M/s R Systems International Ltd., New Delhi V. ACIT, New Delhi

ITA 6506/DEL/2016

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 8331 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 20-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR CHADDHA
• Keywords: Business income; Question of law; Benefit of exemption; Capital expenditure
• Section: 80C; 10AA; 80HHC; 80IB; 37(1); 10B; 80IA; 274; 80HH; 28

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI F BEN CH, NEW DELHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI SUDHANSHU SRIVASTAVA, JUDI CIAL MEMBER ITA NO. 6506/DEL/2016 [A.Y 2011-12] R. SYSTEMS INTERNATIONAL LTD VS. THE A.C.I .T B 104A, GREATER KAILASH CIRCLE 20(2) NEW DELHI NEW DELHI PAN: AABCR 9541 B (APPLICANT) ( RESPONDENT) ASSESSEE BY : SHRI AJAY VOHR A, SR. ADV SHRI ADITYA VOHRA, ADV DEPARTMENT BY : SHRI VIJAY KUMAR CHADDHA, SR. DR DATE OF HEARING : 03.10.2019 DATE OF PRONOUNCEMENT : 04.10.2019 ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX [APPEALS] - 44, NEW DELH I DATED 05.08.2016 PERTAINING TO ASSESSMENT YEAR 2011-12. 2 2. THE GRIEVANCE OF THE ASSESSEE IS TWO-FOLD FIRS TLY, NOT ASSESSING THE BANK INTEREST ON SHORT TERM EXPORT SURPLUS DEPO SITS AS BUSINESS INCOME, AND SECONDLY, THE ASSESSEE IS AGGRIEVED BY THE DISALLOWANCE OF LEGAL AND PROFESSIONAL FEE OF RS. 1,93,250 AND F OREIGN TAXES OF RS 51,384/-. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE COMPANY IS ENGAGED INTO THE BUSINESS OF SOFTWARE DE VELOPMENT AND IT ENABLES SERVICES, PRIMARILY EXPORT SALES. 4. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E HAS DECLARED TOTAL INTEREST OF RS. 5,20,16,070/- AS UNDER: [RS.] INTEREST ON FDRS 3,82,03,086/- INTEREST ON ICD AND OTHER DEPOSITS AND ADVANCES - OUT OF SURPLUS FROM EXPORT PROCEEDS 77,83,788/- INTEREST ON FDRS 5,929,196/- - OUT OF IPO FUNDS [PUBLIC ISSUE, 2006] 52,016,070/- 3 3. OUT OF THE ABOVE, INTEREST ON FDR AND INTEREST O N IPO FUNDS WERE KEPT OUT OF THE PURVIEW OF BUSINESS INCOME AND OF FERED FOR TAX AS INCOME FROM OTHER SOURCES. DURING THE COURSE OF A SSESSMENT PROCEEDINGS, THE ASSESSEE REQUESTED THE ASSESSING O FFICER TO REWORK THE INTEREST COMPONENT AND CONSIDER THE INTEREST ON FDR OUT OF SURPLUS FROM EXPORT PROCEEDS AMOUNTING TO RS 3,83,03,086/- UNDER THE HEAD BUSINESS INCOME IN THE LIGHT OF THE PROVISIONS OF SECTION 10A(4) OF THE INCOME TAX ACT, 1961 [HEREINAFTER REFERRED TO AS T HE ACT] 4. THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE AND TREATED THE IN TEREST OF RS. 3.83 CRORES AS INCOME FROM OTHER SOURCES. 5. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFOR E THE LD. CIT(A), BUT WITHOUT ANY SUCCESS. 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE PROVISIONS OF SECTION 10A(4) OF THE ACT AND VEH EMENTLY STATED THAT AS PER THE PROVISIONS, AS APPLICABLE FROM A.Y 2001- 02, THE INTEREST INCOME FORMS PART OF THE PROFIT FROM BUSINESS OF IN DUSTRIAL UNDERTAKING AND ONCE THE FORMULA IS APPLIED AS SPECIFIED IN SUB -SECTION (4) OF 4 SECTION 10A OF THE ACT, THE ASSESSEE WOULD BE ENTIT LED FOR DEDUCTION, AS THE ASSESSEE IS A 100% EOU, THE ENTIRE BUSINESS OF THE ASSESSEE CONSISTS OF DEVELOPMENT AND EXPORT OF SOFTWARE. 7. IT IS THE SAY OF THE LD. COUNSEL FOR THE ASSESS EE THAT THE TERMINOLOGY USED IN SUB-SECTION (4) IS PROFITS OF THE BUSINESS OF THE UNDERTAKING IN CONTRADICTION TO THE WORDS PROFITS AND GAINS DERIVED BY THE ASSESSEE FROM A 100% EOU. ACCORDING TO THE L D. COUNSEL FOR THE ASSESSEE, THE TERM FROM THE BUSINESS OF IS MUCH W IDER THAN THE TERM DERIVED FROM INDUSTRIAL UNDERTAKING. THE LD. COU NSEL FOR THE ASSESSEE FURTHER STATED THAT THE ENTIRE PROFITS DER IVED FROM THE BUSINESS OF UNDERTAKING SHOULD BE TAKEN INTO CONSID ERATION WHILE COMPUTING THE ELIGIBLE DEDUCTION U/S 10A OF THE ACT . 8. ON THE OTHER HAND, THE LD. DR SUPPORTED THE FIND INGS OF THE ASSESSING OFFICER. 9. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE RI VAL CONTENTIONS AND HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHOR ITIES BELOW. SECTION 10A(4) READS AS UNDER: 5 4) FOR THE PURPOSES OF SUB-SECTION (1) AND (1A), T HE PROFITS DERIVED FROM EXPORT OF ARTICLES OR THINGS OR COMPUT ER SOFTWARE SHALL BE THE AMOUNT WHICH BEARS TO THE PRO FITS OF THE BUSINESS OF THE UNDERTAKING, THE SAME PROPORTIO N AS THE EXPORT TURNOVER IN RESPECT OF SUCH ARTICLES OR THIN GS OR COMPUTER SOFTWARE BEARS TO THE TOTAL TURNOVER OF TH E BUSINESS CARRIED ON BY THE UNDERTAKING. 