Appeal details
Counselvise Citation
78724514 RSA 2009
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 4 month(s) 28 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
30-11-2011
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
11-10-2011
Assessment Year
2004-2005
Appeal Filed On
02-07-2009
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI I C SUDHIR, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO. 787/PN/09 (ASSTT. YEAR 2004-05) ASSTT. COMMISSIONER OF INCOME-TAX, .. APPELLANT CIR.7, PUNE VS. SYMANTEC SOFTWARE INDIA P. LTD., .. RE SPONDENT S.NO. 210/A-1, OPP. RANGE HILLS, PUNE 411 020 PAN AAACV6015F AND ITA N0 805/PN/09 ( ASSTT. YEAR: 2004-05)) SYMANTEC SOFTWARE INDIA P. LTD., .. APP ELLANT PUNE VS. ASSTT. COMMISSIONER OF INCOME-TAX, .. RESPONDEN T CIR.7, PUNE ASSESSEE BY : SHRI PORUS KAKA DEPARTMENT BY : SHRI S K MISHRA DATE OF HEARING : 11.10.2011 DATE OF PRONOUNCEMEN T : 30.11.2011 ORDER PER G S PANNU, AM: THE CROSS-APPEALS BY THE REVENUE AND THE ASSESSEE ARISE OUT OF THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-III , PUNE DATED 26.3.2009, WHICH IN TURN HAVE ARISEN FROM THE ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3)(3) OF THE INCOME-TA X ACT, 1961 ( IN SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2004-05. 2. WE SHALL FIRST TAKE UP REVENUES APPEAL, VIDE ITA NO.787/PN/09. 3. ALTHOUGH THE REVENUE HAS RAISED FOUR GROUNDS OF APP EAL, BUT ESSENTIALLY THE DISPUTE IS ON TWO ISSUES. FIRSTLY, AS PER THE REVENUE THE ASSESSEE IS NOT ENTITLED TO THE CLAIM OF DEDUCTION UNDER SECTION 10A IN RESPECT OF UNIT-B PRIMARILY 2 FOR THE REASON THAT THE SAID UNIT IS NEITHER SEPARATE AND NOR HAS A DISTINCT IDENTITY BUT WAS A MERE EXPANSION OF THE EXISTING BUSINESS. THE SECO ND ISSUE RAISED BY THE REVENUE IS WITH REGARD TO THE ORDER OF THE COMMI SSIONER OF INCOME-TAX (APPEALS) IN HOLDING THAT INCOMES BY WAY OF SALES-TAX RE FUND, LIABILITIES NO LONGER REQUIRED WRITTEN BACK AND PROFIT ON SALE OF ASSETS ARE ELIGIBLE INCOMES FOR COMPUTING DEDUCTION UNDER SECTION 10A OF THE ACT FOR UNI T-A. THE FORMER ISSUE BEING THE SUBSTANTIVE DISPUTE, THE SAME IS BEING TAKEN UP AT THE OUTSET. 4. IN ORDER TO APPRECIATE THE BACKGROUND OF THE FIRST I SSUE, THE FOLLOWING DISCUSSION IS RELEVANT. THE ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT, 1956 ON 12.9.1995 AND IS EN GAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT SERVICES. IT WAS REGISTERED WITH THE STPI AUTHORITIES INITIALLY ON 16.11.1995 AND THEREAFTER, APPROVALS WE RE SOUGHT FOR EXPANSION AND IN THIS MANNER, OVER THE YEARS UPTO THE INSTANT ASSESSME NT YEAR, THE FOLLOWING TABULATION EXTRACTED IN PARA 3.2 OF THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) SHOWS THE BUSINESS OPERATIONS BEING CARRIED OUT B Y THE ASSESSEE: SR.NO ADDRESS DATE OF STPI APPROVAL UNIT 1 SYMPHONY 1 ST FLOOR 20.8.1997 A 2 SYMPHONY 2 ND FLOOR 20.8.1997 A 3 SYMPHONY 6 TH FLOOR 18.1.1999 A 4 OFFICE NO. 5B4 12.5.1999 A 5 MAY FAIR OFFICE NO 104, 303, 304, 24.5.2001 A 401, 402, 403, 404 24.5.2000 A 501, 502, 503, 504 30.11.1999 601, 602, 603, 604, 30.11.1999 6 PUNE IT PARK OFFICE NO. 4 TH FLOOR AND 5 TH FLOOR, 6 TH FLOOR 27.6.2001 10.1.2002 A 7 PUNE IT PARK BLDG. B 34, AUNDH ROAD OCTOBER, 2003 B 8 GODREJ CASTLE MARINE BUND GARDEN ROAD, RUBY HALL MARCH, 2004 A SINCE THE PAST YEARS, THE ASSESSEE HAS BEEN CLAIMING DEDUCTI ON UNDER SECTION 10A FOR THE PROFITS RELATING TO THE BUSINESSES CARRIED OUT AFORESAID AT UNIT-A AND THE ASSESSING OFFICER HAS NOTED THAT THE SAID PERIOD OF E XEMPTION OF TEN YEARS 3 WAS EXPIRING IN THE ASSESSMENT YEAR 2005-06. WITH REGARD TO ITEM 7 OF THE AFORESAID TABULATION, THE SAID BUSINESS UNIT CLASSIFIED AS U NIT-B WAS SET-UP DURING THE YEAR UNDER CONSIDERATION IN TERMS OF AN STP I APPROVAL DATED 8.10.2003. THE SAID UNIT-B WAS TREATED BY THE ASSESSEE A S A SEPARATE UNDERTAKING INDEPENDENT OF UNIT-A AND WAS CLAIMED TO B E ELIGIBLE FOR BENEFIT OF DEDUCTION UNDER SECTION 10A IN AN INDEPENDENT MANNER, THOUGH DURING THE YEAR NO DEDUCTION IN RELATION TO UNIT-B WAS CLAIMED, AS IT HAD INCURRED A LOSS. SO, HOWEVER, THE ASSESSING OFFICER DID NOT AGREE TO THE ASSESSEE S CLAIM THAT UNIT-B WAS INDEPENDENTLY ELIGIBLE FOR DEDUCTION UNDER SECTION 10A SINCE, ACCORDING TO HIM, THERE WAS NO SEPARATE EXISTENCE OF UNIT-B. IN COMIN G TO SUCH CONCLUSION, THE ASSESSING OFFICER HAS ENUMERATED VARIOUS REASONS, WHICH CAN BE SUMMARIZED AS UNDER: I) THAT UNIT B IS SITUATED IN THE SAME BUILDING IN WHI CH THE ERSTWHILE UNIT A WAS SITUATE; II) THAT EXPANSIONS CARRIED OUT IN THE PAST YEARS AT DIF FERENT PREMISE WERE CLAIMED AS EXPANSIONS OF UNIT A AND THAT IT IS ONLY EXPANSION IN THE INSTANT YEAR THAT IS BEING CLAIMED AS A NEW AND SEPARATE UNDERTAKING; III) THAT THE STPI PERMISSION OBTAINED IN OCTOBER, 200 3 IS FOR EXPANSION OF BUSINESS AND NOT FOR STARTING A NEW BUSINESS ; IV) THAT COMMON BOND REGISTER FOR THE PURPOSES OF CUSTOM DUTY HAS BEEN MAINTAINED FOR THE TWO UNITS SITUATED IN THE SAM E BUILDING; V) THAT THERE WAS NO SPECIFIC RECRUITMENT OF EMPLOYEES I N THE CASE OF UNIT B; VI) THAT UNIT B WAS SET UP BY TRANSFERRING SOME OF THE ASSETS OF UNIT A; VII) THAT THE NEW UNIT HAS A COMMON SOURCE OF POWER AS THERE IS A COMMON ELECTRICITY METER; VIII) THAT UNIT B WAS NOT CARRYING OUT ANY NEW BUSINESS A CTIVITIES AND THE TECHNICAL SUPPORT WAS OBTAINED FROM UNIT-A ALSO; AND, IX) THAT THE INTENTION BEHIND THE ASSESSEES CLAIM OF TRE ATING UNIT-B AS A SEPARATE UNDERTAKING WAS TO EXTEND THE TAX HOLIDAY A VAILABLE UNDER SECTION 10A OF THE ACT, WHICH WAS OTHERWISE EXPIRIN G IN ASSESSMENT YEAR 2005-06 AS THE PERIOD OF TEN YEARS IN CASE OF UNIT-A WAS NEARING COMPLETION. 4 5. FOR ALL THE ABOVE REASONS, THE ASSESSING OFFICER CONCLU DED THAT UNIT-B WAS NOT INDEPENDENTLY ELIGIBLE FOR THE CLAIM OF DEDUCTI ON UNDER SECTION 10A OF THE ACT AND THAT IT WAS MERELY AN EXPANSION OF THE EXISTING BUSINESS AND WAS A PART AND PARCEL OF UNIT-A ITSELF. 6. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) AND SUBMITTED POINT-WISE REBUTTAL TO THE REASONS ADVANCED BY THE ASSESSING OFFICER. THE STAND OF THE ASSESSEE BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS THAT THE REASONS ADVANCED BY THE ASSESSING OFFICER WERE CONTRARY TO THE FACTS ON RECORD AND THAT ON THE B ASIS OF THE EVIDENCES/INFORMATION ON RECORD, THE UNIT-B WAS A SEPAR ATE UNIT CARRYING ON DIFFERENT ACTIVITIES AND WAS INDEPENDENTLY ELIGIBLE F OR THE CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT. THE COMMISSIONER OF INCOME-TAX ( APPEALS) HAS SUCCINCTLY NOTED THE POINTS RAISED BY THE ASSESSEE IN PARAS 3 .4 AND 3.5 OF THE IMPUGNED ORDER, WHICH ARE NOT BEING REPRODUCED HEREIN FOR THE SAKE OF BREVITY. THE COMMISSIONER OF INCOME-TAX (APPEALS) THEREAFTER CALL ED FOR A REMAND REPORT FROM THE ASSESSING OFFICER, CONTENTS OF WHICH HAVE BEEN REP RODUCED IN PARA 3.6 OF THE IMPUGNED ORDER. IT TRANSPIRES THAT IN THE REM AND PROCEEDINGS, PHYSICAL INSPECTION OF THE ASSESSEES BUSINESS PREMISES HOUSING UNIT-B W AS ALSO CARRIED OUT BY THE DEPARTMENT. ON THE BASIS OF THE AFORESAID E XERCISE, THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS THEREAFTER DEALT WITH EACH OF THE POINTS MADE OUT BY THE ASSESSING OFFICER AND ULTIMATELY IN PARA 3.9 HAS CONCL UDED THAT UNIT-B IS A PHYSICALLY NEW AND SEPARATE UNDERTAKING WHICH COULD EXIST ON ITS OWN AND THEREFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN TRE ATING IT AS A MERE EXPANSION OF UNIT-A. NOT BEING SATISFIED WITH THE AF ORESAID CONCLUSION OF THE COMMISSIONER OF INCOME-TAX (APPEALS), REVENUE IS IN APPE AL BEFORE US. 7. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIV E HAS ARGUED THAT THE ASSESSING OFFICER WAS JUSTIFIED IN HOLDING THAT UNIT-B CO ULD NOT BE TREATED AS INDEPENDENTLY ELIGIBLE FOR THE DEDUCTION UNDER SECTIO N 10A OF THE ACT. ACCORDING 5 TO HIM, THE ELABORATE POINTS MADE OUT BY THE ASSESSING OFFICER HAVE BEEN WRONGLY NEGATED BY THE COMMISSIONER OF INCOME-TAX (AP PEALS) INASMUCH AS THE INTENTION OF THE ASSESSEE TO CLAIM UNIT-B AS A SEPARATE U NIT WAS MERELY TO EXTEND THE TAX HOLIDAY OF TEN YEARS WHICH WAS BEING ENJOYED B Y UNIT-A AND THE SAME WAS COMING TO AN END IN ASSESSMENT YEAR 2005-06. IN SUM AND SUBSTANCE, THE ARGUMENTS SET UP BY THE LEARNED DEPARTMENTAL REPRESENT ATIVE IS THAT THE ASSESSING OFFICER WAS JUSTIFIED IN TREATING UNIT-B AS NOT ELIGIBLE FOR THE CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT. 8. ON THE OTHER HAND, THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE, HAS ASSAILED THE ARGUMENTS OF THE LEARNED DEPARTMENTAL REP RESENTATIVE BY POINTING OUT THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS D ULY DELIBERATED UPON THE POINTS RAISED BY THE ASSESSING OFFICER AND, AFTER DU E EXAMINATION OF THE FACTUAL POSITION, HE HAS HELD UNIT-B AS A NEW AND SEPAR ATE UNDERTAKING. IN THIS REGARD, REFERENCE HAS BEEN MADE TO FINDINGS OF THE COM MISSIONER OF INCOME-TAX (APPEALS) IN PARA 3.8 OF THE IMPUGNED ORDER, WHICH DE AL WITH EACH OF THE POINTS RAISED BY THE ASSESSING OFFICER AND IN THIS REGARD HE HAS A LSO REFERRED TO PAPER BOOK FILED WHICH, INTER ALIA, CONTAINS THE MATERIAL AND EVIDENCES WHICH SUPPORT SUCH FINDINGS OF THE COMMISSIONER OF INCOME-TAX (APPEALS). IN PARTICULAR, IT HAS BEEN ARGUED THAT DURING THE REMAND PROCEEDINGS, THE PREMISES OF UNIT-B WERE SUBJECT TO PHYSICAL INSPECTION AND ITS DISTINCT PHYSICAL SEPARA TENESS STOOD ESTABLISHED. IT HAS ALSO BEEN SUBMITTED THAT THE PLEA O F THE ASSESSING OFFICER THAT UNIT-B WAS MERELY AN EXPANSION OF THE BUSINESS OF U NIT-A HAS BEEN FOUND TO BE FACTUALLY ERRONEOUS INASMUCH AS THE BUSINESS OF CALL CENTRE UNDERTAKEN IN UNIT-B IS PECULIAR TO THE SAID UNIT WHICH WAS NOT BEING HITHERTO CARRIED OUT IN UNIT- A. REFERRING TO THE PLEA OF THE REVENUE THAT MERELY BECAUSE THE APPROVAL ISSUED BY STPI FOR UNIT-B CONTAINS THE WORD EXPANSION OF YOUR OPERATIONS THE SAME WOULD NOT BE FATAL TO THE PLEA THAT UNIT-B WAS AN IN DEPENDENT UNIT. IN THIS CONNECTION, IT IS POINTED OUT THAT A SIMILAR OBJECTION I N THE CONTEXT OF CLAIM FOR DEDUCTION UNDER SECTION 10A OF THE ACT IN THE CASE OF PA TNI COMPUTERS SYSTEMS 6 LTD. (ITA NO 687/PN/07 FOR ASSESSMENT YEAR 2002-03) W AS DEALT WITH BY THE TRIBUNAL IN ITS ORDER DATED 30.6.2011 IN FAVOUR OF T HE ASSESSEE. A COPY OF THE SAID ORDER HAS BEEN PLACED ON RECORD. IN SUM AND SUBSTANCE, THE LEARNED COUNSEL HAS DEFENDED THE ORDER OF THE COMMISSIONER OF INCOME-TA X (APPEALS) BY PLACING RELIANCE ON THE FINDINGS CONTAINED THEREIN. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. I N THIS CASE, THE ASSESSEE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF DEVE LOPMENT OF COMPUTER SOFTWARE AND IN THE MONTH OF NOVEMBER, 2003 IT STARTED A NEW ACTIVITY OF CALL CENTRE WHICH WAS CLAIMED AS UNIT-B. THE SAID UNI T-B WAS CLAIMED TO BE A SEPARATE AND DISTINCT UNIT AND WAS REGISTERED WITH SOFTWA RE TECHNOLOGY PARKS OF INDIA (STPI) VIDE APPROVAL DATED 8.10.2003, A COPY O F WHICH HAS BEEN PLACED IN PAPER BOOK AT PAGE 17. THE SUM AND SUBSTANCE OF THE CASE MADE OUT BY THE ASSESSING OFFICER IS THAT UNIT-B IS NOT TO BE UNDERSTOOD AS A SEPARATE UNIT BUT A MERE EXPANSION OF THE ERSTWHILE UNIT-A AND, THEREFORE , THE UNIT-B IS NOT TO BE RECKONED AS A SEPARATE UNIT FOR THE PURPOSES OF CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT. THE COMMISSIONER OF INCOME-TAX (APPEAL S) HAS, HOWEVER, APPRECIATED THE PLEA OF THE ASSESSEE AND HAS HELD UNIT-B AS A SEPARATE UNDERTAKING AND IN TERMS THEREOF, IT HAS BEEN HELD TO BE ELIGIBLE FOR THE CLAIM OF DEDUCTION U/S 10A INDEPENDENT OF THE OLD UNIT-A. SECTI ON 10A OF THE ACT PROVIDES FOR A DEDUCTION IN RESPECT OF PROFITS AND GAINS AS ARE DERIVED BY AN UNDERTAKING FROM EXPORT OF COMPUTER SOFTWARE, ETC. FOR A PERIOD OF 10 CONSECUTIVE ASSESSMENT YEARS, SUBJECT OF-COURSE TO FULFILMENT OF THE CONDITIONS S PECIFIED BY SUB-SECTION (2) OF SECTION 10A OF THE ACT. THE CONDITIONS PRESCRIBED IN SUB-SECTION (2) OF SECTION 10A OF THE ACT ARE, NAMELY, THAT THE UNDERTAKIN G HAS TO BEGIN MANUFACTURE OR PRODUCE COMPUTER SOFTWARE DURING THE PR EVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON OR AFTER THE FIRST DAY OF APRIL, 1994 IN ANY SOFTWARE TECHNOLOGY PARK; AND THAT THE UNDERTAKING IS NO T FORMED BY SPLITTING UP OR RECONSTRUCTION OF THE BUSINESS ALREADY IN EXISTENCE; AND , THAT THE UNDERTAKING IS NOT FORMED BY TRANSFER TO A NEW BUSINESS OF MACHINER Y OR PLANT PREVIOUSLY USED 7 FOR ANY PURPOSE. PERTINENTLY, BEFORE WE PROCEED FUR THER, WE MAY OBSERVE THAT THERE IS NO DISPUTE BETWEEN THE PARTIES THAT THE ACTIVI TY BEING CARRIED OUT IN UNIT-B IS OTHERWISE ELIGIBLE FOR THE BENEFITS OF SECTION 10A O F THE ACT. COMING BACK TO THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), IT IS NOTICED THAT HE HAS FACTUALLY CONCLUDED THAT UNIT-B IS A PHYSICALLY NEW AND SEP ARATE UNDERTAKING. THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS DEALT WITH THE PRINCIPAL OBJECTION OF THE ASSESSING OFFICER THAT UNIT-B IS OPERATING FROM T HE SAME PREMISES. IN FACT, IN POINT (A) IN PARA 3.8 OF THE IMPUGNED ORDER, THE COMMISSIONER OF INCOME-TAX (APPEALS) RECORDS A FINDING ON THE BASIS OF THE LEASE AGR EEMENTS, LAY OUT PLAN OF THE PREMISES, PHOTOGRAPHS OF THE PREMISES THAT UNIT-B IS HOUSED IN DIFFERENT PREMISES. IN COMING TO SUCH CONCLUSION, THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS ALSO BEEN GUIDED BY THE REMAND REPORT OF THE ASSESSING OFFICER, WHICH INTER ALIA INCLUDED THE SITE INSPECTION BY THE DEP ARTMENTAL AUTHORITIES. BEFORE US, NO MATERIAL HAS BEEN BROUGHT OUT SO AS TO N EGATE THE AFORESAID FINDINGS OF THE COMMISSIONER OF INCOME-TAX (APPEALS). SE CONDLY, THE PLEA THAT ASSESSEE WAS MAINTAINING A COMMON BOND REGISTER AND THEREF ORE, IT WAS INFERRED THAT NO SEPARATE LICENSE WAS OBTAINED FOR UNIT-B, IN OU R VIEW, HAS BEEN APPROPRIATELY ADDRESSED BY THE COMMISSIONER OF INCOME- TAX (APPEALS) IN POINT (C) OF PARA 3.8 OF THE IMPUGNED ORDER. THE COMMISSIONE R OF INCOME-TAX (APPEALS) HAS REPRODUCED THE TERMS OF THE LICENSE ISSUED BY THE ASSISTANT COMMISSIONER OF CENTRAL EXCISE DATED 20.10.2003 WHICH CLE ARLY BRINGS OUT THAT THE PERMISSION TO NEW UNIT-B WAS GRANTED IN ADDITION T O THE PERMISSION CONTAINED IN THE ORIGINAL LICENSE. MERELY BECAUSE THE NEW PERMI SSION CONTAINS REFERENCE TO THE ORIGINAL LICENSE CANNOT BE CONSIDERED AS CONCLUSIVE THAT THE NEW UNIT IS NOT A SEPARATE OR INDEPENDENT UNIT. IN THIS L IGHT, WE MAY ALSO REFER TO LETTER DATED 8.10.2003 ISSUED BY STPI PERMITTING ASSESSEE TO CAR RY OUT ACTIVITIES IN UNIT-B WHEREIN IT HAS BEEN STATED AS UNDER: THIS OFFICE HAS NO OBJECTION TO THE EXPANSION OF Y OUR OPERATIONS TO THE PREMISES AT UNIT NO. 501 TO 504, 601 TO 604, AND 701 TO 704, BUILDIN G B, S. NO. 41/C, 41-A.1/5, 34 PUNE I.T PARK, BHAU PATIL MARG BOPODI, PUNE 411 003 SUBJ ECT TO YOUR FULFILLING THE EXCISE & CUSTOMS RELATED FORMALITIES . 8 THE AFORESAID HAS BEEN INTERPRETED BY THE REVENUE TO INFER THAT THE APPROVAL BY STPI IS ONLY AN EXPANSION OF THE OLD UNIT AND NOT TO SET-UP A NEW AND SEPARATE UNIT. SIMILAR OBJECTION IN THE CONTEXT OF SECTION 10A OF THE ACT WAS A SUBJECT- MATTER OF CONSIDERATION BY THE PUNE BENCH IN THE CASE OF PATNI COMPUTER SYSTEMS LTD. (SUPRA) WHEREIN REFERENCE WAS MADE TO AN EA RLIER DECISION OF THE TRIBUNAL IN THE CASE OF JAYANT AGRO ORGANICS LTD. AKHAND ANAD, MUMBAI V. JT. CIT (ITA NO 5439/MUM/01 DATED 3.3.2006) AND IT WAS HELD THAT THE SAID PLEA WAS NOT COGENT TO DENY THE CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT. THE RELEVANT PORTION OF THE ORDER OF TRIBUNAL CONTAINED IN PARA 4 1 & 42 IS REPRODUCED: 41. THE ONLY PLEA OF THE REVENUE IS THAT IN THE AP PROVALS GRANTED BY THE STPI, THE THREE UNITS HAVE BEEN REFERRED TO AS AN EXPANSION O F THE CORRESPONDING OLD UNITS. THE MOOT QUESTION IS AS TO WHETHER SUCH A PLEA OF THE R EVENUE IS POTENT TO EFFECT THE ASSESSEES ENTITLEMENT FOR DEDUCTION UNDER SECTION 10A OF THE ACT. SIMILAR PLEA OF THE REVENUE IN THE CONTEXT OF SECTION 10B OF THE ACT WA S A SUBJECT MATTER OF CONSIDERATION BY OUR CO-ORDINATE BENCH IN THE CASE OF JAYANT AGRO OR GANICS LTD. AKHANDANAD, (SUPRA) WHEREIN FOLLOWING DISCUSSION IS WORTHY OF NOTICE: 8. REVENUE HAS VEHEMENTLY CONTENDED THAT THERE IS NO INDEPENDENT GOVERNMENT APPROVAL OF THE NEW UNIT AND ALL THAT TH E GOVERNMENT HAS PERMITTED IS ENHANCEMENT IN CAPACITY OF THE EXISTING UNIT. AS EVIDENT FROM THE LAND ALLOTMENT LETTER DATED 19 TH JULY, 1995 ISSUED BY THE GUJARAT INDUSTRIAL DEVELOPMENT CORP. LTD. IT IS CLEAR THAT THE LAND AL LOTTED FOR THE NEW UNIT IS PLOT #624/1 AND 2, AND 625 TO 627 WHEREAS THE EXISTING P LANT WAS IN PLOT 3 602. THE PRODUCTION OF 12 HYDROXY STEARIC ACID IS AUTHORIZED BY THE LETTER DT 27 TH JANUARY 1995 WHICH STATES THAT THE GOVERNMENT HAS TAKEN NOT E OF ASSESSEES WISH TO MANUFACTURE HYDROXY STEARIC ACID ALSO BY WAY OF FOR WARD INTEGRATION AND AMENDED THE LETTER OF PERMISSION TO INCLUDE 12 HYDR OXY STEARIC ACID OF 12,000 MT IN THE VERY NEXT SENTENCE. IT IS OBSERVED THAT GOVT ALSO APPROVES OF YOUR REQUEST FOR THE IMPORT OF ADDITIONAL CAPITAL GOODS WORTH RS 550 LAKHS FOR THE PROJECT. THAT CLEARLY DEMONSTRATES THAT THE PRODUC TION OF HYDROXY STEARIC ACID OF 12,000 MT WAS VIEWED BY THE GOVERNMENT AS AN INDEPE NDENT PROJECT. IT WAS NOT A CASE FOR PURCHASE OF ADDITION CAPITAL GOODS FOR T HE EXISTING PROJECT. THE ASSESSEE IS IRRESPECTIVE OF THE NUMBER OF UNITS, IS ONE OF ARTIFICIAL JURIDICAL PERSON. THEREFORE, A COMBINED PERMISSION, WHICH INVOLVES SE TTING UP FOR DIFFERENT UNITS, IS QUITE IN ORDER. THE FACT OF AMENDMENT OF EARLIER PE RMISSION OR OF GRANT OF SEPARATE PERMISSIONS, IS NOT REALLY RELEVANT. WHAT IS REALLY TO BE EXAMINED IS WHETHER THE UNITS ARE INDEPENDENT OF UNIT AND WHETH ER THE UNITS ARE COVERED BY THE PERMISSION OR NOT. IN OUR HUMBLE UNDERSTANDING IT MEETS BOTH THE TESTS. WE HAVE ALSO NOTED THAT IT IS NOT AN STATUTORY REQUIRE MENT THAT THERE HAS TO BE SEPARATE PERMISSION FOR EACH UNIT AND THEREFORE JUS T BECAUSE THE PERMISSION IS GRANTED BY THE GOVERNMENT BY WAY OF AMENDING THE OR IGINAL PERMISSION LETTER DOES NOT AFFECT THE ELIGIBILITY FOR DEDUCTION U/S 1 0B IN ANY MANNER. 42. FROM THE AFORESAID, IT IS QUITE CLEAR THAT THE MANNER IN WHICH THE APPROVAL HAS BEEN GRANTED IS NOT RELEVANT TO EXAMINE THE ASSESSE ES CASE FOR CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT WITH RESPECT TO THE THREE UN ITS. WHAT IS REALLY TO BE EXAMINED IS AS TO WHETHER THE THREE UNITS ARE INDEPENDENT UNITS AN D THAT THEY FULFILL THE CONDITIONS PRESCRIBED UNDER SECTION 10A(2) OF THE ACT. THERE I S NO PROHIBITION THAT AN EXPANSION IN THE SAME LINE OF BUSINESS ACHIEVED BY SETTING UP A NEW INDEPENDENT UNIT WOULD LEAD TO DENIAL OF DEDUCTION UNDER SECTION 10A OF THE ACT. I N THIS BACKGROUND, IN THE EARLIER PART OF THIS ORDER WE HAVE ALREADY NOTED WITH APPROVAL THE FACTUAL FINDINGS OF THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT THE THREE UNITS ARE SE PARATE AND INDEPENDENT PRODUCTION UNITS AND THE SAME CANNOT BE TREATED AS MERE EXPANS IONS OF THE EXISTING UNDERTAKINGS. 9 THEREFORE, THE MERE FACT THAT THE REQUISITE PERMISS IONS FROM STPI REFER THEM AS EXPANSIONS OF THE EXISTING UNITS, WOULD NOT DIS-ENT ITLE THE ASSESSEE FROM THE CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT. IN THIS VIE W OF THE MATTER, WE FIND NO ERROR IN THE APPROACH OF THE COMMISSIONER OF INCOME-TAX (APPEALS ) IN HAVING ALLOWED THE CLAIM OF ASSESSEE FOR THE BENEFITS UNDER SECTION 10A OF THE ACT ON THE THREE UNITS TREATING THE SAME AS INDEPENDENT UNITS. THUS, GROUND NOS 1 & 2 O F THE APPEAL OF THE REVENUE ARE DISMISSED. 10. FOLLOWING THE AFORESAID PARITY OF REASONING, IN OUR VIEW, THE AFORESAID PLEA WOULD NOT DIS-ENTITLE THE ASSESSEE FROM CLAIMING THAT UN IT-B WAS AN INDEPENDENT AND SEPARATE UNIT AND NOT MERELY AN EXPANSION OF THE OLD UNIT. IN FACT, THE ASSESSEE HAS REFERRED TO VARIOUS MILESTONES TO POINT OUT T HAT UNIT-B WAS SET-UP TO CARRY OUT A NEW ACTIVITY NAMELY, A CALL CENTRE AND VARIOUS PERMISSIONS FROM GOVERNMENTAL AUTHORITIES WERE INDEPENDENTLY OBTAINED FOR THIS PURPOSE. IN THIS CONNECTION, REFERENCE HAS BEEN MADE TO THE FOLLOWING: (I) STPI PERMISSION DATED 8.10.2003; (II) CUSTOMS BONDING PERMISSION DATED 20.10.2003; (III) LEASE AGREEMENT BETWEEN THE ASSESSEE AND VASUM IND USTRIES TO TAKE ON LEASE PREMISES OF UNIT-B; AND, (IV) PERMISSION FROM DEPARTMENT OF TELECOMMUNICATION D ATED 3.11.2003 FOR SETTING UP AN INTERNATIONAL CALL CENTRE , WHICH IS TREATED AS UNIT-B. 11. APART THEREFROM AT PAGES 2 TO 6 OF THE PAPER BOO K ARE PLACED THE ACTIVITIES BEING CARRIED OUT AT UNIT-A AND UNIT-B AND THE SAID MATERIAL CLEARLY SUPPORTS THE FINDING OF THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT THE ACTIVITIES BEING CARRIED OUT IN UNIT-B ARE NEW AND DIST INCT FROM THOSE OF UNIT-A. FACTUALLY SPEAKING, THERE IS NO COGENT MATERIAL OR REASON ING BROUGHT OUT BY THE REVENUE WHICH WOULD REQUIRE US TO INTERFERE WITH THE ULTIMATE CONCLUSION OF THE COMMISSIONER OF INCOME-TAX (APPEALS) CONTAINED IN PARA 3 .9 OF HIS ORDER, WHICH IS REPRODUCED HEREINAFTER:- 3.9: IN VIEW OF THE FACTS THAT THERE IS A CLEAR DI FFERENCE IN ACTIVITIES CARRIED OUT BY UNIT-B, NEW PLANT AND MACHINERY HAS SPECIFICALLY BEEN PURCH ASED FOR UNIT B AND A SEPARATE DOT LICENSE HAS BEEN TAKEN FOR UNIT B, IT IS CLEAR THAT UNIT B IS A PHYSICALLY NEW AND SEPARATE UNDERTAKING WHICH COULD EXIST ON ITS OWN AND, THERE FORE, THE AO IS NOT JUSTIFIED IN TREATING AS MERE EXPANSION OF UNIT A. THIS GROUND OF APPEAL SUCCEEDS. 10 12. THE AFORESAID CONCLUSION IS WELL SUPPORTED BY THE RE LEVANT MATERIAL ON RECORD WHICH HAS NOT BEEN SHOWN TO BE INCORRECT OR LACKING IN BONA FIDES. ANOTHER ASPECT WHICH PREVAILED WITH THE ASSESSING OFFICER WAS THAT THE INTENTION OF THE ASSESSEE IN CLAIMING UNIT-B AS A SEPARATE AND INDE PENDENT UNIT WAS TO GET DEDUCTION UNDER SECTION 10A OF THE ACT BEYOND THE PERIOD OF 10 YEARS, WHICH WAS EXPIRING IN ASSESSMENT YEAR 2005-06 IN RELATION TO UNIT-A AND THAT IN THE EARLIER YEARS, THE EXPANSIONS WERE NOT CLAIMED AS SEPARA TE UNITS FOR THE PURPOSES OF CLAIMING DEDUCTION UNDER SECTION 10A OF THE ACT. IN OUR CONSIDERED OPINION, THE AFORESAID APPROACH OF THE ASSESSING OFFICER IS UNTENABLE, INASMUCH AS ON FACTS AND IN LAW, AS SUCCINCTLY BROUGHT OUT BY THE CO MMISSIONER OF INCOME- TAX (APPEALS), UNIT-B IS ENTITLED TO BE UNDERSTOOD AS A SEPARATE AND INDEPENDENT UNIT FOR THE PURPOSE OF CLAIMING DEDUCTION UNDER SECTIO N 10A OF THE ACT. MOREOVER, IN THE COURSE OF HEARING BEFORE US, THE LEAR NED COUNSEL FOR THE RESPONDENT-ASSESSEE POINTED OUT THAT EVEN AFTER THE EXPI RY OF TAX HOLIDAY PERIOD OF 10 YEARS IN UNIT-A, THE ACTIVITIES AND PROFITS OF UN IT-A HAVE SHOWN POSITIVE GROWTH AND THIS ITSELF SHOWS THAT THERE WAS NO INTENTIO N TO CLAIM SEPARATE DEDUCTION FOR UNIT-B MERELY FOR THE PURPOSES OF ENJOYI NG TAX HOLIDAY. THE AFORESAID PLEA HAS NOT BEEN CONTROVERTED BEFORE US. CO NSIDERING THE TOTALITY OF CIRCUMSTANCES, IN OUR VIEW, THE COMMISSIONER OF INCOME-TAX (APPEALS) RIGHTLY DIS-AGREED WITH THE APPREHENSION OF THE ASSESSING OFFICER ON THIS MATTER AND HAS CORRECTLY UPHELD THE ASSESSEES CLAIM FOR TREATING UNIT-B A S A SEPARATE AND INDEPENDENT UNIT FOR THE PURPOSES OF CLAIM OF DEDUCTIO N UNDER SECTION 10A OF THE ACT. IN THIS VIEW OF THE MATTER, WE, THEREFORE, FIND NO MERIT IN THE GROUND OF APPEAL RAISED BY THE REVENUE AND THE SAME IS DISMISSED ACC ORDINGLY. 13. THE LAST GROUND IN APPEAL OF THE REVENUE IS WITH REGARD TO THE MANNER OF COMPUTING DEDUCTION UNDER SECTION 10A OF THE ACT. THE DI SPUTE PERTAINS TO THE INCLUSION OF THE FOLLOWING INCOMES FOR THE PURPOSES OF CO MPUTING DEDUCTION UNDER SECTION 10A OF THE ACT: 11 (I) SALES-TAX REFUND RS 21,13,822/- (II) LIABILITIES NO LONGER REQUIRED AND WRITTEN BAC K RS 12,79,558/- (III) PROFIT ON SALE OF ASSETS RS 74,104/- THE ASSESSING OFFICER FOUND THAT WHILE WORKING OUT THE EL IGIBLE PROFITS UNDER SECTION 10A, ASSESSEE HAD NOT EXCLUDED THE AFORESAID INCOME S, WHICH AS PER HIM CANNOT BE SAID TO HAVE BEEN DERIVED FROM THE EXP ORT ACTIVITIES. THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS SINCE NEGATED TH E CLAIM OF THE ASSESSING OFFICER BY MAKING THE FOLLOWING DISCUSSION IN PARA 7.4 OF HIS ORDER: 7.4: THE SUBMISSION HAS BEEN CONSIDERED AND IS FOU ND TO HAVE MERIT. IT IS SEEN FROM THE ASSESSMENT ORDER THAT IN EXCLUDING INCOME OF RS 92, 33,705/- FROM THE PROFITS DERIVED FROM EXPORT ACTIVITIES, THE AO HAS RELIED UPON THE JUDGMENT IN THE CASE OF CIT V STERLING FOOD LTD. 237 ITR 579 (SC) WHEREIN, WHILE INTERPRET ING THE WORDS DERIVED FROM USED IN SECTION 80HH, HONBLE APEX COURT HAS HELD THAT THER E MUST BE, FOR THE APPLICATION OF THE WORDS DERIVED FROM, A DIRECT NEXUS BETWEEN THE PR OFITS AND GAINS AND THE INDUSTRIAL UNDERTAKING. HOWEVER, WHILE APPLYING THE RATIO OF T HE DECISION MENTIONED SUPRA, THE DISTINCTION BETWEEN THE PROVISIONS OF SECTION 80HH AND SECTION 10A CANNOT BE LOST SIGHT OF. WHILE THE PROVISIONS OF SECTION 80HH LEAVE MARG IN FOR INTERPRETATION OF THE PHRASE PROFITS AND GAINS DERIVED FROM AN INDUSTRIAL UNDER TAKING FOR WANT OF ANY DEFINITION IN SECTION 80HH, SECTION 10A CATEGORICALLY CLARIFIES T HAT THE PROFITS DERIVED FROM EXPORT OF COMPUTER SOFTWARE SHALL BE THE AMOUNT WHICH BEARS T O THE PROFITS OF THE BUSINESS OF THE UNDERTAKING, THE SAME PROPORTION AS THE EXPORT TURN OVER IN RESPECT OF SUCH COMPUTER SOFTWARE BEARS TO THE TOTAL TURNOVER OF THE BUSINE SS CARRIED OUT BY THE ASSESSEE. THE STATUTORY FORMULA PRESCRIBED IN SECTION 10A, RULES OUT THE APPLICABILITY OF THE RATIO OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F CIT V. STERLING FOOD LTD., GIVEN IN THE CONTEXT OF SECTION 80HH. THE AO IS, THEREFORE, DIRECTED NO TO EXCLUDE THE AMOUNTS OF PROFIT ON SALE OF ASSETS, SALES TAX REFUND AND LIAB ILITIES WRITTEN BACK FROM THE PROFITS DERIVED FROM EXPORT ACTIVITIES WHILE COMPUTING DEDU CTION U/S 10A. THIS GROUND OF APPEAL SUCCEEDS. 14. AGAINST THE AFORESAID, THE LEARNED DEPARTMENTAL R EPRESENTATIVE HAS REITERATED THE ARGUMENTS SET UP BY THE ASSESSING OFFICER THAT THE AFORESAID INCOMES DO NOT MEET THE TESTS OF HAVING BEEN DERIVED BY AN UNDERTAKING FROM THE EXPORT OF ARTICLES AS CONTAINED IN SECTION 10A OF THE ACT AND, THEREFORE, THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN ALLOWING APPROPRIATE RELIEF TO THE ASSESSEE. 15. IN THIS CONNECTION, THE COUNSEL FOR THE RESPONDENT-A SSESSEE HAS DEFENDED THE CONCLUSION OF THE COMMISSIONER OF INCOME-TAX (APPEALS) BY RELYING UPON AN ORDER OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF LIVINGSTONES JEWELLERY (P) LTD. V.DCIT 31 SOT 323 (MUM), WHEREIN SIMILAR AR GUMENT HAS BEEN DEALT WITH IN FAVOUR OF THE ASSESSEE. 12 16. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. IN OUR VIEW, THE ASSESSEE IS CORRECT IN ASSERTING THAT A SIMILAR SITUATION HAS B EEN DEALT WITH BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF LIVINGSTON ES JEWELLERY (P) LTD (SUPRA) WHEREIN AN IDENTICAL ARGUMENT SET UP BY THE R EVENUE IN THE CONTEXT OF THE CLAIM OF DEDUCTION UNDER SECTION 10A HAS BEEN FOUND TO BE UNTENABLE. THE FOLLOWING DISCUSSION CONTAINED IN PARA 5 OF THE SAID DECISI ON IS WORTHY OF NOTICE: COMING BACK TO SECTION 10A WE FIND THAT SUB-SECTIO N (1) ALSO EMPLOYS THE EXPRESSION DERIVED FROM THE EXPORT OF ARTICLES. BUT IT IS NOT THE END OF THE MATTER. THE EXPRESSION PROFITS DERIVED FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE AS EMPLOYED IN SUB-SECTION (1) OR (1A) HAS BEEN GIVEN A SPECIFIC M EANING IN SUB-SECTION (4). THE SUB- SECTION (4) STATES THAT THE PROFITS DERIVED FROM E XPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE SHALL BE THE AMOUNT WHICH BEARS TO THE P ROFITS OF THE BUSINESS OF THE UNDERTAKING, THE SAME PORTION AS THE EXPORT TURNOV ER IN RESPECT OF SUCH ARTICLES O THINGS OR COMPUTER SOFTWARE BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE UNDERTAKING. BY PROVIDING FOR CONSIDERING THE PROF ITS OF THE BUSINESS OF THE UNDERTAKING, THE POSITION HAS BEEN MADE CLEAR THAT THE RESTRICTE D GENERAL MEANING GIVEN TO ELIGIBLE PROFITS AS DERIVED FROM THE EXPORT OF ARTICLES IN S UB-SECTION (1) HAS BEEN GIVEN A GO BY IN SUB-SECTION (4) AND THE SCOPE OF THE BENEFIT HAS BE EN EXPANDED BY EXTENDING TO THE AL PROFITS OF THE BUSINESS CARRIED ON BY THE UNDERTAKI NG. ONCE THE EXPRESSION DERIVED FROM HAVING RESTRICTED SCOPE HAS BEEN SPECIFICALLY DEFIN ED IN THE SAME SECTION, THEN THE MEANING OF SUCH EXPRESSION AS UNDERSTOOD IN COMMON PARLANCE WILL NOT BE APPLICABLE. RATHER THE SPECIFIC MEANING GIVEN TO IT WILL COME I NTO PLAY. WE FURTHER NOTE THAT SUB- SECTION (4) HAS BEEN WORDED ON THE PATTERN OF SECTI ON 80-IA, PRIOR TO ITS SUBSTITUTION WITH EFFECT FROM 1.4.2000, WHICH REFERRED TO PROFITS AN D GAINS DERIVED FROM ANY BUSINESS OF AN INDUSTRIAL UNDERTAKING. IN THE CONTEXT OF SECTION 80IA, THE AMRITSAR BENCH OF THE TRIBUNAL IN THE CASE OF DY. CIT V CHAMAN LAL & SONS (2005) 3 SOT 333 (TO WHICH ONE OF US, NAMELY THE AM, IS PARTY) HELD THAT IN SUCH A WORDED SECTION, THE BENEFIT OF DEDUCTION HAS TO BE MADE AVAILABLE IN RESPECT OF PURCHASE AND SAL E WHICH WAS PART AND PARCEL OF THE BUSINESS OF THE INDUSTRIAL UNDERTAKING. THUS WHEN S UB-SECTION (1) OF SECTION 10A IS READ IN JUXTAPOSITION TO SUB-SECTION (4), WE ARE NOT INC LINED TO ACCEPT THAT ONLY THE PROFITS AND GAINS AS DERIVED BY THE UNDERTAKING FROM THE EXPORT OF ARTICLES IS ELIGIBLE FOR DEDUCTION. ALL THE PROFITS WHICH HAVE NEXUS WITH THE BUSINESS OF THE UNDERTAKING WILL QUALIFY FOR DEDUCTION. FROM THE FACTS OF THE INSTANT CASE IT IS NOTED THAT THE ASSESSEE HAD GIVEN FDRS TO THE BANK FOR OBTAINING CREDIT FACILITY. SUC H INTEREST INCOME HAS NEXUS WITH THE BUSINESS OF THE UNDERTAKING AND FALLS UNDER THE HEA D PROFITS AND GAINS OF BUSINESS OR PROFESSION AS HAVING RELATION WITH THE CARRYING ON OF THE BUSINESS. SIMILAR VIEW HAS BEEN TAKEN IN THE CASE OF MOTOROLA INDIA ELECTRONICS (P) LTD. (SUPRA). IN OUR CONSIDERED OPINION THE LD CIT(A) WAS NOT JUSTIFIED IN TREATING THE INT EREST INCOME AS NOT DERIVED FROM THE EXPORT ACTIVITY. WE, THEREFORE HOLD THAT THE ASSESS EE WAS ENTITLED TO DEDUCTION U/S 10A IN RESPECT OF THE INTEREST INCOME. THE RESULTANT DENIA L OF DEDUCTION UNDER SECTION 10A IS DELETED. 17. FOLLOWING THE AFORESAID PRECEDENT, WE ENDORSE THE VIEW OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AND REVENUE FAILS O N THIS GROUND. 18. IN THE RESULT, REVENUES APPEAL IS DISMISSED . 19. IN THE ASSESSEES APPEAL, VIDE ITA NO 805/PN/09, TH E FIRST GROUND OF APPEAL RAISED IS THAT THE COMMISSIONER OF INCOME-TAX (A PPEALS) WAS NOT JUSTIFIED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN SETT ING-OFF LOSS OF UNIT-B 13 AGAINST PROFITS OF UNIT-A FOR THE PURPOSES OF COMPUTING THE DEDUCTION U/S 10A OF THE ACT RELATING TO UNIT A. 20. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSIN G OFFICER OBSERVED THAT THE ASSESSEE COMPANY HAD SHOWN A LOSS OF RS 1 ,78,08,674/- IN UNIT B AND HAD SHOWN PROFIT OF RS 13,15,75,991/- IN UNIT A. HE FURTHER OBSERVED THAT THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 10A OF TH E ACT IN RESPECT OF THE NET PROFIT OF RS 13,15,75,991/- PERTAINING TO UN IT A ALONE AND LOSS OF RS 1,78,08,674/- OF UNIT B WAS CARRIED FORWARD BY THE ASSE SSEE. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE PROFIT OF UNIT A WA S TO BE SET-OFF AGAINST LOSS OF UNIT B AS BOTH THE UNITS WERE ELIGIBLE FOR DEDUCTION U NDER SECTION 10A OF THE ACT. ACCORDING TO THE ASSESSING OFFICER, INCOME UNDER SECTION 10 A WAS PART OF TOTAL INCOME AND INCOME OR LOSS OF 10A UNIT NEEDED TO BE SET OFF AGAINST THE LOSS OF OTHER UNIT AS PER SECTION 70 OF THE ACT TO ARRIVE AT TH E TOTAL INCOME. ACCORDINGLY, HE SET-OFF THE LOSS OF UNIT B AGAINST THE PROFITS OF UNIT A AND WORKED OUT NET PROFIT OF UNIT A AT 11,37,67,317/- AND THE DEDUCTION UNDER SECTION 10A OF THE ACT WAS ACCORDINGLY ALLOWED. THE ASSESSEE TOOK UP THE MATTER IN A PPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS). 21. BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS), THE ASSESSEE REITERATED ITS STAND THAT WHILE COMPUTING DEDUCTION UN DER SECTION 10A OF THE ACT IN RESPECT OF THE PROFITS OF UNIT-A, LOSS PERTAINING TO UNIT-B IS NOT REQUIRED TO BE SET OFF AGAINST IT. IN SUPPORT OF THIS CONTENTION, ASSESS EE PLACED RELIANCE ON A CATENA OF JUDICIAL DECISIONS, INCLUDING THE DECISION OF T HE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF M/S WIPRO LTD. VIDE ITA NOS 42 6/BANG/2006, ETC. DATED 30.5.2008. THE COMMISSIONER OF INCOME-TAX (APPEALS) AF TER CONSIDERING THE DETAILED SUBMISSIONS OF THE ASSESSEE AND THE JUDICIAL DECISIO NS RELIED UPON BY THE ASSESSEE, HELD THAT THE ISSUE AT HAND IS SQUARELY COVER ED BY THE RATIO OF THE DECISION IN THE CASE OF NAVIN BHARAT INDUSTRIES LTD. V. DCIT 90 ITD 1 AND THAT THE DECISION IN THE CASE OF WIPRO LTD. (SUPRA) RELIED UPON BY THE ASSESSEE DID NOT 14 DIRECTLY DEAL WITH THE ISSUE UNDER CONSIDERATION. HE ACCOR DINGLY HELD THAT THE ACTION OF THE ASSESSING OFFICER IN SETTING-OFF THE LOSS OF U NIT B AGAINST PROFIT OF UNIT A WAS IN ACCORDANCE WITH LAW AND THUS AFFIRMED THE SAME. AGGRIEVED, ASSESSEE IS IN FURTHER APPEAL BEFORE US. 22. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE VEHE MENTLY SUBMITTED THAT THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN REJ ECTING THE CLAIM OF THE ASSESSEE FOR COMPUTING DEDUCTION UNDER SECTION 10A OF THE ACT FOR THE UNIT-A WITHOUT DEDUCTING THE LOSS PERTAINING TO UNIT-B. IN THIS CONNECTI ON, RELIANCE HAS BEEN PLACED ON THE DECISION OF THE COCHIN BENCH OF THE TRIB UNAL IN THE CASE OF M/S F.C.I TECHNOLOGY SERVICES LTD., COCHIN V. ACIT IN ITA N O 616/COCH/2008 DATED 04.06.2010, A COPY OF WHICH IS PLACED ON RECORD. 23. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE, APPEARING FOR THE REVENUE HAS DEFENDED THE ORDERS OF THE AUTHOR ITIES BELOW AND HAS IN PARTICULAR REFERRED TO THE DECISION OF THE COMMISSIONER OF INCOME-TAX (APPEALS) WHEREIN THE ASSESSEES CLAIM HAS BEEN REJECTED BY RELYING ON THE DECISION OF THE TRIBUNAL IN THE CASE OF NAVIN BHARAT INDUSTRIES LTD. (SUPRA). 24. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN THIS CASE, THE STAND OF THE ASSESSEE HAS BEEN NEGATED BY THE COMMISSIONER OF INCOME-TA X (APPEALS) FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF N AVIN BHARAT INDUSTRIES LTD. (SUPRA). IN SO FAR AS THE DECISION IN THE CASE OF NAVIN B HARAT INDUSTRIES LTD (SUPRA) IS CONCERNED, WE HAVE CAREFULLY PERUSED THE SAME AND FIND THAT THE RATIO DECIDENDI CONTAINED THEREIN IS INAPPLICABLE TO THE FACTS IN THE PRESENT CASE. IN THE CASE OF NAVIN BHARAT INDUSTRIES LTD (SUPRA), THE ISSUE REL ATED TO ASSESSEES CLAIM FOR SETTING OFF OF THE LOSS INCURRED IN A SEEPZ UNIT AG AINST INCOME OF OTHER UNITS WHILE WORKING OUT THE TOTAL INCOME OF THE ASSESSEE. THE REVENUE HAD NEGATED SUCH CLAIM OF THE ASSESSEE ON THE GROUND THAT SINCE TOTAL I NCOME OF THE UNIT WAS EXEMPT UNDER SECTION 10A OF THE ACT, THEREFORE, THE LO SS OF SUCH EXEMPT UNIT WOULD ALSO HAVE TO BE IGNORED/EXCLUDED FOR WORKING OUT TOTAL INCOME OF THE 15 ASSESSEE. THE TRIBUNAL NOTED THAT BENEFIT OF SECTION 10A WAS AVAILABLE TO THE ASSESSEE FOR 5 YEARS, BUT IT WAS CLAIMED ONLY FOR 3 YEARS A ND FOR REST OF THE YEARS, ASSESSEE DID NOT CLAIM BENEFIT OF SECTION 10A OF THE ACT A ND THE ASSESSEE OPTED TO GET ASSESSED THE INCOME OF THE UNIT UNDER THE NORMA L PROVISIONS. IT ALSO NOTICED THAT SECTION 10A OF THE ACT IS A CODE BY ITSELF AN D CANNOT BE COMPARED WITH SECTION 10 OF THE ACT. THEREFORE, IN THIS BACKGROUND , THE TRIBUNAL UPHELD THE PLEA OF THE ASSESSEE AND HELD THAT ASSESSEE WAS ENTITLED T O SET-OFF LOSS INCURRED BY SEEPZ UNIT AGAINST ITS OTHER INCOME UNDER THE NORMA L COMPUTATION PROCEDURE FOR THE PURPOSES OF COMPUTING TOTAL INCOME. THUS, THE STA ND OF THE ASSESSEE WAS UPHELD. QUITE CLEARLY, THE DISPUTE IN THE INSTANT CASE R ELATES TO MERE QUANTIFICATION OF DEDUCTION UNDER SECTION 10A OF THE ACT AS DISTINCT FROM THE CASE OF NAVIN BHARAT INDUSTRIES LTD. (SUPRA) WHERE THE ISSUE WAS TO WORK OUT THE TOTAL INCOME OF THE ASSESSEE. IN THE PRESENT CASE, THE ISSUE IS WHE THER LOSS OF A 10A ELIGIBLE UNIT IS LIABLE TO BE SET OFF AGAINST INCOME O F ANOTHER 10A ELIGIBLE UNIT SO AS TO COMPUTE THE ELIGIBLE DEDUCTION OF THE LATTER UN IT. THE PRECISE QUESTION HAS BEEN THE SUBJECT MATTER OF CONSIDERATION BY THE COCHI N BENCH IN THE CASE OF M/S F.C.I TECHNOLOGY SERVICES LTD. (SUPRA) AND IN SO FAR AS T HE DECISION IN THE CASE OF NAVIN BHARAT INDUSTRIES LTD (SUPRA) IS CONCERNED, THE SAME IS RENDERED ON A DIFFERENT FOOTING. THE RELEVANT PORTION OF THE ORDE R OF THE TRIBUNAL IN THE CASE OF M/S F.C.I TECHNOLOGY SERVICES LTD. (SUPRA) IS AS UNDER: 4.2 IN THE PRESENT CASE, WHILE THE ASSESSEE CLAIM S DEDUCTION QUA ITS ONLY PROFIT EARNING S.10A UNIT BY CONSIDERING IT AS ITS ONLY SOURCE OF INCOME, THE REVENUE SEEKS TO ADJUST THE SAID INCOME AGAINST LOSSES FROM THE OTHER TWO U NITS, ONE OF WHICH IS AN ELIGIBLE (U/S 10A) UNIT, FOR COMPUTING THE DEDUCTION U/S 10A. THE ISSUE OF SET OFF OR ADJUSTMENT OF SEC.10A INCOME AGAINST NON-SECTION 10A INCOME STAND S ANSWERED BY THE TRIBUNAL PR ITS SPECIAL BENCH DECISION IN THE CASE OF SCIENTIFIC AT LANTA INDIA TECHNOLOGY P. LTD. (SUPRA), WHICH IS EVEN OTHERWISE BINDING ON US, SO THAT THE SAME MUST BE CONSIDERED AS RESOLVED, AT LEAST AS FAR AS THE TRIBUNAL IS CONCERNED; THE R EVENUE NOT BRINGING ANY DECISION TO THE CONTRARY BY AN HIGHER AUTHORITY TO OUR NOTICE. THE SECOND ASPECT OF THE MATTER, I.E. AGGREGATION OF THE INCOME FROM TWO (OR MORE) ELIGIB LE (U/S 10A) UNDERTAKINGS AND, CONSEQUENTLY, THE SET OFF OF THE TWO, WHERE ONE OF THEM IS IN LOSS, AS IN THE PRESENT CASE, REMAINS FOR BEING ANSWERED. AS THIS ISSUE WAS NOT CONSIDERED OR ADDRESSED AT T HE TIME OF HEARING, THE MATTER WAS POSTED FOR HEARING AGAIN, T O ALLOW THE PARTIES AN OPPORTUNITY OF HEARING ON THIS ASPECT OF THE MATTER. THE LD AR DRE W OUR ATTENTION TO THE DIFFERENT PARAGRAPHS OF THE SAME DECISION, WHERE, WHILE DISCU SSING THE MATTER WITH REFERENCE TO THE PRECEDENTS IN THE MATTER, IT STANDS EMPHASIZED THAT DEDUCTION U/S 10A IS QUA AN UNDERTAKING. NOWHERE THE WORD UNDERTAKINGS, IS USED. THE SAME, IT WAS ARGUED, THUS, CANNOT BE CONSIDERED AS PLURAL, AND WHERE MORE THAN ONE UNIT QUALIFIES FOR BENEFIT U/S 16 10A, THE SAME HAS TO BE WORKED OUT INDEPENDENTLY FO R EACH SUCH UNIT. THE LD DR, ON THE OTHER HAND, WOULD SUBMIT THAT THE SAME GOES AGAINST THE GRAIN OF THE DECISION BY THE SPECIAL BENCH; IT, ADJUDICATING THE ISSUE OF SET OF F OF LOSS (FROM A NON-ELIGIBLE UNIT) AGAINST THE PROFIT FROM AN ELIGIBLE UNDERTAKING, FOR THE PU RPOSE OF COMPUTATION OF DEDUCTION U/S 10A, CLEARLY HOLDS THE SAME AS NOT PERMISSIBLE; THE TWO INCOMES FALLING UNDER DIFFERENT CHAPTERS OF THE ACT. THAT BEING THE PREMISES OF ITS DECISION, IT FOLLOWS THAT WHERE THE LOSS IS ALSO FROM AN ELIGIBLE UNDERTAKING (SOURCE), IT W OULD WARRANT BEING SET OFF OR ADJUSTED PRIOR TO THE GRANT OF DEDUCTION U/S 10A. THE TRIBUN AL INDICATES SO IN NO UNCERTAIN TERMS WHEN IT STATES, AT PARA 27 OF ITS ORDER, OF THE POS ITION BEING DIFFERENT WHERE THE LOSS WHICH IS TO BE SET OFF IS FROM AN ELIGIBLE UNDERT AKING, AND THAT ITS DECISION (REGARDING THE NON-SET OFF OF LOSS OF AN NON-ELIGIBLE UNIT) SHALL HAVE NO APPLICATION IN SUCH A CASE; THE RELEVANT PART OF ITS ORDER READING AS: 27. HAVING HELD THAT. OF COURSE, IF THERE ARE MO RE THAN ONE UNDERTAKING WHICH IS ELIGIBLE FOR DEDUCTION U/S 10A AND IF SOME OF THE UNITS HAVE PROFIT AND OTHER UNITS HAVE LOSS, IT WOULD BE AN ENTIRELY DIFF ERENT CASE WHICH IS BEFORE US. HENCE, THE DECISION RENDERED IN THIS APPEAL WOULD N OT BE APPLICABLE TO SUCH CASES WHERE THERE ARE MORE THAN ONE ELIGIBLE UNDERT AKING CLAIMING DEDUCTION UNDER SECTION 10A. IN THIS CASE THERE IS ONLY ONE E LIGIBLE UNDERTAKING CLAIMING DEDUCTION U/S 10A AND HENCE, THE LOSS FROM THE NON- ELIGIBLE UNIT CANNOT BE SET OFF AGAINST THE PROFITS OF THE ELIGIBLE UNIT WHILE DETE RMINING THE DEDUCTIONS U/S 10A 4.3 WE HAVE GIVEN OUR ANXIOUS CONSIDERATION TO TH E MATTER, AND FOR THE REASONS THAT FOLLOW, ARE NOT MOVED IN FAVOUR OF THE REVENUES ST AND. THAT THE DEDUCTION U/SS. 10A AND 10B, AS ALSO AS THOSE U/S 80HH, 80HHA, 80I, 80IA, E T. AL. ARE UNIT-SPECIFIC, IN CONTRADISTINCTION TO BEING ASSESSEE-SPECIFIC, IS WE LL-SETTLED, AND NOT IN DISPUTE, AND FOR WHICH REFERENCE MAY BE MADE TO THE DECISION IN THE CASE OF SCIENTIFIC ATLANTA INDIA TECHNOLOGY PVT. LTD. (SUPRA) ITSELF, WHEREIN THIS A SPECT STANDS EMPHASIZED IN SUFFICIENT DETAIL. THAT BEING THE BASIC POSITION IN RESPECT OF THE DEDUCTION, THE NEXT QUESTION IN THE MATTER WOULD BE WITH REGARD TO ITS QUANTIFICATION, I.E. THE QUALIFYING AMOUNT OF PROFIT AND GAINS ON WHICH THE SAME IS TO BE ALLOWED OR WORKED AT. AGAINST, THE DEDUCTION BEING UNIT- SPECIFIC AND, FURTHER, NOT FORMING PART OF GTI, IT IS NOT SUBJECT TO EITHER AGGREGATION OR ADJUSTMENT AND, CONSEQUENTLY, TO THE RESTRICTIVE IN FLUENCE OF SS. 80A(2) AND 80AB OF CHAPTER VI-A. ALSO, THERE IS NOTHING IN THE SECTION THAT SUGGESTS AGGREGATION OF PROFITS FROM TWO OR MORE ELIGIBLE UNDERTAKINGS, SO THAT THE PROFIT DERIVED FROM EACH IS TO BE CONSIDERED SEPARATELY, I.E. AS IF IT WERE THE ONLY INCOME OF THE ASSESSEE, FOR THE PURPOSE OF COMPUTATION OF DEDUCTION THEREUNDER. IN OTHER WO RDS, THE QUALIFYING AMOUNT AN, CONSEQUENTLY, THE DEDUCTION IN ITS RESPECT IS TO BE WORKED ON A STAND-ALONE BASIS, INDEPENDENTLY FOR EACH ELIGIBLE UNIT. IN THIS RESPE CT, SS.10A AND 10B ARE A SEPARATE CODE IN THEMSELVES. THE TREATMENT OF THE UNABSORBED LOSS OR DEPRECIATION, AS THE CASE MAY BE, THAT MAY ARISE FOR ANY OF THE YEARS, WHETHER IN SIDE OR OUTSIDE THE TAX HOLIDAY PERIOD, STANDS, AGAIN, PROVIDED THEREUNDER. OF COURSE, ONCE THE TAX HOLIDAY PERIOD EXPIRES, THERE IS NO QUESTION OF THE UNDERTAKING BEING AN ELIGIBLE ONE, AND INCOME THEREFROM, SUBJECT TO ANY LIMITATION PROVIDED N ITS REWSPECT UNDER THE PR OVISION ITSELF, WOULD FAIL TO BE CONSIDERED AS ONLY FROM A NON-ELIGIBLE SOURCE. THE QUESTION HERE IS NOT OF THE SINGULAR OR PLURAL SENSE IN WHICH THE WORD UNDERTAKING IS USE D IN THE SECTION, OR IS CAPABLE OF BEING READ, BUT WHETHER THERE IS ANY POSITIVE RELATIONSHI P BETWEEN THE INCOMES DERIVED FROM TWO ELIGIBLE SOURCES. THE PROVISION IS COMPLETELY S ILENT IN THE MATTER, SO THAT THE ONLY CONCLUSION IS AN EMPHATIC NO, AND THE SAME ARE TO B E CONSIDERED DE HORS EACH OTHER. THE ISSUE BEFORE THE SPECIAL BENCH WAS THE ADMISSIB ILITY OF THE SET OFF OF LOSS OF AN NON- ELIGIBLE UNIT AGAINST THE PROFIT FROM AN ELIGIBLE O NE, FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 10A. IT IS WELL SETTLED THAT A DECISI ON IS AN AUTHORITY ON WHAT IT ACTUALLY DECIDES. ITS OBSERVATIONS AT PARA 27 OF ITS ORDER, THEREFORE, ARE TO BE READ IN THE CONTEXT OF THE ISSUE THAT WAS BEFORE IT AND, FURTHER, LIMIT ED TO THAT. WHEN IT STATES THAT ITS DECISION WOULD HAVE NO APPLICATION TO A CASE WHERE THE LOSS (TO BE SET OFF) IS FROM AN ELIGIBLE UNIT, THE SAME HAS TO BE READ AS JUST THAT, I.E. THAT IT HAS NOT EXPRESSED ANY OPINION IN THE MATTER, SO THAT THE ISSUE IS AT LARGE, AND CANNOT B E CONSTRUED AS A POSITIVE STATEMENT BY IT, AS CONTENDED BY THE REVENUE. 4.4 IN VIEW OF THE FOREGOING, WE MAY SUM UP OUR F INDINGS, AS UNDER: 17 (A). THE DEDUCTION U/S 10A IN RESPECT OF THE ISR CE NTRE, BANGALORE, IS TO BE COMPUTED ONLY QUA ITS PROFITS, I.E., WITHOUT ANY AD JUSTMENT OR SET OFF OF ANY LOSS FROM ANY OTHER SOURCE, EITHER ELIGIBLE OR NON-ELIGI BLE (U/S 10A). THE ALLOCATION OF PRELIMINARY EXPENSES U/S 35D FOR THE PURPOSE COULD EITHER ON SOME REASONABLE BASIS, AS TURNOVER, OR BETTER STILL, SET OFF AGAINS T THE SPECIFIC INCOME(S) OF THE UNIT(S) IN RELATION TO THE SETTING UP OR EXPANSION OF WHICH THE SAME STOOD INCURRED IN THE FIRST PLACE. (B). THE INCOME THAT OBTAINS AFTER THE DEDUCTION U/ S 10A, OR THE UNABSORBED CLAIM U/S 10A, AS THE TRIBUNAL DESCRIBES IT IN THE CASE O F SCIENTIFIC ATLANTA INDIA TECHNOLOGY PVT. LTD. (SUPRA) WOULD STAND TO BE TAXE D AS SUCH, I.E., SHALL NOT BE SET OFF AGAINST ANY OTHER LOSS OR BE CARRIED FORWAR D. 25. FOLLOWING THE AFORESAID PRECEDENT, WHICH HAS BEEN R ENDERED IN SIMILAR CIRCUMSTANCES, WE HOLD THAT THE ASSESSING OFFICER WAS NOT JUS TIFIED IN REJECTING THE ASSESSEES CLAIM OF COMPUTING DEDUCTION UNDER SECTION 1 0A OF THE ACT FOR THE PROFITS OF UNIT-A WITHOUT DEDUCTING LOSS PERTAINING TO UNIT-B. AS A RESULT, WE SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPE ALS) AND DIRECT THE ASSESSING OFFICER TO RECOMPUTE THE DEDUCTION PERTAINING TO UNIT-A ACCORDINGLY. THUS ON THIS GROUND, ASSESSEE SUCCEEDS. 26. GROUND NO. 2 READS AS FOLLOWS: TREATMENT OF TELECOMMUNICATION CHARGES IN COMPUTIN G DEDUCTION U/S 10A. THE LD CIT(A) ERRED IN HOLDING THAT 80% OF TELECOMM UNICATION CHARGES ARE ATTRIBUTABLE TO THE DELIVERY OF SOFTWARE OUTSIDE INDIA AND HENCE IS REQUIRED TO BE REDUCED FROM EXPORT TURNOVER. YOUR APPELLANT PRAYS THAT TELECOMMUNICATION CHARGES ATTRIBUTABLE TO DELIVERY OF SOFTWARE OUTSIDE INDIA ESTIMATED TO BE NOT MORE THAN 5 TO 10 % BE ACCEPTED. AT THE TIME OF HEARING BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS THIS GROUND, IN VIEW OF THE SMALLNESS OF TH E QUANTUM INVOLVED. ACCORDINGLY, WE DISMISS THIS GROUND AS NOT PRESSED. 27. GROUND NO. 3 READS AS UNDER: EXPENSES REDUCED FROM EXPORT TURNOVER ONLY WITHOUT PREJUDICE TO GROUND NO. 2 ABOVE, THE LD CIT (A) ERRED IN UPHOLDING THE ACTION OF THE AO THAT FOLLOWING EXPENSES ARE REQUIRED TO BE R EDUCED ONLY FROM EXPORT TURNOVER WITHOUT A CORRESPONDING ADJUSTMENT IN TOTAL TURNOV ER WHILE COMPUTING DEDUCTION UNDER SECTION 10A. TELECOMMUNICATION CHARGES - RS 15,040,083 EXPENSES INCURRED IN FOREIGN CURRENCY - RS 16,608, 519 YOUR APPELLANT PRAYS THAT DEDUCTION FROM TOTAL TUR NOVER BE MADE FOR ANY CORRESPONDING DEDUCTION FROM EXPORT TURNOVER. 18 28. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSIN G OFFICER ADJUSTED TELECOMMUNICATION CHARGES AND EXPENSES INCURRED IN FOREIGN CURRENCY ONLY FROM THE FIGURE OF EXPORT TURNOVER WITHOUT A CORRESPONDING REDUCTION FROM THE FIGURE OF TOTAL TURNOVER. BEFORE THE COMMISSION ER OF INCOME-TAX (APPEALS), ASSESSEE PLEADED THAT THE ASSESSING OFFICER BE DIRECTED TO REDUCE TELECOMMUNICATION CHARGES AND EXPENSES INCURRED IN F OREIGN CURRENCY ALSO FROM TOTAL TURNOVER FOR THE PURPOSE OF COMPUTING DE DUCTION UNDER SECTION 10A OF THE ACT. IN THIS CONTEXT, ASSESSEE RELIED UPON FOLLO WING DECISIONS: I) TATA ELXSI LTD. VIDE ITA NO. 315(BANG)/2006; AND, II) M/S SAK SOFT LTD, VIDE ITSA NOS 691 & 1953/MDS/2007 . AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE COMMI SSIONER OF INCOME- TAX (APPEALS) AFFIRMED THE DECISION OF THE ASSESSING OFFI CER BY HOLDING AS UNDER: COMING TO THE ISSUE AT HAND, IT IS SEEN THAT OUT O F THE TERMS EXPORT TURNOVER AND TOTAL TURNOVER ONLY THE TERM EXPORT TURNOVER HAS SPECI FICALLY BEEN DEFINED IN SECTION 10A AND NO SPECIFIC DEFINITION HAS BEEN GIVEN FO THE TERM TOTAL TURNOVER. IN SUCH A SITUATION, THE TERM TOTAL TURNOVER HAS TO BE UNDERSTOOD AS PER T HE COMMON UNDERSTANDING. IT NEEDS TO BE APPRECIATED THAT ALTHOUGH THE TERM TOTAL TURNOV ER HAS BEEN DEFINED IN SECTION 80HHE, THE MEANING AS PER SECTION 80HHE REMAINS RESTRICTED TO SECTION 80HHE ONLY. THE LEGISLATURE, IN ALL ITS WISDOM, HAS REFRAINED ITSEL F FROM SPECIFICALLY DEFINING THE TERM TOTAL TURNOVER IN SECTION 10A AND IT SHALL BE PRESUMPTUO US TO CONSIDER THE ACT OF NO DEFINING THE TERM TOTAL TURNOVER IN SECTION 10A AS A LAPSE ON THE PART OF THE LEGISLATURE. RATHER, SUCH OMISSION INDICATES THE INTENTION OF THE LEGISL ATURE THAT THE TERM TOTAL TURNOVER IN SECTION 10A IS TO BE UNDERSTOOD AS IT IS UNDERSTOOD IN COMMON PARLANCE. THEREFORE, TO MY MIND, IT SHALL NOT BE CORRECT TO IMPORT THE MEANING OF THE TERM TOTAL TURNOVER FROM SECTION 80HHE TO SECTION 10A. ACCORDINGLY, THIS GROUND OF A PPEAL FAILS. BEING AGGRIEVED WITH THE DECISION OF THE COMMISSIONER O F INCOME-TAX (APPEALS), ASSESSEE IS IN FURTHER APPEAL BEFORE US. 29. BEFORE US, LEARNED COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THE LOWER AUTHORITIES HAVE ERRED IN LAW WHILE ADJUSTING THE IMP UGNED EXPENSES ONLY FROM EXPORT TURNOVER WITHOUT A CORRESPONDING REDUCTION F ROM THE FIGURE OF TOTAL TURNOVER. THE MAIN REASON ADVANCED IS THAT THE ADJUST MENTS ARE MERITED FROM THE FIGURE OF TOTAL TURNOVER ALSO ON THE PRINCIPLE OF PARITY FOR THE PURPOSE OF COMPUTING THE ELIGIBLE DEDUCTION UNDER SECTION 10A OF T HE ACT. IN THIS CONNECTION, RELIANCE HAS BEEN PLACED ON THE FOLLOWING DECISIONS: (I) ITO V SAK SOFT LTD. 121 TTJ 865 (CHENNAI) (SB) (II) CIT V. GEM PLUS JEWELLERY INDIA LTD 233 CTR 24 8 (BOM) 19 30. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE, APPEARING FOR THE REVENUE, CONTENDED THAT THE COMMISSIONER OF IN COME-TAX (APPEALS) MADE NO MISTAKE IN DIS-AGREEING WITH THE ASSESSEE INASMU CH AS THE EXPRESSION EXPORT TURNOVER HAS BEEN SPECIFICALLY DEFINED IN SECTI ON 10A AND FOR THAT REASON THE IMPUGNED EXPENSES HAVE BEEN ADJUSTED, WHEREAS NO SPECIFIC DEFINITION IS LAID DOWN FOR THE EXPRESSION TOTAL TURNOVER IN THE SECTION AND, THEREFORE, ITS MEANING HAS TO BE BASED ON ITS COMMON UNDERSTANDING. T HEREFORE, THE AFORESAID AMOUNTS NEED NOT BE REDUCED FROM THE FIGURE OF TOTA L TURNOVER FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 10A OF THE ACT. 31. WE HAVE CAREFULLY CONSIDERED THE RIVAL STANDS AND FI ND THAT THE ISSUE IS LIABLE TO BE DECIDED IN THE LIGHT OF THE REASONING PR OPOUNDED BY THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF GEM PLUS JEWELLERY IND IA LTD. (SUPRA). IN THE CASE BEFORE THE HONBLE HIGH COURT, THE ISSUE RELATED T O THE EXCLUSION OF FREIGHT AND INSURANCE CHARGES FROM THE FIGURE OF TOTAL TURNO VER FOR THE PURPOSES OF COMPUTING DEDUCTION UNDER SECTION 10A OF THE ACT. IN T HAT CASE, THE ASSESSING OFFICER WHILE COMPUTING DEDUCTION UNDER SECTION 10A OF THE ACT REDUCED THE ELEMENT OF FREIGHT AND INSURANCE CHARGES FROM THE FIGU RE OF EXPORT TURNOVER, BUT DID NOT MAKE SIMILAR ADJUSTMENT FROM THE FIGURE OF TO TAL TURNOVER. THE REVENUE SOUGHT TO JUSTIFY THIS ACTION ON THE PLEA THAT IN TERM S OF THE DEFINITION OF THE EXPRESSION EXPORT TURNOVER IN EXPLANATION 2 (IV) TO SECTION 10A THE LEGISLATURE HAS MADE A SPECIFIC EXCLUSION OF FREIGHT AND INSURANCE CHAR GES, WHEREAS, NO SUCH PRESCRIPTION WAS AVAILABLE IN THE SECTION FOR THE PUR POSES OF THE TOTAL TURNOVER. THE HONBLE HIGH COURT NEGATED THE AFOR ESAID ARGUMENT AND HELD THAT THE EXPRESSION EXPORT TURNOVER CANNOT HAVE A DIFFERE NT MEANING WHEN IT FORMS A CONSTITUENT PART OF THE TOTAL TURNOVER FOR THE PURP OSES OF THE APPLICATION OF THE FORMULA CONTAINED IN SECTION 10A(4) OF THE ACT. THE FOL LOWING DISCUSSION CONTAINED IN PARA 7 OF THE JUDGMENT IS WORTHY OF NOTI CE: 7. THE SUBMISSION WHICH HAS BEEN URGED ON BEHALF O F THE REVENUE IS THAT WHILE FREIGHT AND INSURANCE CHARGES ARE LIABLE TO BE EXCL UDED IN COMPUTING EXPORT TURNOVER, A SIMILAR EXCLUSION HAS NOT BEEN PROVIDED IN REGARD T O TOTAL TURNOVER. THE SUBMISSION OF THE 20 REVENUE, HOWEVER, MISSES THE POINT THAT THE EXPRESS ION TOTAL TURNOVER HAS NOT BEEN DEFINED AT ALL BY PARLIAMENT FOR THE PURPOSES OF S. 10A. HOWEVER, THE EXPRESSION EXPORT TURNOVER HAS BEEN DEFINED. THE DEFINITION OF EXPO RT TURNOVER EXCLUDES FREIGHT AND INSURANCE. SINCE EXPORT TURNOVER HAS BEEN DEFINED B Y PARLIAMENT AND THERE IS A SPECIFIC EXCLUSION OF FREIGHT AND INSURANCE, THE EXPRESSION EXPORT TURNOVER CANNOT HAVE A DIFFERENT MEANING WHEN IT FORMS A CONSTITUENT PART OF THE TOTAL TURNOVER FOR THE PURPOSES OF THE APPLICATION OF THE FORMULA. UNDOUBTEDLY, IT WAS OPEN TO PARLIAMENT TO MAKE A PROVISION TO THE CONTRARY. HOWEVER, NO SUCH PROVISI ON HA ING BEEN MADE, THE PRINCIPLE WHICH HAS BEEN ENUNCIATED EARLIER MUST PREVAIL AS A MATTER OF CORRECT STATUTORY INTERPRETATION. ANY OTHER INTERPRETATION WOULD LEAD TO AN ABSURDITY. IF THE CONTENTION OF THE REVENUE WERE TO BE ACCEPTED, THE SAME EXPRESSION VI Z. EXPORT TURNOVER WOULD HAVE A DIFFERENT CONNOTATION IN THE APPLICATION OF THE SAM E 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 TH E PURPOSES 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. 32. APPLYING THE AFORESAID REASONING LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT TO THE PRESENT CASE, WE HOLD THAT THE IMPU GNED TWO ITEMS, NAMELY, TELECOMMUNICATION CHARGES RS 1,50,40,083/- AND EXPE NSES INCURRED IN FOREIGN CURRENCY RS 1,60,08,519/- ARE LIABLE TO BE E XCLUDED FROM THE FIGURE OF TOTAL TURNOVER ALSO FOR THE PURPOSES OF COMPUTING DE DUCTION UNDER SECTION 10A OF THE ACT. AS A RESULT, ASSESSEE SUCCEEDS ON THIS GROUND. 33. IN THE RESULT, WHEREAS THE APPEAL OF THE REVENUE IS DISMISSED, THAT OF THE ASSESSEE IS PARTLY ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 30 TH THIS DAY OF NOVEMBER, 2011. SD/- SD/- (I C SUDHIR) (G.S. PANNU) JUDICIAL MEMBER ACC OUNTANT MEMBER PUNE: 30 TH NOVEMBER, 2011 B COPY TO:- 1) APPELLANT 2) RESPONDENT 3) THE CIT (A) III PUNE 4) THE CIT IV PUNE 5) THE D R, A BENCH, PUNE 6) GUARD FILE TRUE COPY BY ORDER SR. PS, I.T.A.T., PUNE 21
