, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . , ! , # $ BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NOS.17 AND 18/PN/2014 #& & / ASSESSMENT YEAR : 2009-10 AMDOCS DEVELOPMENT CENTRE INDIA PVT. LTD., 6 TH FLOOR, TOWER 2, CYBERCITY, MAGARPATTA, HADAPSAR, PUNE 411 013 PAN NO.AAECA5803G . / APPELLANT V/S DCIT, CIRCLE-1(1), PUNE . / RESPONDENT . / ITA NOS.902/PN/12 AND 796/PN/13 #& & / ASSESSMENT YEARS : 2007-08 AND 2008-09 AMDOCS DEVELOPMENT CENTRE INDIA PVT. LTD., 6 TH FLOOR, TOWER 2, CYBERCITY, MAGARPATTA, HADAPSAR, PUNE 411 013 PAN NO.AAECA5803G . / APPELLANT V/S DCIT, CIRCLE-1(1), PUNE . / RESPONDENT . / ITA NOS.978/PN/12 AND 776/PN/13 #& & / ASSESSMENT YEARS : 2007-08 AND 2008-09 DCIT, CIRCLE-1(1), PUNE . / APPELLANT V/S AMDOCS DEVELOPMENT CENTRE INDIA PVT. LTD., 6 TH FLOOR, TOWER 2, CYBERCITY, MAGARPATTA, HADAPSAR, PUNE 411 013 PAN NO.AAECA5803G . / RESPONDENT 2 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 / ASSESSEE BY : SHRI FARROKH IRANI / REVENUE BY : SHRI S.B. MOREY / ORDER PER R.K. PANDA, AM : ITA NO.902/PN/2012 FILED BY THE ASSESSEE AND ITA NO.978/PN/2012 FILED BY THE REVENUE ARE CROSS APPEALS A ND ARE DIRECTED AGAINST ORDER DATED 17-11-2011 OF THE CIT (A)-I, PUNE RELATING TO ASSESSMENT YEAR 2007-08. ITA NO.796/PN/2013 FILED BY THE ASSESSEE AND ITA NO.776/PN/2013 FILED BY THE REVENUE ARE CROSS APPEALS A ND ARE DIRECTED AGAINST THE ORDER DATED 11-01-2013 OF THE CIT(A)-I, PUNE RELATING TO ASSESSMENT YEAR 2008-09. ITA NOS. 17 AND 18/PN/2014 FILED BY THE ASSESSEE ARE DIRECTED AGAINST TH E SEPARATE ORDERS DATED 30-09-2013 OF THE CIT(A)-I, PUN E RELATING TO ASSESSMENT YEAR 2009-10. FOR THE SAKE OF CONVENIE NCE ALL THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOS ED OF BY THIS COMMON ORDER. ITA NO.902/PN/2012 (BY ASSESSEE) (A.Y. 2007-08) : 2. GROUNDS OF APPEAL NO.1 AND 1.1 BY THE ASSESSEE READ AS UNDER : GROUND 1 : SET OFF OF BROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPRECIATION BEFORE ALLOWING DEDUCTION UN DER SECTION 10A / DATE OF HEARING :20.01.2016 / DATE OF PRONOUNCEMENT: 21.03.2016 3 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 1.1 THE HONBLE CIT(A) HAS ERRED IN FACTS AND LAW I N HOLDING THAT DEDUCTION UNDER SECTION 10A OF THE ACT IS ALLOWA BLE AFTER SET OFF OF BROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPR ECIATION. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DURING T HE COURSE OF ASSESSMENT PROCEEDINGS NOTED FROM THE STATEM ENT OF COMPUTATION OF INCOME AND AUDIT REPORT IN FORM 56G THAT THE ASSESSEE HAS CLAIMED EXEMPTION U/S.10A OF THE ACT AT RS.113,32,52,316/- AFTER COMPUTING THE SAME AS NET PROFIT. HE NOTED THAT THE ASSESSEE HAS ALSO CARRIED FORWARDED UNA BSORBED DEPRECIATION OF RS.10,69,75,452/- AND BUSINESS LOSS OF RS.3,63,60,503/- TOTALING TO RS.14,33,35,955/-. THUS ASSESSEE HAS NOT SET OFF THE BUSINESS LOSSES AND UNABSORBED DEPR ECIATION BEFORE COMPUTING EXEMPTION U/S.10A. THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY DEDUCTION U/S.10A OF THE ACT SHOULD NOT BE ALLOWED AFTER SET OFF OF BROUGHT FORWARD LOSS ES AND UNABSORBED DEPRECIATION. 4. IT WAS SUBMITTED BY THE ASSESSEE THAT AS PER PROV ISIONS OF SECTION 10A OF THE ACT DEDUCTION IS ALLOWED FROM THE PROFITS AND GAINS DERIVED BY THE UNDERTAKING FROM EXPORT OF ARTICLES OR COMPUTER SOFTWARE. AS PER THE PROVISIONS OF SECTION 29 O F THE ACT, THE INCOME UNDER THE HEAD PROFITS AND GAINS FROM BUS INESS AND PROFESSION IS REQUIRED TO BE COMPUTED AFTER GIVING EFFEC T TO THE PROVISIONS OF SECTION 30 TO 43D OF THE ACT. THUS, A P LAIN READING OF THE SECTION SUGGESTS THAT DEDUCTION HAS TO B E COMPUTED ON THE BASIS OF PROFITS AND GAINS DERIVED FROM TH E EXPORT ACTIVITIES R.W. PROVISIONS OF SECTION 28 TO 44 OF T HE ACT WITHOUT SETTING OFF ANY CARRIED FORWARD LOSSES AND UNABSO RBED DEPRECIATION. 4 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 5. IT WAS SUBMITTED THAT AS PER PROVISIONS OF SECTION 10 A(4) THE PROFITS DERIVED FROM EXPORT OF ARTICLES OR THINGS OR CO MPUTER SOFTWARE SHALL BE THE AMOUNT WHICH BEARS TO THE PROFITS O F THE BUSINESS OF THE UNDERTAKING, THE SAME PROPORTION AS EXP ORT TURNOVER IN RESPECT OF SUCH ARTICLE OR THINGS OR COMPUTE R SOFTWARE BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CA RRIED ON BY THE UNDERTAKING. THUS, THE COMPUTATION MECHANISM PROVIDED FOR ARRIVING AT THE DEDUCTION ALSO CONSIDERS THE ENTIRE PROFITS OF THE YEAR (WITHOUT SET OFF OF LOSSES) GENERATED OU T OF THE EXPORTS MADE DURING THE YEAR. THE ASSESSEE FURTHER SU BMITTED THAT THE FORM OF RETURN OF INCOME PRESCRIBED BY THE TAX AUTHORITIES ALSO REQUIRES THE ASSESSEE TO COMPUTE THE IN COME BEFORE SET OFF OF LOSSES. IT WAS ACCORDINGLY ARGUED THAT LOSSES AND UNABSORBED DEPRECIATION OF RS.143,335,955/- BROUGHT FORWARD BY THE ASSESSEE COMPANY FROM A.Y. 2005-06 HAS CORRECTLY BEEN SET OFF AGAINST THE RESIDUAL INCOME OF THE COMPANY AFTER CLAIMING DEDUCTION U/S.10A OF THE ACT. 6. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. ACCORDING TO HIM, SECTION 10A HAS TO BE ALLOWED FROM THE TOTAL INCOME. THE TOTAL INCOME IS DETERMIN ED AFTER TAKING INTO THE PROVISIONS OF SECTION 28 TO 44D OF TH E ACT WHICH INCLUDES SECTION 32(2). IMPLIEDLY, THE EFFECT TO SECTION 32(2) HAS TO BE GIVEN BEFORE ARRIVING AT NET PROFIT AND GAIN S AS PER BUSINESS AND PROFESSION. THE AO FURTHER HELD THAT FOR COMPUTING THE TOTAL INCOME, THE EFFECT TO PROVISIONS OF SECT ION 72 HAS TO BE GIVEN AND WHAT REMAINS FINALLY IS THE TOTAL IN COME OF ELIGIBLE BUSINESS WHICH WILL BE ALLOWED AS EXEMPTION U/S.10A 5 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 OF THE ACT. THEREFORE, THE CONTENTION OF THE ASSESSEE TH AT THE LOSSES DESERVES TO BE CARRIED FORWARD IS MISPLACED. RELYIN G ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF HIMATASINGIKA SEIDE LTD. REPORTED IN 286 ITR 255 AND THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF GLOBE VANTEDGE PVT. LTD. VS. DCIT REPORTED IN 37 SOT 1 THE AO REJECTED THE CLAIM OF THE ASSESSEE. 7. IN APPEAL THE LD.CIT(A) UPHELD THE ACTION OF THE AO BY OBSERVING AS UNDER : 3.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE LAW AS ARE APPARENT FROM THE RECORDS. THE ASSESSEE IS ENGAGE D IN THE BUSINESS OF SOFTWARE DEVELOPMENT WITH ASSOCIATED ENTERPRI SES. AS PER THE PARA 3 OF THE ASSESSMENT ORDER THE APPELLANT H AD RECEIVED PAYMENT OF RS.3,73,02,71,812 FOR SOFTWARE DEVELOPMENT SERVICES FROM THE AES AND HAS INCURRED INTEREST EXPENDITURE OF RS.1,14,19,869 ON ECB LOANS. BOTH THESE INTERNATIONAL TRANSACTIONS WERE DECLARED TO BE AT ALP UNDER THE CUP METHOD AND THE SAME WERE ALSO ACCEPTED TO BE CORRECT BY THE JT.CIT(TP)-I , PUNE. HOWEVER, THE ASSESSING OFFICER NOTED THAT THE APPELLANT HAS CLAIMED DEDUCTION U/S 10A OF THE I.T. ACT AT RS.1,13,32,52,316. FOR WHICH AUDITORS' REPORT IN FORM NO. 56G HAS BEEN FILED . THE ASSESSING OFFICER NOTED THAT THE APPELLANT HAS NOT SET OF F THE UNABSORBED DEPRECIATION AND THE UNABSORBED BUSINESS LOSS O F THE EARLIER YEAR BEFORE COMPUTING THE DEDUCTION AND THE REFORE, RAISED QUERIES AND EXAMINED THE ISSUE IN DETAIL. AS CAN BE SEEN FROM THE RELEVANT PORTION OF THE ASSESSMENT ORDER QUOTED AT PARA 3.1 OF THIS ORDER, THERE WAS A DISAGREEMENT BETWEEN THE APPELLAN T AND THE ASSESSING OFFICER IN RESPECT OF THE METHOD IN WHICH THE DEDUCTION U/S 10A WAS REQUIRED TO BE COMPUTED. THE ASSESSING OFFICE R WAS OF THE OPINION THAT DEDUCTION U/S 10A IS TO BE ALLOWE D FROM THE TOTAL INCOME WHICH CAN ONLY BE DETERMINED AFTER TAK ING INTO ACCOUNT THE PROVISIONS CONTAINED U/S 28 TO 44D, WHICH INCLUDES SEC. 32(2) AND ALSO AFTER GIVING EFFECT TO THE PROVISI ONS CONTAINED U/S 72. THE ASSESSING OFFICER WAS NOT CONVINCED FROM THE ARGUMENTS MADE BY THE APPELLANT THAT THE DEDUCTION H AS TO BE COMPUTED ON THE BASIS OF PROFIT AND GAINS DERIVED FRO M THE ELIGIBLE BUSINESS WITHOUT SETTING OFF ANY CARRY FORWARD UNABSORBE D BUSINESS LOSSES AND THE UNABSORBED DEPREDATION. FOR THIS PROPOSITION THE APPELLANT HAD TRIED TO TAKE STRENGTH FROM SEC. 10A(4) AND ITR 6 ETC. BEFORE THE ASSESSING OFFICER WHIC H WAS NOT CONSIDERED TO BE RELEVANT AND THE ASSESSING OFFICER FINA LLY CAME TO THE CONCLUSION THAT FROM THE INCOME OF THE ELIGIBLE BUSINESS COMPUTED AT RS.1 ,13,35,84,143, BROUGHT FORWARD UNAB SORBED DEPREDATION AND LOSSES OF RS.14,33,35,955 IS TO BE FIRST SET OFF. THE ASSESSING OFFICER ALSO HELD THAT THE INTEREST INCOME OF R S.3,31,827 6 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 INCLUDED IN THE PROFIT OF ELIGIBLE BUSINESS IS REQUIRED TO BE TAKEN OFF FOR COMPUTING THE DEDUCTIONS. IN OTHER WORDS, THE ASSESSING OFFICER COMPUTED THE PROFIT FROM THE ELIGIBLE BUSINE SS AVAILABLE FOR COMPUTATION OF DEDUCTION U/S 10A AT RS.98,99,16,361. AFTER CONSIDERING THE EXCLUSION OF RECEIPTS RELATING TO LEASE D LINE CHARGES FOR SOFTWARE DEVELOPMENT SERVICES FROM THE AMBI T OF EXPORT TURNOVER, THE ASSESSING OFFICER COMPUTED THE DE DUCTION U/S 10A AT RS.98,54,88,881 AND THE EXCESS DEDUCTION WAS COM PUTED AT RS.14,47,63,434. IT HAS BEEN FURTHER SUBMITTED DURING THE COURSE OF THE APPEAL FILED FOR THE ASSESSMENT YEAR THAT THE AB OVE ASSESSMENT ORDER HAS BEEN RECTIFIED BY THE ASSESSING OFFICER VIDE ORDER U/S 154 DATED 13.1.2011, AND NOW THE ADJUSTMENT OR TOTAL INCOME CHARGEABLE TO TAX HAS BEEN REDUCED TO RS.17,59 ,308. THE APPELLANT HAS MADE AN ELABORATE SUBMISSION VIDE THEIR L ETTER DATED 15.11.2011 AND HAS ALSO RELIED ON DIFFERENT JUDGMENTS TO CLAIM THAT THE DEDUCTION COMPUTED BY IT U/S 10A IS CORRECT AND IS REQUIRED TO BE ACCEPTED. FROM THE PERUSAL OF THE ARG UMENTS MADE BY THE APPELLANT IT COULD BE SEEN THAT THE APPELLANT HAS TRIED TO ARGUE THAT THE TERM 'TOTAL INCOME' APPEARING IN SEC. 10A(1) CANNOT BE GIVEN THE MEANING AS IS AVAILABLE IN SEC. 2(45) OF THE I.T. ACT. INSTEAD IT HAS BEEN CLAIMED THAT A CONTEXTUAL MEANING IS REQUIRED TO BE GIVEN. FURTHERMORE, IT HAS BEEN STATED THAT SEC. 10A(4) ALSO SUPPORTS THEIR CLAIM AS IT SAYS THAT THE DEDUCTION WILL BE ALLOWED FROM THE PROFIT DERIVED FROM EXPORT OF ARTICLE OR T HINGS OR COMPUTER SOFTWARE AS IT BEARS TO BE TOTAL TURNOVER OF THE BUSINESS. IT HAS ALSO BEEN CONTENDED THAT DEDUCTION U/S 10A IS TO BE COMPUTED BEFORE APPLICATION OF CHAPTER VIA. IN SIMPL E TERMS, IT HAS BEEN STATED THAT THE DEDUCTION U/S 10A SHOULD BE C OMPUTED UNDER CHAPTER IVD AT THE TIME OF COMPUTING THE PROF ITS AND GAINS OF BUSINESS. IN OTHER WORDS, IT HAS BEEN CLAIMED THAT SET OFF OF UNABSORBED LOSS AND DEPRECIATION CANNOT BE MADE BEFORE COMPUTING THE DEDUCTION. THE APPELLANT HAS ALSO TRIED TO REFER TO FORM NO. 56F WHICH IS REQUIRED TO BE FILED BY THE CA FOR THE ABOVE DEDUCTION. THE APPELLANT HAS TRIED TO DISTINGUISH THE CASES RELIED UPON BY THE ASSESSING OFFICER BY SAYING THAT THE AFORESA ID JUDGMENT OF HON'BLE KARNATAKA HIGH COURT RELIED UPO N BY THE ASSESSING OFFICER IS RELATING TO THE OLD LAW, APPLICABLE BEFORE AY. 2001-02 AND HAS ALSO BEEN HELD OBLIQUELY TO BE NOT A GOOD LAW BY OTHER COURTS. IT HAS ALSO BEEN STATED THAT THE READING OF SEC. 32 (2) AND SEC. 72(2) SHOWS THAT SET OFF OF BUSINESS LOSS WILL GET PRECEDENCE OVER THE DEPRECIATION. ON THESE ARGUMENTS THE APPELLANT HAS CLAIMED THAT UNABSORBED BUSINESS JOSS AND DEPRECIATION CANNOT BE SET OFF BEFORE DETERMINING TH E DEDUCTION U/S 10A. FORMAT OF THE RETURN PRESCRIBED IN ITR-6 HAS ALSO BEEN REFERRED TO. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE LAW AS HAS BEEN RELIED UPON BY THE ASSESSING OFFICER AND THE APPELLANT INCLUDING THE JUDGMENTS FROM WHICH STRENGT HS HAVE BEEN DRAWN. SECTION 10A, UNDER WHICH THE APPELLANT HAS MA DE THE CLAIM FOR DEDUCTION IS INCLUDED IN CHAPTER III OF THE I.T . ACT. THIS CHAPTER DEALS WITH 'INCOMES WHICH DO NOT FORM PART OF THE TOT AL INCOME'. SECTION 10A HAS BEEN AMENDED W.E.F. 1.4.2001 BY FINA NCE ACT, 2000. BEFORE ITS AMENDMENT, INCOME EARNED BY INDUSTRI AL UNDERTAKINGS ELIGIBLE U/S 10A WAS NOT TO BE INCLUDED I N THE TOTAL INCOME OF THE ASSESSEE. THEREFORE, THE ORIGINAL SEC. 10A WAS FITTING INTO THE CONCEPT OF CHAPTER III. AFTER AMENDMENT W. E.F. 1.4.2001 7 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 THE INCOME OF THE ELIGIBLE UNIT IS TO BE ALLOWED AS D EDUCTION AND THEREFORE, THE INCOME OF THE ELIGIBLE BUSINESS HAS TO FORM PART OF THE GROSS TOTAL INCOME. THE LEGISLATURE, EVEN AFTER AM ENDMENT HAS RETAINED THIS PROVISION IN CHAPTER III AND THEREFORE, IT WOULD BE INCORRECT TO HOLD THAT THE MEANING TO THE WORDS 'TOT AL INCOME' CANNOT BE GIVEN AS IS AVAILABLE IN SEC. 2(15) OF THE I.T. ACT . THE CLAIM OF THE APPELLANT IN THIS RESPECT IS FARFETCHED. SIMILARLY, THE ASSESSING OFFICER HAS VERY CORRECTLY STATED THAT THE DEDU CTION IS TO BE COMPUTED OUT OF THE INCOME OF THE ELIGIBLE BUSINE SS WHICH CAN ONLY BE COMPUTED AFTER APPLYING SEC. 28 TO 44D INCLU DING SEC. 32(2). IT IS IMPORTANT IN THIS RESPECT TO POINT OUT T HAT BEFORE EFFECT TO SECTION 32(2) IS GIVEN EFFECT TO SECTION 72(2) HAS TO BE GIVEN. THE APPELLANT ALSO CLAIMS THE SAME. HENCE BOTH THE UNA BSORBED DEPRECIATION AND LOSS WILL HAVE TO BE CONSIDERED. FURT HERMORE, THE DEDUCTION IS TO BE GIVEN ON THE INCOME OF THE ELIGIB LE BUSINESS AND NOT TO THE BUSINESS AS A WHOLE AND THEREFORE, IT WILL B E INCORRECT TO SAY THAT THE DEDUCTION SHOULD BE COMPUTED ON THE PROF IT DETERMINED WITHOUT TAKING INTO ACCOUNT THE BROUGHT FORWARD TOSSES AND THE DEPRECIATION OF THE ELIGIBLE BUSINESS AS SUC H INCOME WILL BE INFLATED. ALL THE ARGUMENTS MADE BY THE APPE LLANT ARE BASED ON INTERPRETATIONS WHICH ARE NOT DIRECTLY APPLICABLE TO THE FACTS OF THIS CASE AND MOST OF THEM ARE DISTINGUISHABLE ON FACTS A ND LAW. IT IS NOT DIFFICULT TO NOTE THAT THE AUTHORISED REPRESENT ATIVE HAS TRIED TO DRAW STRENGTHS FROM PROVISIONS, JUDGMENTS AND FORMS A ND NOT FROM THE SECTION 10A OR 28 TO 44D ETC. IT IS A TRITE LAW THAT SUCH INDIRECT SUPPORT CAN ONLY BE DRAWN WHEN THE PROVISION S CANNOT BE GIVEN EFFECT PROPERLY. A PROVISION CANNOT BE INTERPR ETED DIFFERENTLY BECAUSE IT DOES NOT GIVE HIGHER DEDUCTION BEING SOUGHT TO BE CLAIMED. IN FACT ON CAREFUL CONSIDERATION, IT CAN BE SEEN THAT NO ORDER OF THE JURISDICTIONAL HIGH COURT OR THE TRIBU NAL HAS BEEN RELIED UPON BY THE APPELLANT WHICH IS DIRECTLY APPLI CABLE TO THE FACTS OF THIS CASE AND IN VIEW OF THE SAME, THERE IS NO JUDICIAL BINDING PRECEDENT AVAILABLE ON GROUND NO.1. IN THE ABSENCE OF THE SAME, THOSE FINDINGS ARE TO BE CONSIDERED FROM THE STAND POINT OF ITS PERSUASIVE VALUE ONLY IN THE CONTEXT OF DISPUTE. SI NCE I AM CONVINCED THAT THE FINDING OF THE ASSESSING OFFICER IS P ROPER AND IN ACCORDANCE WITH LAW AS ARE DISCERNIBLE FROM THE PROVI SIONS DIRECTLY APPLICABLE, GROUND NO.1 IS TREATED AS DISMISSED . 8. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 9. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET REFER RING TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. VISHAY COMPONENTS PVT. LTD. VS. ADDL.CIT AND VICE VERS A VIDE ITA NO.551/PN/2014 AND ITA NO.736/PN/2014 ORDER DATED 08-08-2015 FOR A.Y. 2005-06 SUBMITTED THAT THE TR IBUNAL 8 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 HAS HELD THAT DEDUCTION U/S.10A OF THE ACT WAS TO BE CO MPUTED IN THE HANDS OF THE ASSESSEE BEFORE ADJUSTING THE BROUG HT FORWARD LOSSES/DEPRECIATION. THE ABOVE VIEW HAS BEEN FOLLOW ED BY THE TRIBUNAL IN THE CASE OF PRECISION CAMSHAFTS CO. LTD. VS. ACIT AND VICE VERSA VIDE ITA NO.70/PN/2012 AND ITA NO.72/PN/2012 ORDER DATED 10-11-2015 FOR A.Y. 2007-08. THE TRIBUNAL HAS AGAIN FOLLOWED THE ABOVE DECISION IN THE CASE O F KPIT CUMMINS INFOSYSTEMS LTD. VS. ITO VIDE ITA NO.1736/PN/2012 ORDER DATED 30-11-2015 FOR A.Y. 2007-08 . THEREFORE, THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASS ESSEE BY THE COORDINATE BENCH OF THE TRIBUNAL IN VARIOUS DECISIO NS. HE ACCORDINGLY SUBMITTED THAT THE GROUNDS RAISED BY TH E ASSESSEE SHOULD BE ALLOWED. 10. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND T HE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND T HE ONLY ISSUE TO BE DECIDED IN THE INSTANT CASE IS AS TO W HETHER THE CLAIM OF DEDUCTION U/S.10A IS TO BE ALLOWED BEFORE SET OFF O F BROUGHT FORWARD UNABSORBED BUSINESS LOSS AND DEPRECIAT ION OR AFTER SET OFF OF BROUGHT FORWARD BUSINESS LOSS AND DEPRECIA TION. WE FIND THE ISSUE HAS BEEN THOROUGHLY DISCUSSED BY THE TRIBUNAL IN THE CASE OF M/S. VISHAY COMPONENTS INDIA PVT. L TD. (SUPRA) AND IT HAS BEEN HELD THAT DEDUCTION U/S.10B OF THE ACT HAS TO BE COMPUTED IN THE HANDS OF THE ASSESSEE BEFOR E 9 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 ADJUSTING BROUGHT FORWARD UNABSORBED BUSINESS LOSS/DEPRECIATION. WE FIND FOLLOWING THE ABOVE DECISION THE TRIBUNAL IN THE CASE OF PRECISION CAMSHAFTS LTD. (SUPRA) HAS HELD THAT DEDUCTION U/S.10B OF THE ACT WOULD BE ALLOWED TO THE ASSESSEE BEFORE ALLOWING THE ADJUSTMENT ON ACCOUNT BROU GHT FORWARD BUSINESS LOSS AND DEPRECIATION. THE DEDUCTION U/S.10B OF THE ACT IS TO BE AGAINST THE ELIGIBLE PROFITS AND IN CASE THERE ARE ANY LEFT OVER PROFITS, THEN THE SAME ARE TO BE ADJUSTED AGAINST BROUGHT FORWARD UNABSORBED DEPRECIATION/BUSINESS LOSS AS CLAIMED BY THE ASSESSEE IN IT S RETURN OF INCOME. FOLLOWING THE ABOVE 2 DECISIONS, THE TRIBUNAL IN THE CASE OF M/S.KPIT CUMMINS INFOSYSTEMS LTD. (SUPRA) HAS HELD THE SAME VIEW BY OBSERVING AS UNDER. THE RELEVANT OBSERVATION OF THE TRIBUNAL FROM PARA 5 ONWARDS READ AS UNDER: 5. WE FIND THAT IDENTICAL ISSUE OF SEQUENCES OF AL LOWING THE BENEFIT OF DEDUCTION UNDER SECTION 10B OF THE ACT AND THE ADJU STMENT OF BROUGHT FORWARD LOSSES / UNABSORBED DEPRECIATION, AROSE BEF ORE PUNE BENCH OF TRIBUNAL IN M/S. VISHAY COMPONENTS INDIA PVT. LTD. VS. ADDL.CIT & ANR. (SUPRA). THE TRIBUNAL AFTER CONSIDERING THE FA CTS OF THE CASE, WHICH ARE IDENTICAL TO THE FACTS BEFORE US, OBSERVE D AS UNDER:- 27. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. THE ISSUE ARISING VIDE GROUND OF APPEAL NO. 3 IS IN RELATION TO THE COMPUTATION OF DEDUCTION UNDER SECT ION 10B OF THE ACT AFTER THE AMENDMENT TO SECTION W.E.F. 01.04 .2001. THE PERSONS INVOKING THE SAID PROVISIONS ARE ENTITLED T O A DEDUCTION UNDER THE ACT, AS COMPARED TO THE PRE-AMENDED PROVI SIONS OF THE SECTION, UNDER WHICH THE INCOME COMPRISING UNDE R THE SAID SECTION WAS EXEMPT FROM THE TOTAL INCOME. THE ISSUE ARISING BEFORE US IS WHETHER WHILE COMPUTING DEDUCTION UNDE R SECTION 10B OF THE ACT, IN CASES WHERE THE ASSESSEE HAS UNA BSORBED LOSSES OR DEPRECIATION, BROUGHT FORWARD FROM EARLIE R YEARS, THEN WHETHER THE SAID UNABSORBED BUSINESS LOSSES / DEPRECIATION ARE TO BE ADJUSTED FROM THE GROSS TOTA L INCOME BEFORE ALLOWING THE DEDUCTION UNDER SECTION 10B OF THE ACT OR THE SAID LOSSES OR THE DEDUCTION UNDER SECTION 10B OF THE ACT IS TO BE ALLOWED IN THE HANDS OF THE ASSESSEE WITHOUT CONSIDERING THE BROUGHT FORWARD UNABSORBED LOSSES / DEPRECIATIO N, WHICH 10 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 CAN BE SET OFF AGAINST THE OTHER INCOME OF ASSESSEE . BOTH THE AUTHORITIES BELOW HAD DENIED THE CLAIM TO THE ASSES SEE, IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN HIMASINGKA SEIDE LTD. VS. CIT (SUPRA). THE PERUSAL OF THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE SAI D CASE REFLECTS THAT THE YEARS UNDER APPEAL RELATED TO ASS ESSMENT YEARS 1988-89 TO 1990-91 I.E. THE YEARS WHERE THE BENEFIT UNDER SECTION 10B OF THE ACT WAS FOR BEING EXEMPT FROM TO TAL INCOME. HOWEVER, THE YEAR UNDER APPEAL BEFORE US IS ASSESSMENT YEAR 2005-06, WHEREIN THE SAID SECTION H AS BEEN AMENDED AND THE DEDUCTION NOW IS ALLOWABLE TO THE A SSESSEE AS AGAINST THE SAID INCOME BEING EXEMPT IN THE EARLIER YEARS. THE ISSUE IS SETTLED BY THE HONBLE BOMBAY HIGH COURT I N CIT VS. BLACK & VEATCH CONSULTING PVT. LTD. (2012) 348 ITR 72 (BOM), WHEREIN IT WAS HELD AS UNDER:- THE DEDUCTION UNDER S. 10A, 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 PROVISIONS OF S. 72 WHICH DEALS WITH THE CARRY FORWARD AND SET OFF OF BUSINESS LOSS ES. A DISTINCTION HAS BEEN MADE BY THE LEGISLATURE WHILE INCORPORATING THE PROVISIONS OF CHAPTER VI-A. SECTI ON 80A(1) STIPULATES THAT IN COMPUTING THE TOTAL INCOME OF AN ASSESSEE, THERE SHALL BE ALLOWED FROM HIS GROSS TOTAL INCOME, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF TH E CHAPTER, THE DEDUCTIONS SPECIFIED IN SS.80C TO 80U. S.80B(5) DEFINES FOR THE PURPOSE OF CHAPTER VI-A GROSS TOTAL INCOME TO MEAN THE TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PR OVISIONS OF THE ACT, BEFORE MAKING ANY DEDUCTION UNDER THE C HAPTER. WHAT THE REVENUE IN ESSENCE SEEKS TO ATTAIN IS TO T ELESCOPE THE PROVISIONS OF CHAPTER VI-A IN THE CONTENT OF THE DE DUCTION WHICH IS ALLOWABLE UNDER S.10A, WHICH WOULD NOT BE PERMISSIBLE UNLESS A SPECIFIC STATUTORY PROVISION T O THAT EFFECT WERE TO BE MADE. IN THE ABSENCE THEREOF, SUCH AN AP PROACH CANNOT BE ACCEPTED. THUS ITAT WAS CORRECT IN HOLDIN G THAT THE BROUGHT FORWARD UNABSORBED DEPRECIATION AND LOSSES OF THE UNIT THE INCOME WHICH IS NOT ELIGIBLE FOR DEDUCTION UNDER S.10A OF THE ACT CANNOT BE SET OFF AGAINST THE CURR ENT PROFIT OF THE ELIGIBLE UNIT FOR COMPUTING THE DEDUCTION UNDER S.10A OF THE IT ACT. 28. THE SAID PROPOSITION OF LAW HAS FURTHER BEEN AP PLIED BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. M/S. GANESH POLYCHEM LTD. IN INCOME TAX APPEAL NO.2083 OF 2012, ORDER DATED 25.02.2013 AND IN CIT VS. SCHMETZ INDIA PVT. LTD. (2012) 79 DTR (BOM) 356 AND ALSO BY THE HONBLE HIG H COURT OF GUJARAT IN CIT VS. ACE SOFTWARE EXPORTS LT D. IN TAX APPEAL NO.687 OF 2012, ORDER DATED 18.02.2013. THE MUMBAI BENCH OF TRIBUNAL HAS ALSO APPLIED THE SAID PROPOSI TION IN VARIOUS CASES. 29. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, PLACED RELIANCE ON THE RATIO LAI D DOWN BY THE HONBLE SUPREME COURT IN SYNCO INDUSTRIES LTD. VS. AO, (2008) 299 ITR 444 (SC), WHEREIN THE ISSUE WAS WHET HER 11 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 WHILE COMPUTING THE QUANTUM OF DEDUCTION UNDER SECT ION 80I(6) OF THE ACT, THE ASSESSING OFFICER HAS TO TRE AT THE PROFITS DERIVED FROM AN INDUSTRIAL UNDERTAKING AS ONLY SOUR CE OF INCOME IN ORDER TO ARRIVE AT DEDUCTION UNDER CHAPTE R VI-A. THE HONBLE SUPREME COURT HELD THAT THE GROSS TOTAL INCOME UNDER SECTION 80B(5) OF THE ACT, WHICH IS ALSO REFE RRED TO IN SECTION 80I(1) OF THE ACT, WAS REQUIRED TO BE COMPU TED IN MANNER PROVIDED UNDER THE ACT, WHICH PRE- SUPPOSES THAT GROSS TOTAL INCOME SHALL BE ARRIVED AT AFTER ADJUST ING LOSSES OF OTHER DIVISION AGAINST PROFITS DERIVED FROM AN INDU STRIAL UNDERTAKING. THE ISSUE BEFORE THE HONBLE SUPREME C OURT IS AT VARIANCE WITH THE ISSUE BEFORE US AND THE SAID RATI O IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE IS SUE IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE RATIO LAI D DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. BLACK & VE ATCH CONSULTING PVT. LTD. (SUPRA), WHEREIN DEDUCTION UND ER SECTION 10A OF THE ACT WAS TO BE COMPUTED IN THE HANDS OF A SSESSEE AND THE SAME WAS WHETHER THE BROUGHT FORWARD LOSSES HAD TO BE ADJUSTED BEFORE COMPUTING DEDUCTION UNDER SECTIO N 10A OF THE ACT. IT MAY BE POINTED OUT THAT THE PROVISIONS OF SECTION 10A AND 10B OF THE ACT ARE AT PARAMETRIA. FOLLOWING THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT, WE HOLD THAT THE DEDUCTION UNDER SECTION 10B OF THE ACT IS TO BE COMPUTED IN THE HANDS OF THE ASSESSEE BEFORE ADJUSTING BROUG HT FORWARD UNABSORBED LOSSES / DEPRECIATION. THE GROUND OF APP EAL NO.3 RAISED BY THE ASSESSEE IS THUS, ALLOWED. 6. THE SAID RATIO LAID DOWN BY THE TRIBUNAL WAS LAT ER APPLIED WHILE DECIDING SIMILAR ISSUE IN PRECISION CAMSHAFTS LIMIT ED VS. ACIT (SUPRA). THE TRIBUNAL VIDE ORDER DATED 10.11.2015 A FTER CONSIDERING THE RATIO LAID DOWN BY THE TRIBUNAL IN M/S. VISHAY COMPONENTS INDIA PVT. LTD. VS. ADDL.CIT & ANR. (SUPRA), OBSERVED AS UNDER:- 17. THE TRIBUNAL RELYING ON THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. BLACK & VEATCH CONSULTING PVT. LTD. (2012) 348 ITR 72 (BOM) AND OT HER DECISIONS OF THE HONBLE BOMBAY HIGH COURT, HELD TH AT THE DEDUCTION UNDER SECTION 10B OF THE ACT WAS TO BE CO MPUTED BEFORE ADJUSTING BROUGHT FORWARD UNABSORBED LOSSES / DEPRECIATION. THE FACTS ARISING IN THE PRESENT CASE ARE SIMILAR TO THE FACTS BEFORE THE TRIBUNAL IN VISHAY COMPONENTS INDIA PVT. LTD. VS. ADDL.CIT & ANR. (SUPRA) AND FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT THE DEDUCTION UND ER SECTION 10B OF THE ACT WOULD BE ALLOWED TO THE ASSESSEE IN THE FIRST INSTANCE BEFORE ALLOWING THE ADJUSTMENT ON ACCOUNT OF BROUGHT FORWARD DEPRECIATION LOSSES, THE DEDUCTION UNDER SE CTION 10B OF THE ACT IS TO BE FIRST ALLOWED AGAINST THE ELIGI BLE PROFITS AND IN CASE THERE ARE ANY LEFTOVER PROFITS, THEN THE SA ME ARE TO BE ADJUSTED AGAINST BROUGHT FORWARD UNABSORBED DEPRECI ATION / LOSS AS CLAIMED BY THE ASSESSEE IN ITS RETURN OF IN COME. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO RE- COMPUTE THE DEDUCTION UNDER SECTION 10B OF THE ACT IN THE H ANDS OF THE ASSESSEE. THE ADDITIONAL GROUND OF APPEAL NOS.1 AND 2 RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 12 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 7. THE ISSUE ARISING BEFORE US IS IN RELATION TO T HE COMPUTATION OF DEDUCTION UNDER SECTION 10A OF THE ACT, WHICH ADMIT TEDLY IS PARAMATRIA TO SECTION 10B OF THE ACT AND HENCE, THE RATIO LAID DOWN BY THE TRIBUNAL IN M/S. VISHAY COMPONENTS INDIA PVT. L TD., VS. ADDL.CIT (SUPRA) AND PRECISION CAMSHAFTS LIMITED VS . ACIT (SUPRA), IS SQUARELY APPLICABLE. 8. ANOTHER ASPECT TO BE CONSIDERED IN THE PRESENT C ASE IS THE ARGUMENTS OF THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE THAT THE RATIO IS COVERED BY THE DECISION OF HONBLE KARNATA KA HIGH COURT IN CIT VS. HIMATSINGKA SEIDA LTD. (SUPRA), APPEAL AGAI NST WHICH, HAS BEEN DISMISSED BY THE HONBLE SUPREME COURT. BEFORE THE HONBLE KARNATAKA HIGH COURT, THE YEARS INVOLVED WERE ASSES SMENT YEARS 1988-89 TO 1990-91 I.E. THE YEAR, WHERE THE BENEFIT UNDER SECTION 10B OF THE ACT WAS EXEMPT. THE TRIBUNAL WHILE DECIDING THE ISSUE IN M/S. VISHAY COMPONENTS INDIA PVT. LTD., VS. ADDL.CIT (SU PRA) HAD TAKEN NOTE OF THE DECISION OF THE HONBLE SUPREME COURT A ND THE HONBLE KARNATAKA HIGH COURT IN HIMATSINGKA SEIDA LTD. (SUP RA) IN PARA 27 OF THE ORDER AND THEREAFTER, APPLIED THE RATIO LAID DO WN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. BLACK & VEATCH CONSULT ING PVT. LTD. (SUPRA) AND PARA 27 OF THE ORDER HAS ALREADY BEEN R EPRODUCED HEREINABOVE. IN THE TOTALITY OF THE ABOVE SAID FACT S AND CIRCUMSTANCES, WE FIND NO MERIT IN THE OBJECTIONS RAISED BY THE LE ARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE. FOLLOWING THE RATIO LAID DOWN BY THE TRIBUNAL IN M/S. VISHAY COMPONENTS INDIA PVT. LTD., VS. ADDL.CIT (SUPRA) AND PRECISION CAMSHAFTS LIMITED VS. ACIT (S UPRA), WE HOLD THAT THE ASSESSEE IS ENTITLED TO THE CLAIM OF DEDUC TION UNDER SECTION 10A OF THE ACT BEFORE SETTING UP OF BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION. THE DEDUCTION UNDER SECTIO N 10A OF THE ACT IS FIRST ALLOWED AGAINST THE ELIGIBLE PROFITS AND I N CASE THERE ARE CERTAIN LEFT OVER PROFITS FOR THE YEAR UNDER APPEAL, THEN T HE SAME ARE TO BE ADJUSTED AGAINST THE BROUGHT FORWARD LOSSES AND UNA BSORBED DEPRECIATION / LOSS AS CLAIMED BY THE ASSESSEE IN R ETURN OF INCOME. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO RE -COMPUTE THE DEDUCTION UNDER SECTION 10A OF THE ACT. THE GROUNDS OF APPEAL NOS.1 AND 7 RAISED BY THE ASSESSEE ARE THUS, ALLOWED AND BALANCE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE DISMISSED BEING A RGUMENTATIVE. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. 12. RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL CITED (SUPRA) WE HOLD THAT DEDUCTIO N U/S.10A OF THE ACT IS TO BE ALLOWED AGAINST THE ELIGIBLE PR OFITS AND IN CASE THERE ARE CERTAIN LEFT OVER PROFITS FOR THE YE AR UNDER APPEAL THE SAME ARE TO BE ADJUSTED AGAINST THE BROUGH T FORWARD LOSSES AND UNABSORBED DEPRECIATION AS CLAIMED BY THE ASS ESSEE IN THE RETURN OF INCOME. WE ACCORDINGLY SET ASIDE THE O RDER OF THE CIT(A) AND DIRECT THE AO TO RECOMPUTE THE DEDUCTION 13 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 U/S.10A OF THE ACT AGAINST THE ELIGIBLE PROFITS BEFORE ADJUST MENT OF BROUGHT FORWARD LOSSES/DEPRECIATION. GROUNDS OF APPEAL NO.1 AND 1.1 BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. 13. SINCE THE ASSESSEE SUCCEEDS ON GROUNDS OF APPEAL N O. 1 AND 1.1 THE GROUNDS OF APPEAL NO.1.2 AND 1.3 BECOME ACADE MIC IN NATURE AND THEREFORE DO NOT REQUIRE ANY ADJUDICATION. 14. GROUND OF APPEAL NO.2 BY THE ASSESSEE READS AS UNDER : 2. GROUND NO.2 : REDUCTION OF EXPENSES INCURRED ON L EASE LINE CHARGES FROM EXPORT TURNOVER THE HONBLE CIT(A) ERRED IN FACTS AND LAW BY UPHOLDI NG THE ORDER OF DEPUTY CIT FOR REDUCING THE EXPENSES ON LEASE LINE D CHARGES FROM EXPORT TURNOVER OF THE APPELLANT WHILE COMPUTI NG DEDUCTION U/S.10A OF THE ACT. 15. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASESS EE COMPANY HAS INCURRED EXPENDITURE OF RS.53,79,131/- AS LEAS E LINE CHARGES FOR EXPORT OF THE SOFTWARE OUTSIDE INDIA. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THIS EXPENDITURE SHOULD NOT BE EXCLUDED FROM THE EXPORT TURN OVER FOR COMPUTING THE DEDUCTION U/S.10A OF THE ACT. IT WAS SUBMITTED THAT THE EXPENDITURE INCURRED BY THE ASSESSE E COMPANY FOR TELECOMMUNICATION CHARGES ARE NOT SEPARATEL Y CHARGED TO ITS CUSTOMERS. THUS THESE EXPENSES DO NOT FORM PART OF THE EXPORT TURNOVER. 16. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE NOTED THAT THE ASSESSEE IS RAISING THE BILLS TO THE OVERSEAS CUSTOMERS AS THE SALES PRICE TO TH E SOFTWARE 14 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 EXPORTED. THE BILLS RAISED AND THE SERVICES CHARGES ARE BASED ON THE COST INCURRED BY THE COMPANY. THUS, THE EXPEND ITURE INCURRED FOR THE TELECOMMUNICATION CHARGES (LEASE LINE CHARG ES) ARE EMBEDDED OR FACTORED IN THE BILLS RAISED AGAINST THE SERVICES PROVIDED TO THE CUSTOMERS. THERE IS NO NEED TO CHARGE THESE EXPENSES SEPARATELY AS IT IS CLEAR THAT THESE EXPENSES ARE INCLUDED IN THE EXPORT TURNOVER. THE ASSESSEE ALSO TOOK AN ALTERNATE CLAIM WITHOUT PREJUDICE THAT IF THE ABOVE MENTIO NED EXPENSES ARE EXCLUDED FROM THE EXPORT TURNOVER THE SA ME NEEDS TO BE EXCLUDED FROM THE TOTAL TURNOVER AS WELL. VARIOUS DECISIONS WERE ALSO BROUGHT TO THE NOTICE OF THE AO. HOW EVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. ACCORDING TO HIM CERTAIN EXPENSES SUCH AS FRE IGHT, TELECOMMUNICATION CHARGES ETC. HAVE BEEN SPECIFICALLY EXCLUD ED FROM THE EXPORT TURNOVER UNDER CLAUSE (IV) OF EXPLANATION 2 TO SECTION 10A. IF THE LEGISLATURE INTENT WERE TO EFFECT EXCLUS ION OF IDENTICAL AMOUNTS FROM TOTAL TURNOVER, THEN THE SAME WO ULD HAVE BEEN SPECIFICALLY PROVIDED FOR/MANDATED IN THIS SECTI ON. THAT IS NOT THE CASE, THEREFORE, DOING SO WOULD AMOUNT TO IMPUTING AN INTERPRETATION TO THE STATUTORY PROVISIONS WH ERE SUCH INTERPRETATIONS ARE NOT WARRANTED IN VIEW OF THE P ROVISIONS BEING UNAMBIGUOUS. REJECTING THE VARIOUS EXPLANATIONS GI VEN BY THE ASSESSEE AND DISTINGUISHING THE VARIOUS DECISIONS, T HE AO HELD THAT THE EXPENSES INCURRED FOR TELECOMMUNICATION CHARGES OF RS.53,79,131/- ATTRIBUTABLE TO THE DELIVERY OF TH E COMPUTER SOFTWARE OUTSIDE INDIA IS NOT TO BE INCLUDED IN T HE EXPORT TURNOVER ELIGIBLE FOR COMPUTATION OF EXEMPTION U/S.1 0A OF THE ACT. 15 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 17. IN APPEAL THE LD.CIT(A) UPHELD THE ACTION OF THE AO B Y OBSERVING AS UNDER : 4.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE LAW AS ARE APPARENT FROM RECORDS. THE ASSESSING OFFICER HAS T REATED THE RECEIPTS RELATING TO LEASED LINE CHARGES AS NOT PAR T OF THE EXPORT TURNOVER IN VIEW OF THE SPECIFIC PROVISIONS AV AILABLE IN THIS SECTION 10A. THE APPELLANT HAS CLAIMED THAT THE RECEI PT RELATING TO LEASED LINE CHARGES IS PART AND PARCEL OF THE TOTAL PA YMENT RECEIVABLE FOR THE EXPORT OF THE SOFTWARE AND THEREF ORE, IT SHOULD BE TREATED AS PART OF THE EXPORT TURNOVER. ALTERNATI VELY, THE APPELLANT HAS CLAIMED THAT IF SUCH RECEIPTS ARE EXCLUD ED FROM EXPORT TURNOVER, THEN IT SHOULD ALSO BE EXCLUDED FROM THE TOTAL TURNOVER FOR COMPUTING THE DEDUCTION U/S 10A(4). IN OTHER WORDS, THE LEASED LINE CHARGES WERE ARGUED TO BE EXCLUDED FR OM THE NUMERATOR AND THE DE-NUMERATOR BOTH. ON CAREFUL CON SIDERATION OF THE LAW, I AM IN AGREEMENT WITH THE FINDING OF T HE ASSESSING OFFICER THAT THE RECEIPT FROM THE LEASED LINE CHARGE S ARE TO BE EXCLUDED FROM THE EXPORT TURNOVER IN VIEW OF THE SPE CIFIC PROVISIONS AVAILABLE IN EXPLANATION 2(IV) OF SEC. 10A, WHICH SAYS THAT THE EXPORT. TURNOVER IS THE CONSIDERATION IN RESP ECT OF EXPORT TURNOVER BY THE UNDERTAKING OF ARTICLE OR THINGS OR COMPUTER SOFTWARE RECEIVED IN, OR BROUGHT INTO, INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE IN ACCORDANCE WITH SUB SEC.(3) BUT DOES NOT INCLUDE FREIGHT, TELECOMMUNICATION CHARGES O R INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES OR THIN GS OR COMPUTER SOFTWARE OUTSIDE INDIA OR EXPENSES, IF ANY, INCURRED IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICES OUTSIDE I NDIA. HOWEVER, THE ALTERNATE CLAIM OF THE APPELLANT THAT THE ITEMS WHICH ARE EXCLUDED FROM THE EXPORT TURNOVER SHOULD ALSO BE EXCLUDED FROM THE TOTAL TURNOVER HAS BEEN UPHELD BY MANY COUR TS INCLUDING THE JURISDICTIONAL HIGH COURT IN GEMPLUS JEWELLERY (I ) LTD. DATED 23.6.2010 (BOMBAY HE). THE HON'BLE HIGH COURT HAS UP HELD THE DECISION OF THE MUMBAI IT AT GIVEN IN THE CASE OF GEM PLUS JEWELLERY (I) LTD. (2009-TIOL-212-ITAT-MUM) AND HAS STATED AS UNDER: 'THE SUBMISSION WHICH HAS BEEN URGED ON BEHALF OF THE REVENUE IS THAT WHILE FREIGHT AND INSURANCE ARE LIABL E TO BE EXCLUDED IN COMPUTING EXPORT TURNOVER, A SIMILAR EXCLUSION HAS NOT BEEN PROVIDED IN REGARD TO TOTAL TURNOVER. T HE SUBMISSION OF THE REVENUE, HOWEVER, MISSES THE 'POINT THA T THE EXPRESSION 'TOTAL TURNOVER' HAS NOT BEEN DEFINED A T ALL BY THE PARLIAMENT FOR THE PURPOSE OF SECTION 10A. HOW EVER THE EXPRESSION 'EXPORT TURNOVER' HAS BEEN DEFINED. THE DEFINITION OF EXPORT TURNOVER EXCLUDES FREIGHT AND INSURANCE. SINCE EXPORT TURNOVER HAS BEEN DEFINED BY THE PARLIAMENT AND THERE IS A SPECIFIC EXCLUSION OF FREIGH T AND INSURANCE, THE EXPRESSION 'EXPORT TURNOVER' CANNOT HAV E A DIFFERENT MEANING WHEN IT FORMS A CONSTITUENT PART O F THE TOTAL TURNOVER FOR THE PURPOSE OF THE APPLICATION OF THE FORMULA. UNDOUBTEDLY, IT WAS OPEN TO PARLIAMENT TO M AKE A 16 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 PROVISION TO THE CONTRARY. HOWEVER, NO SUCH PROVISION HAVING BEEN MADE, THE PRINCIPLE WHICH HAS BEEN ENUNCIATED EARLIER MUST PREVAIL AS A MATTER OF CORRECT STATUTORY INTERPRETATION. ANY OTHER INTERPRETATION W OULD LEAD TO AN ABSURDITY. IF THE CONTENTION OF THE REVEN UE WERE TO BE ACCEPTED, THE SAME EXPRESSION VIZ. 'EXPORT TURNO VER' WOULD HAVE A DIFFERENT CONNOTATION IN THE APPLICATI ON OF THE SAME FORMULA. THE SUBMISSION OF THE REVENUE WOULD LEAD TO A SITUATION WHERE FREIGHT AND INSURANCE, THOUGH IT HAS BEEN SPECIFICALLY EXCLUDED FROM EXPORT TURNOVER FOR THE PURPOSE OF THE NUMERATOR WOULD BE BROUGHT IN AS PART OF THE EXPORT TURNOVER WHEN IT FORMS AN ELEMENT OF THE TOTAL TURNOVER AS A DENOMINATOR IN THE FORMULA. A CONSTRUCTION OF A STATUTORY PROVISION WHICH WOULD LEAD TO AN ABSURDITY MUST BE AVOIDED. ' THEREFORE, IT CAN BE SEEN THAT THE COURTS HAVE GIVEN THE INTERPRETATION THAT THE ITEMS REQUIRED TO BE SPECIFI CALLY EXCLUDED FROM THE DEFINITION OF EXPORT TURNOVER AS SPECIFIED I N THE SECTION HAS TO BE EXCLUDED. HOWEVER, SINCE TOTAL TURNOVER IS N OT DEFINED BUT WOULD DEFINITELY INCLUDE THE EXPORT TURNOVER AN D THE OTHER TURNOVER, THE SAME EXPORT TURNOVER FOR WHICH THE EXC LUSION HAS BEEN MADE CAN ONLY BE CONSIDERED TO CONSTITUTE THE TO TAL TURNOVER. IN VIEW OF THE ABOVE, THE ALTERNATE CLAIM OF THE AP PELLANT HAS TO BE ALLOWED. THE ASSESSING OFFICER IS DIRECTED TO EXCLUDE LE ASED LINE CHARGES FROM THE EXPORT TURNOVER AND THE TOTAL TURNO VER BOTH FOR COMPUTING THE DEDUCTION U/S 10A. GROUND NO. 2 THEREFORE, IS PARTLY ALLOWED. 18. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 19. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE PROVISIONS OF SECTION 10A DREW THE ATTENTION OF THE BENCH TO EXPLANATION 2(IV) WHERE THE EXPORT TURNOVER HAS BEEN DEFIN ED AS UNDER : EXPORT TURNOVER MEANS THE CONSIDERATION IN RESPECT O F EXPORT [BY THE UNDERTAKING] OF ARTICLES OR THINGS OR COMPUTER SOF TWARE RECEIVED IN, OR BROUGHT INTO, INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE IN ACCORDANCE WITH SUB-SECTION (3), BUT DOES NOT INCLUDE FREIGHT, TELECOMMUNICATION CHARGES OR INSURAN CE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES OR THIN GS OR COMPUTER SOFTWARE OUTSIDE INDIA OR EXPENSES, IF ANY INCURRED IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICES OUTSIDE I NDIA. 17 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 HE SUBMITTED THAT UNLESS IT IS SPECIFICALLY RECOVERED IN SPE CIE YOU CANNOT EXCLUDE THE SAME. HE ACCORDINGLY SUBMITTED THAT THIS GROUND HAS TO BE DECIDED IN FAVOUR OF THE ASSESSEE. 20. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE DE CISION OF THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF PAT NI TELECOM PVT. LTD. VS. ITO REPORTED IN 120 ITD 105 SUBMIT TED THAT THE TRIBUNAL IN THE SAID DECISION HAS HELD THAT INTERN ET SERVICE PROVIDER CHARGES INCURRED BY THE ASSESSEE ON DEVELOPMENT OF SOFTWARE, I.E. GOODS, NOT BEING ATTRIBUTABLE TO DELIVERY OF SOFTWARE TO THE CLIENT DO NOT COME WITHIN THE S COPE OF TELECOMMUNICATION CHARGES AS PROVIDED UNDER CLAUSE (IV) OF EXPLANATION 2 TO SECTION 10A. THEREFORE, THE SAME CANNOT BE EXCLUDED FROM THE CONSIDERATION RECEIVED IN CONVERTIBLE FORE IGN EXCHANGES WHILE COMPUTING THE EXPORT TURNOVER. REFERRING TO THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CAS E OF WILLS PROCESSING SERVICES INDIA PVT. LTD. VS. DCIT REPORTED IN 151 TTJ 555 HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HAS HELD THAT SATELLITE CHARGES ARE NOT TELECOMMUNICATION CHARGES TO BE EXCLUDED FROM THE EXPOR T TURNOVER FOR PURPOSE OF COMPUTING DEDUCTION U/S.10A. 21. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). REFERRING TO THE BILLS RAISED BY AMDOCS HE SUBMITTED THAT THE TELECOMMUNICATION CHARGES ARE EMBEDDED IN IT, THEREFORE, IN VIEW OF THE DEFINITION OF EXPORT TURNOVER AS PER CLAUSE (IV) OF EXPLANATION 2 TO SEC TION 10A TELECOMMUNICATION CHARGES SHOULD BE EXCLUDED FROM THE 18 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 EXPORT TURNOVER. HE ACCORDINGLY SUBMITTED THAT THE CI T(A) IS JUSTIFIED. 22. AS REGARDS THE CONTENTION OF THE ASSESSEE THAT TH E TELECOMMUNICATION CHARGES ARE NOT EMBEDDED OR NOT RECO VERED HE SUBMITTED THAT IT WAS NEVER BROUGHT TO THE NOTICE O F THE AO OR THE CIT(A) THAT TELECOMMUNICATION CHARGES ARE NOT EM BEDDED IN THE BILLS AND ARE NOT RECOVERED FROM THE CUSTOMERS. 23. THE LD. COUNSEL FOR THE ASSESSEE IN HIS REJOINDER DRE W THE ATTENTION OF THE BENCH TO PARA 4.1.5 AND 4.1.6 OF THE LETTE R DATED 31-08-2010 ADDRESSED TO THE AO DURING THE COUR SE OF ASSESSMENT PROCEEDINGS A COPY OF WHICH IS PLACED AT PAGE S 51 TO 57 OF THE PAPER BOOK. REFERRING TO THE REPLY OF THE ASSESSEE HE SUBMITTED THAT IT WAS CATEGORICALLY STATED BEFORE THE AO THAT ONLY IF THE SALE CONSIDERATION INCLUDES SAID TELECOMMUNICATION CHARGES, I.E. IF THE CHARGES ARE RECOVERED FROM THE PURCHA SER, THEY HAVE TO BE EXCLUDED FROM THE EXPORT TURNOVER BUT WHERE THE SALE CONSIDERATION IS A SINGLE CONSOLIDATED AMOUNT IT S HOULD NOT BE SPLIT INTO INDIVIDUAL COMPONENTS AND TO EXCLUDE SOM E OF THEM FOR THE PURPOSE OF SECTION 10A OF THE ACT. HE ACCO RDINGLY SUBMITTED THAT THE LD. DEPARTMENTAL REPRESENTATIVE IS NO T JUSTIFIED IN STATING THAT NOTHING WAS BROUGHT TO THE NOTIC E OF THE AO OR THE CIT(A). AS REGARDS VARIOUS DECISIONS RELIED ON B Y THE AO AND THE CIT(A) HE SUBMITTED THAT THOSE DECISIONS ARE PRIOR TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CAS E OF GEM PLUS JEWELLERY INDIA LTD. AND VARIOUS LATEST DECISIONS O F THE TRIBUNAL. HE ACCORDINGLY SUBMITTED THAT THE GROUND S RAISED BY THE ASSESSEE SHOULD BE DISMISSED. 19 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 24. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND T HE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THE ONL Y DISPUTE TO BE DECIDED IN THE IMPUGNED GROUND IS REGARDING THE EXCLUSION OF RS.53,79,131/- TOWARDS LEASE LINE CHARGES FROM THE EXPORT TURNOVER FOR COMPUTING DEDUCTION U/S.10A OF T HE ACT. IT WAS THE SUBMISSION OF THE ASSESSEE BEFORE THE A O THAT THE EXPENDITURE INCURRED BY THE ASSESSEE COMPANY FOR TELECOMMUNICATION CHARGES ARE NOT SEPARATELY CHARGED T O ITS CUSTOMERS AND THEREFORE THESE EXPENSES DO NOT FORM PA RT OF THE TOTAL TURNOVER. IT IS THE CASE OF THE AO THAT THE ASSE SSEE WAS RAISING THE BILLS TO THE OVERSEAS CUSTOMERS AS THE SALE P RICE TO THE SOFTWARE EXPORTED. THE BILLS RAISED AND THE SERVICES CHARGE ARE BASED ON THE COST INCURRED BY THE COMPANY, THEREFO RE, THE EXPENDITURE INCURRED FOR THE SAID TELECOMMUNICATION CHARGE S ARE EMBEDDED OR FACTORED IN THE BILLS RAISED AGAINST THE S ERVICES PROVIDED TO THE CUSTOMER. THE AO ACCORDINGLY EXCLUDED THE TELECOMMUNICATION CHARGES FROM THE EXPORT TURNOVER WHICH HAS BEEN UPHELD BY THE CIT(A). 25. WE FIND THE ASSESSEE DURING THE COURSE OF ASSESSMEN T PROCEEDINGS BEFORE THE AO VIDE LETTER DATED 31-08-2010 AT PARA 4.1.5 AND 4.1.6 HAS STATED AS UNDER : 4.1.5 IN THE PROCESS OF COMPUTATION OF EXPORT TURNO VER, THE STARTING POINT TO BE CONSIDERED IS SALE CONSIDERATI ON RECEIVED. ONLY IF THE SALE CONSIDERATION INCLUDES TELECOMMUNICAT ION CHARGES, I.E. IF THE CHARGES ARE RECOVERED FROM THE P URCHASER, THEY HAVE TO BE EXCLUDED FROM THE EXPORT TURNOVER. BUT WHERE THE SALE CONSIDERATION IS A SINGLE CONSOLIDATED AMOUNT IT SHOULD NOT BE 20 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 SPLIT INTO INDIVIDUAL COMPONENTS AND TO EXCLUDE SOME O F THEM FOR THE PURPOSE OF SECTION 10A OF THE ACT. 4.1.6 THE RATIONALE BEHIND THE SAID PROPOSITION, AS U PHELD BY VARIOUS COURTS, IS WHAT IS INCLUDED IN THE INVOICE VALUE CAN ONLY BE EXCLUDED. IN THIS REGARD, YOUR ATTENTION IS INV ITED TO THE DECISION OF THE HONOURABLE HYDERABAD TRIBUNAL IN THE CASE OF PATNI TELECOM (P) LIMITED VS. ITO (22 SOT 26) (HYD), WHEREIN IT HAS BEEN HELD THAT TELECOMMUNICATION CHARGES CANNOT B E REDUCED FROM THE EXPORT TURNOVER IF EXPORT TURNOVER DOES NOT SPECIFICALLY INCLUDE RECOVERY ON ACCOUNT OF TELECOMMUNICATION EX PENSES. RELEVANT EXTRACT FROM THE PARA 7.2 OF THE SAID DECISI ON IS REPRODUCED BELOW : IF SUCH EXPENSES ARE NOT INCLUDED IN THE CONSIDERATION RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE, DEDUCTION OF SUCH EXPE NDITURE FROM THE CONSIDERATION DOES NOT ARISE . . . . . . . . . . . . . ..IF THE CONSIDERATION RECEIVED IS ONLY AG AINST THE GOODS THEN THERE IS NO NEED TO DEDUCT SUCH EXPENSES FROM THE CONSID ERATION RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE. 26. WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF PATNI TELE COM PVT. LTD. (SUPRA). THE TRIBUNAL AFTER CONSIDERING CLAUSE (IV) OF EXPLANATION 2 TO SECTION 10A HAS HELD THAT SUCH EXPENS ES CANNOT BE EXCLUDED FROM THE EXPORT TURNOVER. THE RELEV ANT OBSERVATION OF THE TRIBUNAL AT PARA 7.4 OF THE ORDER REA D AS UNDER : 7.4 NOW, WE EXAMINE THE FACTS OF THE CASE IN THE LI GHT OF THE ABOVE DISCUSSION. THE AO NOTICED THAT THE EXPENSES ATTRI BUTABLE TO THE DELIVERY OF THE SOFTWARE WERE RS. 40,93,493 BOOKE D UNDER ISP, SINCE THE ASSESSEE GOT LEASED LINE EXCLUSIVELY. THE AO DED UCTED THIS AMOUNT FROM CONSIDERATION TREATING AS COMMUNICATI ON CHARGES. WE FIND THAT THE SAID EXPENDITURE ON INTERNE T SERVICE PROVIDER (ISP) DOES NOT COME WITHIN THE SCOPE OF TELECOMMUNICATION CHARGES AS PROVIDED IN CL. (IV) OF EXPLN. 2 TO S. 10A OF IT ACT BECAUSE ISP WAS FOR TRANSMITTING THE DAT A, I.E., SOFTWARE DEVELOPED BY THE ASSESSEE. THE ISP EXPENSES INCUR RED ARE IN RESPECT OF DEVELOPMENT OF SOFTWARE I.E., GOODS. THE ISP EXPENSES ARE NOT ATTRIBUTABLE TO THE DELIVERY OF COMP UTER SOFTWARE, THEREFORE, SUCH EXPENSES NEED NOT BE EXCLUDED FROM CONSIDERATION IN FOREIGN EXCHANGE. HOWEVER, IF FOR T HE SAKE OF ARGUMENTS IT IS PRESUMED THAT THE EXPENDITURE INCURRE D IS ATTRIBUTABLE TO DELIVERY OF GOODS OUTSIDE INDIA EVEN THEN SAME IS NOT TO BE EXCLUDED. THE WORDS 'RECEIVED' AND 'BUT N OT INCLUDE' USED 21 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 IN CL. (IV) OF EXPLN. 2 TO S. 10A OF IT ACT ARE SIGN IFICANT. WHAT IS TO BE EXCLUDED IS OUT OF WHAT IS RECEIVED. IN THE CASE UNDER CONSIDERATION THE ASSESSEE RECEIVED CONSIDERATION AGAINST SOFTWARE I.E. GOODS. FOR THIS PURPOSE, THE ASSESSEE HAS DEMONSTRATED BY REFERRIN G INVOICES (PP. 4.1 TO 4.4) AND AGREEMENT (P. 2.1) OF WHICH PHOTOCOPIES HAVE BEEN PLACED IN ASSESSEE'S PAPER BOOK. T HE AGREEMENT, INVOICES AND THE TURNOVER CLEARLY SHOW THA T THE ASSESSEE DID NOT RECOVER ANY SUCH EXPENDITURE. THEREFORE , THERE IS NO SCOPE FOR ANY EXCLUSION FROM THE EXPORT TURNOVER ON ACCOUNT OF SUCH EXPENSES. IF AT ALL ON PRESUMPTION, IT IS TO BE EXC LUDED FOR THE PURPOSE OF 'EXPORT TURNOVER' THEN ON THE SAME ASSUMPTIO N, REASON AND ANALOGY IT SHOULD BE EXCLUDED FROM 'TOTAL TURNOV ER'. THE SIMPLE REASON IS THAT SUCH EXPENDITURE IS ALSO INCLUDED I N CONSOLIDATED CONSIDERATION WHICH IS FORMING PART OF 'T OTAL TURNOVER'. IN ORDER TO MAKE THE FORMULA FOR THE PUR POSE OF 'EXPORT TURNOVER' IN S. 10A WORKABLE ONE HAS TO GIVE A SCHEMAT IC INTERPRETATION TO THE FORMULA. ELIMINATION SHOULD BE FROM BOTH THE DENOMINATOR AND THE NUMERATOR. WE THEREFORE FIND TH AT THE AO WAS NOT CORRECT IN EXCLUDING RS. 40,93,493 FROM CONSID ERATION RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE WHILE CALC ULATING EXPORT TURNOVER FOR THE PURPOSE OF S. 10A OF THE IT ACT. 27. IN VIEW OF THE CATEGORICAL SUBMISSION OF THE ASSESSEE BEFORE THE AO THAT SALE CONSIDERATION INCLUDES TELECOMMUNICATION CHARGES AND IT IS NOT SEPARATELY CHARG ED TO CUSTOMERS AND FOLLOWING THE DECISION OF THE HYDERABAD BEN CH OF THE TRIBUNAL IN THE CASE OF PATNI TELECOM PVT. LTD. (SUPR A) WE ARE OF THE CONSIDERED OPINION THAT THE LEASE LINE CHARGES SHOULD NOT BE REDUCED FROM THE EXPORT TURNOVER OF THE ASSESS EE WHILE COMPUTING THE DEDUCTION U/S.10A OF THE ACT. WE THEREFORE SET ASIDE THE ORDER OF THE CIT(A) AND THE GROUND RAISED BY T HE ASSESSEE IS ALLOWED. ITA NO.978/PN/2012 (BY REVENUE) (A.Y. 2007-08) : 28. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE REA DS AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD .CIT(A) ERRED IN DIRECTING THE AO TO EXCLUDE LEASED LINE CHA RGES FROM THE 22 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 EXPORT TURNOVER AND THE TOTAL TURNOVER BOTH FOR COM PUTING THE DEDUCTION U/S.10A OF THE INCOME TAX ACT, 1961. 29. AFTER HEARING BOTH THE SIDES WE FIND THE ASSESSEE BE FORE THE CIT(A) MADE AN ALTERNATE CLAIM THAT THE ITEMS WHICH AR E EXCLUDED FROM THE EXPORT TURNOVER ARE ALSO BE EXCLUDED FROM THE TOTAL TURNOVER. THE LD.CIT(A) FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GEMPLUS JEWELLERY INDIA LTD. REPORTED IN 330 ITR 175 DIRECTED THE AO TO EXCLUDE THE LEASE LINE CHARGES FROM THE EXPORT TURNOVER AND THE TOTAL TURNOVER BOTH FOR COMPUTING DEDUCTION U/S.10A. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) WHO HAS FOLLOWED THE DECISION OF THE HONBLE BOMBAY HIGH COURT WHILE DIRECTING THE AO TO EXCLUDE THE LEASE LINE CHARGES FROM TH E EXPORT TURNOVER AND THE TOTAL TURNOVER FOR COMPUTING DEDUCTION U/S.10A OF THE ACT. IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE BY THE LD. DEPARTMENTAL REPRESE NTATIVE AGAINST THE DECISION OF HONBLE BOMBAY HIGH COURT CITED (SU PRA) WHICH WAS RELIED ON BY THE CIT(A), THE GROUND RAISED BY T HE REVENUE IS DISMISSED. ITA NO.796/PN/2013 (BY ASSESSEE) (A.Y. 2008-09) : 30. GROUND OF APPEAL NO. 1 BY THE ASSESSEE READS AS UNDER: 1. NOT ALLOWING DEDUCTION OF REVERSAL OF PROVISIONS MADE FOR EMPLOYEES STOCK OPTION PLAN WHILE COMPUTING BOOK PROFIT UNDER SECTION 115JB OF THE ACT [RS.5,95,15,054]. THE HONBLE CIT(A) HAS ERRED IN LAW BY NOT ALLOWING DEDUCTION FOR REVERSAL OF PROVISIONS OF RS.5,95,15,054 FOR OPTIONS GRANTED TO EMPLOYEE UNDER EMPLOYEE STOCK OPTION PLAN SCHEME WHILE COMPUTING BOOK PROFITS OF THE APPELLANT UNDER SECTION 115JB. 23 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 31. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DURING T HE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSES SEE HAS REDUCED AN AMOUNT OF RS.5,95,15,054/- ON ACCOUNT OF WITHDRAWAL FROM THE PROVISIONS OF ESOP FORM THE TAXABLE BOO K PROFIT IN THE WORKING OF MAT. ON BEING ASKED THE AO IT WA S EXPLAINED AS UNDER : EMPLOYEES STOCK OPTION COSTS (ESOP COST) : THE COMPANY HAS ENTERED INTO AN 'EQUITY AWARD REIMBU RSEMENT AGREEMENT' (REIMBURSEMENT AGREEMENT) WITH ITS PARENT COMPANY I.E. AMDOCS LIMITED ON 1 FEBRUARY 2006 (IN R ESPECT OF SHARES OF THE PARENT COMPANY ALLOTTED TO THE EMPLOYEE S UNDER AN ESOP SCHEME). AS PER THE AGREEMENT, THE COMPANY SHALL PAY AMDOCS LIMITED THE COST, COMPUTED AS PER THE MECHANISM PROVIDED IN THE REIMBURSEMENT AGREEMENT, IN RELATION TO THE OPTIONS EXERCISED BY THE EMPLOYEES 1 RIGHT IN THE RESTRICTED SHARES VESTED IN THE EMPLOYEES. DURING THE YEAR ENDED 31 MARCH 2007, THE COMPANY HA D MADE PROVISION IN ITS BOOKS OF ACCOUNTS FOR PAYMENTS TO BE MA DE BY IT TO AMDOCS LIMITED IN TERMS OF THE REIMBURSEMENT AGREEMEN T, COMPUTED WITH REFERENCE TO THE FAIR MARKET VALUE (' FMV') OF THE SHARES OF AMDOCS LIMITED AS ON 31 MARCH 2007. THE PROVI SION HAD BEEN SUO MOTTO OFFERED FOR TAXATION UNDER THE NORMAL PROVISIONS OF THE ACT AS WELL AS IN THE COMPUTATION OF BOOKS PROF ITS OF THE COMPANY FOR THE PURPOSES OF SECTION 115JB OF THE ACT. HOWEVER, AS ON 31 MARCH 2008, THERE WAS A SIGNIFICANT REDUCTION IN THE FMV OF THE SHARES AS COMPARED TO THE FMV AS ON 3 1 MARCH 2007. ACCORDINGLY, THE COMPANY REVERSED THE PROVISION MADE AS ON 31 MARCH 2007 TO THE EXTENT OF RS. 59,515,054. TH E SAME HAS BEEN CLAIMED AS A DEDUCTION/ ADJUSTMENT, BOTH UNDER T HE NORMAL PROVISIONS OF THE ACT AS WELL AS UNDER THE PROVISIONS OF SECTION 115JB OF THE ACT. 32. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE VERIFIED THE CLAIM OF THE ASSESS EE FROM THE RETURN OF INCOME FOR A.Y. 2007-08 AND NOTED TH AT IN THE COMPUTATION OF INCOME FOR A.Y. 2007-08 UNDER MAT PROVISIONS THIS ITEM WAS NOT ADDED BACK BY THE ASSESSEE . THE ONLY ADJUSTMENT MADE IN THE COMPUTATION OF INCOME U/S.11 5JB 24 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 FOR A.Y. 2007-08 IS FOR PROVISION OF INCOME TAX OF RS.1,12,790/ -. SINCE THE PROVISION FOR ESOP WAS NOT ADDED BACK WHILE COMPUTING BOOK PROFIT U/S.115JB OF THE ACT FOR A.Y. 2007-08 THE AO HELD THAT NO DEDUCTION CAN BE ALLOWED FROM THE BO OK PROFIT U/S.115JB OF THE ACT FOR THE CURRENT YEAR. ACCORDIN GLY, THE CLAIM OF THE ASSESSEE FOR REDUCTION OF THIS AMOUNT OF RS.5,95,15,054/- ON ACCOUNT OF PROVISION FOR ESOP FROM THE TAXABLE BOOK PROFIT WAS REJECTED BY THE AO. 33. IN APPEAL THE LD.CIT(A) UPHELD THE ACTION OF THE AO. WHILE DOING SO SHE NOTED THAT FOR A.Y. 2007-08 THE ASSESS EE HAS ADDED BACK THE EXPENSES RELATABLE TO SECTION 10A INCOME (INCLUSIVE OF ESOP PROVISION) AND REDUCED INCOME TO WHICH 10A APPLIES AS PER CLAUSE (F) AND (II) TO EXPLANATION 115JB. HOWEVER , THE EXPLANATION SEPARATELY ALSO PROVIDES FOR ADDING BACK THE AMOUNT OF INCOME TAX PAID OR PAYABLE AND THE PROVISION TH EREOF {CLAUSE (A)} AND AMOUNT OR AMOUNTS SET ASIDE TO PROVISION S MADE FOR MEETING LIABILITIES OTHER THAN ASCERTAINED LIABILITIES {CLAUSE (C)}. THE ASSESSEE HAS ADDED BACK PROVISION FOR INC OME TAX, WHICH THE ASSESSING OFFICER HAS DULY NOTED IN THE ASSESSMENT ORDER, BUT SINCE PROVISION FOR ESOP IS NOT ASCERTAINED LIABILITY, IT SHOULD ALSO HAVE BEEN ADDED BACK TO MAT PROFITS FOR F.Y. 2006-07, I.E., A.Y. 2007-08. IT IS AN UNDISPUTED FACT THAT ESOP PROVISION IS IN THE NATURE OF UNASCERTAINED LIABILITY AND BECAUSE OF ITS UNASCERTAINABLE NATURE, THE ASSESSEE HAD TO REVERSE THE PROVISION OF RS.5,95,15,054/- FROM THE TOTAL PROVISION OF RS.7,67,47,000/- CREATED LAST YEAR IN TERMS OF CLAUSE (C) OF EXPOLANATION TO 25 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 SECTION 115JB. DISTINGUISHING THE VARIOUS DECISIONS RELIED ON BY THE ASSESSEE THE CIT(A) HELD THAT THIS AMOUNT OF REVE RSAL OF PROVISION OF RS.5,95,15,054/- CANNOT BE REDUCED FROM THE B OOK PROFIT FOR THE CURRENT YEAR, SINCE THE ASSESSEE COMPANY HAS NOT ADDED BACK THE ESOP PROVISION IN TERMS OF CLAUSE (C) OF EXPLANATION 2 TO SECTION 115JB. 34. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 35. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLENGED THE ORDER OF THE CIT(A). HE SUBMITTED THAT AS PER ESOP NORM S THE EMPLOYEES HAVE A RIGHT TO SUBSCRIBE TO THE SHARES AT A CERTAIN PRICE. THE PARENT COMPANY RECOVERS THE DIFFERENCE FROM T HE INDIAN COMPANY WHICH IS THE DIFFERENCE BETWEEN THE MARKE T PRICE AND THE OPTION PRICE. THE PROVISION WAS MADE IN THIS CASE IN A.Y. 2007-08. DURING THIS YEAR, THE MARKET PRICE HAS FAL LEN DOWN FOR WHICH EXCESS PROVISION WAS CREDITED TO THE PROFIT AND LOSS ACCOUNT. REFERRING TO EXPLANATION (2) TO PROVISIONS OF SECTION 115JB HE SUBMITTED THAT AS PER EXPLANATION (1) BOO K PROFIT MEANS THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR AND REDUCED BY THE AMOUNT WITHDRAWN FROM ANY RESERVES OR PROVISION, IF ANY SU CH AMOUNT IS CREDITED TO THE PROFIT AND LOSS ACCOUNT. HE SUB MITTED THAT ASSESSEE FULFILS THESE CONDITIONS. HE SUBMITTED THAT U PTO A.Y. 2007-08 THERE WAS SPECIFIC EXEMPTION U/S.10A COMPANIES AS PER CLAUSE (F) OF EXPLANATION (1) TO SECTION 115JB(2). 26 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 36. REFERRING TO THE LETTER DATED 21-11-2011 ADDRESSED TO THE AO HE DREW THE ATTENTION OF THE BENCH TO PARA 5 OF THE SUBMISSION WHICH READS AS UNDER : TREATMENT OF PROVISION FOR EMPLOYEE STOCK COMPENSATI ON COST WHILE COMPUTING MAT FOR THE A.Y. 2007-08. WHILE COMPUTING THE INCOME UNDER THE SECTION 115JB O F THE ACT, ADCIPL HAS REDUCED THE NET PROFIT AS APPEARING IN THE PROFIT AND LOSS ACCOUNT, PREPARED IN ACCORDANCE WITH SCHEDULE VI OF THE COMPANIES ACT, 1956 (I.E. NET OF ALL THE EXPENSES DEB ITED TO PROFIT AND LOSS ACCOUNT AND THE INCOME CREDITED TO PROFIT A ND LOSS ACCOUNT THAT IS RELATED TO THE INCOME DEDUCTIBLE UND ER THE SECTION 10A). ACCORDINGLY, ADCIPL HAS ADDED BACK ALL THE EX PENSES THAT ARE DEBITED TO PROFIT AND LOSS ACCOUNT AND FURTHER RE DUCED THE INCOME THAT IS RELATED TO THE INCOME DEDUCTIBLE UNDE R THE SECTION 10A OF THE ACT IN ACCORDANCE WITH THE PROVISIONS EXPL ANATION 1(F) AND 1(II) TO THE SECTION 115JB OF THE ACT. ALL THE EXPENSES THAT HAVE BEEN ADDED BACK TO THE INCOME UNDER SECTION 115JB IN CLUDES PROVISION MADE TOWARDS EMPLOYEE STOCK COMPENSATION COS T. ACCORDINGLY PROVISION FOR EMPLOYEE STOCK COMPENSATION COST HAS BEEN ADDED BACK WHILE COMPUTING MAT FOR THE A.Y. 20 07-08. COMPUTATION OF THE MAT OF THE A.Y.2007-08 ALONG WIT H RELEVANT EXTRACT HAS BEEN ENCLOSED AS ATTACHMENT 4. 37. REFERRING TO THE ORDER OF THE CIT(A) HE SUBMITTED THA T THE LD.CIT(A) HAS ERRONEOUSLY HELD THAT IN A CASE WHERE ASSE SSEE HAS CREDITED PROVISION OF EXPENSES THAT HAVE GONE TO IN CREASE THE BOOK PROFIT IN AN EARLIER YEAR WHEN THE PROVISIONS OF S ECTION 115JB WERE APPLICABLE THE ASSESSEE BECAME ENTITLED TO DEDUCTION FOR AMOUNT WRITTEN BACK FROM SUCH RESERVES FOR THE PURPOSE OF COMPUTING BOOK PROFIT U/S.115JB OF THE ACT. S INCE THE ASSESSEE COMPANY HAS NOT ADDED BACK THE ESOP PR OVISION IN TERMS OF CLAUSE (C) OF EXPLANATION TO SECTION 115JB THE AMOUNT OF REVERSAL CANNOT BE REDUCED FROM THE BOOK PRO FIT. HE SUBMITTED THAT PROVISO NOWHERE SAYS THAT YOU SHOULD HA VE ADDED UNDER A PARTICULAR CLAUSE. IF THE ASSESSEE HAS INC REASED ITS BOOK PROFIT UNDER ANY OTHER CLAUSE OF THE PROVISO THE ASSESSEE IS ENTITLED TO REDUCE THE SAME FROM THE BOOK P ROFITS. 27 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 ADMITTEDLY THE ASSESSEE HAS INCREASED THE BOOK PROFIT IN THE PRECEDING YEAR. HE ACCORDINGLY SUBMITTED THAT THE GROU ND RAISED BY THE ASSESSEE SHOULD BE ALLOWED. 38. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED TH AT PROVISION WAS MADE FOR MEETING THE EXPENSES ON ACCOUNT OF ESOP ON 31-03-2007. THE PROVISION WAS REVISED NEXT YEAR BECAUSE OF DECREASE IN FAIR MARKET VALUE OF SHARES. THERE FORE, IT WAS AN UNASCERTAINED LIABILITY. THEREFORE, CLAUSE (A) OF EXPLANATION 1 TO PROVISIONS OF SECTION 115JB ARE APPLICABLE. REFERRING TO PAGE 83 OF THE PAPER BOOK HE DREW THE ATT ENTION OF THE BENCH TO THE COMPUTATION OF INCOME U/S.115JB OF THE A CT WHICH RESULTS INTO LOSS, THEREFORE, WHOLE EXERCISE SHOWS A NEGATIVE INCOME FOR WHICH THE PURPOSE OF THE SCHEME IS DEFEATED. HE ACCORDINGLY SUBMITTED THAT THE CIT(A) WAS FU LLY JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE. 39. THE LD. COUNSEL FOR THE ASSESSEE IN HIS REJOINDER SUBMITTED THAT THE QUARREL BETWEEN THE ASSESSEE AND T HE DEPARTMENT IS UNDER WHICH CLAUSE THE AMOUNT HAS TO BE ADDED. ACCORDING TO THE ASSESSEE IT IS AS PER CLAUSE (F) WHEREAS AS PER THE REVENUE IT IS CLAUSE (C). THEREFORE, AS PER THE ASSESSEE THER E IS NO DIFFERENCE. THE RESULT WOULD HAVE BEEN SAME HAD THE ASSESSEE ADDED UNDER CLAUSE (C). HE ACCORDINGLY SUBMITTE D THAT THE GROUND RAISED BY THE ASSESSEE SHOULD BE ALLOWED. 40. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER 28 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDE RED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE AO IN TH E INSTANT CASE MADE ADDITION OF RS.5,95,15,054/- TO THE TAXA BLE BOOK PROFIT ON THE GROUND THAT THE ASSESSEE HAS WRONG LY REDUCED THE AMOUNT OF RS.5,95,15,054/- ON ACCOUNT OF WITHDRAWAL FROM THE PROVISION OF ESOP FROM THE TAXABLE BOOK PROFITS IN THE WORKING OF MAT. ACCORDING TO THE AO SINCE T HE ASSESSEE IN ITS COMPUTATION OF INCOME FOR A.Y. 2007-08 UNDE R MAT PROVISIONS HAD NOT ADDED BACK THE PROVISION FOR ESOP , THEREFORE, THE ASSESSEE IS NOT ENTITLED TO ANY DEDUCTION FROM THE BOOK PROFIT U/S.115JB OF THE ACT IN THE CURRENT YEAR. WE FIND THE CIT(A) UPHELD THE ACTION OF THE AO. WHILE DOING SO, SHE ALSO HELD THAT SINCE THE ASSESSEE COMPANY HAS NOT ADDED BA CK THE ESOP PROVISION IN TERMS OF CLAUSE (C) TO EXPLANATION I OF SE CTION 115JB THE AO HAS CORRECTLY HELD THAT THIS AMOUNT OF RE VERSAL OF PROVISION OF RS.5,95,15,054/- CANNOT BE REDUCED FROM THE B OOK PROFIT OF THE CURRENT YEAR. 40.1 IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSES SEE THAT THE ASSESSEE IN THE A.Y. 2007-08 HAD ADDED ESOP AMOUNTING TO RS.7,67,47,000 UNDER CLAUSE (F) TO EXPLANATION 1 OF SECTION 115JB. THE SUBMISSION OF THE ASSESSEE SHOWING T HE WORKING OF BOOK PROFIT HAS BEEN GIVEN AT PAGE 7 OF THE O RDER OF THE CIT(A) WHICH IS AS UNDER : FOR EASE OF UNDERSTANDING, WE PROVIDE BELOW A WORKIN G OF THE BOOK PROFITS AS PER SECTION 115JB OF THE ACT (DEPICTIN G SEPARATELY THE EXPENDITURE ADDED BACK TO BOOK PROFITS AND INCOM ES REDUCED FROM THE BOOK PROFITS) OF A.Y. 2007-08. 29 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 1 PROFIT AFTER TAX AS PER THE BOOKS OF ACCOUNT 81,12,61,351 2 ADD : A PROVISION FOR INCOME TAX CLAUSE (A) TO EXPLANATION 1 1,12,790 A EXPENDITURE RELATABLE TO INCOME TO WHICH SECTION 10A OF THE ACT (INCLUDING EMPLOYEES STOCK OPTION COMPENSATION COSTS RS.7,67,47,000) CLAUSE (F) TO EXPLANATION 1 290,00,88,307 3 TOTAL (2) = (A) + (B) 290,02,02,097 4 LESS: INCOME TO WHICH SECTION 10A APPLIES CLAUSE (II) TO EXPLANATION 1 373,02,71,818 5 BOOK PROFITS AS PER SECTION 115JB OF THE ACT (1) +(2) (3) (1,88,09,370) AS IS EVIDENT FROM THE WORKING ABOVE, THE PROVISION IN RESPECT OF OPTIONS GRANTED/ALLOTTED TO EMPLOYEES UNDER ESOP SCH EME HAD BEEN ADDED BACK TO THE BOOK PROFITS FOR A.Y. 2007-08 UNDER EXPLANATION 1. 40.2 IN VIEW OF THE ABOVE CLARIFICATION/SUBMISSION BY THE ASSESSEE BEFORE THE LD. CIT(A) WHICH IS NOT CONTROVERTED BY THE REVENUE, WE FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT WHETHER THE SAME HAS BEEN ADDED U NDER CLAUSE (F) OR AS PER CLAUSE (C) TO EXPLANATION 1 OF SECTION 115JB, THERE WILL BE NO DIFFERENCE AND THE RESULT WOULD HAVE BEEN SAME HAD THE ASSESSEE ADDED THE ESOP PROVISION UNDER CLAUSE (C) INSTEAD OF CLAUSE (F). SINCE AN AMOUNT OF RS.7,67,47,000/- HAS ALREADY BEEN ADDED BY THE ASSESSEE WHILE COMPUTING THE BOOK PROFIT AS PER SECTION 115JB OF THE I.T ACT IN THE A.Y. 2007- 08, THEREFORE, IN OUR OPINION THE ASSESSEE IS ENTITLED TO REDU CE AN AMOUNT OF RS.5,95,15,054/- ON ACCOUNT OF WITHDRAWAL FROM THE PROVISION FOR ESOP FROM THE TAXABLE BOOK PROFIT IN THE WOR KING OF MAT. WE FURTHER FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE PROVISO NOWHERE SAYS THAT YOU 30 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 SHOULD HAVE ADDED THE PROVISION UNDER A PARTICULAR CLAUSE AND IF THE ASSESSEE HAS INCREASED ITS BOOK PROFIT UNDER ANY O THER CLAUSE OF THE PROVISO THE ASSESS IS NOT ENTITLED FOR THE R EDUCTION. SINCE THE ASSESSEE HAS ADMITTEDLY INCREASED ITS BOOK PR OFIT IN A.Y. 2007-08 AS PER THE SUBMISSION BEFORE CIT(A), WHICH HAS ALREADY BEEN RECORDED BY THE CIT(A) IN THE BODY OF THE O RDER AT PAGE 7 AND THE SAME HAS NOT BEEN PROVED TO BE FALSE O R UNTRUE, THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE ASS ESSEE IS ENTITLED TO REDUCE AN AMOUNT OF RS.5,95,14,054/- ON ACCOU NT OF WITHDRAWAL FROM THE PROVISION FOR ESOP FROM THE TAXABLE BOO K PROFIT IN THE WORKING OF MAT. GROUND RAISED BY THE ASSESS EE IS ACCORDINGLY ALLOWED. 41. GROUND OF APPEAL NO.2 BY THE ASSESSEE READS AS UNDER : GROUND NO.2 : SET OFF OF BROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPRECIATION BEFORE ALLOWING DEDUCT ION U NDER SECTION 10A 2.1 THE HONBLE CIT(A) HAS ERRED IN FACTS AND LAW I N HOLDING THAT DEDUCTION UNDER SECTION 10A OF THE ACT IS ALLOWA BLE AFTER SET OFF OF BROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPR ECIATION. 2.2 THE HONBLE CIT(A) ERRED IN FACTS AND LAW IN N OT ALLOWING SET OFF OF BROUGHT FORWARD LOSS FROM PROFITS / GAINS FRO M BUSINESS FOR THE YEAR AMOUNTING TO RS 11,08,219/-. 2.3 THE HONBLE CIT(A) ERRED IN FACTS AND LAW IN N OT ALLOWING CARRY FORWARD OF BUSINESS LOSS AND UNABSORBED DEPRECIATI ON AMOUNTING TO RS 14,18,95,909/-. 42. AFTER HEARING BOTH THE SIDES, WE FIND THE ABOVE GROUND IS IDENTICAL TO GROUND OF APPEAL NO,1 IN ITA NO.902/PN/2012 FOR A.Y. 2007-08. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUND RAISED BY THE ASSESSEE HAS BEEN ALLOWED. FOLLOWING THE SAME REASONINGS THE ABOVE GROUNDS BY THE ASSESSEE IS ALLOWED. 31 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 43. GROUND OF APPEAL NO.3 BY THE ASSESSEE READS AS UNDER : 3. GROUND NO.3 : REDUCTION OF EXPENSES RS.71,32,538/ - INCURRED ON LEASE LINE CHARGES FROM EXPORT TURNOVER THE HONBLE CIT(A) ERRED IN FACTS AND LAW BY UPHOLDI NG THE ORDER OF ADDL. CIT FOR REDUCING THE EXPENSES OF RS.71,32,538 /- ON LEASE LINED CHARGES FROM EXPORT TURNOVER OF THE APPELLANT WHILE COMPUTING DEDUCTION U/S.10A OF THE ACT. 44. AFTER HEARING BOTH THE SIDES, WE FIND THE ABOVE GROUND IS IDENTICAL TO GROUND OF APPEAL NO. 2 IN ITA NO.902/PN/2012 FO R A.Y. 2007-08. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUNDS RAISED BY THE ASSESSEE HAVE BEEN ALLOWED. FOLLOW ING THE SAME REASONINGS THE ABOVE GROUNDS BY THE ASSESSE E ARE ALLOWED. ITA NO.776/PN/2013 (BY REVENUE) (A.Y. 2008-09) : 45. GROUND OF APPEAL NOS. 1, 6 AND 7 BEING GENERAL IN NAT URE ARE DISMISSED. 46. GROUND OF APPEAL NOS. 2 TO 4 BY THE REVENUE READ AS UNDER : 2. THE LD.CIT(A) GROSSLY ERRED IN ALLOWING THE PROV ISION OF RS.86,14,207/- IN RESPECT OF LEASE RENT EQUALIZATION WHILE COMPUTING THE BOOK PROFITS U/S.115JB. 3. THE LD.CIT(A) GROSSLY ERRED IN FAILING TO APPRECIA TE THAT THE PROVISION MADE OF FOR FUTURE LIABILITIES WHICH CANNOT BE SAID ASCERTAINED LIABILITIES AND WHICH IS NOT PERTAINS TO TH E YEAR UNDER CONSIDERATION. 4. THE LD.CIT(A) GROSSLY ERRED IN DECIDING THE ISSUE I N FAVOUR OF THE ASSESSEE ON THE ADDITIONAL EVIDENCES I.E. RENTAL AGREEMENT SIGNED BY THE ASSESSEE IN RESPECT OF LEASE PREMISES AT CYB ER CITY, WHICH WAS NOT PRODUCED BEFORE THE ASSESSING OFFICER AND ALSO WITHOUT GIVING THE ASSESSING OFFICER ANY OPPORTUNITY F OR REBUTTAL WHICH IS VIOLATION OF RULE 46A OF THE I.T. RULES, 196 2. 32 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 47. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DURING T HE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSES SEE HAS CREATED PROVISION OF RS.86,14,207/- IN RESPECT OF LEASE RENT . ON BEING QUESTIONED BY THE AO IT WAS SUBMITTED THAT THIS P ROVISION HAS BEEN MADE ON THE BASIS OF AS-19 ON ACCOUNTING OF L EASE ISSUED BY ICAI W.E.F. 01-04-2001. IT WAS EXPLAINED THAT IN ACCORDANCE WITH SECTION 211(3A) R.W.S. 211(3C) OF THE COMPANIES ACT AND SCHEDULES THERETO THE PROFIT AND LOSS ACCOUNT OF THE COMPANY IS PREPARED IN ACCORDANCE WITH T HE ACCOUNTING STANDARDS SPECIFIED BY ICAI AND FURTHER NOTIFIED BY THE MINISTRY OF CORPORATE AFFAIRS. HOWEVER, THE AO WAS NO T SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE CONCLUDED THAT SINCE PROVISIONS, WHICH ARE IN THE NATURE O F UNASCERTAINED LIABILITIES, HAVE TO BE ADDED BACK TO COMPUTE BOOK PROFIT U/S.115JB. THE PROVISIONS FOR LEASE RENT EQUALIZATION BEING IN NATURE OF UNASCERTAINED LIABILITIES WAS REQUIRED TO BE ADDED BACK IN THE MAT WORKING. HE ACCOR DINGLY ADDED THE SAME WHILE COMPUTING THE BOOK PROFIT. 48. BEFORE CIT(A) THE ASSESSEE MADE ELABORATE SUBMISSIONS AND STATED THAT THE PROVISION FOR LEASE RENT EQUALIZATION ARE ASCERTAINED LIABILITIES AND THEREFORE SHOULD NOT BE ADDED AS PER SECTION 115JB OF THE ACT WHILE COMPUTING BOOK PROFIT SINCE SUCH PROVISION MADE WAS AS PER AS-19 WHICH IS REQUIRED T O BE MANDATORILY FOLLOWED BY THE ASSESSEE. THE PROVISIONS SO M ADE WILL BE DISCHARGED IN THE FUTURE AS PER THE TERMS OF AGRE EMENT. RELYING ON VARIOUS DECISIONS IT WAS SUBMITTED THAT LEASE R ENT 33 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 EQUALIZATION PROVISION IS NOT A PROVISION FOR UNASCERTAINED LIABILITY. 49. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) HELD THAT THE PROVISION FOR LEASE RENT EQUALIZATION MAY NOT BE INCLUDED FOR COMPUTING BOOK PROFIT U/S.115JB OF THE I .T. ACT. THE RELEVANT OBSERVATION OF THE CIT AT PARA 4.2 OF T HE ORDER READS AS UNDER : 4.2. I HAVE EXAMINED THE SUBMISSIONS MADE AS PER ABOVE AND FIND THAT THE RENTAL AGREEMENTS SIGNED BY THE APPELLA NT IN RESPECT OF LEASE PREMISES AT CYBER CITY, MAGARPATTA MENTION THE T ERMS OF THE LEASE FOR INITIAL PERIOD OF 3 YEARS, RENEWABLE FOR FU RTHER TWO TERMS OF THREE YEARS EACH. THERE IS ALSO PROVISION FOR INCREASE I N THE MONTHLY RENT BY 15% OF THE LAST PAID RENT AT THE END OF EACH THREE YEAR PERIOD. EFFECTIVELY THEREFORE, THE APPELLANT HAS SIGNED LEASE AGREEMENT FOR 9 YEARS WITH A PROVISION FOR ESCALATION OF THE RENT AT T HE END OF EVERY THREE YEARS. THE ARS OF THE APPELLANT HAVE ARGUED THA T THE APPELLANT HAS EFFECTIVELY SIGNED RENT AGREEMENT FOR 9 YEARS SINCE SUBSTANTIAL INVESTMENTS IN THE LEASE PREMISES HAVE BEEN INCURRED BY THE APPELLANT. THE PROVISION MADE ON ACCOUNT OF LEASE IS M ADE BY APPORTIONING THE LEASE PAYMENTS DUE OVER A PERIOD OF 9 YEARS (I.E. THE LEASE TERM) ON A STRAIGHT LINE BASIS AND TAKING INTO AC COUNT THE ESCALATION CLAUSE PROVIDED IN THE LEASE AGREEMENT. NO DOUBT CREATION OF THE LIABILITY PROVISION FOR LEASE EQUALIZATION CAN NOT BE SAID TO BE AN UNASCERTAINED LIABILITY. IT, ON THE CONTRARY, AMOUNT S TO AN ASCERTAINED LIABILITY, BEING A REASONABLE ESTIMATE IN THE CONTEXT OF THE ABOVE, THE HON'BLE DELHI ITAT IN GOODWILL INDIA LTD. VS ACIT RE PORTED IN 306 ITR (AT) 34 WHILE ADJUDICATING ON THE EXPLANATION TO SEC . 115JA HELD AS UNDER: AS FAR AS ASST. YR. 1998-99 IS CONCERNED, THE QUEST ION REVOLVES AROUND AS TO WHETHER THE LEASE EQUALIZATION HAVE TO BE ADDED AS PROFIT AS PER THE P & L ACCOUNT IN VIEW OF THE CL . (C) OF EXPLANATION TO S. 115JA OF THE ACT. ON THIS ASPECT, WE FIND THA T THE TRIBUNAL IN THE CASE OF MGF INDIA LTD., IT APPEAL NO 1143/ DELH I/02 WHILE CONSIDERING A SIMILAR CLAIM IN THE CONTEXT OF S. 11 5 JA HAS HELD THAT SUCH AN ADJUSTMENT CANNOT BE MADE. THE TRIBUNA L HAD REFERRED TO THE DECISION OF HON'BLE SUPREME COURT I N THE CASE OF APOLLO TYRES LTD. VS. CIT (2002) 174 CTR (SC) 521 : ; (2002) 255 ITR 273 (SC) AND HAS HELD THAT SUCH ADJUSTMENTS CAN NOT ' BE MADE WHILE DETERMINING INCOME UNDER S. 115 J OF THE ACT. RESPECTFULLY, FOLLOWING THE DECISIONS OF THE TRIBUNAL REFERRED TO ABOVE, WE ALLOW THE APPEAL OF THE ASSESSEE. WE ARE NOT CONVI NCED WITH THE ARGUMENT OF LEARNED DEPARTMENTAL REPRESENTATIVE THA T THE AMOUNT IN QUESTION NAMELY THE LEASE EQUALIZATION CHARGES IS AN AMOUNT SET ASIDE TO PROVISIONS FOR ME ETING LIABILITY OTHER THAN ASCERTAINED LIABILITIES . THE LEASE EQUALIZATION CHARGE IS 34 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 NOT AN AMOUNT SET ASIDE FOR MEET I NG A N Y LIABILITIES WHICH IS UNASCERTAINED. IT IS A RECOGNIZED METHOD FOR PREPAR ING FINANC I AL STATEMENT OF NBFCS. IT IS APPLICABLE WHILE PREPARIN G FINANCIAL STATEMENTS UNDER THE COMPANIES ACT, 1956. THE SUM I N QUESTION DOES NOT FALL WITHI N ANY OF THE OTHE R CLS. (A) TO (/) OF EXPLANATION TO S . 115 JA. IN VIEW OF THE ABOVE, THE CLAIM MAID BY THE ASSESSEE FOR THE ASST . YR. 1998-99 IS ALLOWED. IN THE RESULT, IT APPEAL NO . 2977/DEL/02 AND IT APPEAL NO. 2912/DEL/02 ARE DISMI SSED WHILE IT APPEAL NO. 1712/DELHI/02 IS ALLOWED. 4.3 ON ACCOUNT OF THE JUDICIAL PRECEDENT AVAILABLE ON THIS ISSUE WITH REFERENCE TO SECTION 115JA, WHICH IS PAR I MATERIAL TO SECTION 115JB, IT IS HELD THAT THE PROVISIONS FOR L EASE RENT EQUALIZATION MAY NOT BE INCLUDED FOR COMPUTING THE BOOK PROFITS U/S. 115JB OF THE I.T. ACT. CONSEQUENTLY, GROUND N O. 2 IS ALLOWED IN FAVOUR OF THE APPELLANT. 50. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 51. THE LD. DR HEAVILY RELIED ON THE ORDER OF THE AO. T HE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND WHILE SUPPOR TING THE ORDER OF THE CIT(A) SUBMITTED THAT THE AO HAD NOT ASKED ANY SPECIFIC EVIDENCE DURING THE COURSE OF ASSESSMENT PROCEED INGS ON THIS ISSUE. FURNISHING OF THE RENT AGREEMENT DURING TH E COURSE OF APPEAL PROCEEDINGS CANNOT BE TERMED AS ADDITIO NAL EVIDENCE BECAUSE SUBMISSIONS WERE MADE DURING THE COURS E OF HEARING AND THE AO HAS NEVER ASKED FOR THE RENT AGREE MENTS. REFERRING TO THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF U.P. CERAMICS AND POTTERIES LTD. VS. DCIT REP ORTED IN 52 ITD 334 HE DREW THE ATTENTION OF THE BENCH TO TH E FOLLOWING OBSERVATION OF THE TRIBUNAL. IN THE PRESENT CASE, ASSESSING OFFICER DID NOT ASK THE A SSESSEE TO FURNISH CERTIFICATES/CONFIRMATIONS FROM THE DEALERS WHO SE TURNOVER WAS INCLUDED IN THE TURNOVER OF OTHERS. THE ASSESSING OFFICER ALSO DID NOT MAKE ANY ENQUIRIES OF HIS OWN FRO M SUCH DEALERS. THE TAXPAYERS ARE NOT EXPERTS SO AS TO JUDGE THE MIND OF QUASI-JUDICIAL AUTHORITY. SOMETIMES ASSESSEE CONSIDERS SOM E EVIDENCE TO BE SUFFICIENT TO SUPPORT ITS CLAIM. IF TH E ASSESSING OFFICER THINKS OTHERWISE, NOTHING PREVENTS HIM IN INF ORMING THE 35 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 ASSESSEE ABOUT THE INADEQUACY OF THE EVIDENCE. AN ASSESS ING OFFICER EXERCISING QUASI-JUDICIAL AUTHORITY IS NOT SUPP OSED TO TAKE ADVANTAGE OF IGNORANCE OF THE ASSESSEES. THE JOB OF TH E ASSESSING OFFICER IS TO MAKE A FAIR AND REASONABLE ASSESSMENT AND NOT TO FIGHT A PING PONG BATTLE OF WRITE WITH THE ASSESSEES. A FAIR AND REASONABLE ASSESSMENT IS POSSIBLE ONLY BY GIVING A FAIR AND REASONABLE OPPORTUNITY TO THE ASSESSEE AND IF NECESSARY B Y GUIDING THE ASSESSEE AS TO THE EVIDENCE THAT IS REQUIRED IN SUPPO RT OF THE CLAIM MADE BY THE ASSESSEE. IN THE PRESENT CASE, ASSESSEE H AVING FURNISHED EVIDENCE IN SUPPORT OF THE CLAIM IN THE FO RM OF BOOKS OF ACCOUNT, SALE BILLS REGISTER MAINTAINED FOR THE PURPOSE S OF INCENTIVE BONUS AND CERTIFICATES FROM M/S. DUGGAL CROC KERIES, DELHI AND M/S. CAPITAL CROCKERY STORES SUPPORTING THE VERSION OF THE ASSESSEE, THE FACT OF INCENTIVE BONUS HAVING BEEN CR EDITED IN THE LEDGER ACCOUNT OF RESPECTIVE DEALERS, THE PRIMARY ONUS THAT VESTED WITH THEM STOOD DISCHARGED. BY GIVING A SATISFAC TORY EXPLANATION AND THE EVIDENCE REFERRED TO ABOVE, THE ONUS HAD SHIFTED TO THE REVENUE AND THE LATTER HAVING FAILED TO MAKE ENQUIRIES FROM THE CONCERNED DEALERS WHOSE TURNOVER H AD BEEN INCLUDED BY THE ASSESSEE IN THE TURNOVER OF OTHER DEALE RS FOR THE PURPOSES OF COMPUTATION OF INCENTIVE BONUS AS ALSO HAVIN G FAILED TO COLLECT ANY MATERIAL AGAINST THE ASSESSEE DISPROVING THEIR CLAIM, THE ADDITION MADE BY THE ASSESSING OFFICER, IN OUR VIEW , IS UNCALLED FOR AND UNWARRANTED. WE, THEREFORE, HOLD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE ADDITIONS OF R S.24,87,111/- FOR ASSESSMENT YEAR 1988-89 AND RS.61,28,207/- FOR ASSESSMEN T YEAR 1989-90 ON ACCOUNT OF SUPPRESSED SALES. THE SAID A DDITIONS ARE ACCORDINGLY DELETED. HE ACCORDINGLY ADMITTED THAT THE ORDER OF CIT(A) BE UPHE LD AND THE GROUNDS RAISED BY THE REVENUE BE DISMISSED. 52. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND T HE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND T HE LD.CIT(A) WHILE HOLDING THAT THE LEASE RENT EQUALIZATION PROVISION SHOULD NOT BE INCLUDED FOR COMPUTING BOOK PROFIT U/S.115JB OF THE ACT HAS FOLLOWED THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF GOODWILL INDIA LTD. (SUPR A) AND HAS HELD THAT LEASE RENT EQUALIZATION CHARGE CANNOT BE SAID TO BE AN UNASCERTAINED LIABILITY. FURTHER, HE HAS ALSO ANAL YSED 36 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 VARIOUS CLAUSES OF THE LEASE AGREEMENT ACCORDING TO WHICH THE TERMS OF LEASE IS FOR INITIAL PERIOD OF 3 YEARS WHICH CAN BE RENEWED FOR A FURTHER PERIOD OF TWO TERMS OF THREE YEARS EACH. THERE IS ALSO PROVISION FOR INCREASE IN THE MONTHLY RENT BY 15% OF THE LAST PAID RENT AT THE END OF EACH 3 YEAR PERIOD. THUS, THE ASSESSEE IN FACT SIGNED THE LEASE AGREEMENT FOR 9 YEARS WITH PROVISION FOR ESCALATION OF RENT AT THE END OF EVERY 3 YEA RS. THE LD. DEPARTMENTAL REPRESENTATIVE NEITHER COULD POINT OUT A NY INFIRMITY IN THE ORDER OF THE CIT(A) APPEAL NOR COULD CONTROV ERT THE FACTUAL FINDINGS GIVEN BY THE CIT(A). ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS ISSUE. GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY DISMISSED. 53. AS REGARDS THE GRIEVANCE OF THE REVENUE THAT CIT(A) HAS VIOLATED PROVISIONS OF SECTION 46A BY DECIDING THE ISSUE ON THE BASIS OF ADDITIONAL EVIDENCE, I.E. RENT AGREEMENT, WE DO NOT FI ND ANY MERIT IN THE SAME. FROM THE COPY OF THE ASSESSMENT ORDER WE FIND THE AO HAS GIVEN A FINDING THAT PROVISION FOR RENT A ND MAINTENANCE IS ONLY IN THE NATURE OF UNASCERTAINED LIABILITY WITHOUT GOING THROUGH THE CLAUSES OF THE RENT AGREEMENT . HE HAS NOT SPECIFICALLY ASKED FOR THE COPY OF THE RENT AGREE MENT. THEREFORE, WHEN THE ASSESSEE WAS NOT CALLED UPON TO PRO DUCE THE RENT AGREEMENT BY THE AO AND SINCE THE SAME WAS PRODUCED BEFORE THE CIT(A), WHOSE POWERS ARE COTERMINOUS WITH THAT OF THE AO, FOR PROPER ADJUDICATION OF THE MATTER, THE REFORE, WE DO NOT FIND ANY MERIT IN THE GROUNDS RAISED BY THE RE VENUE ON THIS ISSUE. ACCORDINGLY, THE GRIEVANCE OF THE REVENUE REGARDING VIOLATION OF RULE 46A UNDER THE FACTS AND 37 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 CIRCUMSTANCES OF THE CASE IS NOT SUSTAINABLE. GROUNDS OF APPEAL NO.2, 3 AND 4 BY THE REVENUE ARE ACCORDINGLY DISMISSED. 54. GROUNDS OF APPEAL NO.5 BY THE REVENUE READS AS UNDER : 5. THE LD.CIT(A) GROSSLY ERRED IN DIRECTING THE ASSESS ING OFFICER TO EXCLUDE LEASED LINE CHARGES FROM THE EXPO RT TURNOVER AND THE TOTAL TURNOVER BOTH FOR COMPUTING THE DEDUC TION U/S.10A. 55. AFTER HEARING BOTH THE SIDES, WE FIND THE ABOVE GROUND IS IDENTICAL TO GROUNDS RAISED BY THE REVENUE IN A.Y. 2007-08 . WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUNDS RAISED B Y THE REVENUE HAVE BEEN DISMISSED. FOLLOWING THE SAME REASONING S THIS GROUND RAISED BY THE REVENUE IS DISMISSED. 56. GROUNDS OF APPEAL NO.1, 6 AND 7 BEING GENERAL IN NATURE ARE DISMISSED. ITA NOS. 17 & 18/PN/2014 (A.Y. 2009-10) : 57. GROUNDS RAISED BY THE ASSESSEE IN ITA NO.17/PN/2014 ARE AS UNDER : AGGRIEVED BY THE ORDER PASSED BY THE HON'BLE COMMISSION ER OF INCOME-TAX (APPEALS) - I, PUNE HEREINAFTER REFERRED TO AS 'THE HONBLE CIT(A)'], UNDER SECTION 250 OF THE INCOME-TAX ACT, 1961 ('ACT') AND BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AMDOCS DEVELOPMENT CENTRE INDIA PRIVATE LIMITED [HER EINAFTER REFERRED TO AS 'APPELLANT'] RESPECTFULLY SUBMITS THAT T HE HONBLE CIT(A) ERRED IN DISPOSING OFF THE APPEAL OF THE APPEL LANT, ON THE FOLLOWING GROUND WHICH ARE WITHOUT PREJUDICE TO EAC H OTHER: GROUND 1 : SET OFF OF BROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPRECIATION BEFORE ALLOWING DEDUCT ION U NDER SECTION 10A 1.1 THE HONBLC CIT(A) HAS ERRED IN FACTS AND LAW I N HOLDING THAT DEDUCTION UNDER SECTION 10A OF THE ACT IS ALLOWA BLE AFTER SET OFF OF BROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPR ECIATION. 1.2 THE HONBLE CIT(A) ERRED IN FACTS AND LAW IN NO T ALLOWING SET OFF OF BROUGHT FORWARD LOSS FROM PROFITS / GAINS FRO M BUSINESS 38 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 FOR THE YEAR AMOUNTING TO RS 2,96,64,834. 1.3 THE HONBLE CIT(A) ERRED IN FACTS AND LAW IN NO T ALLOWING CARRY FORWARD OF BUSINESS LOSS AND UNABSORBED DEPRECIATI ON AMOUNTING TO RS I 1,18,09,218. 58. GROUNDS RAISED BY THE ASSESSEE IN ITA NO.18/PN/2014 ARE AS UNDER : AGGRIEVED BY THE ORDER PASSED BY THE HON'BLE COMMISSIO NER OF INCOME-TAX (APPEALS) - I, PUNE HEREINAFTER REFERRED TO AS 'THE HONBLE CIT(A)'], UNDER SECTION 250 OF THE INCOME-TAX ACT, 1961 ('ACT') AND BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AMDOCS DEVELOPMENT CENTRE INDIA PRIVATE LIMITED [ AS A SUCCESSOR OF AMDOCS BUSINESS SERVICES PRIVATE LIMITED [HEREINAFTER REFERRED TO AS 'APPELLANT'] RESPECTFULLY SUBMITS THAT THE HONBLE CIT(A) ERRED IN DISPOSING OFF THE APPEAL OF THE APPELLANT, O N THE FOLLOWING GROUND WHICH ARE WITHOUT PREJUDICE TO EACH OTHER: GROUND 1 : SET OFF OF BROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPRECIATION BEFORE ALLOWING DEDUCT ION U NDER SECTION 10A 1.1 THE HONBLE CIT(A) HAS ERRED IN FACTS AND LAW I N HOLDING THAT DEDUCTION UNDER SECTION 10A OF THE ACT IS ALLOWA BLE AFTER SET OFF OF BROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPR ECIATION. 1.2 THE HONBLE CIT(A) ERRED IN FACTS AND LAW IN N OT ALLOWING SET OFF OF BROUGHT FORWARD LOSS FROM PROFITS / GAINS FRO M BUSINESS FOR THE YEAR AMOUNTING TO RS 5,97,306/-. 1.3 THE HONBLE CIT(A) ERRED IN FACTS AND LAW IN N OT ALLOWING CARRY FORWARD OF BUSINESS LOSS AND UNABSORBED DEPRECIATI ON AMOUNTING TO RS 7,24,67,850/-. 59. AFTER HEARING BOTH THE SIDES WE FIND THE GROUNDS OF APPEAL NO.1 AND 1.1 BY THE ASSESSEE IN THE ABOVE TWO AP PEALS ARE IDENTICAL TO GROUNDS OF APPEAL NO.1 AND 1.1 IN ITA NO.902/PN/2012 FOR A.Y. 2007-08. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUNDS RAISED BY THE ASSESSEE HAVE BEEN ALLOWED. FOLLOWING THE SAME REASONINGS, THE ABOVE GROUNDS BY THE RESPECTIVE ASSESSEES ARE ALLOWED. 39 ITA NO.17 &18/PN/14, 776 & 796/PN/13 AND ITA NO.902 AND 978/PN/12 60. AS MENTIONED EARLIER, GROUNDS OF APPEAL NO.1.2 AND 1.3 ARE ACADEMIC IN NATURE FOR WHICH THESE ARE NOT BEING ADJUDICATED. 61. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED AND THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21-03-2016. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE ; DATED : 21 ST MARCH, 2016. ) *#,! -! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT A) - I, PUNE 4. 5. 6. THE CIT-I, PUNE $ ''(, (, / DR, ITAT, B PUNE; - / GUARD FILE. / BY ORDER , // TRUE COPY // /0 ' ( / SR. PRIVATE SECRETARY (, / ITAT, PUNE