10. THE FULL BENCH OF THE HON'BLE HIGH COURT OF KAR NATAKA IN THE CASE OF HEWLETT PACKARD GLOBAL SOFT LTD 403 ITR 453 WAS SEIZED WITH THE FOLLOWING SUBSTANTIAL QUESTIONS OF LAW: '( I ) WHETHER IN THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, TRIBUNAL WAS JUSTIFIED IN HOLDING THAT INTEREST FRO M FIXED DEPOSITS, ACCRUED INTEREST ON FIXED DEPOSITS, INTER EST RECEIVED FROM CITIBANK, HONG KONG AND INTEREST ON S TAFF LOANS SHOULD BE TREATED AS BUSINESS INCOME OF THE A SSESSEE EVEN THOUGH THE ASSESSEE IS NOT CARRYING ANY BANKING/FINANCIAL ACTIVITY? (II ) WHETHER THE ASSESSING OFFICER WAS CORRECT IN HOLDIN G THAT THE INTEREST INCOME CANNOT BE HELD TO BE DERIVED FR OM ELIGIBLE BUSINESS OF THE ASSESSEE (SOFTWARE DEVELOP MENT) FOR THE PURPOSE OF CLAIMING DEDUCTION UNDER SECTION 10A OF THE INCOME TAX ACT, 1961?' 6 11. THE RELEVANT FINDINGS OF THE HON'BLE HIGH COURT READ AS UNDER: 29. IN RIVIERA HOME FURNISHING V. ADDL. CIT [2016] 65 TAXMANN.COM 287/237 TAXMAN 520 (DELHI) , THE DIVISION BENCH OF DELHI HIGH COURT DEALING WITH A CASE OF EXPORT O RIENTED UNDERTAKING, FOR THE ASSESSMENT YEAR 2008-09, IN RE SPECT OF INTEREST RECEIVED BY AN ASSESSEE ON FIXED DEPOSIT R ECEIPTS (FDRS.) WHICH WERE UNDER LIEN WITH BANK FOR FACILIT ATING LETTER OF CREDIT AND BANK GUARANTEE FACILITIES HELD THAT SUCH INTEREST RECEIVED ON FDRS WOULD QUALIFY FOR DEDUCTI ON UNDER SECTION 10-B OF THE ACT. THE RELEVANT PARAGRAPHS 9 AND 15 OF THE SAID DECISION ARE QUOTED BELOW. '9. THE QUESTION AS TO WHAT CAN CONSTITUTE AS PROFITS A ND GAINS DERIVED BY A 100% EOU FROM THE EXPORT OF ARTI CLES AND COMPUTER SOFTWARE CAME FOR CONSIDERATION BEFORE THE KARNATAKA HIGH COURT IN CIT V. MOTOROLA INDIA ELECT RONICS PVT. LTD. (2014) 46 TAXMANN.COM 167 (KAR) . THE SAID APPEAL BEFORE THE KARNATAKA HIGH COURT WAS BY THE REVENUE CHALLENGING AN ORDER PASSED BY THE ITAT WHI CH HELD THAT THE INTEREST PAYABLE ON FDRS WAS PART OF THE PROFITS OF THE BUSINESS OF THE UNDERTAKING AND THER EFORE INCLUDIBLE IN THE INCOME ELIGIBLE FOR DEDUCTION SEC TIONS 10A AND 10B OF THE ACT. THERE THE ASSESSEE HAD EARN ED INTEREST ON THE DEPOSITS LYING IN THE EEFC ACCOUNT AS WELL 7 AS INTEREST EARNED ON INTER-CORPORATE LOANS GIVEN T O SISTER CONCERNS OUT OF THE FUNDS OF THE UNDERTAKING. THERE WAS A RESTRICTION ON THE ASSESSEE IN THAT CASE FROM MAKIN G PRE- PAYMENT OF ITS EXTERNAL COMMERCIAL BORROWINGS ('ECB '). IT COULD REPAY ONLY TO THE EXTENT OF 10% OF THE OUTSTA NDING LOAN IN A YEAR. THIS MADE THE ASSESSEE TEMPORARILY PARK THE BALANCE FUNDS AS DEPOSITS OR WITH VARIOUS SISTE R CONCERNS AS INTER CORPORATE DEPOSITS UNTIL THE DATE OF REPAYMENT. THE ASSESSEE CONTENDED THAT THE INTEREST DERIVED FROM THE BUSINESS OF THE INDUSTRIAL UNDERTA KING WAS ELIGIBLE FOR EXEMPTION WITHIN THE MEANING OF SE CTION 10B AND APPLIED THE FORMULA UNDER SECTION 10B(4) OF THE ACT FOR DETERMINING THE PROFITS FROM EXPORTS. THE ASSESSEE'S CONTENTION THAT THE EXPRESSION 'PROFITS OF THE BUSINESS OF THE UNDERTAKING' IN SECTION 10B(4) WAS WIDER THAN THE EXPRESSION 'PROFITS AND GAINS DERIVED BY' THE ASSESSEE FROM A 100% EOU OCCURRING IN SECTION 10B(1 ) WAS ACCEPTED BY THE ITAT. THE ITAT NOTICED THAT UNL IKE SECTION 80 HHC, WHERE THERE WAS AN EXPRESS EXCLUSIO N OF THE INTEREST EARNED FROM THE 'PROFITS OF BUSINESS O F UNDERTAKING', THERE WAS NO SIMILAR PROVISION AS FAR AS SECTIONS 10A AND 10B WERE CONCERNED. 8 15. IN THE CONSIDERED VIEW OF THE COURT, THE SUBMISSIONS MADE ON BEHALF OF THE REVENUE PROCEED ON THE BASIC MISCONCEPTION REGARDING THE TRUE PURPORT OF THE PRO VISIONS OF CHAPTER VIA OF THE ACT AND ON AN INCORRECT UNDERSTANDING OF SECTION 80A(4) OF THE ACT. THE OPE NING WORDS OF SECTION 80A(4) READ 'NOTWITHSTANDING ANYTH ING TO THE CONTRARY CONTAINED IN SECTION 10A OR SECTION 10AA OR SECTION 10B OR SECTION 10BA OR IN ANY PROVISIONS OF THIS CHAPTER..'. WHAT IS SOUGHT TO BE UNDERSCORED, THER EFORE, IS THAT SECTION 80A, AND THE OTHER PROVISIONS IN CH APTER VIA, ARE INDEPENDENT OF SECTIONS 10A AND 10B OF THE ACT. IT APPEARS THAT THE OBJECT OF SECTION 80A(4) WAS TO ENSURE THAT A UNIT WHICH HAS AVAILED OF THE BENEFIT UNDER SECTION 10B WILL NOT BE ALLOWED TO FURTHER CLAIM RE LIEF UNDER SECTION 80IA OR 80IB READ WITH SECTION 80A(4) . THE INTENTION DOES NOT APPEAR TO BE TO DENY RELIEF UNDE R SECTION 10B(1) READ WITH SECTION 10B(4) OR TO WHITT LE DOWN THE AMBIT OF THOSE PROVISIONS AS IS SOUGHT TO BE SU GGESTED BY MR. MANCHANDA. ALSO, HE IS NOT RIGHT IN CONTENDI NG THAT THE DECISIONS OF THE HIGH COURTS REFERRED TO ABOVE HAVE NOT NOTICED THE DECISION OF THE SUPREME COURT IN LI BERTY INDIA. THE KARNATAKA HIGH COURT IN CIT V. MOTOROLA INDIA ELECTRONICS PVT. LTD. (SUPRA) MAKES A REFERENCE TO THE SAID DECISION. THAT DECISION OF THE KARNATAKA HIGH COURT HAS BEEN CITED WITH APPROVAL BY THIS COURT IN HRITNIK 9 EXPORTS ( SUPRA ) AND UNIVERSAL PRECISION SCREWS ( SUPRA ). IN HRITNIK EXPORTS (SUPRA) THE COURT QUOTED WITH AP PROVAL THE OBSERVATIONS OF THE SPECIAL BENCH OF THE ITAT IN MARAL OVERSEAS LTD. (SUPRA) THAT 'SECTION 10A/10 B OF THE ACT IS A COMPLETE CODE PROVIDING THE MECHANISM FOR COMPUTING THE 'PROFITS OF THE BUSINESS' ELIGIBLE FO R DEDUCTION U/S 10B OF THE ACT. ONCE AN INCOME FORMS PART OF THE BUSINESS OF THE INCOME OF THE ELIGIBLE UNDER TAKING OF THE ASSESSEE, THE SAME CANNOT BE EXCLUDED FROM THE ELIGIBLE PROFITS FOR THE PURPOSE OF COMPUTING DEDUC TION U/S 10B OF THE ACT.' 30. THE SAID JUDGMENT, IN OUR OPINION, RIGHTLY DISTING UISHES THE JUDGMENTS ON THE INTERPRETATION OF SECTION 80-H H, 80-IA ETC. UNDER CHAPTER VI-A OF THE ACT IN VIEW OF SECTI ON 80-A (4) OF THE ACT WHICH, WITH A NON-OBSTANTE CLAUSE WH ICH STARTS WITH 'NOTWITHSTANDING ANYTHING TO THE CONTRARY CONT AINED IN SECTION 10-A OR SECTION 10-AA OR SECTION 10-B OR SE CTION 10- BA OR IN ANY PROVISIONS OF THIS CHAPTER' PROCEEDS T O ENUMERATE THE VARIOUS DEDUCTIONS UNDER CHAPTER VI-A OF THE ACT. 31. SIMILARLY THE DIVISION BENCH OF THE CALCUTTA HIGH COURT IN CIT V. HINDUSTAN GUM & CHEMICALS LTD. [2016] 72 TAXMANN.COM. 90/241 TAXMAN 401 AGAIN HELD THAT INTEREST EARNED ON SURPLUS BUSINESS FUNDS DEPOSITED WITH BAN KS FOR 10 SHORT PERIODS WILL BE PART OF PROFITS OF BUSINESS F OR THE PURPOSES OF SECTION 10-B OF THE ACT. THE RELEVANT P ORTION OF THE JUDGMENT IN PARA.3 RELIED UPON IN THE DECISION OF THE DIVISION BENCH OF THIS COURT IN THE CASE OF MOTOROL A INDIA ELECTRONICS (P.) LTD. (SUPRA) IS QUOTED BELOW FOR R EADY REFERENCE. '3. A BARE READING OF SUB-SECTION (1) SUGGESTS THAT 100 % EXPORT ORIENTED UNDERTAKINGS ARE ENTITLED TO A DEDUCTION OF PROFITS AND GAINS DERIVED FROM THE EXPORT OF ARTICLES FOR A PERIOD OF 10 YEARS. THE AFORESAID ENTITLEMENT IS, HOWEVER, SUBJECT TO THE PROVISIONS OF SECTION 10B. IN OTHER WORDS, SUBJECT TO THE PROVISIONS CONTAINED IN THE OTHER PARTS OF THE SECTION 10B, THE BENEFIT IS AVAILABLE TO AN ASSESSE E. IT WAS NOT DISPUTED THAT THE ONLY RELEVANT PROVISION T O BE TAKEN INTO ACCOUNT IS SUB-SECTION (4) WHICH WE ALRE ADY HAVE QUOTED. SUB-SECTION (4) PROVIDES THE QUANTUM O F DEDUCTION WHICH CAN BE AVAILED BY AN ASSESSEE. THE QUANTUM OF DEDUCTION IS DEPENDENT UPON THE TOTAL TURNOVER OF THE BUSINESS OF THE UNDERTAKING AND THE EXPORT TURNOVER OF THE UNDERTAKING. ONCE THESE TWO FIGURES ARE AVAILABLE, ONE HAS TO DIVIDE THE TOTAL TURNOVER BY THE EXPORT TURNOVER IN ORDER TO WORK OU T THE PERCENTAGE OF THE EXPORT TURN OVER, VIS--VIS T HE 11 TOTAL TURN OVER. SUPPOSE TOTAL TURN OVER IS RS. 100 /- AND TOTAL EXPORT TURN OVER IS FOR RS. 10/-, THEN TH E EXPORT TURN OVER IS 10 % OF THE TOTAL TURNOVER. THE N ONE HAS TO FIND OUT THE TOTAL PROFIT OF THE BUSINES S OF THE UNDERTAKING. SUPPOSE THE TOTAL PROFIT OF THE BUSINESS OF THE UNDERTAKING IS RS. 100, IN THAT CAS E, DEDUCTION AVAILABLE TO THE ASSESSEE UNDER SECTION 1 0 SUB-SECTION (1) OF SECTION 10B SHALL BE 10% OF RS. 100, I.E. TO SAY RS. 10/-. THIS IS THE FORMULA WHICH HAS BEEN PROVIDED BY SUBSECTION (4) FOR THE PURPOSE OF WORKI NG OUT THE BENEFIT OR DEDUCTION UNDER SUBSECTION (1). TOTAL TURNOVER SHALL NATURALLY INCLUDE RECEIPT ON ACCOUNT OF INTEREST. THE LEGISLATURE DOES NOT APPEA R TO HAVE PROVIDED FOR EXCLUDING THE AMOUNT OF INTEREST FROM THE TOTAL TURNOVER AS HAS BEEN DONE IN THE CAS E OF 80HHC BY EXPLANATION (BAA) OF SUB-SECTION (4C) THEREOF. IN THAT CASE, 90% OF THE INCOME ARISING OU T OF INTEREST HAS TO BE EXCLUDED FROM THE PROFITS OF THE BUSINESS FOR THE PURPOSE OF ARRIVING AT DEDUCTION AVAILABLE UNDER SECTION 80HHC. BUT AN IDENTICAL PROVISION IS NOT THERE. THEREFORE, THAT PROVISION CANNOT BE IMPORTED BY IMPLICATION. THE SUBMISSION T HAT THE AMOUNT EARNED FROM INTEREST WAS NOT INTENDED TO BE TAKEN INTO ACCOUNT FOR THE PURPOSE OF GIVING BEN EFIT UNDER SUBSECTION (1) OF SECTION 10B MAY BE CORRECT. 12 BUT THE AMOUNT OF DEDUCTION AVAILABLE TO A 100% EXPORT ORIENTED UNDERTAKING IS NECESSARILY DEPENDEN T UPON THE FORMULA PROVIDED IN SUBSECTION (4). THERE IS, AS SUCH, NO SCOPE FOR ANY CONTROVERSY THAT PART OF THE MONEY WAS EARNED FROM INTEREST AND NOT FROM EXPORT. THIS QUESTION CAME UP BEFORE THE KARNATAKA HIGH COURT AND WAS ANSWERED IN THE CASE OF CIT V. MOTORO LA INDIA ELECTRONICS (P.) LTD. [2014] 46 TAXMANN.COM 167/225 TAXMAN 11 (KAR.)(MAG.) AS FOLLOWS: IN THE INSTANT CASE, THE ASSESSEE IS A 100% EOU, WH ICH HAS EXPORTED SOFTWARE AND EARNED THE INCOME. A PORTION OF THAT INCOME IS INCLUDED IN EEFC ACCOUNT. YET ANOTHER PORTION OF THE AMOUNT IS INVESTED WITHIN TH E COUNTRY BY WAY OF FIXED DEPOSITS, ANOTHER PORTION O F THE AMOUNT IS INVESTED BY WAY OF LOAN TO SISTER CON CERN WHICH IS DERIVING INTEREST OR THE CONSIDERATION REC EIVED FROM SALE OF THE IMPORT ENTITLEMENT, WHICH IS PERMISSIBLE IN LAW. NOW THE QUESTION IS WHETHER THE INTEREST RECEIVED AND THE CONSIDERATION RECEIVED BY SALE OF IMPORT ENTITLEMENTS IS TO BE CONSTRUED AS I NCOME OF THE BUSINESS OF THE UNDERTAKING. THERE IS A DIRE CT NEXUS BETWEEN THIS INCOME AND THE INCOME OF THE BUSINESS OF THE UNDERTAKING. THOUGH IT DOES NOT PAR TAKE THE CHARACTER OF A PROFITS AND GAINS FROM THE SALE OF AN 13 ARTICLE, IT IS THE INCOME WHICH IS DERIVED FROM THE CONSIDERATION REALIZED BY EXPORT OF ARTICLES. IN VI EW OF THE DEFINITION OF INCOME FROM PROFITS AND GAINS INCORPORATED IN SUB-SECTION (4), THE ASSESSEE IS EN TITLED TO THE BENEFIT OF EXEMPTION OF THE SAID AMOUNT AS CONTEMPLATED UNDER SECTION 10B OF THE ACT. THEREFOR E, THE TRIBUNAL WAS JUSTIFIED IN EXTENDING THE BENEFIT TO THE AFORESAID AMOUNTS ALSO. WE DO NOT FIND ANY MERI T IN THESE APPEALS. THEREFORE, THE FIRST SUBSTANTIAL QUE STION OF LAW RAISED IN ITA NO.428/2007 IS ANSWERED IN FAV OUR OF THE REVENUE AND AGAINST THE ASSESSEE AND THE FIR ST SUBSTANTIAL QUESTION OF LAW IN ITA NO.447/2007 IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. IN THE LIGHT OF THE AFORESA ID FINDINGS, THE SECOND QUESTION OF LAW IN BOTH THE APPEALS DO NOT ARISE FOR CONSIDERATION. ' 32. THE DIVISION BENCH OF BOMBAY HIGH COURT IN CIT V. SYMANTEE SOFTWARE INDIA (P.) LTD. [MANU /MH/2575/2014] RIGHTLY HELD, IN OUR OPINION, THAT T HE PROVISIONS OF CHAPTER VI-A IN THE CONTEXT OF 'DEDUC TIONS' CANNOT BE ALLOWED TO BE TELESCOPED IN SECTION 10-A AND THE DEDUCTION UNDER SECTION 10-A HAS TO BE GIVEN EFFECT TO AT THE PRIOR STAGE OF COMPUTING THE PROFITS AND GAINS OF T HE BUSINESS, WHEREAS CHAPTER VI-A COMES IN FOR APPLICA TION AFTER 14 THE GROSS TOTAL INCOME IS DETERMINED BY ADDING THE INCOME UNDER VARIOUS INDEPENDENT HEADS OF INCOME IN CHAPTE R IV COMPRISING OF SECTIONS 14 TO 59 OF THE ACT. 33. THE RELEVANT EXTRACT FROM PARAGRAPHS 19 TO 21 OF B OMBAY HIGH COURT DECISION IS ALSO QUOTED BELOW FOR READY REFERENCE. 19. THERE IS SOME SUBSTANCE IN THE CONTENTION OF MR . KAKA THAT IF THE DEDUCTION SHALL BE ALLOWED FROM TH E TOTAL INCOME OF THE ASSESSEE IN THE MANNER SET OUT BY SEC TION 10A AND THE COMPUTATION IS ALSO PROVIDED IN THAT PR OVISION ITSELF NAMELY SUB-SECTION (4), THEN THERE IS A COMP LETE CODE WHICH IS EVOLVED AND FORMULATED BY THE LEGISLA TURE. 20. IN RELATION TO THIS, WE ALSO FIND SUPPORT IN TH E JUDGMENT OF THIS COURT IN THE CASE OF BLACK AND VEA TCH CONSULTING PVT. LTD. THIS COURT HAS OBSERVED AND HE LD AS UNDER: 'SECTION 10A IS A PROVISION WHICH IS IN THE NATURE OF A DEDUCTION AND NOT AN EXEMPTION. THIS WAS EMPHASIZED IN A JUDGMENT OF A DIVISION BENCH OF THIS COURT, WHILE CONSTRUING THE PROVISIONS OF SECTION 10B, IN HINDUS TAN UNILEVER LTD. V. DEPUTY COMMISSIONER OF INCOME TAX MANU/MH/0417/2010: [2010] 325 ITR 102 (BOM.) AT PARAGRAPH 24. THE SUBMISSION OF THE REVENUE PLACED ITS RELIANCE ON THE LITERAL READING OF SECTI ON 10A 15 UNDER WHICH A DEDUCTION OF SUCH PROFITS AND GAINS A S ARE DERIVED BY AN UNDERTAKING FROM THE EXPORT OF ARTICL ES OR THINGS OR COMPUTER SOFTWARE FOR A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS IS TO BE ALLOWED FROM THE TOTAL INCOME OF THE ASSESSEE. THE DEDUCTION UNDER SECTION 10A, IN OUR VIEW, HAS TO BE GIVEN EFFECT TO AT THE STAGE OF COMPUTING THE PROFITS AND GAINS OF BUSINES S. THIS IS ANTERIOR TO THE APPLICATION OF THE PROVISIO NS OF SECTION 72 WHICH DEALS WITH THE CARRY FORWARD AND S ET OFF OF BUSINESS LOSSES. A DISTINCTION HAS BEEN MADE BY THE LEGISLATURE WHILE INCORPORATING THE PROVISIONS OF CHAPTER VI-A. SECTION 80A(1) STIPULATES THAT IN COMPUTING THE TOTAL INCOME OF AN ASSESSEE, THERE SH ALL BE ALLOWED FROM HIS GROSS TOTAL INCOME, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THE CHAPTER, THE DEDUCTIONS SPECIFIED IN SECTIONS 80C TO 80U. SECTIO N 80B(5) DEFINES FOR THE PURPOSES OF CHAPTER VIA 'GRO SS TOTAL INCOME' TO MEAN THE TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT, BEFORE M AKING ANY DEDUCTION UNDER THE CHAPTER. WHAT THE REVENUE I N ESSENCE SEEKS TO ATTAIN IS TO TELESCOPE THE PROVISI ONS OF CHAPTER VI-A IN THE CONTEXT OF THE DEDUCTION WHICH IS ALLOWABLE UNDER SECTION 10A, WHICH WOULD NOT BE PERMISSIBLE UNLESS A SPECIFIC STATUTORY PROVISION T O THAT EFFECT WERE TO BE MADE. IN THE ABSENCE THEREOF, SUC H AN APPROACH CANNOT BE ACCEPTED. IN THE CIRCUMSTANCES, THE 16 DECISION OF THE TRIBUNAL WOULD HAVE TO BE AFFIRMED SINCE IT IS PLAIN AND EVIDENT THAT THE DEDUCTION UNDER SE CTION 10A HAS TO BE GIVEN AT THE STAGE WHEN THE PROFITS A ND GAINS OF BUSINESS ARE COMPUTED IN THE FIRST INSTANC E. '21. THEREFORE, WHEN THIS COURT HAS HELD THAT CHAPT ER VIA PROVIDES FOR DEDUCTION TO BE MADE IN COMPUTING THE TOTAL INCOME AND SECTION 80HH DEALS WITH DEDUCTION IN RESPECT OF PROFIT AND GAINS FROM THE NEWLY ESTABLIS HED UNDERTAKING OR HOTEL BUSINESS IN BACKWARD AREAS, TH EN THE ATTEMPT OF THE REVENUE TO TELESCOPE CHAPTER VIA IN THE CONTEXT OF THE DEDUCTION, WHICH IS PERMISSIBLE UNDER SECTION 10A FALLING IN CHAPTER III, CANNOT BE COUNTENANCED.' 34. WE ARE OF THE CONSIDERED OPINION THAT THE ABOVE RE FERRED DECISIONS RELIED UPON BY THE LEARNED COUNSEL FOR TH E REVENUE, MR. ARAVIND DO NOT COVER THE CASES UNDER SECTIONS 1 0-A AND 10-B OF THE ACT WHICH ARE SPECIAL PROVISIONS AND CO MPLETE CODE IN THEMSELVES AND DEAL WITH PROFITS AND GAINS DERIVED BY THE ASSESSEE OF A SPECIAL NATURE AND CHARACTER LIKE 100% EXPORT ORIENTED UNITS (EOUS.) SITUATED IN SPECIAL E CONOMIC ZONES (SEZS), STPI, ETC., WHERE THE ENTIRE PROFITS AND GAINS OF THE ENTIRE UNDERTAKING MAKING 100% EXPORTS OF AR TICLES INCLUDING SOFTWARE AS IS THE FACT IN THE PRESENT CA SE, THE 17 ASSESSEE IS GIVEN 100% DEDUCTION OF PROFIT AND GAIN S OF SUCH EXPORT BUSINESS AND THEREFORE INCIDENTAL INCOME OF SUCH UNDERTAKING BY WAY OF INTEREST ON THE TEMPORARILY P ARKED FUNDS IN BANKS OR EVEN INTEREST ON STAFF LOANS WOUL D CONSTITUTE PART OF PROFITS AND GAINS OF SUCH SPECIA L UNDERTAKINGS AND THESE CASES CANNOT BE COMPARED WIT H DEDUCTIONS UNDER SECTIONS 80-HH OR 80-IB IN CHAPTER VI-A OF THE ACT WHERE AN ASSESSEE DEALING WITH SEVERAL A CTIVITIES OR COMMODITIES MAY INTER ALIA EARN PROFITS AND GAIN S FROM THE SPECIFIED ACTIVITY AND THEREFORE IN THOSE CASES, TH E HON'BLE SUPREME COURT HAS HELD THAT THE INTEREST INCOME WOU LD NOT BE THE INCOME 'DERIVED FROM' SUCH UNDERTAKINGS DOING S UCH SPECIAL BUSINESS ACTIVITY. 35. THE SCHEME OF DEDUCTIONS UNDER CHAPTER VI-A IN SECTIONS 80-HH, 80-HHC, 80-IB, ETC FROM THE 'GROSS TOTAL INCOME OF THE UNDERTAKING', WHICH MAY ARISE FROM DI FFERENT SPECIFIED ACTIVITIES IN THESE PROVISIONS AND OTHER INCOMES MAY EXCLUDE INTEREST INCOME FROM THE AMBIT OF DEDUCTION S UNDER THESE PROVISIONS, BUT EXEMPTION UNDER SECTION 10-A AND 10-B OF THE ACT ENCOMPASSES THE ENTIRE INCOME DERIVED FR OM THE BUSINESS OF EXPORT OF SUCH ELIGIBLE UNDERTAKINGS IN CLUDING INTEREST INCOME DERIVED FROM THE TEMPORARY PARKING OF FUNDS BY SUCH UNDERTAKINGS IN BANKS OR EVEN STAFF LOANS. THE DEDICATED NATURE OF BUSINESS OR THEIR SPECIAL GEOGR APHICAL 18 LOCATIONS IN STPI OR SEZS. ETC. MAKES THEM A SPECIA L CATEGORY OF ASSESSEES ENTITLED TO THE INCENTIVE IN THE FORM OF 100% DEDUCTION UNDER SECTION 10-A OR 10-B OF THE ACT, RA THER THAN IT BEING A SPECIAL CHARACTER OF INCOME ENTITLED TO DEDUCTION FROM GROSS TOTAL INCOME UNDER CHAPTER VI-A UNDER SE CTION 80-HH, ETC. THE COMPUTATION OF INCOME ENTITLED TO E XEMPTION UNDER SECTION 10-A OR 10-B OF THE ACT IS DONE AT TH E PRIOR STAGE OF COMPUTATION OF INCOME FROM PROFITS AND GAI NS OF BUSINESS AS PER SECTIONS 28 TO 44 UNDER PART-D OF C HAPTER IV BEFORE 'GROSS TOTAL INCOME' AS DEFINED UNDER SECTIO N 80- B(5) IS COMPUTED AND AFTER WHICH THE CONSIDERATION OF VARIOUS DEDUCTIONS UNDER CHAPTER VI-A IN SECTION 80HH ETC. COMES INTO PICTURE. THEREFORE ANALOGY OF CHAPTER VI DEDUC TIONS CANNOT BE TELESCOPED OR IMPORTED IN SECTION 10-A OR 10-B OF THE ACT. THE WORDS 'DERIVED BY AN UNDERTAKING' IN S ECTION 10- A OR 10-B ARE DIFFERENT FROM 'DERIVED FROM' EMPLOYE D IN SECTION 80-HH ETC. THEREFORE ALL PROFITS AND GAINS OF THE UNDERTAKING INCLUDING THE INCIDENTAL INCOME BY WAY OF INTEREST ON BANK DEPOSITS OR STAFF LOANS WOULD BE ENTITLED T O 100% EXEMPTION OR DEDUCTION UNDER SECTION 10-A AND 10-B OF THE ACT. SUCH INTEREST INCOME ARISES IN THE ORDINARY CO URSE OF EXPORT BUSINESS OF THE UNDERTAKING EVEN THOUGH NOT AS A DIRECT RESULT OF EXPORT BUT FROM THE BANK DEPOSITS ETC., AND IS THEREFORE ELIGIBLE FOR 100% DEDUCTION. 19 12. THE HON'BLE SUPREME COURT IN THE CASE OF YOKOGA WA INDIA LTD 391 ITR 274 HAD THE OCCASION TO EXPLAIN THE MEANING OF THE PHRASE TOTAL INCOME. THE HON'BLE SUPREME COURT HELD AS UNDER: 15. THE PHRASE 'TOTAL INCOME' HAS BEEN USED IN THE INCOME- TAX ACT IN SEVERAL PLACES WITH DIFFERENT CONNOTATIO NS AND SHADES. THE PHRASE 'TOTAL INCOME' USED IN SECTION 1 0A IS ONE SUCH VARIANT. THE PHRASE NEED NOT NECESSARILY MEAN THE TOTAL INCOME AS COMPUTED IN ACCORDANCE WITH THE PROVISION S OF THE ACT. THE RELIEF UNDER THIS SECTION IS WITH REFERENC E TO THE STP UNDERTAKINGS AND NOT TO THE ASSESSEE. IN OTHER WORDS, THE RELIEF TRAVELS WITH THE UNDERTAKING IRRESPECTIV E OF WHO OWNS THE SAME. THE COMPUTATION OF RELIEF AS PROVIDE D IN SECTION 10A(4) IS ALSO WITH REFERENCE TO THE UNDERT AKING. A BUSINESS MIGHT HAVE SEVERAL UNDERTAKINGS AND SECTIO N 28 DOES NOT ENVISAGE COMPUTATION OF INCOME OF EACH SUCH UND ERTAKING. IN OTHER WORDS, THE PROFITS OF THE BUSINESS OF THE UNDERTAKING CANNOT BE COMPUTED IN ISOLATION. THE PR OFITS ARE COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSIN ESS OR PROFESSION', AS UNDER THE ABOVE HEAD, THE INCOME FR OM BUSINESS AS A WHOLE HAS TO BE COMPUTED. THE PHRASE 'TOTAL INCOME' USED IN SECTION 10A(1) IS, THEREFORE, TO BE UNDERSTOOD AS THE TOTAL INCOME OF THE STP UNIT. THIS IS CLEAR FROM THE FIRST PROVISO TO SECTION 10A(1) WHICH MAKES A REFER ENCE TO THE TOTAL INCOME OF THE UNDERTAKING AND NOT TO THE TOTA L INCOME OF 20 THE ASSESSEE. THE DEFINITION OF ANY TERN: GIVEN IN SECTION 2 WILL APPLY ONLY WHEN THE CONTEXT DOES NOT OTHERWISE REQU IRE. THE PLACEMENT, LANGUAGE AND SETTING OF SECTION 10A CANN OT MEAN THE TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PR OVISIONS OF THE ACT. INSTEAD, SUCH A PHRASE IN THE CONTEXT O F SECTION 10A, MEANS PROFITS AND GAINS OF THE STP UNDERTAKING AS UNDERSTOOD IN ITS COMMERCIAL SENSE. 16. CHAPTER VI DEALS WITH THE COMPUTATION OF T OTAL INCOME UNDER VARIOUS HEADS OF INCOME. SECTION 14 PROVIDES FOR CLASSIFICATION OF INCOME UNDER VARIOUS HEADS OF INC OME FOR THE PURPOSE OF CHARGE OF INCOME TAX AND COMPUTATION OF TOTAL INCOME. THE PURPOSE OF CLASSIFICATION OF ANY INCOME UNDER ANY HEAD OF INCOME IS TO COMPUTE THE SAME. THE TWIN CON DITIONS OF SECTION 14 ARE THAT INCOME IS SUBJECT TO CHARGE OF INCOME-TAX AND IS INCLUDIBLE IN THE TOTAL INCOME. AS THE RELIE F UNDER SECTION 10A IS IN THE NATURE OF EXEMPTION ALTHOUGH TERMED AS DEDUCTION AND THE SAID RELIEF IS IN RESPECT OF COMM ERCIAL PROFITS, SUCH INCOME IS NEITHER SUBJECT TO CHARGE O F INCOME- TAX NOR INCLUDIBLE IN THE TOTAL INCOME. THEREFORE, THE TWIN PROVISIONS OF SECTION 14 ARE NOT EXISTING IN THE CA SE OF INCOME OF STP UNDERTAKING AND ACCORDINGLY SUCH INCOME IS N OT LIABLE TO BE COMPUTED UNDER CHAPTER IV. THEREFORE, THE COR RECT VIEW WOULD BE THAT THE RELIEF UNDER SECTION 10A WIL L HAVE TO BE GIVEN BEFORE CHAPTER IV. THE DEDUCTION SHALL BE GIV EN FIRST 21 AND PROCESS OF COMPUTATION OF 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' BEGINS THEREAFTER. THIS PROPOSITION IS IN LINE WITH THE FORM OF RETURN. ALLOWING DEDUCTION AT THE EARLIEST STAGE OF BUSINESS INCOME COMPUTATION ALMOST BLURS T HE DIFFERENCE BETWEEN THE COMMERCIAL PROFITS AND TAX P ROFITS. 17 . THE SUBSTITUTED SECTION 10A CONTINUES TO REMAIN I N CHAPTER III. IT IS TITLED AS 'INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME'. IT MAY BE NOTED THAT WHEN SECTION 10A WAS RECAST BY THE FINANCE ACT, 2001, PARLIAMENT WAS AWA RE OF THE CHARACTER OF RELIEF GIVEN IN CHAPTER III. CHAPTER I II DEALS WITH INCOMES WHICH DO NOT FORM RAN OF TOTAL INCOME. IF PARLIAMENT INTENDED THAT THE RELIEF UNDER SECTION 1 0A SHOULD BE BY WAY OF DEDUCTION IN THE NORMAL COURSE OF COMP UTATION OF TOTAL INCOME, IT COULD HAVE PLACED THE SAME IN CHAP TER VI-A WHICH ROUSES THE SECTIONS LIKE 80HHC, 80-IA, ETC. P ARLIAMENT WAS AWARE OF THE VARIOUS RESTRICTING AND LIMITING P ROVISIONS LIKE SECTION 80A AND SECTION 80AB WHICH WAS IN CHAP TER VI-A WHICH DO NOT APPEAR IN CHAPTER III.. THE FACT THAT EVEN AFTER ITS RECAST, THE RELIEF HAS BEEN RETAINED IN CHAPTER III INDICATES THAT THE INTENTION OF PARLIAMENT IT IS TO BE REGARDED AS AN EXEMPTION AND NOT A DEDUCTION. THE ACT OF PAR LIAMENT IN CONSCIOUSLY SECTION IN CHAPTER III INDICATES ITS I NTENTION THAT THE NATURE OF RELIEF CONTINUES TO BE AN EXEMPTION. CHAPTER VII DEALS WITH THE INCOMES FORMING PART OF THE TOTA L INCOME 22 ON WHICH NO INCOME-TAX IS PAYABLE. THESE ARE THE I NCOMES WHICH ARE EXEMPTED FROM CHARGE, BUT ARE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE. PARLIAMENT DESPITE BEING C ONVERSANT WITH THE IMPLICATIONS OF THIS CHAPTER, HAS CONSCIOU SLY CHOSEN TO RETAIN. SECTION 0A IN CHAPTER III. 18. IF. SECTION 10A IS TO BE GIVEN EFFECT TO A S A DEDUCTION FROM THE TOTAL INCOME AS DEFINED IN SECTION 2(45), IT : MEAN THAT SECTION 10A IS TO BE CONSIDERED AFTER CHAPTER VI-A DEDUCTIONS HAVE BEEN EXHAUSTED. THE DEDUCTION UNDER CHAPTER VI-A ARE TO BE GIVEN FROM OUT OF THE GROSS TOTAL INCOME. THE TERM 'GROSS TOTAL INCOME IS DEFINED IN SECTION 80B(5) TO MEAN THE TOTAL INCOME COMPUTED IN ACCORDA NCE WITH THE PROVISIONS OF ACT. BEFORE MAKING ANY DEDUCTION UNDER THIS CHAPTER. AS PER THE DEFINITION OF GROSS TOTAL INCOM E, THE OTHER PROVISIONS OF THE ACT WILL HAVE TO BE FIRST G IVEN EFFECT TO. THERE IS NO REASON WHY REFERENCE TO THE PROVISI ONS OF THE ACT SHOULD NOT INCLUDE SECTION 10A. IN OTHER WORDS, THE GROSS TOTAL INCOME WOULD BE ARRIVED AT AFTER CONSIDERING SECTION 10A DEDUCTION ALSO. THEREFORE, IT WOULD BE INAPPROPRIAT E TO CONCLUDE THAT SECTION 10A DEDUCTION IS TO BE GIVEN EFFECT TO AFTER CHAPTER VI-A DEDUCTIONS ARE EXHAUSTED. 23 19. IT IS AFTER THE DEDUCTION UNDER CHAPTER VI-A THAT THE TOTAL INCOME OF AN ASSESSEE AS ARRIVED AT. CHAPTER VI- A DEDUCTIONS ARE THE LAST STAGE OF GIVING EFFECT TO A LL TYPES OF DEDUCTIONS PERMISSIBLE UNDER THE ACT. AT THE END OF THIS EXERCISE, THE TOTAL INCOME IS ARRIVED AT. TOTAL INC OME IS THUS, A FIGURE ARRIVED AT AFTER GIVING EFFECT TO ALL DEDU CTIONS UNDER THE ACT. THERE CANNOT BE ANY FURTHER DEDUCTION FROM THE TOTAL INCOME AS THE TOTAL INCOME IS ITSELF ARRIVED AT AFTER ALL DEDUCTIONS. 20. FROM THE AFORESAID DISCUSSION IT IS CLEAR THAT THE INCOME OF THE SECTION 10A UNIT HAS TO BE EXCLUDED B EFORE ARRIVING AT THE GROSS TOTAL INCOME OF THE ASSESSEE. THE INCOME OF THE SECTION 10A UNIT HAS TO BE DEDUCTED AT SOURC E ITSELF AND NOT AFTER COMPUTING THE GROSS TOTAL INCOME. THE TOTAL INCOME USED IN THE PROVISIONS OF SECTION 10A IN THI S CONTEXT MEANS THE GLOBAL INCOME OF THE ASSESSEE AND NOT THE TOTAL INCOME AS DEFINED IN SECTION 2(45). HENCE, THE INCO ME ELIGIBLE FOR EXEMPTION UNDER SECTION 10A WOULD NOT ENTER INT O COMPUTATION AS THE SAME HAS TO BE DEDUCTED AT SOURC E LEVEL. 