eligible for deduction u/s. 10A of the Act is Letter of Permission from STPI. It would be only after the date of Letter of Permission that an undertaking would be set up and thereafter begin to manufacture/provide services. In the present case, after examining the sequence of events we have no hesitation in holding that the undertaking could not have commenced its activity of providing services i.e. software development/ITES prior to the Assessment Year 2006-07. Though the assessee has not given specific date of start of providing services, but it is assessee’s own admission that no claim of deduction u/s. 10A of the Act was made in Assessment Year 2006-07, as the assessee had incurred business loss. From the above, it can be safely deduced that the assessee commenced the services of software development and ITES in Financial Year 2005-06 relevant to Assessment Year 2006-07. 13. Now, we have to determine the initial/first year of assessee’s eligibility to claim deduction u/s.10A of the Act. Here it would be imperative to refer to the provisions of section 10A(1) of the Act. The same is reproduced herein below: 14 ITA NO. 2243/MUM/2013(A.Y. 2009-10) ITA NO. 5523/MUM/2013(A.Y. 2010-11) ITA NO. 5855/MUM/2014(A.Y. 2011-12) “10A. (1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by an undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee:” A bare perusal of the provisions of sub-section(1) would show that the assessee is eligible to claim deduction for a period of ten consecutive assessment year beginning with assessment year relevant to the previous year in which undertaking begins development of software or providing services. In the instant case since the assessee started providing services in the previous year 2005-06, the period of 10 Assessment Years shall start from assessment year 2006-07. The ld. Counsel for the assessee has stated that since, the eligible unit had incurred losses in assessment year 2006-07, the deduction u/s. 10A of the Act was not claimed. The assessee is eligible to claim benefit of section 10A of the Act only in respect of profits. Therefore, the first year for the purpose of claiming deduction u/s. 10A would be assessment year 2007-08. We do not concur with this argument of the assessee. A plain reading of section 10A(1) of the Act leaves no element of doubt or scope of interpretation that the period of ten years begins with the Assessment Year in which the undertaking starts manufacturing. Thus, in the present case, the first Assessment Year wherein assessee is eligible to claim deduction u/s. 10A of the Act is assessment year 2006-07. As a sequitur Assessment Year 2009-10 would be assessee’s fourth year of claim. The ground No.3 of appeal is thus, partly allowed. 15 ITA NO. 2243/MUM/2013(A.Y. 2009-10) ITA NO. 5523/MUM/2013(A.Y. 2010-11) ITA NO. 5855/MUM/2014(A.Y. 2011-12) 14. In the result, the appeal of assessee is allowed partly. ITA NO.5523/MUM/2013- A.Y. 2010-11: 15. The ld.Authorized Representative of the assessee submitted that the facts and grounds raised in the appeal for assessment year 2010-11 are similar to the grounds and facts in Assessment Year 2009-10. Therefore, the submissions madein respect of grounds in Assessment Year 2009-10 would equally hold good for Assessment Year 2010-11. 16. The ld. Departmental Representative fairly stated that the facts and issues raised in appeal by the assessee for Assessment Year 2010-11 are similar to Assessment Year 2009-10. 17. Both sides heard. We find that the issue raised in ground No.1 of present appeal is similar to the issue raised in ground No.1 of appeal for Assessment Year 2009-10. Similarly, the issued raised in ground No.2 and 3 of present appeal is similar to ground No.2 of Assessment Year 2009-10. The findings given on the aforesaid grounds in Assessment Year 2009-10 would mutatis mutandis apply to ground No.1, 2 and 3 of the present appeal. Ergo, ground No.1,2 and 3 of appeal are allowed. 18. The issue raised in ground No.4 of present appeal is identical to the issue raised in ground No.3 of appeal for Assessment Year 2009-10. While adjudicating the said ground in Assessment Year 2009-10, we have held that first/initial Assessment Year for claiming deduction u/s.10A of the Act is Assessment Year 2006-07. Accordingly, Assessment Year 2010-11 would be 16 ITA NO. 2243/MUM/2013(A.Y. 2009-10) ITA NO. 5523/MUM/2013(A.Y. 2010-11) ITA NO. 5855/MUM/2014(A.Y. 2011-12) the fifth year of assessee’s claim of deduction u/s. 10A of the Act . The ground No.4 of the present appeal is thus, partly allowed. 19. In the result, appeal of assessee for Assessment Year 2010-11 is partly allowed. ITA NO.5855/MUM/2014- A.Y.2011-12: 20. The ld.Authorized Representative of the assessee submitted that in this appeal assessee has raised seven grounds. The issue raised in ground No.1,2 and 3 are similar to the issue raised in Assessment Years 2009-10 and 2010-11. In ground No.4 of appeal, the assessee has assailed the findings of authorities below in not granting set off of carry forward losses of Rs.44,85,052/-. The ground No.4 of appeal is consequential to ground No.3. The ld.Authorized Representative of the assessee pointed that on the issues raised in ground No.5,6 & 7, the CIT(A) has not given a separate finding and has disallowed the claim. Although the issue are co-related to the disallowance of claim of deduction u/s.10A of the Act r.w.s. 80IA (8) and (10) of the Act . 21. The ld. Departmental Representative fairly stated that the issues raised in present appeal are similar to the one raised in Assessment Year 2009-10. She reiterated her submissions and prayed for dismissing the appeal of assessee. 22. Both sides heard. We find that ground No.1 of the present appeal is identical to ground No.3 in Assessment Year 2009-10. While adjudicating the issue in Assessment Year 2009-10 we have held that the first/initial Assessment Year for claiming deduction u/s. 10A of the Act in the case of 17 ITA NO. 2243/MUM/2013(A.Y. 2009-10) ITA NO. 5523/MUM/2013(A.Y. 2010-11) ITA NO. 5855/MUM/2014(A.Y. 2011-12) assessee is Assessment Year 2006-07. Accordingly, Assessment Year 2011-12 would be 6 th year for claiming deduction u/s. 10A of the Act. The ground No.1 of appeal is thus, partly allowed. 23. The issue raised in ground No.2 of appeal is identical to the one raised in ground No.1 of Assessment Year 2009-10 and the issue raised in ground No.3 of present appeal is identical to ground No.2 of Assessment Year 2009-10. The facts relevant to the aforesaid grounds are identical. The findings given by us while adjudicating ground No.1 & 2 in Assessment Year 2009-10 would mutatis mutandis apply to ground No.2 & 3, respectively in the present appeal. For parity of reasons, ground No.2 and 3 are allowed. 24. In so far as issue raised in ground No.4 is concerned, it is stated to be consequential to ground No.3. This issue is restored to Assessing Officer to allow set off of carry forward losses in line with the findings given by us while adjudicating ground No.3 of the present appeal. The ground No.4 is allowed for statistical purpose. 25. As regards ground No.5,6 & 7 of appeal, the contention of the assessee is that they are part of ground No.2, however, no specific findings has been given by the CIT(A) on this issue. Since, we have allowed ground No.2 of appeal holding that the provisions of section 10A(7) r.w.s. 80IA(8) & (10) of the Act are not attracted, the issue raised in ground No.5,6 & 7 becomes academic, hence, require no adjudication 26. In the result, appeal of the assessee is partly allowed. 18 ITA NO. 2243/MUM/2013(A.Y. 2009-10) ITA NO. 5523/MUM/2013(A.Y. 2010-11) ITA NO. 5855/MUM/2014(A.Y. 2011-12) 27. To sum up, appeal in ITA No.2243/Mum/2013,A.Y.2009-10, ITA No.5523/Mum/2013, A.Y.2010-11 and ITA No.5855/Mum/2014,A.Y. 2011-12 are partly allowed. Order pronounced in the open court on Friday the 03 rd day of November, 2023. Sd/- Sd/- (GAGAN GOYAL) (VIKAS AWASTHY) लेखाकार सद瀡य/ACCOUNTANT MEMBER 瀈याियक सद瀡य/JUDICIAL MEMBER मुंबई/ Mumbai, 琈दनांक/Dated 03/11/2023 Vm, Sr. PS(O/S) 灹ितिलिप अ灡ेिषत 灹ितिलिप अ灡ेिषत灹ितिलिप अ灡ेिषत 灹ितिलिप अ灡ेिषतCopy of the Order forwarded to : 1. अपीलाथ牸/The Appellant , 2. 灹ितवादी/ The Respondent. 3. The PCIT 4.. िवभागीय 灹ितिनिध, आय.अपी.अिध., मुबंई/DR, ITAT, Mumbai 5. गाड榁 फाइल/Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar), ITAT, Mumbai