M/s. Ygyan Consulting Pvt. Ltd., Pune V. Deputy Commissioner of Income-tax,

ITA 65/PUN/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7341 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 11-10-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 15-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts
• Section: 143(3); 234B; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 65 /P U N/201 5 / ASSESSMENT YEAR : 20 05 - 06 M/S. YGYAN CONSULTING PVT. LTD., PLOT NO. 26, RAJIV GANDHI INFOTECH PARK, MIDC, HINJEWADI, PUNE - 411057 PAN : AABCP0154C ....... / APPELLANT / V/S. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 7, PUNE / RESPONDENT ASSESSEE BY : S HRI PERCY PARDIWALA REVENUE BY : SHRI AJAY MODI / DATE OF HEARING : 11 - 10 - 2017 / DATE OF PRONOUNCEMENT : 13 - 10 - 2017 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - III, PUNE DATED 27 - 10 - 2014 FOR THE ASSESSMENT YEAR 2005 - 06. 2 ITA NO . 65/PUN/2015, A.Y. 2005 - 06 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE IS ENGAGED IN SOFTWARE DEVELOPMENT PROJECT RELATED TO ERP, E - COMMERCE AND OTHER SOFTWARE SERVICES. THE ASSESSEE COMPANY WAS INCORPORATED ON 20 - 08 - 1991. THE ASSESSEE RECEIVED SOFTWARE TECHNOLOGY PARKS OF INDIA (STPI) APPROVAL IN RESPECT OF ITS NEW UNDERTAK ING AT B - 8, DAFFODILS, VISAVA, DP ROAD, AUNDH, PUNE ON 30 - 03 - 2000. THE ASSESSEE CLAIMED DEDUCTION U/S. 10A O F THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) IN RESPECT OF STPI APPROV ED UNIT FOR THE FIRST TIME IN ASSESSMENT YEAR 2001 - 02. THE ASSESSING OFFICER, IN THE IMPUGNED ASSESSMENT YEAR REJECTED ASSESSEES CLAIM OF DEDUCTION U/S. 10A ON THE GROUND THAT THE ASSESSEE STARTED MANUFACTURING/PRODUCTION FROM THE ASSESSMENT YEAR 1991 - 92. THE PERIOD OF 10 YEARS OF TAX HOLIDAY BENEFIT U/S. 10 A EXPIRE D IN ASSESSMENT YEAR 2000 - 01 , T HEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR CLAIMING DEDUCTION U/S. 10A IN THE IMPUGNED ASSESSMENT YEAR. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE STPI UNIT WAS FORMED BY ASSESSEE BY SPLITTING UP/RECONSTRUCTION OF EXISTING BUSINESS. APART FROM HOLDING ASSESSEE INELIGIBLE FOR CLAIMING DEDUCTION U/S. 10A OF THE ACT , T HE ASSESSING OFFICER FURTHER REJECTED ASSESSEES COMPUTATION OF DEDUCTION U/S. 10A BY INTER ALIA DISALLOWING PROVISIONS FOR BAD AND DOUBTFUL DEBTS, A LLOCATION OF EXPENDITURE BETWEEN STPI AND NON - STPI UNIT AND CLAIM OF DEDUCTION U/S. 10A BEFORE SETTING OFF OF LOSS OF NON - STPI UNIT. AGGRIEVED BY THE ASSESSMENT ORDER DATED 20 - 12 - 2007, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE FINDINGS OF ASSESSING OFFICER IN HOLDING ASSESSEE INELIGIBLE FOR CLAIMING DEDUCTION U/S. 10A . THE COMMISSIONER OF INCOME TAX (APPEALS) FURTHER UPHELD DISALLOWANCE OF PROVISION FOR BAD DEBTS, ALLOCATION OF EXPENDITURE AMONGST 3 ITA NO . 65/PUN/2015, A.Y. 2005 - 06 STPI AND NON - STPI UNITS ON TURNOVER BASIS AND THE MANNER OF COMPUTATION OF D ED UCTION U/S. 10A , I.E. AFTER SETTING OFF OF LOSS OF NON - STPI UNIT. AGAINST THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL. 3. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL ASSAILING THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS): ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A): GROUND NO 1: DISALLOWANCE OF DEDUCTION UNDER SECTION 10A 1. ERRED IN UPHOLDING THE DISALLOWANCE OF CLAIM OF DEDUCTION UNDER SECTION 10A. GROUND NO 2: DEDUCTION UNDER SECTION 10A IN RESPECT OF DISALLOWANCE OF PROVISION FOR BAD DEBTS 2. ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER (AO), OF NOT ALLOWING DEDUCTION UNDER SECTION 10A ON THE AMOUNT OF DISALLOWANCE OF PROVISION FOR BAD DEBTS. GROUND NO 3: ALLOCATION OF EXPENDITURE AMONG STPI AND NON - STPI UNITS ON TURNOVER BASIS 3. ERRED I N UPHOLDING THE ACTION OF THE A O OF ALLOCATING THE EXPENDITURE ON TURNOVER BASIS AMONG STPI AND NON - STPI UNITS. GROUND NO 4: DEDUCTION UNDER SECTION 10A BEFORE SETTING OFF LOSSES OF NON - ELIGIBLE UNITS 4. ERRED IN UPHOLDING THE ACTION OF THE A O IN NOT A LLOWING BENEFIT OF TAX HOLIDAY UNDER SECTION 10A OF THE ACT, BEFORE SETTING OFF OF LOSSES OF NON - STPI UNIT. 5. ERRED IN DISALLOWING THE CLAIM OF CARRY FORWARD OF LOSSES OF NON - STPI UNIT. GROUND NO 5: INTEREST UNDER SECTION 234B OF THE ACT 6. ERRED IN LEVYING INTEREST UNDER SECTION 234B. 4 ITA NO . 65/PUN/2015, A.Y. 2005 - 06 4. SHRI PERCY PARDIWALA APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE AUTHORITIES BELOW HAVE ERRED IN HOLDING THAT THE ASSESSEE IS NOT ELIGIBLE FOR CLAIMING DEDUCTION U/S. 10A IN THE IMPUGNED ASSESSMENT YEAR. THE LD. AR SUBMITTED THAT THE ASSESSEE W AS GRANTED STPI APPROVAL ON 30 - 03 - 2000 . THE LD. AR REFERRED TO APPROV AL LETTER DATED 30 - 03 - 2000 FROM STPI AT PAGES 32 AND 33 OF THE PAPER BOOK . THE LD. AR CONTENDED THAT THE ASSESSEE CLAIMED DEDUCTION U/S. 10A FOR THE FIRST TIME IN ASSESSMENT YEAR 2001 - 02. HE POINTED THAT TILL ASSESSMENT YEAR 2004 - 05 THE DEPARTMENT ACCEPTED THE CLAIM OF ASSESSEE. THE LD. AR REFERRED TO ASSESSMENT ORDER DATED 22 - 12 - 2006 PASSED U/S. 143(3) OF THE ACT FOR ASSESSMENT YEAR 2004 - 05 AT PAGES 38 TO 40 OF THE PAPER BOOK. THE LD. AR FURTHER SUBMITTED THAT IN SUBSEQUENT ASSESSMENT YEAR S I.E. ASSESSMENT YEAR 2006 - 07 AND 2007 - 08 AGAIN THE CLAIM OF DEDUCTION U/S. 10A WAS ACCEPTED BY THE DEPARTMENT IN PROCEEDINGS U/S. 143(1) OF THE ACT. THE LD. AR SUBMITTED THAT IT IS IN IMPUGNED A SSESSMENT YEAR ALONE THAT THE ASSESSING OFFICER HAS DISTURBED THE CLAIM OF ASSESSEE U/S. 10A. THE LD. AR PLACED RELIANCE ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. PAUL BROTHERS REPORTED AS 216 ITR 548 TO CO NTEND THAT THE ASSESSING OFFICER CANNOT QUESTION VALIDITY OF DEDUCTION U/S. 10A IF THE SAME HAS NOT BEEN QUESTIONED IN THE INITIAL/FIRST YEAR OF CLAIM. THE LD. AR SUBMITTED THAT BOTH THE AUTHORITIES BELOW HAVE ERRED IN COMING TO THE CONCLUSION THAT THE FI RST YEAR OF CLAIM OF DEDUCTION WAS ASSESSMENT YEAR 1991 - 92. THE DOCUMENTS ON RECORD CLEARLY ESTABLISH THAT THE STPI APPROVAL WAS GRANTED TO THE ASSESSEE IN THE YEAR 2000. PRIOR TO THE GRANT OF APPROVAL THERE IS NO QUESTION OF ASSESSEE CLAIMING DEDUCTION U/S. 10A OF THE ACT. 5 ITA NO . 65/PUN/2015, A.Y. 2005 - 06 4.1 THE LD. AR IN RESPECT OF DISALLOWANCE OF PROVISION FOR BAD DEBTS SUBMITTED THAT ADMITTEDLY THE ASSESSEE HAS CREATED PROVISIONS FOR BAD AND DOUBTFUL DEBTS ON THE PREMISE THAT SOME OF THE RECEIVABLES WILL NOT BE REALIZED DUE TO VA RIOUS PROBLEMS IN THE IMPLEMENTATION OF PROJECT. TO ARRIVE AT TRUE AND FAIR FINANCIAL POSITION , THE PROVISION WAS CREATED . H OWEVER, WHILE COMPUTING TAXABLE PROFIT NO DEDUCTION WAS CLAIMED BY THE ASSESSEE. THE PROVISION WAS ADDED BACK TO THE PROFITS. IN THE COMPUTATION OF INCOME AT PAGES 2 AND 3 OF THE PAPER BOOK THE ASSESSEE HAD CATEGORICALLY SHOWN PROVISION FOR BAD DEBTS ADDED BACK. THE LD. AR FURTHER REFERRED TO THE INCOME CALCULATION FOR STPI UNIT AT PAGE 4 TO SHOW THAT PROVISION FOR BAD DEBTS IN RE SPECT OF STPI UNIT RS.22,56,208/ - WAS ADDED BACK TO THE PROFITS. THUS, IN VIEW OF THE FACT THAT PROVISIONS FOR BAD AND DOUBTFUL DEBTS WERE NEVER CLAIMED , T HE AUTHORITIES BELOW HAVE ERRED IN DISALLOWING THE AFORESAID AMOUNT WHILE COMPUTING DEDUCTION U/S. 1 0A OF THE ACT. 4.2 THE LD. AR SUBMITTED THAT THE AUTHORITIES BELOW HAVE ERRED IN ALLOCATING EXPENDITURE AMONGST STPI AND NON - STPI UNITS ON TURNOVER BASIS. ALLOCATION OF EXPENDITURE ON TURNOVER IS JUSTIFIED ONLY IN RESPECT OF EXPENDITURE COMMON FOR BOTH STPI AND NON - STPI UNITS. THE ASSESSEE HAS MAINTAINED SEPARATE SET OF ACCOUNT FOR STPI AND NON - STPI UNITS. THE LD. AR REFERRED TO THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT OF ASSESSEE COMPANY AT PAGES 26 AND 27 OF THE PAPER BOOK. THE LD. AR SUBMITTE D THAT THE COMPANY IS NOW UNDER LIQUATION. IT WOULD BE VERY DIFFICULT FOR THE ASSESSEE NOW TO DIG OUT FURTHER INFORMATION WITH RESPECT TO THE DETAILS OF EXPENDITURE UNDER DIFFERENT HEADS. THE LD. AR SUBMITTED THAT THE DOCUMENTS WHICH ARE ALREADY ON RECOR D CLEARLY INDICATE THAT THE OPERATING 6 ITA NO . 65/PUN/2015, A.Y. 2005 - 06 EXPENDITURE, SALARY OF STAFF ETC. WERE SEPARATELY MAINTAINED FOR STPI AND NON - STPI UNITS. THE DEPARTMENT NEVER RAISED ANY QUESTION WITH RESPECT TO ALLOCATION OF EXPENDITURE EITHER IN EARLIER ASSESSMENT YEARS OR IN SUB SEQUENT ASSESSMENT YEARS. 