JT. CIT(OSD), Cir.-3, Pune V. Opus software solutions Pvt. Ltd., Pune

ITA 643/PUN/2011

• Counselvise Citation: 64324514 RSA 2011
• Duration Of Justice: 2 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-10-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 16-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MUKESH VERMA
• Keywords: Business income; Depreciation; Revenue expenditure; Capital expenditure
• Section: 143(3); 37(1); 147; 54; 144; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 584/PN/2011 (ASSESSMENT YEAR: 2002-03) M/S OPUS SOFTWARE SOLUTIONS PVT. LTD. COMMERZONE, BUILDING NO. 4 1 ST FLOOR, SAMRAT ASHOKA PATH OPP. AIRPORT ROAD, YERWADA PUNE 411 006 PAN : AAACO 2203 N . APPELLANT VS. ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 3, PUNE . RESPONDENT ITA NO. 643/PN/2011 (ASSESSMENT YEAR: 2002-03) JOINT COMMISSIONER OF INCOME TAX (OSD) CIRCLE 3, PUNE . APPELLANT VS. OPUS SOFTWARE SOLUTIONS PVT. LTD. 22 GAURISHANKAR SENAPATI BAPAT MARG SHIVAJI CHS, PUNE PAN : AAACO 2203 N . RESPONDENT APPELLANT BY : MR. NIKHIL PATHAK RESPONDENT BY : MR. MUKESH VERMA DATE OF HEARING : 02-04-2013 DATE OF PRONOUNCEMENT : 28-05-2013 ORDER PER G. S. PANNU, AM THE CAPTIONED CROSS-APPEALS, EACH BY THE ASSESSEE AND THE REVENUE, PERTAINING TO THE ASSESSMENT YEAR 2002-03, WERE HEA RD TOGETHER AND ARE BEING DISPOSED-OFF BY WAY OF A CONSOLIDATED ORDER F OR THE SAKE OF CONVENIENCE AND BREVITY. THE CAPTIONED APPEALS ARE DIRECTED AGA INST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - II, PUNE DAT ED 24.02.2011 WHICH, IN TURN, HAS ARISEN FROM AN ASSESSMENT ORDER DATED 31.12.2009 PASSED BY THE ITA NOS. 584 & 643/PN/2011 A.Y. 2002-03 ASSESSING OFFICER, UNDER SECTION 144 READ WITH SECT ION 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT), FOR THE ASSESSMENT YEAR 2002-03. 2. FIRSTLY, WE MAY TAKE UP THE APPEAL OF THE ASSESS EE WHEREIN TWO ISSUES HAVE BEEN RAISED. THE FIRST ISSUE IS WITH REGARD T O THE VALIDITY OF THE INITIATION OF PROCEEDINGS UNDER SECTION 147 OF THE ACT. AS THE SAME HAS NOT BEEN PRESSED AT THE TIME OF HEARING, ACCORDINGLY THE SAM E IS DISMISSED AS NOT PRESSED. 3. THE SECOND ISSUE, RAISED BY THE ASSESSEE, IS WIT H REGARD TO THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OF RS.4, 02,11,000/- REPRESENTING PRODUCT DEVELOPMENT EXPENSES. THE ASSESSING OFFICER HAD MADE THE DISALLOWANCE BY RELYING ON HIS STAND IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 VIDE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT DATED 28.02.2006. BEFORE THE CIT(A), ASSESSEE P OINTED OUT THAT IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS WRONGLY TAKEN THE