13. CONSIDERING THE FACTS OF THE CASE IN HAND IN TH E LIGHT OF THE JUDICIAL DECISIONS DISCUSSED HEREINABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE INTEREST EARNED ON SHORT TERM EXPORT SURPLUS DEPOSIT HAS 24 TO BE TREATED AS BUSINESS INCOME FOR THE PURPOSES OF COMPUTATION OF DEDUCTION U/S 10A(4) OF THE ACT. GROUND NO. 1 IS A CCORDINGLY ALLOWED. 14. GROUND NO. 2 RELATES TO THE DISALLOWANCE OF CLA IM OF TWO EXPENDITURES, NAMELY, LEGAL AND PROFESSIONAL FEE OF RS 1,93,250/- AND RS 51,384/- ON FOREIGN TAXES. 15. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON GOING THROUGH THE DETAILS OF RATES AND TAXES, THE ASSESSING OFFIC ER NOTICED THAT THE ABOVE MENTIONED EXPENDITURES WERE CLAIMED U/S 37(1) OF THE ACT. THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE CLAIM OF EXPENDITURE AND DISALLOWED THE SAME. 16. THE ASSESSEE COULD NOT SUCCEED BEFORE THE LD. C IT(A). 17. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STA TED THAT THE AMOUNT OF RS. 1,92,250/- WAS INCURRED TOWARDS STAMP DUTY AND REGISTRATION CHARGES FOR EXECUTION OF LEASE DEED BY NOIDA IT UNIT OF THE ASSESSEE AND RS. 51,384/- HAS BEEN DEDUCTED BY THE OVERSEAS CUSTOMER WHILE RELEASING THE PAYMENT AGAINST INVOICES RAISED BY WAY OF TURNOVER 25 TAX. IT IS THE SAY OF THE LD. COUNSEL FOR THE ASSE SSEE THAT BOTH THESE EXPENDITURES ARE ALLOWABLE U/S 37(1) OF THE ACT. 18. PER CONTRA, THE LD. DR SUPPORTED THE FINDINGS O F THE ASSESSING OFFICER. IT IS THE SAY OF THE LD. DR THAT THE EXPE NDITURE INCURRED TOWARDS STAMP DUTY AND REGISTRATION CHARGES ARE IN THE NATURE OF CAPITAL EXPENDITURE AND THE SAME CANNOT BE ALLOWED U/S 37(1) OF THE ACT. 19. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE O RDERS OF THE AUTHORITIES BELOW AND HAVE CAREFULLY PERUSED THE RE LEVANT MATERIAL ON RECORD. WE ARE OF THE CONSIDERED VIEW THAT THE EXPE NSES TOWARDS REGISTRATION OF STAMP DUTY AND LEGAL EXPENSES INCUR RED IN CONNECTION THEREWITH HAVE TO BE CONSIDERED IN THE LIGHT OF THE PROVISIONS OF SECTION 37(1) OF THE ACT. 20. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CI NECITA PVT LTD 137 ITR 652 HAS HELD THE IMPUGNED EXPENDITURE DID NOT INVOLVE ANY ELEMENT OF PREMIUM IN THE AMOUNT CLAIMED AS EXPENDI TURE. IT WAS INCURRED ONLY TO DRAW UP AND GET REGISTERED AN EFFE CTIVE AND PROPER LEASE DEED AND WOULD HAVE REMAINED THE SAME IRRESPE CTIVE OF THE 26 PERIOD OF LEASE AS LONG AS IT WAS MORE THAN ONE YEA R. FURTHER, THE PERIOD OF LEASE ITSELF COULD NOT BE DECISIVE OF THE QUESTION WHETHER THE ASSET WAS OF ENDURING NATURE. ON THESE FACTS, THE IMPUGNED EXPENDITURE WAS REVENUE IN NATURE. 21. A SIMILAR VIEW WAS TAKEN BY THE HON'BLE HIGH CO URT OF BOMBAY IN THE CASE OF HOECHST PHARMACEUTICALS LTD 113 ITR 877 AND IN THE CASE OF OCTAVIOUS STEEL AND CO. LTD 221 ITR 810. CONSIDERI NG THE NATURE OF EXPENDITURE IN THE LIGHT OF THE JUDICIAL DECISIONS, LEGAL EXPENSES HAVE TO BE ALLOWED U/S 37(1) OF THE ACT. WE ORDER ACCOR DINGLY. 22. IN SO FAR AS THE CLAIM OF EXPENDITURE OF RS. 51 ,384/- IS CONCERNED, THE FACTS ON RECORD SHOW THAT THIS AMOUN T WAS DEDUCTED BY OVERSEAS CUSTOMER WHILE RELEASING PAYMENT AGAINST I NVOICES RAISED BY THE ASSESSEE. THE DEDUCTION WAS ON ACCOUNT OF TURN OVER TAXES. IN OUR CONSIDERED OPINION, THIS DEDUCTION BY OVERSEAS CUST OMER IS NOT A TAX ON PROFIT OF BUSINESS AS SUCH BUT ON THE APPLICABLE LA WS OF THOSE COUNTRIES. THE ASSESSEE IS VERY MUCH ENTITLED TO DEDUCTION IN RESPECT OF SUCH EXPENDITURE U/S 37(1) OF THE ACT. MOREOVER, THE AS SESSEE HAS RECORDED THE SALES ON GROSS BASIS, I.E. INVOICED AMOUNT HAS BEEN TAKEN AS SALES, THEREFORE, ANY DEDUCTION FROM INVOICED AMOUNT HAS T O BE ALLOWED AS 27 DEDUCTION FROM BUSINESS INCOME OF THE ASSESSEE. WE DIRECT ACCORDINGLY. GROUND NO. 2 IS ALLOWED. 23. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO. 6506/DEL/2016 IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 04.10. 2019. SD/- SD/- [SUDHANSHU SRIVASTAVA ] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 04 TH OCTOBER, 2019 VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI 28 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P S/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER