Appeal details
Counselvise Citation
[2017] 126 COUNSELVISE.COM (IT) 7202 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 year(s) 6 month(s) 24 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
10-11-2017
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Next Hearing Date
20-10-2016
Assessment Year
2005-2006
Appeal Filed On
16-04-2013
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM ITA NO.864/PUN/2013 ASSESSMENT YEAR : 2005-06 M/S SYMANTEC SOFTWARE INDIA PVT. LTD., (EARLIER KNOWN AS VERITAS SOFTWARE INDIA PVT. LTD.), ICON, S.NO.3/8, BANER ROAD, PUNE 411 045. PAN : AAACV6015F .APPELLANT. VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 7, PUNE. RESPONDENT ITA NO.961/PUN/2013 ASSESSMENT YEAR : 2005-06 THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-7, PUNE. APPELLANT VS. SYMANTEC SOFTWARE INDIA PVT. LTD., (FORMERLY VERITAS SOFTWARE INDIA PVT. LTD.), S.NO.210/1A, SYMPHONY, RANGE HILLS, PUNE 411 020. PAN : AAACV6015F .RESPONDENT CO NO.70/PN/2014 (ARISING OUT OF ITA NO.961/PUN/2013) ASSESSMENT YEAR : 2005-06 M/S SYMANTEC SOFTWARE INDIA PVT. LTD., (FORMERLY VERITAS SOFTWARE INDIA PVT. LTD.), EON FREE ZONE, 0-05 FLOOR, WING 1, CLUSTER B, PLOT NO.1, SURVEY NO.77, MIDC, KNOWLEDGE PARK, KHARADI, PUNE 411 014. PAN : AAACV6015F CROSS-OBJECTOR/ APPELLANT. VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 7, PUNE. RESPONDENT 2 ITA NO.611/PN/2015 ITA NO.664/PN/2015 ASSESSEE BY : SHRI RAJENDRA AGIWAL. REVENUE BY : SHRI RAJEEV KUMAR, CIT. / DATE OF HEARING : 23.08.2017 / DATE OF PRONOUNCEMENT: 10.11.2017 / ORDER PER ANIL CHATURVEDI, AM : 1. THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVE NUE AND THE CROSS-OBJECTION FILED BY ASSESSEE ARE DIRECTED AGAINST TH E ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-IT/TP, PUNE 06.02.2013 FOR THE ASSESSMENT YEAR 2005-06. 2. BOTH THE CAPTIONED APPEALS AND CROSS OBJECTION ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER. 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIALS ON R ECORD ARE AS UNDER :- ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BU SINESS OF SOFTWARE DEVELOPMENT SERVICES, RENDERING TECHNICAL SUPPORT SERVICES AND RELATED SERVICES. THE ASSESSEE FILED ITS RETURN OF IN COME FOR ASSESSMENT YEAR 2005-06 ON 28.11.2005 DECLARING TOTAL INC OME AT RS. NIL. THE CASE WAS SELECTED FOR SCRUTINY. IT WAS NOTICED B Y THE AO THAT ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTIONS AN D ACCORDINGLY REFERENCE WAS MADE BY HIM TO THE TRANSFER PRICING OFFICER ( TPO) FOR DETERMINING THE ARM'S LENGTH PRICE (ALP) OF THE INTERNATIO NAL TRANSACTIONS. THEREAFTER, ADDL. CIT(TP)-II, PUNE (TPO) VID E ORDER DATED 19.09.2008 PASSED AN ORDER UNDER SECTION 92CA(3) AND DET ERMINED THE 3 ITA NO.611/PN/2015 ITA NO.664/PN/2015 TOTAL ADJUSTMENT OF RS.23,36,53,039/- WHICH WAS REQUIRED TO BE MADE TO THE INTERNATIONAL TRANSACTIONS. ON RECEIPT OF THE SAID ORDER FROM TPO NOTICE UNDER SECTION 142(1) OF THE ACT WAS ISSUED BY AO A ND AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, ASSESSMENT O RDER WAS FRAMED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 19.12.2008 AND THE TOTAL TAXABLE INCOME WAS DETERMINED AT RS.26,41,00,550/ -. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATT ER BEFORE THE LD.CIT(A), WHO VIDE A CONSOLIDATED ORDER DATED 06.02.2013 FO R ASSESSMENT YEARS 2005-06 TO 2008-09 GRANTED PARTIAL R ELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE AND THE REVENUE ARE NOW IN APPEAL BEFORE US. THE EFFECTIVE GROUN DS RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.864/PUN/2013 READS AS UNDER : - BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLANT RESPECTFULLY CRAVES LEAVE TO PREFER AN APPEAL AGAIN ST THE ORDER DATED 6 FEBRUARY 2013 PASSED BY THE HON'BLE CIT(A) UNDER S ECTION 250 OF THE ACT ON THE FOLLOWING GROUNDS, WHICH ARE INDEPENDENT OF AND WITHOUT PREJUDICE TO ONE ANOTHER: ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND I N LAW, THE HON'BLE CIT(A) HAS: 1. GROUND 1: ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFI CER IN DISALLOWING DEDUCTION UNDER SECTION 10A OF THE ACT ON LIABILITIES WRITTEN-BACK OF RS.14,13,817/- 2. GROUND 2: ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFI CER IN DISALLOWING DEDUCTION UNDER SECTION 10A OF THE ACT ON INTEREST INCOME OF RS.22,03,994/- 4. ON THE OTHER HAND, THE GROUNDS RAISED BY THE REVEN UE IN ITS APPEAL IN ITA NO.961/PUN/2013 READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION U/S. 10A ON THE PROFIT OF UNIT B ALSO. 4 ITA NO.611/PN/2015 ITA NO.664/PN/2015 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEARNE D CIT(A) HAS ERRED IN HOLDING THAT THE GAIN FROM FLUCTUATION OF FOREIG N EXCHANGE IS DIRECTLY RELATED WITH THE EXPORT ACTIVITIES AND SHOULD AS IN COME DERIVED FROM EXPORT IN THE YEAR IN WHICH EXPORT TOOK PLACE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEARNE D CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO REDUCE THE TE LECOMMUNICATION CHARGES NOT ONLY FROM THE EXPORT TURNOVER BUT ALSO FROM THE TOTAL TURNOVER. 5. WE FIRST TAKE UP ASSESSEES APPEAL IN ITA NO.864/PUN/2 013 AND ALSO THE GROUNDS OF THE REVENUE TO THE EXTENT THEY AR E INTER-CONNECTED WITH THE ASSESSEES APPEAL. 6. THE FIRST GROUND IS WITH RESPECT TO DISALLOWING DEDUCTION UNDER SECTION 10A ON THE LIABILITY WRITTEN-BACK OF RS.14,13,817/-. T HIS GROUND OF ASSESSEES APPEAL IS INTER-CONNECTED WITH GROU ND NO.2 OF REVENUES APPEAL AND THEREFORE BOTH ARE CONSIDERED TOGETHER. 7. ON PERUSAL OF THE RECORDS AND THE DETAILS OF INCOME, IT W AS NOTICED THAT ASSESSEE HAD CLAIMED DEDUCTION ON INCOME FRO M EXCHANGE GAIN (RS.1,96,72,868/-), INTEREST INCOME (RS.24,61,093/-), LIABILITIES N O LONGER REQUIRED WRITTEN-BACK (RS.14,13,817/-) AND THE AGGRE GATE OF SUCH INCOME BEING RS.2,35,47,778/-. THE AO WAS OF THE VIE W THAT THE AFORESAID INCOME WAS NOT DERIVED FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARES AND FURTHER THE ASSESSEE IN THE NOT ES TO THE FINANCIAL STATEMENTS HAD ITSELF SHOWN THE INCOME AS OTHER INCOME . HE ACCORDINGLY DENIED THE CLAIM OF DEDUCTION UNDER SECTION 10 A OF THE ACT ON SUCH INCOME. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIO NS OF THE ASSESSEE DECIDED THE ISSUE :- 5 ITA NO.611/PN/2015 ITA NO.664/PN/2015 GROUND 2 DISALLOWANCE OF DEDUCTION U/S10A ON FORE IGN EXCHANGE GAIN, INTEREST INCOME AND LIABILITIES NO LONGER REQ UIRED WRITTEN BACK. 2.2.1 THE LEARNED AO DENIED THE DEDUCTION ON THE AB OVE ITEMS OF INCOME TOTALING RS 2,35,47,778. ACCORDING TO HIM, T HESE INCOMES ARE NOT DERIVED FROM THE EXPORT OF ARTICLES OR THINGS OR CO MPUTER SOFTWARE. 2.2.2 THE APPELLANT HAS SUBMITTED THAT THIS ISSUE I S COVERED IN FAVOUR OF THE APPELLANT BY MY PREDECESSOR'S ORDER FOR THE AY 2004-05. THE CIT(A) HELD THAT SECTION 10A(4) PROVIDES FOR COMPUTATIONAL MECHANISM OF 'PROFITS OF THE BUSINESS OF THE ELIGIBLE UNDERTAKING'. ON TH IS BASIS, IT WAS HELD THAT THE ITEMS CREDITED TO PROFIT AND LOSS ACCOUNT WOULD BE ELIGIBLE FOR THE DEDUCTION U/S10A BECAUSE THEY ARE PART OF THE 'PROF ITS OF THE BUSINESS OF THE ELIGIBLE UNDERTAKING', THE APPELLANT ALSO RELIE D ON THE FOLLOWING DECISIONS: I. LIVINGSTONES JEWELLERY (P) LTD VS DCIT (31 SOT 3 23 ) (MUM ITAT) II. WIPRO LTD VS DCIT ( 34 DTR 493) (BANG ITAT) III. CIT VS MOTOROLA INDIA ELECTRONICS (P) LTD ( 11 2 TTJ 562) (BANG ITAT) IV. CIT VS ELTEK SGS (P) LTD (215 CTR 279) (DELHI HC) FINDINGS 2.2.3 I HAVE CONSIDERED THE ARGUMENTS OF THE APPELL ANT AND GONE THROUGH THE CASE-LAWS RELIED ON BY IT. AS FAR AS FO REIGN EXCHANGE GAIN IS CONCERNED, IT HAS BEEN HELD BY THE JURISDICTIONAL H IGH COURT IN THE CASE OF CIT V GEM PLUS JEWELLERY INDIA LTD (2011) 330 ITR 1 75 (BOM) THAT THE GAIN FROM FLUCTUATION OF FOREIGN EXCHANGE IS DIRECT LY RELATED WITH THE EXPORT ACTIVITIES AND SHOULD BE CONSIDERED AS INCOM E DERIVED FROM EXPORT IN THE YEAR IN WHICH THE EXPORT TOOK PLACE. ACCORDI NGLY, DEDUCTION U/S 10A ON FOREIGN EXCHANGE GAIN IS ALLOWABLE. I DIRECT THE LEARNED AO TO ALLOW THE DEDUCTION ON FOREIGN EXCHANGE GAIN. .. 2.2.5. ON LIABILITIES WRITTEN BACK, I AM OF THE VIE W THAT THE LIABILITIES WRITTEN BACK ARE NOT DERIVED FROM THE EXPORT ACTIVI TY. LIABILITIES WRITTEN OFF MAY RELATE TO EXPORT BUSINESS HOWEVER, LIABILIT IES WRITTEN BACK CANNOT BE CONSIDERED TO HAVE BEEN DERIVED FROM THE EXPORT ACTIVITY WHEN THEY ARE CREDITED TO PROFIT AND LOSS ACCOUNT. THEREFORE , I CONFIRM THE DECISION OF THE LEARNED AO TO DENY THE DEDUCTION ON LIABILIT IES WRITTEN BACK. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE AND REVENUE ARE NOW IN APPEAL BEFORE US. 8. BEFORE US, AT THE OUTSET, LD. AR ON THE ISSUE OF DEDUC TION OF LIABILITIES WRITTEN BACK, SUBMITTED THAT IN A.Y. 2004-05, IDENTIC AL ISSUE AROSE IN ASSESSEES OWN CASE BEFORE THE TRIBUNAL AND HO NBLE TRIBUNAL 6 ITA NO.611/PN/2015 ITA NO.664/PN/2015 DECIDED THE ISSUE IN FAOVUR OF ASSESSEE. THEREAFTER THE M ATTER WAS CARRIED BY REVENUE BEFORE THE HONBLE HIGH COURT AND HO NBLE HIGH COURT DISMISSED THE APPEAL OF THE REVENUE. ON THE ISSUE O F CONSIDERING THE GAIN FROM FLUCTUATION FROM FOREIGN EXCHANGE AS BEING ELIGIB LE FOR DEDUCTION U/S 10A BEING RAISED IN REVENUES APPEAL, HE S UBMITTED THAT THE ISSUE AS NOTED BY THE LD CIT(A) IS COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GEM PLU S JEWELLERY (SUPRA). HE FURTHER SUBMITTED THAT THE PRESENT GROUND IS ALSO SQUARELY COVERED BY THE DECISION OF THE HONBLE BOMBAY HIGH COUR T IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004-05. HE PLACED ON R ECORD THE COPY OF THE HONBLE BOMBAY HIGH COURT IN ITA NO.1534 OF 2012, O RDER DATED 12.12.2014 AND POINTED TO THE RELEVANT QUESTION BEFORE T HE HONBLE HIGH COURT AT PAGE 6 OF THE ORDER AND THE RELEVANT OBS ERVATIONS OF THE HONBLE HIGH COURT. HE THEREFORE SUBMITTED THAT SINCE TH E FACTS OF CASE IN THE YEAR ARE IDENTICAL TO THAT OF ASSESSMENT YEAR 200 4-05 AND THEREFORE FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT , THE ISSUE NEEDS TO BE DECIDED IN FAVOUR OF THE ASSESSEE. TH E LD. DR DID NOT CONTROVERT THE SUBMISSIONS OF THE ASSESSEE BUT HOWEVER SUPPORTED THE ORDER OF LOWER AUTHORITIES. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IN ASSESSEES APPEAL IS WHETHER THE AMOUNT OF LIABILITY WRITTEN-BACK IS ELIGIBLE FOR DEDUCTION UN DER SECTION 10A OF THE ACT. WE FIND THAT IN ASSESSEES OWN C ASE IN ASSESSMENT YEAR 2004-05 THE ISSUE WAS DECIDED IN ASSES SEES FAVOUR BY THE CO-ORDINATE BENCH OF THE TRIBUNAL. AGAINST THE ORDE R OF TRIBUNAL, REVENUE CARRIED THE MATTER BEFORE HONBLE HIGH COURT. H ONBLE HIGH 7 ITA NO.611/PN/2015 ITA NO.664/PN/2015 COURT VIDE ORDER DATED 12.12.2014 IN ITA NO.1534 OF 2012 UPHELD THE ORDER OF TRIBUNAL AND DISMISSED THE REVENUES GROUND. TH E RELEVANT GROUND RAISED BY THE REVENUE AND HON'BLE HIGH COURTS OBSERVATION ARE AS UNDER : 9 4(B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS RIGHT IN HOLDING THAT INCOMES BY WAY O F SALES TAX REFUND, LIABILITIES NO LONGER REQUIRED WRITTEN BACK AND PRO FIT ON SALE OF ASSETS ARE ELIGIBLE INCOMES FOR COMPUTING DEDUCTION U/S 10A FO R UNIT-A? 14. REMAINING QUESTION IS QUESTION 4B. IN RELATION TO THAT QUESTION WHAT THE TRIBUNAL HAS OBSERVED IS THAT THE MANNER OF COM PUTING DEDUCTION UNDER SECTION 10A OF THE ACT, ACCORDING TO THE REVE NUE, ENABLES IT TO COMPUTE THE DEDUCTION AND IN THE MANNER THAT WHILE WORKING OUT ELIGIBLE PROFITS UNDER SECTION 10A, THE ASSESSEE WAS REQUIRE D TO EXCLUDE A SUM OF RS.21,13,822/- BEING THE SALES TAX REFUND, A SUM OF RS.12,79,558/- BEING THE LIABILITIES NO LONGER REQUIRED AND WRITTE N BACK AND RS.74,104/- BEING THE PROFIT ON SALE OF ASSETS. THE COMMISSIONE R NEGATED THIS STAND OF THE REVENUE AND REVERSED THE ORDER OF THE ASSESS ING OFFICER. HOWEVER, THE DEPARTMENTAL REPRESENTATIVES ARGUMENT BEFORE T HE TRIBUNAL IS THAT AFOREMENTIONED AMOUNTS OR INCOMES DO NOT MEET THE TE ST OF HAVING BEEN DERIVED BY AN UNDERTAKING FROM THE EXPORT OF ARTIC LES AS CONTAINED IN SECTION 10A OF THE ACT. 15. THE ASSESSEE RELIED UPON THE TRIBUNALS ORDER I N THE CASE OF LIVINGSTONES JEWELLERY PVT.LTD. V/S. DCIT, AND FOLL OWING THAT THE COMMISSIONERS ORDER WAS UPHELD BY THE TRIBUNAL IN T HIS CASE. 16. MR.TEJVEER SINGH HAS ATTEMPTED TO SUPPORT THE F INDING OF THE ASSESSING OFFICER BY URGING THAT SECTION 10A AND SE CTION 80HH HAVE TO BE SEEN AND READ TOGETHER FOR THE PURPOSES OF COMPU TATION OF DEDUCTION. HE TOOK US THROUGH SECTION 10A AND SECTION 80HH TO SUPPORT HIS ABOVE. ARGUMENT. 17. TWO PROVISIONS READ AS UNDER : ............... 18. SECTION 10A IS SETTING OUT A SPECIAL PROVISION IN RESPECT OF NEWLY ESTABLISHED UNDERTAKINGS IN FREE TRADE ZONE. SUB-SE CTION 1 THEREOF STATES THAT SUBJECT TO PROVISIONS OF THIS SECTION, A DEDUC TION OF SUCH PROFITS AND GAIN AS ARE DERIVED BY AN UNDERTAKING FROM EXPORT O F ARTICLES OR THINGS OR COMPUTER SOFTWARE FOR A PERIOD OF TEN CONSECUTIVE A SSESSMENT YEARS BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING BEGINS TO MANUFACTURE OR PROD UCE SUCH ARTICLES OR THINGS OR COMPUTER SOFTWARE, AS THE CASE MAY BE, SH ALL BE ALLOWED FROM TOTAL INCOME OF THE ASSESSEE. SUB-SECTION 4 THEREOF STATES THAT FOR THE PURPOSE OF SUB-SECTION 1 AND 1A THE PROFITS DERIVED FROM THE EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE SHALL BE TH E AMOUNT, WHICH BEARS TO THE PROFITS OF THE BUSINESS OF THE UNDERTAKING, THE SAME PROPORTION AS 8 ITA NO.611/PN/2015 ITA NO.664/PN/2015 THE EXPORT TURNOVER IN RESPECT OF SUCH ARTICLES OR THINGS OR COMPUTER SOFTWARE BEARS TO THE TOTAL TURNOVER OF THE BUSINES S CARRIED OUT BY THE UNDERTAKING. 19. THERE IS SOME SUBSTANCE IN THE CONTENTION OF MR .KAKA THAT IF THE DEDUCTION SHALL BE ALLOWED FROM THE TOTAL INCOME OF THE ASSESSEE IN THE MANNER SET OUT BY SECTION 10A AND THE COMPUTATION I S ALSO PROVIDED IN THAT PROVISION ITSELF NAMELY SUB-SECTION 4, THEN TH ERE IS A COMPLETE CODE WHICH IS EVOLVED AND FORMULATED BY THE LEGISLATURE. 20. IN RELATION TO THIS, WE ALSO FIND SUPPORT IN TH E JUDGMENT OF THIS COURT IN THE CASE OF BLACK AND VEATCH CONSULTING PVT.LTD. THIS COURT HAS OBSERVED AND HELD AS UNDER: SECTION 10A IS A PROVISION WHICH IS IN THE NATURE OF A DEDUCTION AND NOT AN EXEMPTION. THIS WAS EMPHASISED IN A JUDG MENT OF A DIVISION BENCH OF THIS COURT, WHILE CONSTRUING THE PROVISIONS OF SECTION 10B, IN HINDUSTAN UNILEVER LTD VS. DEPUTY C OMMISSIONER OF INCOME TAX [2010] 325 IRT 102 (BOM) AT PARAGRAPH 24. THE SUBMISSION OF THE REVENUE PLACED ITS RELIANCE ON TH E LITERAL READING OF SECTION 10A UNDER WHICH A DEDUCTION OF S UCH PROFITS AND GAINS AS ARE DERIVED BY AN UNDERTAKING FROM THE EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE FOR A PERIO D OF TEN CONSECUTIVE ASSESSMENT YEARS IS TO BE ALLOWED FROM THE TOTAL INCOME OF THE ASSESSEE. THE DEDUCTION UNDER SECTION 10A, IN OUR VIEW, HAS TO BE GIVEN EFFECT TO AT THE STAGE OF COM PUTING THE PROFITS AND GAINS OF BUSINESS. THIS IS ANTERIOR TO THE APPL ICATION OF THE PROVISIONS OF SECTION 72 WHICH DEALS WITH THE CARRY FORWARD AND SET OFF OF BUSINESS LOSSES. A DISTINCTION HAS BEEN MADE BY THE LEGISLATURE WHILE INCORPORATING THE PROVISIONS OF C HAPTER VI-A. SECTION 80A(1) STIPULATES THAT IN COMPUTING THE TOT AL INCOME OF AN ASSESSEE, THERE SHALL BE ALLOWED FROM HIS GROSS TOT AL INCOME, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF TH E CHAPTER, THE DEDUCTIONS SPECIFIED IN SECTIONS 80C TO 80U. SECTIO N 80B(5) DEFINES FOR THE PURPOSES OF CHAPTER VIA GROSS TOTA L INCOME TO MEAN THE TOTAL INCOME COMPUTED IN ACCORDANCE WITH T HE PROVISIONS OF THE ACT, BEFORE MAKING ANY DEDUCTION UNDER THE C HAPTER. WHAT THE REVENUE IN ESSENCE SEEKS TO ATTAIN IS TO TELESC OPE THE PROVISIONS OF CHAPTER VI-A IN THE CONTEXT OF THE DE DUCTION WHICH IS ALLOWABLE UNDER SECTION 10A, WHICH WOULD NOT BE PER MISSIBLE UNLESS A SPECIFIC STATUTORY PROVISION TO THAT EFFEC T WERE TO BE MADE. IN THE ABSENCE THEREOF, SUCH AN APPROACH CANN OT BE ACCEPTED. IN THE CIRCUMSTANCES, THE DECISION OF THE TRIBUNAL WOULD HAVE TO BE AFFIRMED SINCE IT IS PLAIN AND EVIDENT T HAT THE DEDUCTION UNDER SECTION 10A HAS TO BE GIVEN AT THE STAGE WHEN THE PROFITS AND GAINS OF BUSINESS ARE COMPUTED IN THE FIRST INS TANCE. 21. THEREFORE, WHEN THIS COURT HAS HELD THAT CHAPTE R VIA PROVIDES FOR DEDUCTION TO BE MADE IN COMPUTING THE TOTAL INCOME AND SECTION 80HH DEALS WITH DEDUCTION IN RESPECT OF PROFIT AND GAINS FROM THE NEWLY ESTABLISHED UNDERTAKING OR HOTEL BUSINESS IN BACKWA RD AREAS, THEN THE ATTEMPT OF THE REVENUE TO TELESCOPE CHAPTER VIA IN THE CONTEXT OF THE DEDUCTION, WHICH IS PERMISSIBLE UNDER SECTION 10A F ALLING IN CHAPTER III, CANNOT BE COUNTENANCE. 22. IT IS ESSENTIALLY THIS APPROACH WHICH ENABLES T HE TRIBUNAL TO CONCLUDE AND CONSEQUENTLY UPHOLD THE EXERCISE OF THE COMMISS IONER. THE 9 ITA NO.611/PN/2015 ITA NO.664/PN/2015 COMMISSIONER HAS IN RELATION TO THIS QUESTION HELD T HAT THE REVENUE IS SEEKING TO DENY DEDUCTION BY MAKING COMPUTATION CON TRARY TO SECTION 10A ITSELF. THAT IS HOW HE PROCEEDS IN PARA 7.4 OF HIS ORDER. HE PROCEEDS TO HOLD THAT IN EXCLUDING INCOME OF RS.92,33,705/- FROM THE PROFITS DERIVED FROM EXPORT ACTIVITIES, THE ASSESSING OFFIC ER HAS RELIED UPON THE JUDGMENT IN THE CASE OF CIT V/S. STERLING FOOD LTD. , 237 ITR 579 RENDERED BY THE HONBLE SUPREME COURT, BUT THAT IS INTERPRETING SECTION 80HH. THE COMMISSIONER HELD THAT WHILE APPLYING RAT IO OF THIS DECISION, ONE WILL HAVE TO BEAR IN MIND THE DISTINCTION BETWE EN SECTION 80HH AND SECTION 10A. THAT CANNOT BE LOST SIGHT OF. SECTION 10A CATEGORICALLY CLARIFIES THAT THE PROFITS DERIVED FROM EXPORT OF C OMPUTER SOFTWARE, WHICH IS WHAT IS THE ACTIVITY REFERRED TO IN THE PRESENT CASE, SHALL BE THE AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINESS, THE SAM E PROPORTION AS THE EXPORT TURNOVER IN RESPECT OF SUCH COMPUTER SOFTWAR E BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED OUT BY THE ASSESSE E. THIS IS THE DEDUCTION AND COMPUTATION OF THAT DEDUCTION IS TO B E FOUND IN SECTION 10A ITSELF. THAT IS HOW THE COMMISSIONER PROCEEDS A ND CONCLUDES SO AS TO REVERSE THE ASSESSING OFFICERS ORDER. WE DO NOT SEE HOW THE COMMISSIONER COULD HAVE TAKEN ASSISTANCE OF EITHER S ECTION 80HH OR SECTION 80HHC AS IS INTERPRETED IN THE DECISION OF THE HONBLE SUPREME COURT. SECTION 80HHC PERTAINS TO DEDUCTION IN RESPE CT OF PROFIT RETAINED FOR EXPORT BUSINESS. WHEN THERE IS A SPECIFIC SECTI ON IN THE ACT AND THE ENACTMENT CONTAINS A SEPARATE CHAPTER IN RELATION T O THE DEDUCTION OF PROFIT AND GAINS DERIVED BY AN UNDERTAKING FROM EXP ORT AND WHEN SUCH UNDERTAKINGS ARE ESTABLISHED IN A FREE TRADE ZONE, THEN, WE DO NOT SEE ANY BASIS FOR THE COMPLAINT MADE BY MR.TEJVEER SING H. THIS FINDING OF THE COMMISSIONER HAS BEEN UPHELD BY THE TRIBUNAL. WE DO NOT SEE AS TO HOW IN SUCH CIRCUMSTANCES, THE TRIBUNALS ORDER CAN BE TERMED AS PERVERSE OR VITIATED BY ANY ERROR OF LAW APPARENT ON THE FACE O F THE RECORD. THE TRIBUNAL HAS IN ARRIVING AT THE SAME CONCLUSION REL IED UPON ITS OWN ORDER IN THE CASE OF LIVINGSTONES JEWELLERY PVT.LTD. V/S. DEPUTY COMMISSIONER OF INCOME TAX. THE TRIBUNAL IN THAT DECISION WAS CO NCERNED WITH THE PHRASEOLOGY OF SECTION 10A PARTICULARLY THE EXPRESS ION 'DERIVED FROM THE EXPORT OF ARTICLES. THE ASSESSING OFFICER DID NOT NOTE THE COMPLETE PROVISION IN THIS CASE, NAMELY EXPRESSION PROFIT D ERIVED FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE AS THAT IS ALSO APPEARING IN SUB- SECTION 1. THE MANNER IN WHICH THE COMPUTATION HAS TO BE MADE IS TO BE FOUND IN SUB-SECTION 1 AND PARTICULARLY IN SUB-SECT ION 4 OF SECTION 10A. THE TRIBUNAL HAS, THEREFORE, PROCEEDED BY RELYING U PON THE LANGUAGE OF SECTION 10A ITSELF. IT CONCLUDED IN THE EARLIER ORD ER IN THE CASE OF LIVINGSTONE JEWELLERY THAT ONCE THE EXPRESSION DER IVED FROM HAS BEEN SPECIFICALLY DEFINED IN THE SAME SECTION, THEN THE MEANING OF SUCH EXPRESSION AS UNDERSTOOD IN COMMON PARLANCE WILL NO T BE APPLICABLE. THE TRIBUNAL MAY HAVE REFERRED TO SOME RULINGS AS TO HO W SUCH PROVISIONS HAVE TO BE INTERPRETED. HOWEVER, WE DO NOT HAVE TO DECIDE ANY WIDER CONTROVERSY OR QUESTION. ONCE WE FIND THAT THE VIEW TAKEN BY THE TRIBUNAL IN THIS CASE, AND IN UPHOLDING THE CONCLUS ION OF THE COMMISSIONER, IS IN CONSONANCE WITH THE LANGUAGE OF SECTION 10A AND ALSO TAKES INTO CONSIDERATION THE RELEVANT SUB-SECT ION THEREOF NAMELY SUB-SECTION 4 THEREOF, THEN IT CANNOT BE SAID THAT ITS CONCLUSION OR ORDER IS VITIATED BY ANY ERROR OF LAW APPARENT ON THE FACE O F THE RECORD. THE DISTINCTION AND DIFFERENCE IN THE LANGUAGE AND SETT ING OF SECTION 80HHC, SECTION 80HH AND SECTION 10A HAS BEEN RIGHTLY NOTED IN THE PRESENT CASE TO REJECT THE REVENUES GROUNDS. 23. WE ARE, THEREFORE, NOT REQUIRED TO GO INTO ANY FURTHER QUESTIONS AND PARTICULARLY AS NOTED IN THE CASE OF CIT V/S. GEM P LUS JEWELLERY INDIA LTD., 2011, 330 ITR 175. THE DIVISION BENCH IN THAT CASE HELD THAT WHILE 10 ITA NO.611/PN/2015 ITA NO.664/PN/2015 COMPUTATION OF TURNOVER FOR THE PURPOSE OF SECTION 10A, FREIGHTS AND INSURANCES SHOULD BE EXCLUDED. WE ARE NOT REQUIRED TO DECIDE SUCH A CASE OR ISSUE. 24. IN SUCH CIRCUMSTANCES, WE DO NOT FIND THAT EVEN QUESTION 4B CAN BE TERMED AS A SUBSTANTIAL QUESTION OF LAW, SO AS TO E NABLE US TO ENTERTAIN THIS APPEAL. 10. AS FAR AS THE ISSUE OF CONSIDERING GAIN FROM FOREIGN EX CHANGE FLUCTUATION IN REVENUES APPEAL IS CONCERNED, WE FIND THAT L D.CIT(A) RELYING ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN T HE CASE OF CIT VS. JEWELLERS INDIA (SUPRA) HAD DECIDED THE ISSUE IN ASS ESSEES FAVOUR. BEFORE US, REVENUE HAS NOT POINTED ANY FALLACY IN T HE CONCLUSION OF LD.CIT(A) NOR POINTED ANY CONTRARY BINDING DEC ISION. WE THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD .CIT(A). THUS, THE GROUND OF ASSESSEE IS ALLOWED AND THAT OF REVEN UE IS DISMISSED . 11. GROUND NO.2 IS WITH RESPECT TO DENYING THE DEDUCTION OF INTEREST INCOME OF RS.22,03,994/-. 11.1. AO NOTICED THAT ASSESSEE HAD EARNED INTEREST OF R S. 22,05,785/-. AO WAS OF THE VIEW THAT THE INTEREST INCOME E ARNED BY THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 10A AS IT WAS NOT DERIVED FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE. HE ACC ORDINGLY DENIED THE CLAIM OF ASSESSEE. AGGRIEVED BY THE ORDER OF AO, ASSES SEE CARRIED THE MATTER BEFORE CIT(A) WHO CONFIRMED THE ORDER OF AO. A GGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 12. BEFORE US, AT THE OUTSET, LD. AR SUBMITTED THAT THER E IS TYPOGRAPHICAL ERROR IN MENTIONING THE AMOUNT IN GROUND NO .2 AS RS.22,03,994/- AND THE SAME BE READ AS RS.22,05,785/-. ON THE MERITS 11 ITA NO.611/PN/2015 ITA NO.664/PN/2015 OF THE GROUND, BEFORE US, THE LD. AR SUBMITTED THAT ASSES SEE HAD EARNED NET INTEREST OF RS.24,61,093/-. THE BREAKUP OF WHIC H IS AS UNDER :- NAME OF THE BANK INTEREST AMOUNT IDBI BANK LTD. 22,05,785/- NATIONAL HOUSING BANK LTD. 2,57,099/- SBI 1,15,158/- MSEB DEPOSIT 47,760 TOTAL 24,61,093/- 13. HE SUBMITTED THAT THE ASSESSEE WAS DENIED THE CLAI M OF DEDUCTION UNDER SECTION 10A ON THE AFORESAID INTEREST INC OME AS ACCORDING TO THE AO, THE INTEREST INCOME EARNED BY THE ASSESSEE WAS NOT DERIVED FROM THE BUSINESS AND THE ASSESSEE WAS THE REFORE NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 10A. THE ACTION OF THE AO WAS ALSO UPHELD BY CIT(A). BEFORE US, LD. AR SUBMITTED THAT WITH RES PECT TO INTEREST OF RS.2,57,099/- RECEIVED FROM NATIONAL HOUSING BANK LTD., INTEREST OF RS.1,15,158/- RECEIVED FROM SBI AND INTEREST OF RS.47,760/- RECEIVED FROM MSEB DEPOSIT, HE DOES NOT WISH TO PRESS T HE SAID GROUND ON ACCOUNT OF SMALLNESS OF AMOUNT. WITH RESPECT TO INTER EST OF RS.22,05,785/- RECEIVED FROM IDBI BANK LTD., HE REITERATED THE SUBMISSIONS MADE BEFORE THE AO AND CIT(A) AND FURTHER SUB MITTED THAT THE INTEREST WAS RECEIVED ON THE MARGIN MONEY PLACED W ITH BANK FOR ISSUING BANK GUARANTEES IN FAVOUR OF CUSTOM AUTHORITIES AN D FOR AVAILING NON-FUND BASED FACILITIES FROM THE BANK. HE THEREFORE SUBMITTED THAT THESE INCOMES ARE DERIVED FROM THE BUSIN ESS. HE FURTHER SUBMITTED THAT ON IDENTICAL FACTS, IN ASSESSEES O WN CASE IN A.Y 2003-04 (BY ORDER DATED 30.4.2009), THE ISSUE WAS DECIDED IN 12 ITA NO.611/PN/2015 ITA NO.664/PN/2015 ASSESSEES FAVOUR BY THE CO-ORDINATE BENCH OF TRIBUNAL. H E PLACED ON RECORD THE COPY OF THE AFORESAID ORDER. HE THEREFORE SUB MITTED THAT SINCE THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESEES OWN CASE, THE ISSUE BE DECIDED IN FAVOUR OF ASSESSEE. LD DR ON THE OTHER HAND SUPPORTED THE ORDE R OF LOWER AUTHORITIES. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN VIEW OF THE SUBMISSION OF THE LD AR WE PROCEED TO DISPOSE OF THE GROUND ONLY WITH RESPECT TO THE INTEREST OF RS 22,0 5,785 RECEIVED FROM IDBI BANK LTD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPE CT TO ALLOWABILITY OF DEDUCTION U/S 10A OF THE ACT ON THE INTEREST INCOME. WE FIND THAT IDENTICAL ISSUE AROSE IN ASSESSEES OWN CASE FOR A.Y. 2003-04 IN ITA NO.135/PN/2006 & ITA NO.1374/PN/2006 ORDER DAT ED 30.04.2009. THE ISSUE WAS DECIDED BY THE CO-ORDINATE B ENCH BY OBSERVING AS UNDER :- 4. HEARD THE SUBMISSIONS OF BOTH THE SIDES. AT THE OUT SET, IT IS PERTINENT TO MENTION THAT NOW THIS ISSUE IS VERY WE LL SETTLED AFTER ELABORATE DISCUSSION BY THE SEVERAL COURTS. BEFORE WE CITE ALL THESE DECISIONS, IT IS WORTH TO EXAMINE THE NATURE OF INT EREST INCOME WHICH WAS UNDER THE FOLLOWING HEADS: I) INTEREST RECEIVED ON FD KEPT FOR CUSTOM BONDING O F RS. 3,45,484/- II) INTEREST RECEIVED ON MONEY FLEX DEPOSIT OF RS. 12,80,444/- III) INTEREST RECEIVED FROM MSEB DEPOSIT OF RS. 1,05,957/- IV) INTEREST RECEIVED ON SHORT TERM FDS OF RS. 1,29,241/- 5. IN RESPECT OF FIRST ITEM I.E. INTEREST ON FD KE PT FOR CUSTOM BONDING, THE SHORT SUBMISSION WAS THAT THE APPELLAN T WAS REQUIRED TO KEEP THE ACCOUNT IN FIXED DEPOSIT FOR THE PURPOSE OF GIVING A BANK GUARANTEE REQUIRED FOR CUSTOM BONDING IN RESPECT OF IMPORT OF MACHINERIES. 5.1 THE NATURE OF INTEREST IN RESPECT OF ITEM NO.2 WAS RELATED TO THE DEPOSITS MADE UNDER MONEY FLEX DEPOSIT ON THE BASIS OF ASSURANCE 13 ITA NO.611/PN/2015 ITA NO.664/PN/2015 GIVEN BY THE BANK THAT CERTAIN NON-FUND BASED FACIL ITIES SUCH AS REDUCTION IN MARGIN MONEY REQUIRED FOR BANK GUARANT EE, FOREIGN LETTERS OF CREDIT ETC. COULD BE AVAILED AT REDUCED RATES IN LI EU OF SUCH DEPOSITS. IN RESPECT OF NATURE OF INTEREST AS MENTIONED IN ITEM NO.(III) IT WAS EXPLAINED THAT THE DEPOSIT WAS REQUIRED TO BE COMPULSORILY WI TH MSEB FOR OBTAINING ELECTRICITY CONNECTION. FINALLY, IN RESPECT OF FOU RTH ITEM PERTAINING TO INTEREST ON SHORT TERM FD, THE LEARNED A.R HAS FAIRL Y MENTIONED NOT TO CONTEST THIS PART OF THE GROUND. 6. CONSIDERING THE NATURE OF DEPOSITS AND THE CASE- LAW CITED THIS ISSUE IS NO MORE RES INTEGRA BEING DECIDED IN FAVOU R OF THE ASSESSEE BY FOLLOWING JUDGMENTS. (A) RAJESH EXPORTS LTD. - 2008-TIOL-457-ITAT-BANG - WHE REIN IT WAS HELD THAT INTEREST ON FDS AS MARGIN MONEY WI TH BANK FOR OPENING LC HAD AN INEXTRICABLE LINK BETWEE N THE MARGIN MONIES AND THE BUSINESS OF THE UNDERTAKING, HENCE CONSIDERING THE PROVISIONS OF SECTION 10B(4) QUALIF Y FOR ELIGIBLE EXEMPTION. (B) ACIT VS. MOTOROLA INDIA ELECTRONICS (P) LTD. (2007 ) 12 TTJ (BANG) 562 - WHEREIN INTEREST ON DEPOSITS WITH EEFC ACCOUNT WAS HELD AS CLOSE NEXUS WITH THE BUSINESS A CTIVITY OF THE ASSESSEE. 6.1 AS FAR AS ELIGIBILITY OF INTEREST RECEIVED FR OM MSEB DEPOSIT IS CONCERNED, IN OUR CONSIDERED OPINION, THE SAME IS C OVERED IN FAVOUR OF THE REVENUE BY THE RESPECTED SUPREME COURT DECISION IN THE CASE OF PANDIYAN CHEMICALS LTD. (262 ITR 278) WHEREIN IT WA S HELD THAT INTEREST DERIVED BY THE INDUSTRIAL UNDERTAKING OF T HE ASSESSEE ON DEPOSIT WITH THE ELECTRICITY BOARD FOR THE SUPPLY O F ELECTRICITY FOR RUNNING AN INDUSTRIAL UNDERTAKING COULD NOT BE SAID TO BE A DIRECT FLOW FROM THE INDUSTRIAL UNDERTAKING ITSELF, HENCE HELD THAT SUCH INTEREST WAS NOT PROFITS AND GAINS DERIVED BY THE U NDERTAKING. THEREFORE, THIS GROUND DESERVES TO BE DISMISSED. WE THEREFORE, HOLD THAT INTEREST ON FD KEPT FOR CUSTOM BONDING AND INT EREST FROM MONEY FLEX DEPOSIT ARE ELIGIBLE FOR THE CLAIM U/S 10B OF THE ACT AND REST OF INTERESTS ARE NOT ELIGIBLE FOR SUCH A CLAIM. THIS G ROUND IS PARTLY ALLOWED. 15. BEFORE US, REVENUE HAS NOT POINTED OUT ANY CONTRARY BINDING DECISION NOR POINTED OUT ANY DISTINGUISHING FEATURES IN THE FACTS OF THE PRESENT CASE AND THAT FOR ASSESSMENT YEAR 2003-04. I N VIEW OF THE AFORESAID FACTS AND FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH AND FOR SIMILAR REASONS, WE ARE OF THE VIEW THAT THE INTEREST E ARNED BY THE ASSESSEE OF RS 22,05,785/- IS ELIGIBLE FOR DEDUCTION UNDER SE CTION 10A OF THE ACT. FURTHER, SINCE THE LD AR HAS NOT PRESSED FOR THE INTEREST 14 ITA NO.611/PN/2015 ITA NO.664/PN/2015 EARNED FROM NATIONAL HOUSING BANK LTD, SBI AND MSEB, THE SAME ARE NOT ADJUDICATED. THUS, THIS GROUND OF ASSESSEE IS PARTLY ALLOWED. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. 17. NOW, WE TAKE UP REVENUES APPEAL IN ITA NO.961/PUN/2013. 18. GROUND NO 2 OF REVENUES APPEAL IS WITH RESPECT TO CONSIDERING THE PROFIT FORM EXCHANGE FLUCTUATION. THIS GROUND WAS CONSID ERED WHILE DECIDING THE GROUND OF ASSESSEE HEREIN ABOVE AND THE GROUND OF REVENUE IS THUS DISMISSED. 19. GROUND NOS. 1 AND 3 BEING INTER-CONNECTED ARE CONS IDERED TOGETHER AND IT IS WITH RESPECT TO CLAIM OF DEDUCTION ON PROFITS OF UNIT B OF ASSESSEE. 19.1 THE AO OBSERVED THAT THE ASSESSEE WAS CARRYING OUT ITS OPERATIONS UNITS LOCATED AT DIFFERENT PLACES AFTER TAKING AP PROVAL FROM STPI AUTHORITIES. THE DETAILS OF THE VARIOUS UNITS FROM WHIC H THE ASSESSEE WAS CARRYING OUT OPERATIONS ARE LISTED AT PAGE 2 OF THE ASSESSMENT ORDER. AO NOTICED THAT ASSESSEE HAD TREAT ED ALL THE PLACES AS BRANCHES UNDER UNIT A AND HAD CALLED THEM AS SEPARATE UNDERT AKING FOR CLAIMING DEDUCTION U/S 10A. AO NOTICED THAT THE OFFICES LOCATED BY AT PUNE IT PARK, BLDG B AT AUNDH ROAD PUNE AND BIND VIE W OFFICE, NEAR SADHU VASWANI CHOWK PUNE (KNOWN AS UNIT B) WERE NO T ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT, AS THEY WERE EXTENSION OF EXISTING BUSINESS OF THE ASSESSEE. HE ALSO NOTICED THAT HIS PREDEC ESSORS IN 15 ITA NO.611/PN/2015 ITA NO.664/PN/2015 ASSESSMENT YEAR 2004-05 ON IDENTICAL FACTS HAD ALSO DEN IED THE CLAIM OF THE DEDUCTION U/S 10B FOR UNIT-B. HE THEREAFTER REWOR KED THE CLAIM OF DEDUCTION U/S 10B. WHILE REWORKING THE CLAIM, HE ALSO EXCLU DED TELECOMMUNICATION CHARGES (RS 67.20 LACS (ROUNDED OFF) AND RS .15.99 LACS FROM THE EXPORT TURNOVER OF UNIT A AND UNIT B RESPE CTIVELY) FOR DETERMINING THE EXPORT TURNOVERS OF UNIT A AND UNIT B A ND THEREAFTER DETERMINED THE TOTAL DEDUCTION U/S 10B AT RS.2,59,21,094 /- AS AGAINST THE CLAIM OF ASSESSEE OF RS.2,62,63,884/- AND THEREBY DENIE D THE DEDUCTION TO THE EXTENT OF RS.3,42,790/-. AGGRIEVED BY TH E ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A), WHO DECIDE D THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER :- 2.1.1 THE LEARNED AO RESTRICTED THE DEDUCTION CLAI MED U/S 10A AS ACCORDING TO HIM, APPELLANT'S UNIT-B WAS AN EXTENSI ON OF THE EXISTING BUSINESS. HE STATED THAT UNIT-B IS CLAIMING DEDUCTI ON U/S 10A BEYOND TEN YEARS AND HENCE IS NOT ELIGIBLE TO CLAIM THE DEDUCT ION. ON THIS GROUND, THE LEARNED AO HAD RESTRICTED THE DEDUCTION CLAIMED U/S 10A IN THE AY 2004-05. THE LEARNED AO OBSERVED IN THE ASSESSMENT ORDER THAT THE FACTS OF THE CASE UNDER CONSIDERATION ARE IDENTICAL WITH THE FACTS OF THE AY 2004-05. ACCORDINGLY, HE RESTRICTED THE DEDUCTIO N CLAIMED U/S 10A. 2.1.2 THE APPELLANT SUBMITTED THAT THIS ISSUE IS CO VERED IN ITS FAVOUR BY THE ORDER OF THE HONOURABLE ITAT IN ITS OWN CASE FO R AY 2004-05 (ITA 787/PN/09). FINDINGS 2.1.3 IT IS SEEN ON THE PERUSAL OF THE ORDER THAT THE ITAT HAS HELD THAT UNIT-B IS INDEPENDENT AND DISTINCT UNIT FROM UNIT-A , WHICH IS ELIGIBLE TO CLAIM DEDUCTION U/S 10A. THE TRIBUNAL HAS GIVEN ITS DECISION IN PARA 12 OF ITS ORDER AFTER CONSIDERING THE ARGUMENT OF THE LEARNED AO THAT UNIT-B WAS CLAIMING DEDUCTION BEYOND THE PERIOD OF TEN YEA RS. FOLLOWING THE DECISION OF THE JURISDICTIONAL TRIBUNAL, I HOLD THA T THE APPELLANT IS ENTITLED TO CLAIM DEDUCTION U/S 10A ALSO ON THE PROFITS OF U NIT-B. 20. ON THE ISSUE OF EXCLUSION OF TELECOMMUNICATION CHARGE S, THE LD CIT(A) DECIDED THE ISSUE BY OBSERVING AS UNDER: GROUND NO 4 & 5 REDUCING THE TELECOMMUNICATION CHA RGES FROM EXPORT TURNOVER AND NOT REDUCING THE SAME FROM TOTAL TURNO VER 16 ITA NO.611/PN/2015 ITA NO.664/PN/2015 2.4.1 THE APPELLANT HAS CONTENDED THAT THE LEARN ED AO HAS ERRED IN REDUCING TELECOMMUNICATION CHARGES OF RS.83,19,616 FROM THE EXPORT TURNOVER WITHOUT APPRECIATING THE FACT THAT THE SAM E WERE NOT INCURRED IN FOREIGN CURRENCY. THEREFORE, THE APPELLANT PRAYE D THAT TELECOMMUNICATION CHARGES SHOULD NOT BE DEDUCTED FR OM EXPORT TURNOVER. 2.4.2 IT WAS SUBMITTED WITHOUT PREJUDICE TO THE AB OVE THAT THE LEARNED AO HAS REDUCED TELECOMMUNICATION CHARGES OF RS.83,1 9,616 AND EXPENSES INCURRED IN FOREIGN CURRENCY OF RS.1,57,38 ,805 WITHOUT REDUCING THE SAME FROM THE TOTAL TURNOVER TO COMPUT E DEDUCTION U/S 10A. IT WAS SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE APPELLANT BY THE FOLLOWING DECISIONS OF THE HONOURA BLE COURTS INCLUDING THE DECISION OF THE JURISDICTIONAL HIGH COURT: I. CIT VS GEM PLUS JEWELLERY INDIA LIMITED 194 TAXMAN 192 (BOM HC) II. ITO VS SAK SOFT LTD 313 ITR 353 (CHENNAI ITAT SPECIAL BENCH) III. SIP TECHNOLOGIES AND EXPORTS LTD ITA NO 2401/MDS/20 05 (CHENNAI ITAT) IV. BINARY SEMANTICS LTD 109 TT J 556 (DELHI ITAT) V. INFOSYS TECHNOLOGIES LTD (ITA NO 653 AND 969 (BANG)/2006 AND ITA NO.632 AND 862 (BANG)/2006) BANGALORE ITAT VI. PATNI TELECOM (P) LTD VS ACIT (2008) 22 SOT 26 (HYD ITAT) VII. MLS MPHASIS LTD VS ACIT ( ITA NO 884/20071BANG) (BANGALORE ITAT) VIII. ISEVA SYSTEMS PVT LTD VS ACIT ( ITA NO 401/BANG/20 07) IX. M/S ORACLE SOLUTIONS SERVICES (INDIA) PVT LTD VS C IT (ITA NO 528/BANG/2007) X. MIS GOODRICH AEROSPACE SERVICES PVT VS DCIT [ITA N O 58 (BANG/2008) XI. M/S ALTERNATE FOOD PROCESS PVT LTD VS ITO [ITA NO 52 (BANG)/2008) XII. ITO VS MOTOROLA INDIA PVT LTD ITA NO 645/BANG/2008 XIII. ACIT VS NOVEL! SOFTWARE DEVELOPMENT INFORMATION TECHNOLOGY (P) LTD XIV. DCIT VS SHOBHA RENNAISSANCE INFORMATION TECHNOLOGY (P) LTD. XV. ACIT VS I-GATE SOLUTIONS LTD (ITA NO 624/BANG/2009) 2.4.3 IN VIEW OF THE ABOVE, IT WAS SUBMITTED T HAT IN CASE TELECOMMUNICATION EXPENSES AND EXPENSES INCURRED IN FOREIGN CURRENCY ARE EXCLUDED FROM EXPORT TURNOVER, THEN THE SAME SH OULD ALSO BE EXCLUDED FROM THE TOTAL TURNOVER WHILE COMPUTING DE DUCTION U/S 10A(4). 2.5.1 ON REDUCTION OF TELECOMMUNICATION EXPENSE S AND EXPENSES INCURRED IN FOREIGN CURRENCY, I FIND THAT THE LEARN ED AO HAS RELIED ON THE INFORMATION CONTAINED IN THE FORM 56F FILED BY THE APPLICANT. IN VIEW OF THIS FACTS AND CLEAR PROVISIONS OF LAW ON THIS SUBJ ECT, I UPHOLD THE DECISION OF THE LEARNED; AO TO REDUCE THESE EXPENSE S FROM THE EXPORT TURNOVER. 2.5.2. IT IS SEEN THAT THE ISSUE OF REDUCING TH E SAME AMOUNTS ALSO FROM THE TOTAL TURNOVER HAS BEEN COVERED IN THE APPELLAN T'S FAVOUR BY THE ORDER OF THE HONOURABLE ITAT IN THE APPELLANT'S OWN CASE OF AY 2004-05. IN VIEW OF THE DECISION OF THE HONOURABLE TRIBUNAL IN THE APPELLANT'S CASE, 17 ITA NO.611/PN/2015 ITA NO.664/PN/2015 I DIRECT THE AO TO REDUCE THE ABOVE ITEMS OF INCOME ALSO FROM THE TOTAL TURNOVER. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEA L BEFORE US. 21. BEFORE US, LD. DR SUPPORTED THE ORDER OF AO. THE LD. AR, ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE THE A O AND CIT(A) AND SUPPORTED THE ORDER OF CIT(A). HE FURTHER SUBMITTED THAT THE IDENTICAL ISSUE AROSE BEFORE THE HONBLE BOMBAY HIGH COURT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004-05 AND IT WAS DECIDED IN FAVOUR OF THE ASSESSEE. HE POINTED OUT TO THE RELEVANT OBSERVATIONS OF THE HONBLE HIGH COURT. HE THUS SUPPORTED THE ORDER OF CIT(A). 22. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR A.Y. 2004-05 IN ITA NO.787/PUN/2009. WE FURTHER FIND THAT THE HONBLE HIGH COURT IN ASSESSEES OWN CASE IN EARLIER YEAR HAS ALSO DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. BEFORE US, REVE NUE HAS NOT PLACED ANY MATERIAL ON RECORD TO DEMONSTRATE ANY DISTING UISHING FEATURES IN THE FACTS OF THE PRESENT CASE AND THAT OF A .Y. 2004-05 NOR HAS BROUGHT ON RECORD ANY CONTRARY BINDING DECISION. I N VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE OR DER OF CIT(A). THUS, THE GROUNDS OF REVENUE ARE DISMISSED. 23. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. 18 ITA NO.611/PN/2015 ITA NO.664/PN/2015 CO NO.70/PUN/2014, A.Y. 2005-06 (BY ASSESSEE) : 24. THE GROUNDS RAISED BY THE ASSESSEE IN THE CROSS-OB JECTION READS AS UNDER: CROSS OBJECTIONS WITH REFERENCE TO GROUND 3 OF THE DEPARTMENTS APPEAL [REDUCTION OF TELECOMMUNICATION EXPENSES FROM TOTAL TURNOVER] 1. TELECOMMUNICATION CHARGES OUGHT NOT TO HAVE BEEN RE DUCED FROM EXPORT TURNOVER. ERRED IN REDUCING THE TELECOMMUNICATION CHARGES OF RS.83,19,616 FROM EXPORT TURNOVER WITHOUT APPRECIATING THE FAC T THAT THE SAME WERE NOT INCURRED IN FOREIGN CURRENCY. 25. BEFORE US THE LD. AR SUBMITTED THAT IF THE APPEAL OF THE REVENUE IS DISMISSED, THE GROUNDS RAISED BY THE ASSESSEE IN CROSS OBJECTION BE TREATED AS NOT PRESSED. LD DR DID NOT OPPOSE THE SUBMISSION OF LD AR. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL ON RECORD. WHILE DECIDING THE APPEAL OF REVENUE HEREINABOVE, T HE GROUNDS OF THE REVENUE WERE DISMISSED. THEREFORE, IN VIEW OF THE LD ARS SUBMISSION, THE GROUNDS RAISED BY THE ASSESSEE IN THE PRESENT C.O ARE DISMISSED AS NOT PRESSED. 26. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALL OWED AND THE APPEAL OF REVENUE AND C.O OF ASSESSEE ARE DISMISSED . ORDER PRONOUNCED ON THIS 10 TH DAY OF NOVEMBER, 2017. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 10 TH NOVEMBER, 2017. YAMINI. 19 ITA NO.611/PN/2015 ITA NO.664/PN/2015 ! ' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5. 6. CIT(A)-IT/TP, PUNE. THE DIT (TP/IT), PUNE. !'##$%, $%, / DR, ITAT, A PUNE; '*+,/ GUARD FILE. / BY ORDER, //TRUE COPY// -./#0$1 / SR. PRIVATE SECRETARY $%, / ITAT, PUNE