FIGURE OF DISALLOWANCE UNDER THIS HEAD AT RS.2,77,07,736/-, W HICH WAS THE FIGURE FOR ASSESSMENT YEAR 2003-04 WHEREAS THE ACTUAL AMOUNT O F PRODUCT DEVELOPMENT EXPENSES CLAIMED AS DEDUCTION WAS AT RS.4,02,11,000 /-. MOREOVER, THE ASSESSING OFFICER HAD ALLOWED DEPRECIATION ON THE S AME, AND THE SAME @ 25% WORKED OUT TO RS.1,52,750/- INSTEAD OF RS. 69 ,26,934/- MENTIONED IN THE ASSESSMENT ORDER. PERTINENTLY, AS PER THE ASSES SING OFFICER, THE PRODUCT DEVELOPMENT EXPENSES WERE NOT ALLOWABLE AS REVENUE EXPENDITURE AND INSTEAD HE GRANTED DEPRECIATION @ 25% ON THE SAME B ASIS AS FOR ASSESSMENT YEAR 2003-04. 4. WITH REGARD TO THE ERROR IN STATING THE CORRECT AMOUNT OF DISALLOWANCE, THE CIT(A) DIRECTED THE ASSESSING OFFICER TO VERIFY THE SAME AND CORRECT THE ERROR. WITH REGARD TO THE MERITS OF THE CLAIM, CIT( A) RELIED UPON HIS ORDER FOR THE ASSESSMENT YEAR 2003-04 IN ASSESSEES OWN CASE AND HELD THAT THE ASSESSEES CLAIM OF PRODUCT DEVELOPMENT EXPENSES AS REVENUE EXPENDITURE ITA NOS. 584 & 643/PN/2011 A.Y. 2002-03 WAS NOT ALLOWABLE. ON THIS ASPECT, THE CIT(A) DECID ED THE MATTER AGAINST THE ASSESSEE. 5. AT THE TIME OF HEARING BEFORE US, IT WAS A COMMO N POINT BETWEEN THE PARTIES THAT THE ORDER OF THE CIT(A) FOR THE ASSESS MENT YEAR 2003-04 WAS A SUBJECT MATTER OF APPEAL BEFORE THE TRIBUNAL IN ITA NO. 1179/PN/2009 DATED 27.07.2012 WHEREIN THE ASSESSEE HAS BEEN FOUND TO B E ELIGIBLE FOR CLAIMING THE PRODUCT DEVELOPMENT EXPENSES AS A REVENUE EXPEN DITURE. THE RELEVANT DISCUSSION IN THE ORDER OF THE TRIBUNAL DATED 27.07 .2012 (SUPRA) IS AS UNDER :- 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. BEFORE WE PROCEED TO ADJUDICATE THE CONTROVERSY RELATING TO T HE NATURE OF THE PRODUCT DEVELOPMENT EXPENDITURE, IT WOULD BE APPROPRIATE TO BRIEFLY TOUCH UPON THE NATURE OF BUSINESS CARRIED OUT BY THE ASSESSEE. THE APPELLANT COMPANY IS ENGAGED IN DEVELOPING VARIOUS SOFTWARE PRODUCTS, WH ICH ARE IN TURN USED IN THE BANKING SECTOR. THE ASSESSEE HAD EXPLAINED THAT EXPENDITURE IN QUESTION HAS BEEN INCURRED ON DEVELOPMENT OF VARIOUS PRODUCT S, LIKE, TRADE NOW, ELECTRA ATM, ELECTRA CARD AND ELECTRA PRODUCT GATEW AY (EPG). FROM THE EXPLANATION OF THE ASSESSEE RENDERED TO THE LOWER A UTHORITIES, IT EMERGES THAT THE PRODUCT ELECTRA PRODUCT GATEWAY (EPG) IS AN END -TO-END SOFTWARE SOLUTION PRODUCT WHICH CAN SUPPORT MULTIPLE TYPES OF FINANCI AL INSTRUMENTS AND TRANSACTIONS ON THE INTERNET. THE ASSESSEE EXPLAINE D THAT IT WAS IN THE BUSINESS OF SOFTWARE DEVELOPMENT SINCE 1999 AND THE VARIOUS PRODUCTS DEVELOPED BY IT ARE SOLD TO DIFFERENT CUSTOMERS. A PERTINENT FACTOR WHICH WAS BROUGHT OUT AND HAS ALSO BEEN ARTICULATED BY THE LE ARNED COUNSEL BEFORE US IS TO THE EFFECT THAT THE PRODUCTS DEVELOPED AND SOLD BY THE ASSESSEE ARE NOT CUSTOMER-SPECIFIC, BUT ARE DEVELOPED SPECIFIC TO TH E BUSINESS PROCESSES. FOR INSTANCE, THE SOFTWARE PACKAGES, NAMELY, EPG, ELECT RA CARD AND ELECTRA ATM ARE PRODUCTS WHICH ARE DEVELOPED FOR USE IN THE BAN KING AND FINANCIAL SERVICES SECTOR. IN THIS BACKGROUND OF THE NATURE OF BUSINES S BEING CARRIED OUT BY THE ASSESSEE, WE MAY NOW EXAMINE THE EXPENDITURE REFERR ED TO AS PRODUCT DEVELOPMENT EXPENDITURE OF RS 2,77,07,736/-, WHICH IS IN DISPUTE. DETAILS OF SUCH EXPENDITURE SHOW THAT THE SAME COMPRISES OF EM PLOYEES SALARIES, SOFTWARE CONSULTANCY/TRAINING EXPENSES AND INDIRECT COSTS BY WAY OF ADMINISTRATIVE/ OTHER EXPENSES, E.G. POWER AND FUEL , PRINTING & STATIONERY, MARKETING EXPENSES, RENT, PROFESSIONAL FEES, OFFICE EXPENSES, RATES AND TAXES, BOOKS AND PERIODICALS, ETC. THE DETAILS OF SUCH EXP ENDITURE ARE FOUND PLACED IN THE PAPER BOOK AS SUBMITTED AT THE TIME OF HEARI NG. BE THAT AS IT MAY, IT IS QUITE EVIDENT THAT THE EXPENDITURE IN QUESTION CANN OT BE SAID TO HAVE RESULTED IN ACQUISITION OF ANY NEW ASSET. SO, HOWEVER, THE P LEA OF THE REVENUE IS THAT SUCH EXPENDITURE HAS RESULTED IN DEVELOPMENT OF SOF TWARE PRODUCTS, WHICH IN TURN ARE BEING SOLD BY THE ASSESSEE TO VARIOUS CUST OMERS OVER A PERIOD OF TIME ITA NOS. 584 & 643/PN/2011 A.Y. 2002-03 INCLUDING IN THE SUBSEQUENT YEARS AND, THEREFORE, I T RESULTS IN AN ENDURING BENEFIT, AND ACCORDINGLY, SUCH EXPENDITURE WAS TO B E HELD AS CAPITAL EXPENDITURE. 10. IN OUR CONSIDERED OPINION, THE AFORESAID PROPOS ITION OF THE REVENUE IS QUITE ALIEN TO THE BUSINESS REALITIES UN DER WHICH THE ASSESSEE IS OPERATING. QUITE CLEARLY, THE ASSESSEE IS IN THE BU SINESS OF SOFTWARE DEVELOPMENT WHICH ENTAILS FAST TECHNOLOGICAL CHANGE S AND IN THAT VIEW, THERE IS NO PERMANENCE ATTACHED TO ANY PRODUCT DEVELOPED. IN FACT, IT IS QUITE UNDERSTANDABLE THAT THE BUSINESS OF THE ASSESSEE IS EXPOSED TO VOLATILITY OF NEW AND UPCOMING TECHNOLOGICAL ADVANCES AND THE PRO DUCTS DEVELOPED BY IT MAY NOT BE SUSTAINABLE OVER A PERIOD OF TIME TO COM PETE IN THE MARKET PLACE. THEREFORE, IN THIS BACKGROUND ONE HAS TO EXAMINE AS TO WHETHER THE EXPENDITURE INCURRED ON DEVELOPMENT AND LAUNCHING O F NEW PRODUCTS IN THE SAME LINE OF BUSINESS RESULTS IN AN ADVANTAGE IN TH E REVENUE FIELD OR IN THE CAPITAL FIELD. THE HONBLE SUPREME COURT IN THE CAS E OF EMPIRE JUTE CO LTD (SUPRA) HAS HELD THAT THE TRUE TEST TO ASCERTAIN TH E NATURE AND IMPORT OF THE EXPENDITURE IS TO EXAMINE THE SAME FROM A COMMERCIA L PERSPECTIVE. EVEN IF, IT HAS TO BE ACCEPTED THAT THE EXPENDITURE RESULTS IN AN ENDURING BENEFIT TO THE ASSESSEE, YET FOLLOWING DISCUSSION BY THE HONBLE S UPREME COURT WOULD SHOW THAT EACH AND EVERY INCIDENCE OF ENDURING BENEFIT W OULD NOT RESULT IN CLASSIFICATION OF EXPENDITURE AS A CAPITAL EXPENDIT URE:- THERE MAY BE CASES WHERE EXPENDITURE EVEN IF INCUR RED FOR OBTAINING AN ADVANTAGE OF ENDURING BENEFIT, MAY, NO NETHELESS, BE ON REVENUE ACCOUNT AND THE TEST OF ENDURING BENEFIT MA Y BREAKDOWN. IT IS NOT EVERY ADVANTAGE OF ENDURING NATURE ACQUIRED BY AN A SSESSEE THAT BRINGS THE CASE WITHIN THE PRINCIPLE LAID DOWN IN THIS TES T. WHAT IS MATERIAL TO CONSIDER IS NATURE OF THE PRINCIPLE LAID DOWN IN TH IS TEST. WHAT IS MATERIAL TO CONSIDER IS NATURE OF THE ADVANTAGE IN A COMMERCIAL SENSE AND IT IS ONLY WHERE THE ADVANTAGE IS IN THE CAPITAL FIELD THAT TH E EXPENDITURE WOULD BE DISALLOWABLE ON AN APPLICATION OF THIS TEST. IF THE ADVANTAGE CONSISTS MERELY IN FACILITATING THE ASSESSEES TRADING OPERA TIONS OR ENABLING THE MANAGEMENT AND CONDUCT OF THE ASSESSEES BUSINESS TO BE CARRIED ON MORE EFFICIENTLY OR MORE PROFITABLY WHILE LEAVING T HE FIXED CAPITAL UNTOUCHED, THE EXPENDITURE WOULD BE OF REVENUE ACCO UNT, EVEN THOUGH THE ADVANTAGE MAY ENDURE FOR AN INDEFINITE FUTURE. IN THE PRESENT CASE, IN OUR VIEW, THE EXPENDITURE O N DEVELOPMENT OF NEW PRODUCT IN THE LINE OF BUSINESS BEING CARRIED O UT BY THE ASSESSEE IS AN EXPENDITURE RELATED TO SUCH BUSINESS AND BENEFIT TO THE ASSESSEE IS IN THE REVENUE FIELD, INASMUCH AS IT SEEKS TO IMPROVE THE PROFITABILITY OF THE ASSESSEE AND THE ENDURING BENEFIT CANNOT BE REGARDED TO BE I N THE CAPITAL FIELD. THE PARITY OF REASONING LAID DOWN BY THE HONBLE APEX C OURT IN THE CASE OF EMPIRE JUTE CO LTD (SUPRA), AS EXTRACTED ABOVE, CLEARLY SU PPORTS THE STAND OF THE ASSESSEE, INASMUCH AS THE EXPENDITURE IN QUESTION M ERELY RESULTS IN DEVELOPMENT OF NEW PRODUCTS BY THE ASSESSEE IN ITS EXISTING LINE OF BUSINESS. EVEN OTHERWISE, IT IS NOTEWORTHY THAT NONE OF THE E XPENDITURES IN QUESTION ARE OF CAPITAL NATURE AND IN FACT, THE EXPENDITURE WHIC H HAS BEEN REFERRED TO BY US IN THE EARLIER PARAGRAPH CLEARLY ARE SUCH EXPENDITU RE, WHICH ARE INCURRED IN THE COURSE OF CARRYING ON OF BUSINESS. ITA NOS. 584 & 643/PN/2011 A.Y. 2002-03 11. THE OTHER OBJECTION OF THE REVENUE THAT THE ASS ESSEE HAD TREATED THE IMPUGNED EXPENDITURE AS A DEFERRED REVE NUE EXPENDITURE IN THE BOOKS OF ACCOUNT AND CLAIMED IT AS A REVENUE EXPEND ITURE IN THE COMPUTATION OF INCOME, IS OF NO CONSEQUENCE. THE HONBLE SUPREM E COURT IN THE CASE OF KEDARNATH JUTE MFG. CO. LTD (SUPRA) AND ALSO THEREA FTER IN THE CASE OF TUTICORIN ALKALI CHEMICALS V. CITR 227 ITR 172 (SC) AND SUTLEJ COTTON MILLS LTD V. CIT 116 ITR 1 (SC) HAS SUPPORTED THE PROPOSI TION THAT THE ENTRIES IN THE BOOKS OF ACCOUNT CANNOT BE DEMONSTRATIVE OF THE TRU E NATURE OF A TRANSACTION. THE TRUE NATURE OF A TRANSACTION IS TO BE ASSESSED NOT ON THE BASIS OF THE ENTRIES IN THE BOOKS OF ACCOUNT ALONE, BUT HAVING R EGARD TO THE REALITIES OF THE TRANSACTION. IN THIS VIEW OF THE MATTER, THE AFORES AID OBJECTION IS OF NO CONSEQUENCE. 12. REGARDING THE OBJECTION OF THE REVENUE TO THE E FFECT THAT THE ASSESSEE WAS SEEKING TO REGISTER ITS TRADE-MARK IN RELATION TO THE PRODUCES DEVELOPED, SAME, IN OUR VIEW, IS IRRELEVANT TO DECI DE THE NATURE OF THE EXPENDITURE INCURRED ON DEVELOPMENT OF PRODUCTS. IN SECTION 32(1)(II), A TRADE- MARK IS CONSIDERED AS AN INTANGIBLE ASSET, SO HOWEV ER, IT IS CLEAR THAT IN THE PRESENT CASE THE EXPENDITURE IS NOT INCURRED ON A T RADE-MARK DEVELOPED AND ACCORDINGLY, THE PLEA OF THE REVENUE THAT SUCH EXPE NDITURE RESULTED IN CREATION OF AN INTANGIBLE ASSET IS QUITE IRRELEVANT . SIMILARLY, THE REFERENCE MADE BY THE COMMISSIONER OF INCOME-TAX (APPEALS) TO THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF AMWAY INDIA EN TERPRISES (SUPRA) IS ALSO OF NO HELP, INASMUCH AS IT DEALS WITH EXPENDITURE O N ACQUISITION OF A SOFTWARE PACKAGE IN THE HANDS OF A CUSTOMER AND THE DISPUTE IN THE PRESENT CASE STANDS ON A QUALITATIVELY DIFFERENT FOOTING, INASMU CH AS IN THE PRESENT CASE THE ASSESSEE HAS DEVELOPED THE PRODUCTS IN ORDER TO MAR KET THE SAME IN ITS LINE OF BUSINESS OF DEVELOPMENT AND SELLING OF SOFTWARE PAC KAGES. 13. IN CONCLUSION, HAVING REGARD TO THE AFORESAID D ISCUSSION, IN OUR CONSIDERED OPINION, THE EXPENDITURE IN QUESTION WHI CH HAS BEEN INCURRED ON DEVELOPMENT OF VARIOUS SOFTWARE PACKAGES, FOR BEIN G SOLD IN THE ASSESSEES BUSINESS OF SOFTWARE DEVELOPMENT AND SELLING, IS TO BE REGARDED AS IN THE NATURE OF REVENUE EXPENDITURE. THUS, ON THIS ISSUE THE ASSESSEE SUCCEEDS. 14. THE ONLY OTHER GROUND IN THIS APPEAL RAISED BY THE ASSESSEE IS WITH REGARD TO ITS ALTERNATIVE PLEA THAT IN CASE TH E EXPENDITURE OF RS 2,77,07,736/- OF PRODUCT DEVELOPMENT IS NOT HELD TO BE REVENUE EXPENDITURE, THEN THE SAME IS ALLOWABLE IN TERMS OF SECTION 35(1)(I) OR SECTION 35(1)(IV) OF THE ACT WHILE COMPUTING BUSINESS INCOM E AS EXPENDITURE IN THE NATURE OF SCIENTIFIC RESEARCH EXPENDITURE. SINCE TH E ASSESSEE HAS SUCCEEDED ON ITS SUBSTANTIVE PLEA THAT THE IMPUGNED EXPENDITU RE IS OF REVENUE NATURE, THE ALTERNATIVE PLEA IS RENDERED ACADEMIC AND IS, T HEREFORE, NOT BEING ADJUDICATED AT THE PRESENT. ITA NOS. 584 & 643/PN/2011 A.Y. 2002-03 6. FOLLOWING THE AFORESAID PRECEDENT IN ASSESSEES OWN CASE WHICH IS IN RELATION TO THE SIMILAR DISPUTE BEFORE US, THE CLAI M OF THE ASSESSEE DESERVES TO BE ALLOWED. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSE E IN ACCORDANCE WITH THE ORDER OF THE TRIBUNAL DATED 27.07.2012 (SUPRA). THU S, ON THIS GROUND ASSESSEE SUCCEEDS. 7. THE ASSESSEE HAS ALSO RAISED AN ALTERNATIVE PLEA TO THE EFFECT THAT IF THE SAID CLAIM IS NOT ALLOWED UNDER SECTION 37(1) OF TH E ACT, THE SAME IS ALLOWABLE UNDER SECTION 35(1)(I) OR UNDER SECTION 35(1)(IV) O F THE ACT. SINCE THE ASSESSEE HAS SUCCEEDED ON ITS SUBSTANTIVE PLEA THAT THE IMPUGNED EXPENDITURE IS REVENUE IN NATURE, THE ALTERNATIVE P LEA IS RENDERED ACADEMIC AND IS ACCORDINGLY DISMISSED AS INFRUCTUOUS. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. 9. NOW, WE MAY CONSIDER THE CROSS-APPEAL OF THE REV ENUE WHEREIN THE FOLLOWING GROUNDS OF APPEAL HAVE BEEN RAISED BY THE REVENUE :- 2. THE LEARNED CIT(A) GROSSLY ERRED IN BLANKETLY H OLDING THAT THE CLAIM OF THE APPELLANT U/S 10A IN SO FAR AS INCOME HAS ARISEN OUT OF THE ELIGIBLE BUSINESS IS LIABLE TO BE ALLOWED, IF THE CONDITIONS ARE OTHERWISE FULFILLED, AFTER SET OFF OF THE UNABSORBED CARRY FORWARD LOSSES/DEPR ECIATION ETC. 3. THE LEARNED CIT(A) GROSSLY ERRED IN FAILING TO A PPRECIATE THAT THE LOSS RELATING TO THE BUSINESS OF THE UNDERTAKIN G TO WHICH SEC. 10A APPLIES IS NOT PERMITTED TO BE CARRIED FORWARD IN VIEW OF T HE EMBARGO IMPOSED BY SEC. 10A(6) AND, THEREFORE, SUCH LOSS CANNOT BE CARRIED FORWARD AND ADJUSTED AGAINST THE GROSS TOTAL INCOME OF THE ASSESSEE. 4. WITHOUT PREJUDICE TO THE FOREGOING, THE LEARNED CIT(A) GROSSLY ERRED IN HOLDING AS ABOVE IN AN UNQUALIFIED MANNER WHEREAS THERE IS NOTHING IN SEC. 10(6)(II) PERMITTING CARRY FORWARD AND SET OFF OF LOSS RELATING TO A.Y. 2001-02 ONWARDS AGAINST ANY OTHER INCOME OR ANY OTH ER BUSINESS INCOME OF AN ASSESSEE. 10. IN SO FAR AS ISSUE RAISED IN GROUND OF APPEAL N O. 2 IS CONCERNED, THE RELEVANT FACTS ARE THAT WHILE DETERMINING THE TOTAL INCOME IN THE ASSESSMENT ITA NOS. 584 & 643/PN/2011 A.Y. 2002-03 ORDER DATED 31.12.2009, THE ASSESSING OFFICER MADE AN ADDITION OF RS.1,21,57,820/- ON ACCOUNT OF DISALLOWANCE OF EXEMPTION UNDER SECTION 10A AND CARRY FORWARD OF LOSS . BEFORE THE CIT(A), ASSESSEE POINTED OUT THAT THE ASSESSING OFFICER ERRED IN MAKING THE AFORESAID DIS ALLOWANCE INASMUCH AS THE ASSESSEE DID NOT CLAIM ANY SUCH EXEMPTION. IT WAS E XPLAINED THAT THE RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION WAS FILED AT A LOSS OF RS.3,39,49,369/-. THE ASSESSEE CLARIFIED THAT THOUG H IT WAS ELIGIBLE FOR THE EXEMPTION UNDER SECTION 10A OF THE ACT AND THE SAME WAS WORKED OUT IN FORM NO. 56F ATTACHED WITH RETURN OF INCOME BUT DUE TO LOSS IN THE COMPUTATION OF INCOME, NO SUCH EXEMPTION WAS ACTUAL LY CLAIMED BUT WAS ONLY MENTIONED BY WAY OF A FOOTNOTE. THE ASSESSEE SUBMIT TED COPIES OF COMPUTATION OF INCOME AND STATEMENT OF LOSSES IN SU PPORT OF THE SAID PLEA BEFORE THE CIT(A). 11. AT THE SAME TIME, ASSESSEE POINTED OUT THAT SUB SEQUENT TO THE ASSESSMENT ORDER DATED 31.12.2009 AND AFTER RECTIFI CATION ORDER MADE BY THE ASSESSING OFFICER UNDER SECTION 154 OF THE ACT, THE ASSESSED INCOME WAS DETERMINED AT A POSITIVE FIGURE OF RS. 95,58,610/- AND IN VIEW OF THE SAME, ASSESSEE BE GRANTED RELIEF UNDER SECTION 10A OF THE ACT. IN THIS BACKGROUND, THE CIT(A) DELETED THE DISALLOWANCE OF RS.1,27,06,7 47/- AND WITH REGARD TO THE ASSESSEES CLAIM FOR EXEMPTION UNDER SECTION 10A OF THE ACT ON THE REVISED ASSESSED INCOME, HE HELD AS UNDER :- IT IS NOW STATED THAT CLAIM U/S. 10A BE ALLOWED ON THE REVISED WORKING MADE OF PROFIT AT RS. 92,58,610/- AFTER ORDER U/S 1 54 DTD. 27.01.2011. THE CLAIM OF THE APPELLANT U/S. 10A IN SO FAR AS INCOME HAS ARISEN OUT OF THE ELIGIBLE BUSINESS IS LIABLE TO BE ALLOWED, IF THE C ONDITIONS ARE OTHERWISE FULFILLED, AFTER SET OFF OF THE UNABSORBED CARRY FORWARD LOSSE S/DEPRECIATION ETC. ACCORDINGLY, GROUND NO. 10 & 11 WILL BE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE AFORESAID BACKGROUND, WE HAVE HEARD THE RIVAL PARTIES AND FIND THAT THE CIT(A) MADE NO MISTAKE IN HOLDING THAT THE CLAIM OF THE ASSESSEE ITA NOS. 584 & 643/PN/2011 A.Y. 2002-03 UNDER SECTION 10A OF THE ACT BE ALLOWED, SUBJECT TO FULFILLMENT OF ALL THE CONDITIONS. OSTENSIBLY, THERE IS NO DISPUTE TO THE POSITION THAT THE DISALLOWANCE OF RS.1,21,57,820/- MADE BY THE ASSESSING OFFICER I S ERRONEOUS AS NO SUCH CLAIM HAS BEEN MADE IN THE RETURN OF INCOME, AND TH E CIT(A) RIGHTLY DELETED THE SAME. THUS, GROUND OF APPEAL NO. 2 RAISED BY RE VENUE IS DISMISSED. 13. IN SO FAR AS GROUNDS OF APPEAL NO. 3 AND 4 ARE CONCERNED, AT THE TIME OF HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE DID NOT SUBSTANTIATE THE SAME AND FAIRLY CONCEDED THAT THEY DO NOT ARISE OUT OF THE IMPUGNED ORDERS OF THE LOWER AUTHORITIES, AND ACCORDINGLY THE SAME ARE DISMISSED, AS ANNOUNCED AT THE TIME OF THE HEARING. 14. RESULTANTLY, WHEREAS THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED, THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH MAY, 2013. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 28 TH MAY, 2013 SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-II, PUNE; 4) THE CIT-II, PUNE; 5) THE DR, A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// PRIVATE SECRETARY I.T.A.T., PUNE.