4.3 IN RESPECT OF METHOD OF COMPUTATION OF DEDUCTION U/S. 10A I.E. WHETHER LOSSES OF NON - STPI UNIT IS TO BE SET OFF BEFORE OR AFTER CLAIMING DEDUCTION U/S. 10A OF THE ACT , THE LD. AR SUBMITTED THAT THE HONBLE SUPREME COURT O F INDIA IN A RECENT JUDGMENT IN THE CASE OF COMMISSIONER OF INCOME TAX & ANR. VS. YOKOGAWA INDIA LTD. REPORTED AS 145 DTR 1 HAS AFFIRMED THE DECISION OF HONBLE KARNATAKA HIGH COURT , HOLDING DEDUCTION U/S. 10A IN RESPECT OF ELIGIBLE UNIT TO BE COMPUTED BEF ORE SETTING OFF OF LOSSES OF NON - ELIGIBLE UNIT. 5. SHRI AJAY MODI REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS). THE LD. DR SUBMITTED THAT ONCE THE ASSESSEE HAS CREATED PROVISIONS FOR BAD AND DOUBTFUL DEBTS AND HAS DEBITED THE AMOUNT TO P ROFIT AND L OSS ACCOUNT, THE ASSESSEE AT A LATER STAGE CANNOT ADD BACK THE SAID AMOUNT. THE LD. DR FURTHER SUBMITTED THAT THE ASSESSEE HAS FAILED TO SHOW THAT THE PROVISIONS FOR BAD AND DOUBTFUL DEBTS WERE IN R ESPECT OF STPI UNIT. THE LD. DR CONTENDED THAT NATURE OF BUSINESS CARRIED OUT BY ASSESSEE IN STPI AND NON - STPI UNITS IS SAME. HOWEVER, THE ASSESSEE HAS SUFFERED LOSS UNDER NON - STPI UNIT AND HAS EARNED PROFITS UNDER STPI UNIT. THIS CLEARLY INDICATES THAT THE ASSESSEE HAS TRANSFERRED EXPENDITURE OF STPI UNIT TO NON - STPI UNIT . THE LD. DR PRAYED FOR SUSTAINING THE ADDITIONS CONFIRMED BY COMMISSIONER OF INCOME TAX (APPEALS). AS FAR AS ELIGIBILITY OF ASSESSEES 7 ITA NO . 65/PUN/2015, A.Y. 2005 - 06 CLAIM OF DEDUCTION U/S. 10A , THE LD. DR FAIRLY ADMITTED THAT THE ASSESSING OFFICER IN IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2004 - 05 HAS ACCEPTED THE CLAIM OF ASSESSEE. 6. W E HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW . THE FIRST GROUND RAISED IN APPEAL BY ASSESSEE IS WITH RESPECT TO ASSESSEES ELIGIBILITY FOR CLAIMING DEDUCTION U/S. 10A OF THE ACT. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE COMPANY WAS INCORPORATED IN THE YEAR 1991. THE DOCUMENTS ON RECORD SHOW THAT THE ASSESSEE WAS GRANTED STPI APPROVAL ON 30 - 03 - 2000. BEFORE GRANT OF APPROVAL THE ASSESSEE COULD NOT HAVE CLAIMED DEDUCTION U/S. 10A OF THE ACT. THE LD. AR HAS STATED AT THE BAR THAT FIRST YEAR FOR CLAIMING DEDUCTION U/S. 10A WAS ASSESSMENT YEAR 2001 - 02. THOUGH THE LD. AR COULD NOT PLACE ON RECORD ASSESSEES RETURN OF INCOME IN ASSESSMENT YEAR 2001 - 02 AND THE ASSESSMENT ORDER FOR THE SAID ASSESSMENT YEAR, HOWEVER, THE ASSESSEE HAS FURNISHED A COPY OF ASSESSMENT ORDER FOR ASSESSMEN T YEAR 2004 - 05. A PERUSAL OF THE SAID ASSESSMENT ORDER AT PAGES 30 TO 40 OF THE PAPER BOOK CLEARLY INDICATE THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S. 10A IN RESPECT OF PROFITS FROM STPI UNIT AND THE SAME HAS BEEN ALLOWED BY THE ASSESSING OFFICER IN SCR UTINY ASSESSMENT. ONCE HAVING ACCEPTED THE CLAIM OF ASSESSEE , THE REVENUE CANNOT QUESTION ASSESSEES ELIGIBILITY FOR CLAIMING SUCH DEDUCTION IN SUBSEQUENT ASSESSMENT YEARS . THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX V S. PAUL BROTHERS (SUPRA) HAS OBSERVED THAT THERE IS NO PROVISION FOR WITHDRAWAL OF SPECIAL DEDUCTION FOR THE SUBSEQUENT YEARS FOR BREACH OF CERTAIN CONDITIONS. UNLESS THE RELIEF 8 ITA NO . 65/PUN/2015, A.Y. 2005 - 06 GRANTED FOR THE INITIAL ASSESSMENT YEAR IS WITHDRAWN, THE ITO COULD NOT HAVE WITHHELD THE RELIEF FOR THE SUBSEQUENT YEARS. THUS, IN VIEW OF THE FACT THAT THE ASSESSEES CLAIM OF DEDUCTION U/S. 10A WAS NEVER QUESTIONED BY THE REVENUE IN INITIAL ASSESSMENT YEAR , T HE ASSESSING OFFICER CANNOT RAISE QUESTION OVER ASSESSEES ELIGIBILITY FOR CLAIMING DEDUCTION IN ANY OF THE SUBSEQUENT ASSESSMENT YEARS. THE LD. DR HAS ALSO ACCEPTED THE FACT THAT IN ASSESSMENT YEAR 2004 - 05, ASSESSEES CLAIM OF DEDUCTION U/S. 10A WAS ALLOWED BY ASSESSING OFFICER IN SCRUTINY ASSESSMENT PROCEEDINGS. THUS, IN VIEW OF THE FACTS OF THE CASE AND THE LAW LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT , GROUND NO. 1 RAISED IN APPEAL BY THE ASSESSEE IS ALLOWED. 7 . THE GROUND NO. 2 RAISED IN APPEAL BY THE ASSESSEE IS WITH RESPECT TO DISALLOWANCE OF PROVISION FO R BAD DEBTS. THE AUTHORITIES BELOW HAVE DISALLOWED ASSESSEES CLAIM PRIMARILY FOR THE REASON THAT THE ASSESSEE HAS FAILED TO ESTABLISH THAT THE PROVISION WAS CREATED IN RESPECT OF EITHER OF THE UNITS. THE LD. AR REFERRING TO SEPARATE PROFIT AND LOSS ACCO UNT S FOR STPI AND NON - STPI UNITS HAS POINTED THAT PROVISION FOR BAD DEBTS HAS BEEN SEPARATELY CREATED FOR STPI AND NON - STPI UNITS. THE LD. AR HAS FURTHER BROUGHT TO OUR NOTICE THAT WHILE COMPUTING TOTAL INCOME IN THE COMPUTATION OF INCOME , THE ASSESSEE HA S ADDED BACK PROVISIONS FOR BAD DEBTS IN RESPECT OF BOTH STPI AND NON - STPI UNITS. A SEPARATE CALCULATION HAS BEEN GIVEN FOR STPI UNIT WHEREIN PROVISION FOR BAD DEBTS IN RESPECT OF STPI UNIT RS.22,56,208/ - HAS BEEN ADDED BACK. WE DO NOT FIND ANY REASON TO DISALLOW THE CLAIM OF ASSESSEE. THE ASSESSEE HAS ADDED BACK THE PROVISION IN THE COMPUTATION OF INCOME WHICH WAS CREATED EARLIER. THUS, THE ASSESSEE HAS NOT CLAIMED THE SAME WHILE COMPUTING TOTAL TAXABLE 9 ITA NO . 65/PUN/2015, A.Y. 2005 - 06 INCOME. ACCORDINGLY, GROUND NO. 2 RAISED IN APPE AL BY THE ASSESSEE IS ALLOWED. 8 . THE GROUND NO. 3 RAISED IN THE APPEAL BY THE ASSESSEE IS WITH REGARD TO ALLOCATION OF EXPENDITURE AMONGST STPI AND NON - STPI UNITS. THE REVENUE HAS RAISED SUSPICION OVER THE MANNER OF ALLOCATION OF EXPENDITURE BETWEEN E LIGIBLE AND NON - ELIGIBLE UNITS. THE ASSESSEE HAS DRAWN OUR ATTENTION TO THE P ROFIT AND L OSS ACCOUNT AND B ALANCE S HEET AS ON 31 - 03 - 2005 AT PAGES 26 AND 27 OF THE PAPER BOOK TO SHOW THAT SEPARATE ACCOUNTS ARE MAINTAINED FOR STPI AND NON - STPI UNITS. THE REVENUE HAS CHANGED THE ALLOCATION OF EXPENDITURE MERELY ON THE BASIS OF SUSPICION WITHOUT PINPOINTING ANY ERROR IN THE AUDITED FINANCIAL STATEMENTS OF ASSESSEE. IT IS AN UNDISPUTED FACT THAT IN EARLIER ASSESSMENT YEARS THE DEPARTMENT HAS NOT QUESTIONED T HE MANNER OF ALLOCATION OF EXPENDITURE BETWEEN STPI AND NON - STPI UNITS. EVEN IN THE SUBSEQUENT ASSESSMENT YEARS THE ALLOCATION OF EXPENDITURE BY ASSESSEE HAS NOT BEEN DISTURBED, THOUGH THE ASSESSEE IS CONSISTENTLY FOLLOWING SAME METHOD OF ALLOCATION. THU S, IN THE LIGHT OF FACTS OF THE CASE, WE FIND NO MERIT IN THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN SUSTAINING THE ADDITION. ACCORDINGLY, THE SAME IS DELETED AND GROUND NO. 2 RAISED BY THE ASSESSEE IN APPEAL IS ALLOWED. 9 . IN GROUND NO. 4 THE ASSESSEE HAS ASSAILED THE FINDINGS OF AUTHORITIES BELOW IN COMPUTING THE MANNER OF DEDUCTION U/S. 10A BEFORE SETTING OFF OF LOSSES OF NON - ELIGIBLE UNIT. THE HONBLE SUPREME COURT OF INDIA IN RECENT JUDGMENT IN THE CASE OF COMMISSIONER OF INCOME TAX & ANR. VS. YOKOGAWA INDIA LTD. (SUPRA) HAS HELD : 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 10 ITA NO . 65/PUN/2015, A.Y. 2005 - 06 UNDER TAKING 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. T HIS 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 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 PROVI SIONS FOR SET OFF AND CARRY FORWARD CONTAINED IN SECTIONS 70 , 72 AND 74 OF THE ACT WOULD BE PREMATURE F OR 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 F ROM 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 PROVI SIONS OF SECTION 10A THE AFORESAID DISCORD CAN BE RECONCILED BY UNDERSTANDING THE EXPRESSION TOTAL INCOME OF THE ASSESSEE IN SECTION 10A AS TOTAL INCOM E OF THE UNDERTAKING . THUS, IN VIEW OF LAW LAID DOWN BY THE HONBLE APEX COURT IT IS UNAMBIGUOUSLY CLEAR THAT DEDUCTION U/S. 10A HAS TO BE COMPUTED BEFORE ALLOWING SET OFF OF LOSSES OF NON - STPI UNIT. ACCORDINGLY, GROUND NO. 4 RAISED IN THE APPEAL BY THE ASSESSEE IS ALLOWED. 10. IN GROUND NO. 5 THE ASSESSEE HAS IMPUGNED CHARGING OF INTEREST U/S. 234B OF THE ACT. NOW, IT IS A WELL SETTLED LAW THAT C HARGING OF INTEREST 234B 11 ITA NO . 65/PUN/2015, A.Y. 2005 - 06 IS CONSEQUENTIAL AND MANDATORY, HENCE, GROUND NO. 5 RAISED IN THE APPEAL BY ASSESSEE IS DISMISSED . 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN THE AFORESAID TERMS. ORDER PRONOUNCED ON FRIDAY, THE 13 TH DAY OF OCTOBER, 2017 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 13 TH OCTOBER, 2017 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - III, PUNE 4. / THE CIT - IV, PUNE 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE