Unitedhealth Group Information Services Pvt. Ltd., New Delhi V. Addl. CIT, Special Range- 9, New Delhi

ITA 6665/DEL/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6069 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2013-2014
• Appeal Filed On: 03-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUPHAM KANT GARG
• Keywords: Business income; Transfer pricing; Rectification of order; International transaction; Question of law; Deemed export; Notional interest; Set aside
• Section: 92C; 143(3); 10AA; 80HHC; 80IB; 10B; 80IA; 144C; 80HH; 92CE; 48; 13; 92CA; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I-2 : NEW DELHI) (THROUGH VIDEO CONFERENCE ) BEFORE SHRI N.K.BILLAIYA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.6665DEL./2017 (ASSESSMENT YEAR : 2013-14) OPTUM GLOBAL SOLUTIONS (INDIA) PVT. LTD. VS. ACIT (AS SUCCESSOR OF UNITED HEALTH GROUP SPECIAL RANGE-9 INFORMATIONSERVICES PVT. LTD.) NEW DELHI 5 TH , 6 TH AND 7 TH OFFICE LEVEL, HITECH CITY, MADHAPUR, HYDERABAD- 500 081, TELANGANA (PAN : AAACQ2188G) (APPELLANT) ( RESPONDENT) ASSESSEE BY : SHRI NAGESHWAR RAO, ADV. REVENUE BY : SHRI ANUPHAM KANT GARG, CIT-DR DATE OF HEARING : 27.08.2020 DATE OF ORDER : 29 .09.202 0 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER APPELLANT, M/S. OPTUM GLOBAL SOLUTIONS (INDIA) PVT. LTD. (HEREINAFTER REFERRED TO AS TAXPAYER) BY FILIN G THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DA TED 30.08.2017 PASSED BY THE ASSESSING OFFICER (AO) IN CONSONANCE WITH THE ITA NO.6665/DEL/2017 2 ORDERS PASSED BY THE LD. DRP/TPO UNDER SECTION 254/ 143 (3) READ WITH SECTION 144C OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) QUA THE ASSESSMENT YEAR 2013-14 ON THE GROUNDS INTE R ALIA THAT :- 1. THAT ON THE FACTS OF THE CASE AND IN LAW, THE FINAL ASSESSMENT ORDER PASSED BY THE ADDITIONAL COMMISSIONER OF INCO ME TAX, SPECIAL RANGE 9, NEW DELHI (LEARNED AO) UNDER SEC TION 143(3) READ WITH SECTION 144C OF THE INCOME TAX ACT (ACT ) AND THE ORDER PASSED BY HONBLE DISPUTE RESOLUTION PANEL - II (HONBLE DRP) UNDER SECTION 144C OF THE ACT, IS BAD IN LAW AND VOID AB INITIO HAVING BEEN PASSED IN THE NAME OF AN ENTITY UNITEDHEALTH GROUP INFORMATION SERVICES PVT. LTD. THAT WAS NO LO NGER IN EXISTENCE AT THE TIME OF PASSING OF SUCH IMPUGNED O RDERS. 2. THAT, WITHOUT PREJUDICE, THE LEARNED AO HAS GROSSL Y ERRED IN MAKING A TRANSFER PRICING ADDITION OF INR 5,43,68,3 48/- AND A CORPORATE TAX ADDITION OF INR 55,73,134/- WHILE COM PUTING THE INCOME OF THE APPELLANT. THE ADDITION MADE TO THE R ETURNED INCOME IS HIGHLY UNJUSTIFIED. PART I - TRANSFER PRICING (TP) GROUNDS 3. THAT ON THE FACTS OF THE CASE AND IN LAW, THE DEPU TY COMMISSIONER OF INCOME TAX, TRANSFER PRICING OFFICE R- 3(3)(1), NEW DELHI (LEARNED TPO)/ AO HAS ERRED IN MAKING T P ADJUSTMENT OF INR 5,43,68,348/- INSTEAD OF INR 94,3 6,839 AS COMPUTED VIDE RECTIFICATION ORDER PASSED BY THE LEA RNED TPO UNDER SECTION 92CA(5) READ WITH SECTION 154 OF THE ACT. 4. THAT ON THE FACTS OF THE CASE AND IN LAW, THE LEAR NED TPO/ HONBLE DRP HAS ERRED IN MAKING TP ADJUSTMENT ON AC COUNT OF NOTIONAL INTEREST ON RECEIVABLES FROM AE WITHOUT AP PLICATION OF ANY METHOD AS PRESCRIBED UNDER SECTION 92C OF THE A CT. 5. THAT ON THE FACTS OF THE CASE AND IN LAW, THE LEARN ED TPO/ HONBLE DRP HAS ERRED IN RE-CHARACTERIZING THE INTE R-COMPANY RECEIVABLES AS A SEPARATE INTERNATIONAL TRANSACTION OF AN UNSECURED LOAN AND IMPUTING INTEREST ON SUCH TRANSA CTION. 6. THAT ON THE FACTS OF THE CASE AND IN LAW, THE LEARN ED TPO/ HONBLE DRP HAS ERRED IN MAKING A TP ADJUSTMENT FOR INTER- COMPANY RECEIVABLES REALIZATION WITHOUT APPRECIATIN G THE FACT THAT APPELLANT FOLLOWS A UNIFORM POLICY OF NOT CHAR GING ANY INTEREST FOR DELAYED REALIZATIONS FROM AE AS WELL A S NON- AES. 7. THAT ON THE FACTS OF THE CASE AND IN LAW, THE LEAR NED TPO/ HONBLE DRP HAS ERRED IN MAKING A TP ADJUSTMENT FOR INTER- COMPANY RECEIVABLES REALIZATION DESPITE THE FACT TH AT THE ITA NO.6665/DEL/2017 3 APPELLANT IS A DEBT FREE COMPANY AND NO SEPARATE IN TEREST COST IS PAID BY THE APPELLANT TO ITS CREDITORS OR SUPPLIERS ON DELAYED PAYMENTS (IF ANY). 8. THAT ON THE FACTS OF THE CASE AND IN LAW, THE LEARN ED TPO/ HONBLE DRP HAS ERRED IN MAKING A TP ADJUSTMENT FOR INTER- COMPANY RECEIVABLES REALIZATION WITHOUT APPRECIATIN G THE FACT THAT THE INTER-COMPANY RECEIVABLE DAYS OF 51 DAYS A ND 48 DAYS IN RELATION TO PROVISION OF IT AND IT ENABLED SERVICES TO AE RESPECTIVELY FOR FY 2012-13 WAS LESS THAN THE RECEI VABLE DAYS OF COMPARABLE COMPANIES SELECTED BY THE APPELLANT AS W ELL AS LEARNED TPO FOR DETERMINING THE ARMS LENGTH PRICE OF PROVISION OF IT AND IT ENABLED SERVICES TO AE. 9. THAT ON THE FACTS OF THE CASE AND IN LAW, THE LEAR NED TPO/ HONBLE DRP HAS ERRED IN NOT APPRECIATING THAT INTE R-COMPANY RECEIVABLES ARISING OUT OF PROVISION OF SERVICES BY THE APPELLANT TO ITS AE IS CLOSELY LINKED TO SUCH TRANSACTION AND IF SUCH SERVICES TRANSACTION IS DETERMINED AT AN ARMS LENGTH PRICE AFTER CONSIDERING WORKING CAPITAL ADJUSTED MARGINS OF COM PARABLE COMPANIES, NO SEPARATE ADJUSTMENT CAN BE MADE FOR S UCH INTER- COMPANY RECEIVABLES. 10. THAT ON THE FACTS OF THE CASE AND IN LAW, THE LEARN ED HONBLE DRP HAS ERRED IN DETERMINING THE ARM'S LENG TH INTEREST RATE FOR INTER-COMPANY RECEIVABLES AT LIBOR PLUS 40 0 BASIS POINTS BY ERRONEOUSLY CONSIDERING CREDIT RATING OF THE AE USING FICO SCORES, COUNTRY RISK FACTORS, CURRENCY RISK AN D PLACING RELIANCE ON MASTER CIRCULAR OF RESERVE BANK OF INDI A. 11. THAT ON THE FACTS OF THE CASE AND IN LAW, THE HON BLE DRP HAS ERRED IN UPHOLDING THE TP ADJUSTMENT MADE B Y THE LEARNED TPO WITHOUT APPRECIATING THAT INTER-COMPANY RECEIVABLE DAYS FOR PROVISION OF IT AND IT ENABLED SERVICES WA S 51 DAYS AND 48 DAYS RESPECTIVELY WHICH IS LESS THAN THE PERIOD OF 90 DAYS AS PRESCRIBED UNDER SECTION 92CE OF THE ACT READ WITH RULE 10CB OF THE INCOME TAX RULES, 1962 (THE RULES). PART II - CORPORATE TAX GROUNDS 12. THAT ON THE FACTS OF THE CASE AND IN LAW, THE LEAR NED AO/ HONBLE DRP HAS ERRED IN DISALLOWING DEDUCTION UNDER SECTION 10AA OF THE ACT ON THE INTEREST INCOME OF I NR 642,164 EARNED ON FIXED DEPOSITS PLACED WITH BANKS AS PER T HE MANDATE OF STATUTORY AUTHORITIES, AND MISCELLANEOUS INCOME OF INR 4,930,970. 12.1 THAT ON THE FACTS OF THE CASE AND IN LAW, THE LEARNED AO/ HONBLE DRP FAILED TO FOLLOW THE ORDER PASSED BY TH E HONBLE JURISDICTIONAL ITAT IN APPELLANTS OWN CASE FOR AY 2010-11 WHEREIN THE AFORESAID ISSUES OF DEDUCTION U/S 10AA OF THE ACT ON INTEREST AND MISCELLANEOUS INCOMES HAVE BEEN DECIDE D IN FAVOUR ITA NO.6665/DEL/2017 4 OF THE APPELLANT. ALL THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. APPELLANT CRAVES LEAVE TO ADD, AMEND, VARY, OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL AT ANY TIME BEFO RE OR AT THE TIME OF HEARING OF THE APPEAL. THE APPELLANT PRAYS THAT APPROPRIATE RELIEF BE GRAN TED BASED ON THE ABOVE GROUNDS OF APPEAL AND THE FACTS AND CIRCU MSTANCES OF THE CASE. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : (M/S. OPTUM GLOBAL SOLUTI ONS (INDIA) PVT. LTD.) TAXPAYER IS INTO PROVIDING IT E NABLED HEALTH CARE SERVICES AND IT SERVICES PRIMARILY TO I TS GROUP COMPANIES. DURING FY 2012-13, THE COMPANY HAS EXPAN DED ITS OPERATIONS BY SETTING UP TWO NEW SITES AT HYDERABAD AND NOIDA. ACCORDINGLY, UHG INDIAN CURRENTLY PROVIDES SERVICES THROUGH THE FOLLOWING FOUR UNITS IN INDIA : A UNIT LOCATED IN GURGAON AND REGISTERED UNDER THE STPI SCHEME OF THE GOVERNMENT OF INDIA; A UNIT SET-UP UNDER SEZ IN NOIDA IN FY 2012-13 AND ELIGIBLE FOR TAX HOLIDAY BENEFIT UNDER SECTION 10AA OF THE ACT; AND TWO UNITS SET-UP UNDER SEZ IN HYDERABAD IN FY 2 009-10 AND FY 2012-13 RESPECTIVELY AND ELIGIBLE FOR TAX HOLIDA Y BENEFIT UNDER SECTION 10AA OF THE ACT. 3. DURING THE YEAR UNDER ASSESSMENT TAXPAYER ENTERE D INTO INTERNATIONAL TRANSACTION WITH ITS AES AS UNDER :- S.NO. NAME OF AE NATURE OF INTERNATIONAL TRANSACTION METHOD AMOUNT( IN RS.) 1. UNITED PROVISION OF IT TNMM 4,83,14,81,686 ITA NO.6665/DEL/2017 5 HEALTHCARE SERVICES INC. SERVICES 2. UNITED HEALTHCARE SERVICES INC. PROVISION OF IT ENABLED SERVICES TNMM 4,15,93,92,895 3. UNITED HEALTHCARE SERVICES INC. UNITED REIMBURSEMENT OF EXPENSES FROM AES TNMM 11,53,86,874 UNITED HEALTH GROUP INC. UHC INTERNATIONAL SERVICES INC. 4. UNITED HEALTHCARE SERVICES INC. REIMBURSEMENT OF EXPENSES BY AES -- 15,78,28,321 UNITED HEALTH GROUP INC. UNITED HEALTH GROUP GLOBAL SERVICES INC. SPECIFIED DOMESTIC TRANSACTION 1 MR. PARTHA SARATHI MISHRA MANAGERIAL REMUNERATION TNMM 11,59,76,089 MR. VEKATAKRISHNAN RAMASWAMY LYER 3. IN ORDER TO THE BENCHMARK ITS INTERNATIONAL TRA NSACTION, LD. TPO ACCEPTED THE ECONOMIC ANALYSIS MADE BY THE TAXP AYER QUA ITS INTERNATIONAL TRANSACTIONS PERTAINING TO PROVISION OF INFORMATION TECHNOLOGY AND IT ENABLED SERVICES. HOWEVER, LD. TP O CALLED UPON THE TAXPAYER TO EXPLAIN AS TO WHY THE DELAY IN RECE IVABLES SHOULD NOT BE CHARGED WITH THEN APPROPRIATE RATE OF INTERE ST. DECLINING THE CONTENTIONS RAISED BY THE TAXPAYER THAT ARMS LENGT H PRICE (ALP) OF THE INTERNATIONAL TRANSACTION QUA RECEIVABLE IS NIL, PROCEEDED TO ITA NO.6665/DEL/2017 6 COMPUTE THE INTEREST BY APPLYING 6 MONTHS LIBOR PLU S 400 BASIS POINTS BY APPLYING CUP THE MOST APPROPRIATE METHOD. LD. TPO ALSO DETERMINED A MARK UP OF 100 BASIS POINTS TOWAR DS THE CURRENCY RATES ARISING FROM FLUCTUATIONS IN THE FOR EIGN EXCHANGE RATE BORNE BY THE TAXPAYER. TPO DETERMINED THE BENC HMARKING RATE OF INTEREST AT 4.45690% AND MADE THE CUMULATIVE ADJ USTMENT AS UNDER :- THE AE WISE DETAILS OF INTEREST ON RECEIVABLES IS AS FOLLOWS AE INTEREST UNITED HEALTH CARE SERVICES, INC. 5,43,68,348 THE CUMULATIVE ADJUSTMENT MADE IN THIS CASE IS TABU LATED BELOW S. NO. NATURE OF INTERNATIONAL TRANSACTION ALP DETERMINED BY TAXPAYER (INR) ALP DETERMINED BY THE TPO (INR) ADJUSTMENT U/S 92CA (INR) 1. RECEIVABLES NIL 5,43,68,348 5,43,68,348 TOTA L 5,43,68,348 SUBSEQUENTLY, LD. TPO VIDE ORDER DATED 24.01.2017 PASSED U/S 154 OF THE ACT MADE RECITIFICATION AND COMPUTED REVISED ADJUSTMENT AT RS. 9,43,68,39/-. 4. ASSESSEE CARRIED THE MATTER BEFORE THE LD. DRP B Y WAY OF FILING OBJECTIONS WHO HAS CONFIRMED THE ADDITION BY DISMISSING THE OBJECTION. FEELING AGGRIEVED THE TAXPAYER HAS COME UP BEFORE THE TRIBUNAL BY FILING THE PRESENT APPEAL. 5. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ITA NO.6665/DEL/2017 7 ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NO. 1 AND 2 6. GROUND NO. 1 AND 2 ARE GENERAL IN NATURE, HENCE, NEED NO SPECIFIC FINDINGS. GROUND NO. 3 TO 11 7. WHEN WE EXAMINE AUDITED PROFIT AND LOSS ACCOUNT AVAILABLE AT PAGE 294 OF THE PAPER BOOK IT SHOWS THAT TAXPAYE R IS A DEBT FREE ENTITY. IT IS SETTLED PRINCIPLE OF LAW THAT WHEN TA XPAYER IS DEBT FREE COMPANY THERE IS NO QUESTION OF RECEIVING ANY INTER EST ON THE RECEIVABLES. RELIANCE IN THIS REGARD IS PLACED ON D ECISION RENDERED BY HONBLE HIGH COURT OF DELHI ITA NO. 379/2016, PR. COMMISSIONER OF INCOME TAX-2 VS. M/S. BECHTEL INDIA PVT. LTD. 8. PERUSAL OF TP STUDY OF THE TAXPAYER AVAILABLE A T PAGE 404 OF THE PAPER BOOK WORKING CAPITAL ADJUSTMENT HAS BEEN GRANTED TO THE TAXPAYER IN THE YEAR UNDER ASSESSMENT AS WELL AS IN THE EARLIER YEARS. FURTHERMORE WHEN UNDISPUTEDLY IMPACT OF WORK ING CAPITAL OF TESTED PARTY VIS--VIS ITS COMPARABLES HAS BEEN FACTORED IN THE PROFITABILITY OF THE TAXPAYER WHILE BENCHMARKING IN TERNATIONAL TRANSACTION QUA IT AND ITES SEGMENTS HAVE BEEN HEL D TO BE AT ARMS LENGTH, THEN THERE IS NO NEED TO IMPUTE THE I NTEREST ON OUTSTANDING RECEIVABLES FROM ASSOCIATED ENTERPRISES (AE). ITA NO.6665/DEL/2017 8 9. COORDINATE BENCH OF TRIBUNAL IN CASE ITA NO. 4132/DEL/2017, M/S. TARGET SOURCING SERVICES INDIA PVT. LTD. VS. ACIT BY FOLLOWING THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN CASE OF PR. CIT VS. KUSUM HEALTH CARE PVT. LTD. IN ITA NO. 765/2016 ORDER DATED 25.04.2017 HELD THAT RE-CHARACTERIZATION OF OUTSTANDING RECEIVABLES AS LOAN BY THE TPO AND T HEREBY IMPUTING THE INTEREST ON SUCH OUTSTANDING RECEIVABL ES IS NOT SUSTAINABLE IN THE EYES OF LAW BY RETURNING FOLLOWI NG FINDINGS :- IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE AND FOLL OWING THE AFORESAID DECISION RENDERED BY THE HON'BLE DELHI HI GH COURT, WE ARE OF THE CONSIDERED VIEW THAT WHEN THE TAXPAYE R HAS ALREADY TAKEN INTO ACCOUNT THE IMPACT OF OUTSTANDIN G RECEIVABLES ON PROFITABILITY WHILE MAKING WORKING CAPITAL ADJUS TMENTS OF THE TAXPAYER VIS-A-VIS ITS COMPARABLES WHICH IS LESS TH AN THE WORKING CAPITAL ADJUSTED MARGIN OF THE COMPARABLES ANY FURT HER ADJUSTMENT ON ACCOUNT OF DELAYED PAYMENT OF OUTSTAN DING RECEIVABLES FROM AE WOULD DISTORT THE ENTIRE PICTUR E OF RE- CHARACTERIZATION THE TRANSACTIONS. IN OTHER WORDS, TRANSACTIONS AS TO OUTSTANDING RECEIVABLES CANNOT BE RE-CHARACTE RIZED AS LOAN DEEMED TO BE ADVANCED BY THE TAXPAYER TO ITS AE. WE ARE OF THE CONSIDERED VIEW THAT AO/DRP HAVE ERRED IN MAKING AD DITION OF RS.19,79,520/- ON ACCOUNT OF INTEREST ON OUTSTANDIN G RECEIVABLES FROM AE, HENCE ORDERED TO BE DELETED. GROUND NO.1 I S DETERMINED IN FAVOUR OF THE TAXPAYER. 10. SO IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT ADDITION MADE BY TPO/DRP ON AC COUNT OF INTEREST ON OUTSTANDING RECEIVABLE FROM AE IS NOT S USTAINABLE, HENCE, ORDER TO BE DELETED. ITA NO.6665/DEL/2017 9 GROUND NO. 12 11. ASSESSING OFFICER HAS DISALLOWED THE DEDUCTIONS CLAIMED BY THE TAXPAYER U/S 10AA ON ACCOUNT OF INTEREST INCOME OF RS. 7,57,24,178/- AND MISCELLANEOUS INCOME OF RS. 2, 90 ,63,825/-. ON THE GROUND THAT THE SAID INCOME CANNOT BE SET TO HA VE ANY DIRECT NEXUS WITH THE ASSESSEE BUSINESS BECAUSE THE ASSESS EE IS NOT INTO THE BUSINESS OF FINANCE AND INVESTMENT. 12. HOWEVER, THE LD. AR FOR THE ASSESSEE CONTENDED THAT THIS ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE TAX PAYER IN ITS OWN CASE IN AY 2010-11 AND 2011-12 BY THE TRIBUNAL. HOW EVER, LD. AO/DRP DECLINED TO FOLLOW THE ORDER PASSED BY THE T RIBUNAL BY RECORDING REASONS :- 1. THOUGH THE ASSESSEE HAS RELIED ON THE ORDER OF THE HONBLE ITAT IN ITS OWN CASE HOWEVER IT IS RESPECTIVELY SUB MITTED THAT ORDER OF THE HONBLE ITAT HAS STILL NOT ATTAINED FI NALITY. 13. THE LD. AR FOR THE TAXPAYER CONTENDED THAT THIS ISSUE IS ALREADY COVERED BY THE ORDER PASSED BY CO-ORDINATE BENCH OF TRIBUNAL IN AY 2009-10, 2010-11 AND 2011-12. COORD INATE BENCH OF TRIBUNAL IN ASSESSEES OWN CASE IN A.Y. 2009-10 , VIDE ITA NO. 825/DEL/2014 AND ITA NO. 419/DEL/2014 DECIDED BY THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE BY RETURNING FOLLOW ING FINDINGS :- ITA NO.6665/DEL/2017 10 66. THE AO IN THE DRAFT ORDER, AVAILABLE AT PAGES 140 TO 147, DENIED THE DEDUCTION OF RS.125,71,932/- AND RS.22,8 5,957/- CLAIMED U/S 10 A OF THE ACT BEING THE INTEREST ON FDR AND MISC. INCOME RESPECTIVELY ON THE GROUND THAT THE SAME IS NOT RELATED TO EXPORTS. LD. DRP ALSO UPHELD THE FINDINGS OF THE AO BY OBSERVING THAT THE INTEREST INCOME CANNOT BE TERMED AS PROFIT DERIVED FROM AN UNDERTAKING AND HAS ALSO NOT FOLLOWED THE DECISI ON RENDERED BY THE COORDINATE BENCH IN AY 2008-09 ON IDENTICAL ISSUE. 67. UNDISPUTEDLY, IDENTICAL ISSUE HAS COME UP BEFOR E THE TRIBUNAL IN TAXPAYER'S OWN CASE FOR AY 2010-11 AND HAS BEEN DECIDED IN FAVOUR OF THE TAXPAYER BY RELYING UPON T HE DECISION RENDERED BY THE HON'BLE DELHI HIGH COURT IN RIVIERA HOME FURNISHING VS. ADDITIONAL CIT - 65 TAXMANN.COM 287 (DELHI). OPERATIVE PART OF THE FINDING RETURNED BY HON'BLE D ELHI HIGH COURT IN RIVIERA HOME FURNISHING (SUPRA) IS REPRODU CED FOR READY PERUSAL AS UNDER :- '9. THE QUESTION AS TO WHAT CAN CONSTITUTE AS PROFI TS AND GAINS DERIVED BY A 100% EOU FROM THE EXPORT OF ARTICLES A ND COMPUTER SOFTWARE CAME FOR CONSIDERATION BEFORE THE KARNATAK A HIGH COURT IN CIT V. MOTOROLA INDIA ELECTRONICS (P .) LTD. [2014] 46 TAXMANN.COM 167/225 TAXMAN 11 (MAG.). THE SAID APPE AL BEFORE THE KARNATAKA HIGH COURT WAS BY THE REVENUE CHALLENGING AN ORDER PASSED BY THE ITAT WHICH HELD THAT THE INTEREST PAYABLE ON FDRS WAS PART OF THE PROFITS OF THE BUSINESS OF THE UNDERTAKING AND THEREFORE INCLUDIBLE IN THE INCOME ELIGIBLE FOR DEDUCTION SECTIONS 10A AND 10B OF THE ACT. THERE THE ASSESSEE HAD EARNED INTEREST ON THE DEPOSITS LYING IN THE EEFC ACCOUNT AS WELL AS INTEREST EARNED ON INTER-CORPORA TE LOANS GIVEN TO SISTER CONCERNS OUT OF THE FUNDS OF THE UNDERTAK ING. THERE WAS A RESTRICTION ON THE ASSESSEE IN THAT CASE FROM MAK ING PRE- PAYMENT OF ITS EXTERNAL COMMERCIAL BORROWINGS ('ECB '). IT COULD REPAY ONLY TO THE EXTENT OF 10% OF THE OUTSTANDING LOAN IN A YEAR. THIS MADE THE ASSESSEE TEMPORARILY PARK THE BALANCE FUNDS AS DEPOSITS OR WITH VARIOUS SISTER CONCERNS AS INTER C ORPORATE DEPOSITS UNTIL THE DATE OF REPAYMENT. THE ASSESSEE CONTENDED THAT THE INTEREST DERIVED FROM THE BUSINESS OF THE INDUS TRIAL UNDERTAKING WAS ELIGIBLE FOR EXEMPTION WITHIN THE M EANING OF SECTION 10B AND APPLIED THE FORMULA UNDER SECTION 10B(4) OF THE ACT FOR DETERMINING THE PROFITS FROM EXPORTS. T HE ASSESSEE'S CONTENTION THAT THE EXPRESSION 'PROFITS OF THE BUSI NESS 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 UNLIKE SECTION 80HHC , WHERE THERE WAS AN EXPRESS EXCLUSION OF THE INTEREST EARNED FROM THE ' PROFITS OF BUSINESS OF UNDERTAKING', THERE WAS NO SIMILAR PROV ISION AS FAR AS SECTIONS 10A AND 10B WERE CONCERNED. ITA NO.6665/DEL/2017 11 10. IN MOTOROLA INDIA ELECTRONICS (P.) LTD. (SUPRA) REFERENCE WAS MADE TO THE DECISION OF THE SUPREME COURT IN PANDIAN CHEMICALS LTD. V. CIT [2003] 262 ITR 278/129 TAXMAN 539 WHICH DEALT WITH SECTION 80HH AND LIBERTY INDIA V. CIT [2009] 317 ITR 218/183 TAXMAN 349 (SC), WHICH INTERPRETED SECTION 801B OF THE ACT. REFERENCE WAS ALSO MADE TO THE DECISIO N OF CIT V. STERLING FOODS [1999] 237 ITR 579/104 TAXMAN 204 (SC), WHICH INTERPRETED SECTION 80HH AND THE DECISION OF THE MADRAS HIGH COURT IN CIT V. MENON IMPEX (P .) LTD. [2003] 259 ITR 403/128 TAXMAN 11 WHICH INTERPRETED SECTION 10A OF THE ACT. THE KARNATAKA HIGH COURT IN MOTOROLA INDIA ELECTRON ICS (P.) LTD. (SUPRA), AFTER NOTICING THE ABOVE DECISIONS, H ELD THAT 'IT IS CLEAR THAT, WHAT IS EXEMPTED IS NOT MERELY THE PROF ITS AND GAINS FROM THE EXPORT OF ARTICLES BUT ALSO THE INCOME FRO M THE BUSINESS OF THE UNDERTAKING'. SPECIFIC TO THE QUESTION OF IN TEREST EARNED BY THE EOU ON THE FDRS PLACED BY IT AND INTEREST EARNE D FROM THE LOANS GIVEN TO SISTER CONCERNS, IT WAS HELD THAT AL THOUGH IT DID NOT PARTAKE THE CHARACTER OF PROFIT AND GAINS FROM THE SALE OF AN ITA NO.419/DEL/2014 ARTICLE 'IT IS INCOME WHICH IS DERI VED FROM THE CONSIDERATION REALIZED BY EXPORT OF ARTICLES.' 11. THE DECISION OF THE KARNATAKA HIGH COURT IN MOT OROLA INDIA ELECTRONICS (P.) LTD. (SUPRA) WAS FOLLOWED BY THIS COURT IN ITS DECISION IN CIT V. HRITNIK EXPORTS (P .) LTD. (DECISION DATED 13TH NOVEMBER 2014 IN ITA NOS. 219 AND 239 OF 2014). THI S COURT ALSO REFERRED TO ITS EARLIER DECISION DATED 1ST SE PTEMBER 2014 IN ITA NO. 438 OF 2014 ( CIT V. XLNC FASHIONS ). WHILE DECLINING TO FRAME A QUESTION OF LAW IN THE REVENUE'S APPEAL, THIS COURT INHRITNIK EXPORTS (P.) LTD. (SUPRA) QUOTED WITH APP ROVAL THE OBSERVATIONS OF THE SPECIAL BENCH OF THE ITAT IN MARAL OVERSEAS LTD. V. ADDL . CIT [2012] 136 ITD 177/20 TAXMANN.COM 346 (INDORE) ON THE INTERPRETATION OF SECTION 10B(4) OF THE ACT AS UNDER: '79. THUS, SUB-SECTION (4) OF SECTION 10B STIPULATED THAT DEDUCTION UNDER THAT SECTION SHALL BE COMPUTED BY A PPORTIONING THE PROFITS OF THE BUSINESS OF THE UNDERTAKING IN T HE RATIO OF TURNOVER TO THE TOTAL TURNOVER. THUS, NOT- WITHSTAN DING THE FACT THAT SUB-SECTION (1) OF SECTION 10B REFERS THE PROFITS AND GAINS AS ARE DERIVED BY A 100% EOU, YET THE MANNER OF DETERM INING SUCH ELIGIBLE PROFITS HAS BEEN STATUTORILY DEFINED IN SU B-SECTION (4) OF SECTION 10B OF THE ACT. AS PER THE FORMULA STATED ABOVE, THE ENTIRE PROFITS OF THE BUSINESS ARE TO BE TAKEN WHIC H ARE MULTIPLIED BY THE RATIO OF THE EXPORT TURNOVER TO THE TOTAL TU RNOVER OF THE BUSINESS. SUB-SECTION (4) DOES NOT REQUIRE AN ASSES SEE TO ESTABLISH A DIRECT NEXUS WITH THE BUSINESS OF THE U NDERTAKING AND ONCE AN INCOME FORMS PART OF THE BUSINESS OF THE UN DERTAKING, THE SAME WOULD BE INCLUDED IN THE PROFITS OF THE BU SINESS OF THE UNDERTAKING. THUS, ONCE AN INCOME FORMS PART OF THE BUSINESS OF THE ELIGIBLE UNDERTAKING, THERE IS NO FURTHER MANDA TE IN THE ITA NO.6665/DEL/2017 12 PROVISIONS OF SECTION 10B TO EXCLUDE THE SAME FROM THE ELIGIBLE PROFITS. THE MODE OF DETERMINING THE ELIGIBLE DEDUC TION U/S 10B IS SIMILAR TO THE PROVISIONS OF SECTION 80HHC INASMUCH AS BOTH THE SECTIONS MANDATES DETERMINATION OF ELIGIBLE PROFITS AS PER THE FORMULA CONTAINED THEREIN. THE ONLY DIFFERENCE IS T HAT SECTION 80HHC CONTAINS A FURTHER MANDATE IN TERMS OF EXPLANATION (BAA) FOR EXCLUSION OF CERTAIN INCOME FROM THE 'PRO FITS OF THE BUSINESS' WHICH IS, HOWEVER, CONSPICUOUS BY ITS ABS ENCE IN SECTION 10B . ON THE BASIS OF THE AFORESAID DISTINCTION, SUB- SECTION (4) OF SECTION 10A / 10B OF THE ACT IS A COMPLETE CODE PROVIDING THE MECHANISM FOR COMPUTING THE 'PROFITS OF THE BUSINESS' ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT . ONCE AN INCOME FORMS PART OF THE BUSINESS OF THE INCOME OF THE ELIGIBLE UNDERTAKING OF THE ASSESSEE, THE SAME CANNOT BE EXC LUDED FROM THE ELIGIBLE PROFITS FOR THE PURPOSE OF COMPUTING D EDUCTION U/S 10B OF THE ACT. AS PER THE COMPUTATION MADE BY THE ASSESSING OFFICER HIMSELF, THERE IS NO DISPUTE THAT BOTH THES E INCOMES HAVE BEEN TREATED BY THE ASSESSING OFFICER AS BUSINESS I NCOME. THE CBDT CIRCULAR NO. 564 DATED 5TH JULY, 1990 REPORTED IN 184 ITR (ST.) 137 EXPLAINED THE SCOPE AND AMBIT OF SECTION 80HHC AND THE MODE OF DETERMINATION OF PROFITS DERIVED BY AN ASSESSEE FROM THE EXPORT OF GOODS. I.T.A.T., SPECIAL BENCH IN THE CASE OF INTERNATIONAL RESEARCH PARK LABORATORIES V. ACIT, 2 12 ITR (AT) 1, AFTER FOLLOWING THE AFORESAID CIRCULAR, HEL D THAT STRAIGHT JACKET FORMULA GIVEN IN SUB-SECTION (3) HAS TO BE F OLLOWED TO DETERMINE THE ELIGIBLE DEDUCTION. THE HON'BLE SUPRE ME COURT IN THE CASE OFP.R. PRABHAKAR; 284 ITR 584 HAD APPROVED THE PRINCIPLE LAID DOWN IN THE SPECIAL BENCH DECISION I N INTERNATIONAL RESEARCH PARK LABORATORIES V.ACIT (SU PRA). IN THE ASSESSEE'S OWN CASE THE I.T.A.T. IN THE PRECEDING Y EARS, AFTER CONSIDERING THE DECISION IN THE CASE OF LIBERTY IND IA HELD THAT PROVISIONS OF SECTION 10B ARE DIFFERENT FROM THE PROVISIONS OF SECTION 80IA WHEREIN NO FORMULA HAS BEEN LAID DOWN FOR COMPUTING THE ELIGIBLE BUSINESS PROFIT.' 12. RECENTLY, IN A DECISION DATED 6TH OCTOBER 2015 IN ITA NO. 392 OF 2015 ( PRINCIPAL CIT V. UNIVERSAL PRECISION SCREWS ), THIS COURT HAD OCCASION TO AGAIN CONSIDER WHETHER INTERE ST EARNED ON FIXED DEPOSITS KEPT BY AN ASSESSEE WHICH WAS ELIGIB LE UNDER SECTION 10B OF THE ACT, AS A CONDITION FOR UTILIZATION OF LETTER OF CREDIT AND BANK GUARANTEE LIMITS, WOULD Q UALIFY FOR DEDUCTION. THAT QUESTION WAS DECIDED IN FAVOUR OF T HE ASSESSEE AND AGAINST THE REVENUE. THE COURT HELD AS UNDER: '9. ON THE QUESTION OF INTEREST ON THE FDRS, THE IT AT HAS REFERRED TO SECTION 10B(4) WHICH STATES THAT FOR THE PURPOSES OF SECTION 10B(1) , THE PROFITS DERIVED FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE 'SHALL BE THE AMOUNT WH ICH BEARS TO THE PROFITS OF THE BUSINESS OF THE UNDERTAKING', TH E SAME PROPORTION AS THE EXPORT TURNOVER IN RESPECT OF SUC H ARTICLES OR ITA NO.6665/DEL/2017 13 THINGS OR COMPUTER SOFTWARE BEARS TO THE TOTAL TURN OVER OF THE BUSINESS CARRIED ON BY THE UNDERTAKING.' AS NOTED B Y THIS COURT IN CIT V. HRITNIK EXPORTS PVT. LTD . (DECISION DATED 13TH NOVEMBER, 2014 IN ITA NO. 219 & 239 OF 2014), SECTION 10B(4) MANDATES THE APPLICATION OF THE FORMULA FOR DETERM INING THE PROFITS DERIVED FROM EXPORTS FOR THE PURPOSES O F SECTION 10B(1) . IN OTHER WORDS, THE FORMULA WOULD READ THUS: PROFITS DERIVED FROM EXPORT = PROFITS OF THE BUSINE SS OF THE UNDERTAKING 9A. IN TERMS OF THE ABOVE FORMULA, THE QUESTION THAT WOULD ARISE IS WHETHER THE INTEREST ON THE FDRS COU LD FORM PART OF THE 'PROFITS OF THE BUSINESS OF THE UNDERTAKING' . THE ATTENTION OF THE COURT HAS BEEN DRAWN TO THE DECISION OF THE KARNATAKA HIGH COURT IN CIT V. MOTOROLA INDIA ELECTRONICS PVT. LTD . (2014) 46 TAXMANN.COM 167 (KAR.) WHICH HELD THAT THERE WAS A DIRECT NEXUS BETWEEN THE INTEREST RECEIVED FROM THE FDRS C REATED BY A SIMILARLY PLACED ASSESSEE FROM THE AMOUNTS BORROWED BY IT. THE HIGH COURT APPROVED THE ORDER OF THE ITAT IN THAT C ASE WHICH HELD THAT THE ENTIRE PROFITS OF THE BUSINESS OF THE UNDERTAKING SHOULD BE TAKEN INTO CONSIDERATION WHILE COMPUTING THE ELIGIBLE DEDUCTION UNDER SECTION 10B OF THE ACT BY ITA 392/2015 APPLYING THE MANDATORY FORMULA. 10. IN THE PRESENT CASE, THE ASSESSEE HAS STATED TH AT THE INTEREST ON FDRS WAS RECEIVED ON 'MARGIN KEPT IN THE BANK FO R UTILIZATION OF LETTER OF CREDIT AND BANK GUARANTEE LIMITS'. IN THOSE CIRCUMSTANCES, THE DECISION OF THE ITAT THAT SUCH I NTEREST BEARS THE REQUISITE CHARACTERISTIC OF BUSINESS INCOME AND HAS NEXUS TO THE BUSINESS ACTIVITIES OF THE ASSESSEE CANNOT BE F AULTED. IN OTHER WORDS, INTEREST EARNED ON THE FDRS WOULD FORM PART OF THE 'PROFITS OF THE BUSINESS OF THE UNDERTAKING' FOR TH E PURPOSES OF COMPUTATION OF THE PROFITS DERIVED FROM EXPORT BY A PPLYING FORMULA UNDER SECTION 10B(4) OF THE ACT. 13. MR. ASHOK MANCHANDA, LEARNED SENIOR STANDING C OUNSEL FOR THE REVENUE, URGED THAT NONE OF THE EARLIER DECISIO NS OF THE HIGH COURTS HAVE CONSIDERED THE EFFECT OF SECTIONS 80I , 801A AND 801B OF THE ACT WHICH OCCUR IN CHAPTER VIA OF THE ACT. HE REFERRED IN PARTICULAR TO SECTION 80A(4) OF THE ACT, WHICH READS AS UNDER: '4) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAI NED IN SECTION 10A OR SECTION 10AA OR SECTION 10B OR SECTION 10BA OR IN ANY PROVISIONS OF THIS CHAPTER UNDER THE HEADING 'C--DE DUCTIONS IN RESPECT OF CERTAIN INCOMES', WHERE, IN THE CASE OF AN ASSESSEE, ANY AMOUNT OF PROFITS AND GAINS OF AN UNDERTAKING O R UNIT OR ENTERPRISE OR ELIGIBLE BUSINESS IS CLAIMED AND ALLO WED AS A DEDUCTION UNDER ANY OF THOSE PROVISIONS FOR ANY ASS ESSMENT YEAR, DEDUCTION IN RESPECT OF, AND TO THE EXTENT OF, SUCH PROFITS AND GAINS SHALL NOT BE ALLOWED UNDER ANY OTHER PROVISIO NS OF THIS ACT ITA NO.6665/DEL/2017 14 FOR SUCH ASSESSMENT YEAR AND SHALL IN NO CASE EXCEE D THE PROFITS AND GAINS OF SUCH UNDERTAKING OR UNIT OR ENTERPRISE OR ELIGIBLE BUSINESS, AS THE CASE MAY BE.' 14. MR. MANCHANDA'S ATTEMPT WAS TO SHOW THAT SECTION 80A(4) , WHICH INTER ALIA STATED THAT ANY DEDUCTION ALLOWABL E UNDER SECTION 10B CANNOT IN ANY CASE 'EXCEED THE PROFITS AND GAINS OF SUCH UNDERTAKING OR UNIT OR ENTERPRISE OR ELIGIBLE BUSINESS, AS THE CASE MAY BE' MADE IT CLEAR THAT A UNIT SEEKING DEDUCTION UNDER SECTION 10B WOULD BE ELIGIBLE TO DO SO ONLY INSOFAR AS SUCH INCOME WAS DIRECTLY ATTRIBUTABLE TO THE BUSINESS OF EXPORT. ANY INCOME THAT MIGHT BE MERELY INCIDENT AL TO THE BUSINESS OF THE UNDERTAKING, NOT DIRECTLY RELATED T O THE ACTIVITY OF EXPORT, WOULD NOT BE ELIGIBLE FOR SUCH DEDUCTION. H E ALSO TOOK THE COURT AGAIN THROUGH THE DECISION OF THE SUPREME COU RT IN LIBERTY INDIA (SUPRA) AND SUBMITTED THAT THE EARLIE R DECISIONS OF THIS COURT IN HRITNIK EXPORTS (P.) LTD. (SUPRA) AND UNIVERSAL PRECISION SCREWS ITA NO.419/DEL/2014 (SUPRA) MIGHT REQUIRE TO BE RECONSIDERED. WHEN A QUESTION WAS POSED TO HIM A S TO WHETHER THE REVENUE HAD CHALLENGE THE AFOREMENTIONED DECISI ONS OF THIS COURT, AND OF THE ITAT IN THE PRESENT CASE TO THE E XTENT IT HAS ALLOWED THE PLEA OF THE ASSESSEE AS REGARDS 'DEEMED EXPORT DRAWBACK', MR. MANCHANDA STATED THAT THE REVENUE OU GHT TO HAVE CHALLENGED THE ABOVE DECISIONS AS WELL AS THE IMPUGNED ORDER OF THE ITAT IN THE PRESENT CASE AND PERHAPS H E WOULD ADVISE IT TO DO SO HEREAFTER. HE HAS ALSO HANDED OV ER A WRITTEN NOTE OF SUBMISSIONS, REITERATING THE ABOVE SUBMISSI ONS. 15. IN THE CONSIDERED VIEW OF THE COURT, THE SUBMIS SIONS MADE ON BEHALF OF THE REVENUE PROCEED ON THE BASIC MISCONCE PTION REGARDING THE TRUE PURPORT OF THE PROVISIONS OF CHA PTER VIA OF THE ACT AND ON AN INCORRECT UNDERSTANDING OF SECTION 80A(4) OF THE ACT. THE OPENING WORDS OF SECTION 80A(4) READ 'NOTWITHSTANDING ANYTHING 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 SOU GHT TO BE UNDERSCORED, THEREFORE, IS THAT SECTION 80A , AND THE OTHER PROVISIONS IN CHAPTER 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 TH E BENEFIT UNDER SECTION 10B WILL NOT BE ALLOWED TO FURTHER CLAIM RELIEF 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 WHITTLE DOWN THE AMBIT OF THOSE PROVISIONS AS IS SOUGHT TO BE SUGGESTED BY MR . MANCHANDA. ALSO, HE IS NOT RIGHT IN CONTENDING THAT THE DECISI ONS OF THE HIGH COURTS REFERRED TO ABOVE HAVE NOT NOTICED THE DECIS ION OF THE SUPREME COURT IN LIBERTY INDIA. THE KARNATAKA HIGH COURT IN MOTOROLA INDIA ELECTRONICS (P.) LTD. (SUPRA) MAKES A REFERENCE TO THE SAID DECISION. THAT DECISION OF THE KARNATAKA H IGH COURT HAS ITA NO.6665/DEL/2017 15 BEEN CITED WITH APPROVAL BY THIS COURT IN HRITNIK E XPORTS (P.) LTD. (SUPRA) AND UNIVERSAL PRECISION SCREWS (SUPRA) . IN HRITNIK EXPORTS (P.) LTD. (SUPRA) THE COURT QUOTED WITH APP ROVAL THE OBSERVATIONS OF THE SPECIAL BENCH OF THE ITAT IN MA RAL OVERSEAS LTD. (SUPRA) THAT ' SECTION 10A / 10B OF THE ACT IS A COMPLETE CODE PROVIDING THE MECHANISM FOR COMPUTING THE 'PROFITS OF THE BUSINESS' ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT . ONCE AN INCOME FORMS PART OF THE BUSINESS OF THE INCOME OF THE ELIGIBLE UNDERTAKING OF THE ASSESSEE, THE SAME CANNOT BE EXC LUDED FROM THE ELIGIBLE PROFITS FOR THE PURPOSE OF COMPUTING D EDUCTION U/S 10B OF THE ACT.' 16. THIS THEN BRINGS US TO THE QUESTIONS FRAMED FOR CONSIDERATION IN THE PRESENT CASE AND THE DECISION OF THE ITAT IN NOT ACCEPTING THE ASSESSEE'S PLEA IN REGARD TO 'CUSTOMER CLAIMS' 'FREIGHT SUBSIDY' AND 'INTEREST ON FIXED DEPOSIT RECEIPTS' E VEN WHILE ACCEPTED THE ASSESSEE'S CASE AS REGARDS 'DEEMED EXP ORT DRAWBACK'. 17. THE CONTENTION OF THE ASSESSEE AS REGARDS CUSTO MER CLAIMS WAS THAT IT HAD RECEIVED THE CLAIM OF RS. 28,27,224 FROM A CUSTOMER FOR CANCELLING THE EXPORT ORDER. LATER ON THE CANCELLED ORDER WAS COMPLETED AND GOODS WERE EXPORTED TO ANOT HER CUSTOMER. THE SUM RECEIVED AS CLAIM FROM THE CUSTOM ER WAS NONSEVERABLE FROM THE INCOME OF THE BUSINESS OF THE UNDERTAKING. THE COURT FAILS TO APPRECIATE AS TO HO W THE ITAT COULD HAVE HELD THAT THIS TRANSACTION DID NOT ARISE FROM THE BUSINESS OF THE EXPORT OF GOODS. EVEN AS REGARDS FR EIGHT SUBSIDY, THE ASSESSEE'S CONTENTION WAS THAT IT HAD RECEIVED THE SUBSIDY IN RESPECT OF THE BUSINESS CARRIED ON AND THE SAID SUB SIDY WAS PART OF THE PROFIT OF THE BUSINESS OF THE UNDERTAKING. I F THE ITAT WAS PREPARED TO CONSIDER THE DEEMED EXPORT DRAW BACK AS ELIGIBLE FOR DEDUCTION THEN THERE WAS NO JUSTIFICATION FOR EXCLU DING THE FREIGHT SUBSIDY. EVEN AS REGARDS THE INTEREST ON FD R, THE COURT HAS BEEN SHOWN A NOTE OF THE BALANCE SHEET OF THE A SSESSEE [WHICH WAS PLACED BEFORE THE AO] WHICH CLEARLY STAT ES THAT 'FIXED DEPOSIT RECEIPTS (INCLUDING ACCRUED INTEREST) VALUI NG RS. 15,05,875 ARE UNDER LIEN WITH BANK OF INDIA FOR FAC ILITATING THE LETTER OF CREDIT AND BANK GUARANTEE FACILITIES.' IN TERMS OF THE RATIO OF THE DECISIONS OF THIS COURT BOTH IN HRITNI K EXPORTS (P.) LTD. (SUPRA) AND UNIVERSAL PRECISION SCREWS (SUPRA) , THE INTEREST EARNED ON SUCH FDR OUGHT TO QUALIFY FOR DEDUCTION UNDER SECTION 10B OF THE ACT.' 68. SO, FOLLOWING THE FINDINGS RETURNED BY THE COOR DINATE BENCH OF THE TRIBUNAL IN TAXPAYER'S OWN CASE FOR AY 2010- 11 BASED ON THE DECISION OF HON'BLE HIGH COURT IN RIVIERA HOME FURNISHING (SUPRA), WE ARE OF THE CONSIDERED VIEW THAT THE TAX PAYER IS ENTITLED FOR DEDUCTION U/S 10A ON THE INTEREST EARNED ON FIX ED DEPOSIT RECEIPTS TO THE TUNE OF RS.125,71,932/- AND RS.22,8 5,957/-. ITA NO.6665/DEL/2017 16 69. SIMILAR VIEW AS TO ALLOWING THE DEDUCTION U/S 1 0 A OF THE ACT ON EXCESS PROVISION RETURNED BACK AMOUNTING TO RS.7,42,769/- HAS BEEN EXPRESSED BY THE COORDINATE BENCH OF THE TRIBUNAL IN BIRLASOFT (INDIA) LTD. VS. DCIT 44 SOT 664 (DELHI). FOLLOWING THE DECISION RENDERED BY THE COORDINATE B ENCH OF THE TRIBUNAL, WE ARE OF THE CONSIDERED VIEW THAT NOTICE PAY RECOVERIES FROM THE EMPLOYEES IS ALSO PART OF THE BUSINESS PRO FIT OF THE TAXPAYER ON WHICH THE TAXPAYER IS ALSO ELIGIBLE FOR DEDUCTION U/S 10 A OF THE ACT . CONSEQUENTLY, GROUNDS NO.11 & 11.1 ARE ALSO DETERMINED IN FAVOUR OF THE TAXPAYER. 14. SO, FOLLOWING THE ORDER PASSED BY CO-ORDINATE B ENCH OF TRIBUNAL (SUPRA) ON THE IDENTICAL ISSUE, WE ARE OF THE CONSIDERED VIEW THAT THE TAXPAYER IS ENTITLED FOR DEDUCTION U/ S 10A ON THE INTEREST EARNED ON THE FIXED INCOME OF RS. 7,57,24, 178/- AND MISCELLANEOUS INCOME OF RS. 2,90,63,825/- AS SECTIO N 10A IS A COMPLETE CODE PROVIDING THE MECHANISM FOR COMPUTING PROFIT OF THE BUSINESS ELIGIBLE FOR DEDUCTION AND AS SUCH TAX PAYER IS HELD TO BE ENTITLED FOR DEDUCTION U/S 10AA. APPROACH ADOPTE D BY AO/DRP IS LEGALLY AND FACTUALLY MISCONCEIVED THAT ORDER OF TRIBUNAL HAS NOT YET ATTAINED FINALITY, MORE PARTICULARLY WHEN ORDER PASSED BY TRIBUNAL HAS NOT BEEN STAYED BY THE HIGHER FORUM. A CCORDINGLY GROUND NO. 13 IS DECIDED IN FAVOUR OF THE TAXPAYER. 15. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, P RESENT APPEAL FILED BY THE TAXPAYER IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 29 TH SEPTEMBER, 2020 SD/- SD/- (N.K.BILLAIYA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: THE 29 TH SEPTEMBER, 2020 ITA NO.6665/DEL/2017 17 *BINITA* COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A) 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI. DATE OF DICTATION 04 .09.2020 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. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE 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 REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER