J.P . MORGAN SERVICES INDIA P. LTD, MUMBAI V. DCIT (OSD) 8(1), MUMBAI

ITA 8987/MUM/2010

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2121 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Next Hearing Date: 22-04-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 23-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Assessee Lawyers: PORUS KAKA SHRI DIVESH CHAWLA
• Keywords: Business income; Depreciation; Transfer pricing; Business expenditure; International transaction; Question of law; Unabsorbed depreciation
• Section: 92C; 80C; 80HHC; 115JB; 10B; 6; 12; 10; 2; 11; 15

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES K, MUMBAI , , , BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.8987/MUM/2010 ASSESSMENT YEAR: 2006-07 & ITA NO.7822/MUM/2011 ASSESSMENT YEAR: 2007-08 J.P. MORGAN SERVICES P. LTD., TECHNOPOLIS KNOWLEDGE PARK, 3 RD FLOOR, MAHAKALI CAVES ROAD, CHAKALA JUNCTION, ANDHERI(E) MUMBA-400093 / VS. D CIT ( OSD) - 8(1) MUMBAI- (ASSESSEE ) (REVENUE) P.A. NO. AABCD0503B APPELLANT BY SHRI PORUS KAKA SHRI DIVESH CHAWLA (AR) RESPONDENT BY SHRI N.K. CHAND ( CIT - DR) / DATE OF HEARING: 05/10/2015 / DATE OF ORDER: 30/11/2015 J.P. MORGAN S. P. LTD. 2 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THESE APPEALS ARE FILED BY THE ASSESSEE AGAINST THE ORDERS OF DISPUTES RESOLUTION PANEL -I, MUMBAI {IN SHORT, DR P}, FOR THE ASSESSMENT YEARS 2006-07 & 2007-08. 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y SHRI PORUS KAKA & SHRI DIVESH CHAWLA, AUTHORISED REPRESENTATIVE (LD. COUNSEL) ON BEHALF OF THE ASSES SEE AND BY SHRI N.K. CHAND, DEPARTMENTAL REPRESENTATIVE (LD CI T DR) ON BEHALF OF THE REVENUE. WE FIRST TAKE UP ITA NO.8987/M/2010, FOR A.Y. 2006- 07: AFTER HEARING BOTH THE SIDES, THE APPEAL IS DECIDED GROUND WISE AS UNDER: 3. GROUND NO.1: IN THIS GROUND, THE ASSESSEE HAS CHALLENGED THE DECISION OF THE DRP IN CONFIRMING THE ACTION OF AO IN MAKING THE ADDITION OF RS.39,30,43,000/- TO THE INC OME OF THE ASSESSEE COMPANY BY RE-COMPUTING THE ARMS LENGTH P RICE OF THE ASSESSEES INTERNATIONAL TRANSACTION IN RESPECT OF INFORMATION TECHNOLOGY ENABLES SERVICES (ITES) PR OVIDED BY IT. IT HAS BEEN SUBMITTED BY THE LD. COUNSEL AT THE OUTSET THAT THIS IS PRIMARILY A CONCLUDED ISSUE. DURING THE COU RSE OF HEARING, HE SUBMITTED COPY OF PETITION DATED 30 TH JUNE 2015 SEEKING REVISION OF GROUNDS OF APPEAL ON CONCLUSION OF MUTUAL AGREEMENT PROCEDURE (MAP). IT HAS BEEN SUBMITTED TH AT ITS J.P. MORGAN S. P. LTD. 3 ASSOCIATED ENTERPRISE (I.E. AE), JP MORGAN CHASE & CO., US ('JPMC') HAD INITIATED MAP PROCEEDINGS UNDER ARTICL E 27 OF THE INDIA-USA AGREEMENT FOR AVOIDANCE OF DOUBLE TAXATIO N OF INCOME UNDER THE TRANSFER PRICING REGULATIONS (TOWA RDS US RELATED INTERNATIONAL TRANSACTIONS) MADE DURING THE SUBJECT ASSESSMENT YEAR. THE ASSESSEE HAS RECEIVED A LETTER DATED 29TH APRIL, 2015 (ATTACHED AS ANNEXURE A ) FROM THE DEPUTY COMMISSIONER OF INCOME-TAX 10(2)(1) ('AU'), STATING THAT THE MAP HAS BEEN CONCLUDED IN CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. CONSEQUENTLY, IN VIEW OF RULE 44H (4) OF THE INCOME-TAX RULES 1962, THE ASSESSEE HAS ACCEPTE D THE MAP CONCLUSION. ACCORDINGLY, THE ASSESSEE IS WITHDR AWING THE GROUNDS RELATED TO TRANSFER PRICING ADDITION COVERE D UNDER MAP AND THEREBY SEEKS TO REVISE THE GROUNDS OF APPE AL ON THE TRANSFER PRICING ADDITION. 3.1. IN PURSUANCE TO THE ABOVE, THE ASSESSEE COMPANY HAS SUBMITTED REVISED GROUND NO.1 IN PLACE OF GROUND NO .1 OF THE GROUNDS FILED WITH THE ORIGINAL APPEAL MEMO. THE AS SESSEE HAS CHALLENGED THE ADDITION TO REDUCE AMOUNT OF ADDITIO N FOR A SUM OF RS.1,65,07,806/-. 3.2. DURING THE COURSE OF HEARING, IT HAS BEEN SUBMITTE D THAT THE ASSESSEE COMPANY IS PROVIDING IT ENABLED SERVIC ES TO ITS AES. THE ASSESSEE HAD SHOWN A MARGIN OF 12.26%. TH E AO HELD AND TREATED ITES BUSINESS AS ONE, AND APPLIE D MARK-UP @ 21.58%. IT IS FURTHER SUBMITTED THAT OUT OF THE T OTAL TRANSACTIONS DONE BY THE AES WORLD OVER, AROUND 96 TRANSACTIONS WERE DONE WITH THE ENTITIES BASED IN U SA AND J.P. MORGAN S. P. LTD. 4 REMAINING 4% OF THE TRANSACTIONS DONE WITH OTHER AE S LOCATED ELSEWHERE. THE LOWER AUTHORITIES DID NOT MAKE ANY D ISTINCTION WHILE APPLYING MARK-UP AND THE ENTIRE TURNOVER WAS TREATED AS ONE AND ACCORDINGLY MARK UP WAS APPLIED. 3.3. IT HAS BEEN FURTHER SUBMITTED THAT OUT OF THE ORIG INAL TP ADDITION OF RS.39,30,43,000/- (BASED ON THE APPLIED MARK-UP OF 21.58%), MAP HAS BEEN CONCLUDED FOR RS.37,65,35, 194/- (95.80% OF THE TOTAL TP ADDITION ) AT ARMS LENGTH MARK-UP OF 14.38%. ACCORDINGLY, THE ABOVE GROUND HAS BEEN REVI SED TO COVER ONLY THE REMAINING ADDITION OF RS.1,65,07,806 /- I.E. 4.20% OF THE TOTAL ADDITION. 3.4. BEFORE US, THE MAIN ARGUMENT OF THE LD. COUNSEL WA S THAT SINCE THE MARK-UP MAP HAS CONCLUDED THE ARMS LENGT H MARK-UP AT 14.38% FOR 96% OF THE TOTAL TRANSACTIONS DONE WITH THE AES, THEN WITHOUT PREJUDICE TO THE OTHER SUBMI SSIONS, FOR REMAINING TRANSACTIONS OF 4% ALSO SAME TREATMENT SH OULD BE GIVEN, SAME BENCH MARKING SHOULD BE DONE, AND ALP M ARK-UP OF 14.38% SHOULD BE APPLIED, MORE PARTICULARLY, BEC AUSE OF THE FACT THAT THE AO OR DRP HAVE NOT MADE ANY DISTI NCTION BETWEEN THE US ENTITIES AND NON-US ENTITIES. IT WAS FURTHER SUBMITTED THAT ALTHOUGH THE ASSESSEE CAN VERY WELL CONTEST THESE ADDITIONS, BUT THIS CONCESSION HAS COME FROM THE ASSESSEES SIDE WITH A VIEW TO BURY THE LITIGATION, NOTWITHSTANDING THE FACTS THAT NO ADDITION SHOULD H AVE BEEN MADE AS THE CASE OF THE ASSESSEE FALLS WITHIN +/- 5 % RANGE. IT WAS ALSO SUBMITTED THAT THE ASSESSEE RESERVES ITS R IGHT TO CONTEST THE LEVY OF ANY KIND OF PENALTY, AS AND WHE N INITIATED, J.P. MORGAN S. P. LTD. 5 IF ANY. OUR ATTENTION HAS BEEN DRAWN TO THE ANNUAL ACCOUNTS OF THE COMPANY AND ORDERS OF THE LOWER AUTHORITIES TO SHOW THAT NO DISTINCTION HAS BEEN MADE BETWEEN THE 96% AND 4% TRANSACTIONS. 3.5. ON THE OTHER HAND, LD. CIT-DR, VEHEMENTLY OPPOSING THE ARGUMENTS OF THE LD. COUNSEL, SUBMITTED THAT THERE IS NO CONCEPT OF DETERMINATION OF ALP UNDER THE MUTUAL AG REEMENT PROCEDURE. THE RULES AND REGULATIONS OF TRANSFER PR ICING AS PRESCRIBED U/S. 92C CHAPTER X OF THE INCOME TAX ACT ARE NOT APPLICABLE UNDER MAP, AND THEREFORE, NO ALP WAS DET ERMINED UNDER MAP, AND THEREFORE, ASSESSEE CANNOT CLAIM TO TAKE ANY BENEFIT OF THE MARK-UP REACHED UNDER MAP I.E. @ OF 14.38%. ACCORDINGLY TO HIM, THE ALP SHOULD BE COMPUTED FRES HLY AND INDEPENDENTLY FOR THE REMAINING 4% TRANSACTIONS, AN D FOR THIS PURPOSE THIS ISSUE CAN BE SENT BACK TO THE LOWER AU THORITIES. 3.6 WE HAVE GONE THROUGH THE ARGUMENTS MADE BY BOTH TH E SIDES AND ALSO THE MATERIAL PLACED BEFORE US FOR OU R CONSIDERATION. IT IS NOTED THAT LETTER DATED 9 TH APRIL 2015 IN F- NO.480/13/2010-FTD-1 HAS BEEN ISSUED IN THE CASE OF THE ASSESSEE COMPANY UNDER MAP PROCEEDINGS FOR A.Y.2006 -07 TO 2010-111 BY THE DCIT(OSD), APA-I ON BEHALF OF THE F OREIGN TAX AND TAX RESEARCH DIVISION -I, CENTRAL BOARD OF DIRECT TAXES, NEW DELHI WHEREIN IT HAS BEEN CONFIRMED THAT FOR A.Y.2006-07, FOR US RELATED TRANSACTIONS, THE MARGI N HAS BEEN DETERMINED AT 14.38% AS AGAINST MARGIN OF 21.58%, A S WAS DETERMINED BY THE TRANSFER PRICING OFFICER (TPO). I T HAS BEEN FURTHER CLARIFIED BY WAY OF NOTE IN THE SAID LETTER THAT J.P. MORGAN S. P. LTD. 6 APPORTIONMENT BETWEEN US AND NON-US ALP AND TP ADJUSTMENT HAD BEEN MARGINED OUT BY THE APA SECTION (OF FT AND TR DIVISION) ON THE BASIS OF US AND NON-US REVENUE. IT IS FURTHER NOTED FROM THE PERUSAL OF THE ANNUAL ACC OUNTS OF THE ASSESSEE COMPANY THAT AGGREGATE TURNOVER HAS BEEN S HOWN AT RS.47,30,521/-, AND NO DISTINCTION HAS BEEN MADE BE TWEEN THE US AND NON-US TRANSACTIONS. SIMILARLY IN TH E ORDERS PASSED BY THE LOWER AUTHORITIES ALSO NO SUCH DISTIN CTION AS EVER BEEN MADE BY ANY OF THE AUTHORITIES. UNDER THE SE CIRCUMSTANCES, IN OUR CONSIDERED VIEW, WHATEVER MAR GIN HAS BEEN DETERMINED FOR THE 96% OF THE TRANSACTIONS, SA ME MARGIN SHOULD BE DETERMINED FOR THE REMAINING 4% TRANSACTI ONS AS WELL. IT IS WORTH NOTING THAT, EVEN BEFORE US, NO D ISTINCTION IN FACTS OR NATURE OF TRANSACTIONS HAS BEEN BROUGHT OU T ON RECORD. THEREFORE, IN OUR CONSIDERATE VIEW, MARK-UP OF 14.38% SHOULD BE DETERMINED FOR THE REMAINING 4% TRANSACTI ONS PERTAINING TO NON-US ENTITIES AS WELL. THE ASSESS EE GETS PART RELIEF ACCORDINGLY. 4. GROUND NO.2: IN THIS GROUND THE ASSESSEE HAS CHALLENGED THE ACTION OF LOWER AUTHORITIES IN HOLDING THAT UNA BSORBED DEPRECIATION OF RS.2,29,59,653/- HAS EMANATED FROM EXEMPT UNIT AND ACCORDINGLY EXEMPTION U/S 10A OF THE ACT S HOULD BE COMPUTED AFTER SETTING OFF OF THE UNABSORBED DEPREC IATION. 4.1. DURING THE COURSE OF HEARING, IT WAS SUBMITTED AT THE VERY OUTSET BY THE LD. COUNSEL OF THE ASSESSEE THAT THIS ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR J.P. MORGAN S. P. LTD. 7 ASSESSMENT YEAR 2005-06. ON THE OTHER HAND, LD. CIT -DR SUPPORTED THE ORDER OF THE AO. 4.2. WE HAVE GONE THROUGH, WITH THE ASSISTANCE OF THE P ARTIES, THE ORDER OF HONBLE TRIBUNAL FOR A.Y.2005-06 IN IT A NO.5547/MUM/2009 DATED 23.04.2013, IN ASSESSEES OW N CASE. THE RELEVANT PARAS OF THE TRIBUNALS ORDER A RE REPRODUCED HEREIN. 12. THE GRIEVANCE RELATES TO THE SETTING OFF OF TH E UNABSORBED DEPRECIATION. IT IS THE CONTENTION OF TH E ASSESSEE THAT IN COMPUTING INCOME UNDER THE HEAD P ROFITS & GAINS OF BUSINESS OR PROFESSION DEDUCTION U/S. 1 0A SHOULD BE ALLOWED BEFORE SETTING OFF OF BROUGHT FOR WARD BUSINESS LOSS AND UNABSORBED DEPRECIATION AND THE S AME SHOULD BE SET OFF OF AGAINST THE BALANCE TAXABLE IN COME IF ANY. 13. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THESE ISSUES ARE NOW WELL SETTLED IN FAVOUR OF THE ASSESS EE BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN TH E CASE OF CIT VS BLACK AND VEATCH CONSULTING PVT. LTD. (20 12) 348 ITR 72 (BOM). 14. THE LD. DEPARTMENTAL REPRESENTATIVE FAIRLY CONC EDED THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSE SSEE. 15. WE HAVE CAREFULLY PERUSED THE FACTS OF THE VASE VIS-A- VIS DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT (SUPRA). THE QUESTION BEFORE THE HONBLE JURISDICTI ONAL HIGH COURT WAS J.P. MORGAN S. P. LTD. 8 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE INCOME TAX APPELLATE TRIBUNAL WAS CORRECT IN HOLDING THAT THE BROUGHT FORWARD UNABSORBED DEPRECIATION AND LOSSES OF THE UNIT THE INCOME WHICH IS NOT ELIGIBLE FOR DEDUCTION U/S.10A OF THE ACT CANNOT BE SET OFF AGAINST THE CURRENT PROFI T OF THE ELIGIBLE UNIT FOR COMPUTING THE DEDUCTION U/S. 10A OF THE I.T. ACT. 16. THE HONBLE HIGH COURT THUS 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 JUDGMENT OF A DIVISION BENCH OF THI S COURT, WHILE CONSTRUING THE PROVISIONS OF SECTION 1 0B, IN HINDUSTAN UNILEVER LTD. V. DEPUTY CIT [2010] 325 ITR 102 (BOM) AT PARAGRAPH 24. THE SUBMISSION OF THE REVENUE PLACED ITS RELIANCE ON THE LITERAL READ ING OF SECTION 10A UNDER WHICH A DEDUCTION OF SUCH PROFITS AND GAINS AS ARE DERIVED BY AN UNDERTAKING FROM THE EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE FOR A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS IS TO BE ALLOWED FROM THE TOTAL INCOME OF THE ASSESSEE. THE DEDUCTION UNDER SECTION 10A, IN OUR VIEW, HAS TO BE GIVEN EFFECT TO AT THE STAGE OF COMPUTING THE PROFITS AND GAINS OF BUSINESS. THIS I S ANTERIOR TO THE APPLICATION OF THE PROVISIONS OF SE CTION 72 WHICH DEALS WITH THE CARRY FORWARD AND SET OFF O F BUSINESS LOSSES. A DISTINCTION HAS BEEN MADE BY THE LEGISLATURE WHILE INCORPORATING THE PROVISIONS OF J.P. MORGAN S. P. LTD. 9 CHAPTER VI-A. SECTION 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 SECTIONS 80C T O 80U. SECTION 80B(5) DEFINES FOR THE PURPOSES OF CHAPTER VI-A 'GROSS TOTAL INCOME' TO MEAN THE TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT, BEFORE MAKING ANY DEDUCTION UNDER THE CHAPTER. WHAT THE REVENUE IN ESSENCE SEEKS TO ATTAIN IS TO TELESCOPE THE PROVISIONS OF CHAPTER VI -A IN THE CONTEXT OF THE DEDUCTION WHICH IS ALLOWABLE UND ER SECTION 10A, WHICH WOULD NOT BE PERMISSIBLE UNLESS A SPECIFIC STATUTORY PROVISION TO THAT EFFECT WERE TO BE MADE. IN THE ABSENCE THEREOF, SUCH AN APPROACH CANNOT BE ACCEPTED. IN THE CIRCUMSTANCES, THE DECISION OF THE TRIBUNAL WOULD HAVE TO BE AFFIRMED SINCE IT IS PLAIN AND EVIDENT THAT THE DEDUCTION UN DER SECTION 10A HAS TO BE GIVEN AT THE STAGE WHEN THE PROFITS AND GAINS OF BUSINESS ARE COMPUTED IN THE FIRST INSTANCE. SO CONSTRUED, THE APPEAL BY THE REVENUE WOULD NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW AND SHALL ACCORDINGLY STAND DISMISSED. THERE SHALL BE NO ORDER AS TO COSTS. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, WE DIRECT THE AO TO ALLO W DEDUCTION U/S. 10A BEFORE SETTING OF THE BROUGHT FO RWARD J.P. MORGAN S. P. LTD. 10 UNABSORBED DEPRECIATION AND BUSINESS LOSS. GROUND N O. 5 TO 9 TAKEN TOGETHER IS ALLOWED. 4.3. IT IS NOTED THAT NONE OF THE PARTIES HAVE DISPUTED THAT FACTS OF BOTH THE YEARS ARE SIMILAR. THERE IS NO CH ANGE IN THE POSITION OF LAW. THE LD. CIT-DR HAS ALSO NOT MADE A NY DISTINCTION IN THE FACTS OR LEGAL POSITION OF THESE TWO YEARS. THEREFORE, RESPECTFULLY FOLLOWING THE JUDGMENT OF C OORDINATE BENCH IN ASSESSEES OWN CASE AND THAT OF HONBLE JURISDICTIONAL HIGH COURT, AS HAS BEEN RELIED BY TH E COORDINATE BENCH, WE DIRECT THE AO TO ALLOW DEDUCTI ON U/S 10A BEFORE SETTING OFF OF THE BROUGHT FORWARD UNABS ORBED DEPRECIATION. THUS, GROUND NO.2 IS ALLOWED IN TERMS OF THE ABOVE DIRECTIONS. 5. GROUND NO.3: IN THIS GROUND, THE ASSESSEE HAS CHALLENGED THE ACTION OF LD. AO IN TREATING THE INTEREST INCOM E ON DEPOSITS WITH BANKS, AMOUNTING TO RS.2,05,03,390/-AS CHARGEA BLE TO INCOME TAX UNDER THE HEAD INCOME FROM OTHER SOURCE S AS AGAINST THE ASSESSEES CLAIM THAT SUCH INTEREST INC OME IS CHARGEABLE TO TAX UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OF PROFESSION, AND THE ASSESSEE IS FURTHER AGGRIEV ED WITH THE ACTION OF LOWER AUTHORITIES IN HOLDING THAT SUCH IN TEREST INCOME IS NOT DERIVED FROM THE ELIGIBLE UNDERTAKINGS U/S 10A AND THUS, NOT ELIGIBLE FOR DEDUCTION U/S 10A OF THE ACT . 5.1. DURING THE COURSE OF HEARING, IT HAS BEEN SUBMITTE D BY THE LD. COUNSEL THAT THIS ISSUE IS COVERED BY THE O RDERS OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.YS. 2004-05 A ND 2005- J.P. MORGAN S. P. LTD. 11 06. ON THE OTHER HAND, LD. DR HAS SUBMITTED THAT TH E INTEREST INCOME CANNOT BE SAID TO BE DERIVED FROM EXPORTS. H E HAS PLACED RELIANCE UPON THE JUDGMENTS OF HONBLE SUPRE ME COURT IN THE CASE OF LIBERTY INDIA LTD. 317 ITR 218 AND P ANDIAN CHEMICALS LTD. VS. CIT 262 ITR 278 (SC). HE HAS ALS O READ BEFORE US PROVISIONS OF SECTION 10A(1)(IV) FOR THE PROPOSITION THAT LEGISLATURE HAS USED THE EXPRESSION DERIVE A ND SUPREME COURT HAS CAREFULLY CONSIDERED SCOPE AND MEANING OF THIS EXPRESSION IN THE CASE OF LIBERTY INDIA LTD., (SUPR A). HE FURTHER SUBMITTED THAT THE OBJECT OF THIS SECTION IS TO GIV E BENEFIT OF TAX CONCESSION TO THOSE PERSONS WHO ARE BRINGING FOREIG N EXCHANGE INTO THE COUNTRY AS STIPULATED U/S 10A(III) OF THE ACT. HE ALSO RELIED UPON THE JUDGMENT OF DISTRIBUTORS (BARODA) P VT. LTD. V. UNION OF INDIA WHEREIN IT WAS HELD THAT MISTAKES NE ED NOT BE PERPETUATED. FURTHER RELIANCE WAS PLACED ON THE JUD GMENT OF 211 ITR 635 FOR THE PROPOSITION THAT INTELLIGENT AN ALYSIS CAN BE MADE ALWAYS. 5.2. IN REPLY, LD. COUNSEL VEHEMENTLY OPPOSED THESE ARGUMENTS AND CONTENDED THAT LD. CIT-DR HAS NOT APPRECIATED THE POSITION OF LAW CORRECTLY. RELIANCE HAS BEEN PLACED ON SUB-SECTION (4) OF SECTION 10A OF THE ACT CONTENDING THAT THIS SUB-SECTION PROVIDES THE MECHANISM TO WOR K OUT AMOUNT OF PROFIT ELIGIBLE FOR DEDUCTION U/S 10A, AN D THAT SIMILAR MECHANISM IS NOT AVAILABLE IN THE SECTION 8 0-IA AND 80HHC ETC., AND THEREFORE THE POSITION OF SECTION 1 0A IS QUITE DIFFERENT FROM THESE TWO SECTIONS, AND THAT HONBLE SUPREME COURT HAS EXPLAINED THE MEANING OF THE EXPRESSION DERIVE IN J.P. MORGAN S. P. LTD. 12 CONTEXT OF SECTION 80IA AND 80HHC. HE REITERATED TH AT COMPUTATION OF PROFITS ELIGIBLE FOR DEDUCTION U/S 1 0A HAS TO BE MADE STRICTLY IN TERMS OF THE MECHANISM PROVIDED BY SUB- SECTION (4), LAYING DOWN THE MANNER OF COMPUTING PR OFIT ELIGIBLE FOR GRANTING DEDUCTION U/S 10A. WITH REGARD TO THE CONTENTION OF THE LD. CIT-DR ON SUB-SECTION (3) OF SECTION 10A I.E. REQUIREMENT OF BRINGING SALE PROCEEDS INTO INDIA, I T WAS CONTENDED BY THE LD. COUNSEL THAT REQUIREMENT FOR B RINGING SALE PROCEEDS INTO COUNTRY IS ONLY WITH RESPECT TO THE AMOUNT OF EXPORT SALES, AS WOULD BE CLEAR FROM THE CLAIM R EADING OF SUB-SECTION (3). THERE IS NO REQUIREMENT, AS STIPUL ATED UNDER THE SECTION, TO BRING ANY OTHER RECEIPTS IN THE FOR M OF FOREIGN EXCHANGE TO THE COUNTRY. THUS ARGUMENT OF LD. CIT-D R WAS MISPLACED. LASTLY, LD. COUNSEL HAS RELIED UPON THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MOTOROLA INDIA ELECTRONICS (P) LTD.(265 CTR 94), WH EREIN HONBLE HIGH COURT HAS CONSIDERED THE JUDGMENT OF H ONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA LTD. (SU PRA) AS WELL AS PANDIAN CHEMICALS LTD.(SUPRA). AFTER CONSIDERING ALL THESE JUDGMENTS IT WAS HELD BY THE HONBLE HIGH COURT THA T THE ASSESSEE COMPANY WAS ELIGIBLE FOR DEDUCTION U/S 10B IN RESPECT OF INTEREST INCOME DERIVED FROM INTER-CORPO RATE LOANS AND DEPOSIT IN EEFC ACCOUNTS. IT WAS FURTHER SUBMI TTED BY THE LD. COUNSEL SINCE THIS JUDGMENT HAS TAKEN INTO ACCOUNT ALL THE JUDGMENTS OF HONBLE SUPREME COURT AND ALL THE ARGUMENTS MADE BY THE REVENUE AND AFTER CONSIDERING ENTIRE LAW AVAILABLE THE DEDUCTION WAS ALLOWED THEREFORE, AS ON DATE THE ISSUE OF THE ASSESSEE IS COVERED NOT ONLY BY TH E ORDERS OF J.P. MORGAN S. P. LTD. 13 THE TRIBUNAL IN ASSESSEES OWN CASE ON EARLIER YEAR S BUT ALSO THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT. 5.3. WE HAVE GONE THROUGH THE SUBMISSIONS MADE BY BOTH THE SIDES AS WELL AS THE ORDERS PASSED BY THE TRIBUNAL IN EARLIER YEARS AND JUDGMENTS RELIED UPON BEFORE US. IT IS NO TED THAT SIMILAR ISSUE CAME UP FOR ADJUDICATION BEFORE THE T RIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2004-05. THE TRIBUNAL HAS DECIDED THIS ISSUE IN ITA NO.7351/M/2007 VIDE O RDER DATED 26 TH JUNE 2009 RELEVANT PARA OF TRIBUNAL ORDER IS REPRODUCED BELOW: COMING TO THE NEXT GRIEVANCE REGARDING INTEREST IN COME NOT BEING CONSIDERED AS INCOME FROM BUSINESS, LD. COUNSEL FOR THE ASSESSEE FAIRLY ADMITTED THAT SUM O F RS.3,63,042/- BEING INTEREST ON INCOME TAX REFUND, RELATING TO SOFTWARE TECHNOLOGY PARK UNIT I WOULD NOT BE ELI GIBLE FOR DEDUCTION U/S.10A OF THE ACT. HENCE, WE ARE REQUIRE D TO DECIDE ON INTEREST ON FIXED DEPOSIT RS.7,96,223/- A ND INTEREST ON STAFF LOAN OF RS.1,377/-. THERE IS NO D ISPUTE THAT ASSESSEE WAS HUNDRED PER CENT EXPORTER. NO DOU BT THE LD. DEPARTMENTAL REPRESENTATIVE HAS RELIED ON T HE DECISION OF THE KERALA HIGH COURT IN THE CASE OF CI T V. JOSE THOMAS (SUPRA) FOR THE PROPOSITION THAT INTEREST FR OM BANK DEPOSIT COULD NOT BE CONSIDERED AS INCOME FROM BUSI NESS FOR CLAIMING DEDUCTION U/S.80HHC OF THE ACT. HOWEVE R, WE FIND THAT THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. PUNIT COMMERCIAL LTD. (SUPRA) HAS HELD THAT WHERE A N ASSESSEE WAS 100% EXPORTER, DEDUCTION U/S.80HHC HAD J.P. MORGAN S. P. LTD. 14 TO BE GIVEN ON THE ENTIRE BUSINESS INCOME INCLUDING INTEREST ON FIXED DEPOSIT. ACCORDING TO THE HONBLE JURISDIC TIONAL HIGH COURT, ENTIRE PROFITS OF 100% EXPORTER WAS ENT ITLED FOR DEDUCTION U/S.80HHC OF THE ACT. AGAIN THE HONBLE D ELHI HIGH COURT IN THE CASE OF CIT VS. ELTEK S.G. (SUPRA ) HAS HELD THAT THE TERM DERIVED BY AN UNDERTAKING FROM EXPORT OF ARTICLES OF THINGS OR COMPUTER SOFTWARE USED IN SECTION 10A WAS NEITHER AS BROAD AS ATTRIBUTABLE TO NOR A S NARROW AS DERIVED FROM. THOUGH SECTION 80HHC OF T HE ACT USED THE TERM DERIVED FROM, HONBLE JURISDICTIO NS HIGH COURT IN THE CASE OF PUNIT COMMERCIAL LTD. (SUPRA) HELD THAT THE WHOLE FOR THE BUSINESS INCOME WAS ELIGIBLE FOR DEDUCTION U/S.80HHC OF THE ACT. FURTHER TO THIS, WE ALSO FIND THAT HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. LOK HOLDING (SUPRA) HAS CLEARLY HELD THAT IF SURPLUSES WERE DEPOSITED BY THE ASSESSEE OUT OF ITS BUSINESS PROCEEDS INTEREST THERE FROM COULD ONLY BE CONSIDERED AS PART OF PROFITS AND GAINS OF BUSINESS OF THE ASSESSEE. THEREFORE, WE ARE INCLINED TO ALLOW THE C LAIM OF THE ASSESSEE FOR TREATING THE INTEREST FROM FIXED D EPOSIT OF RS.7,96,233/- AND INTEREST ON STAFF LOAN RS.1,377/- AS INCOME FALLING UNDER THE HEAD PROFITS AND GAINS FR OM BUSINESS OR PROFESSION ELIGIBLE FOR DEDUCTION U/S. 10A OF THE ACT. AS FAR AS THE CONTENTION OF THE LEARNED DR THAT SECTION 10A WAS AN EXEMPTION PROVISION WHEREAS SECT ION 80HHC IS A DEDUCTION PROVISION, WE FIND THAT SECTIO N 10A AS SUBSTITUTED BY FINANCE ACT 2000, W.E.F 1.4.2000 CLEARLY MENTIONS IT TO BE A DEDUCTION FROM PROFITS AND GAIN S J.P. MORGAN S. P. LTD. 15 DERIVED BY AN UNDERTAKING FROM EXPORT OF ARTICLES O F THINGS OR COMPUTER SOFTWARE. THEREFORE, IT CANNOT BE DEEME D AS AN EXEMPTION PROVISION FOR THE IMPUGNED ASSESSMENT YEAR. GROUND NO.2 OF THE ASSESSEE IS THEREFORE, PARTLY AL LOWED. 5.4. FURTHER THIS ISSUE AGAIN CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSMENT YEAR 2005-06, WHEREIN IN ITA NO.5547/M/2009 THE TRIBUNAL VIDE ITS ORDER DATED 23 .4.2013 HELD THAT UNDER: THE SECOND ISSUE RELATES TO THE INTEREST ON DEPOSIT S WHICH THE LOWER AUTHORITIES HAVE TAXED UNDER THE HEAD IN COME FROM OTHER SOURCES REJECTING ASSESSEES CONTENTION THAT INTEREST ON DEPOSITS IS CHARGEABLE TO TAX UNDER THE HEAD PROFITS & GAINS OF BUSINESS OR PROFESSION AND THER EFORE ELIGIBLE FOR DEDUCTION U/S. 10A OF THE ACT. 8. IT IS THE SUBMISSION OF THE COUNSEL THAT THE ISS UE IS COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR A.Y. 2004-05 AND TO SUBSTANTIATE HIS CLAIM , THE ASSESSEE SUBMITTED THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE REPORTED IN 33 SOT 327. DRAWING OUR ATTENTION TO PARA-11 OF THE SAID ORDER OF THE TRIBU NAL, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE TRI BUNAL HAS DIRECTED TO TAX THE INTEREST UNDER THE HEAD PR OFITS & GAINS OF BUSINESS OR PROFESSION. 9. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE FINDINGS OF THE LOWER AUTHORITIES. 10. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOW ER AUTHORITIES AND ALSO THE DECISION OF THE TRIBUNAL I N J.P. MORGAN S. P. LTD. 16 ASSESSEES OWN CASE (SUPRA). WE FIND THAT THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBU NAL ALLOWING THE CLAIM OF THE ASSESSEE FOR TREATING THE INTEREST FROM FIXED DEPOSIT AS INCOME FALLING UNDER THE HEAD PROFITS & GAINS OF BUSINESS OR PROFESSION ELIGIBL E FOR DEDUCTION U/S. 10A OF THE ACT. FACTS BEING IDENTICA L, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL , WE DIRECT THE AO TO TREAT THE INTEREST FROM FIXED DEPO SITS AS INCOME FALLING UNDER THE HEAD PROFITS & GAINS OF B USINESS OR PROFESSION ELIGIBLE FOR DEDUCTION U/S. 10A OF T HE ACT. GROUND NOS. 3 & 4 ARE ACCORDINGLY ALLOWED. 5.5. THE PERUSAL OF THE ORDER OF THE TRIBUNAL SHOWS THA T INCOME OF INTEREST WAS ASSESSED AS INCOME FROM BUSI NESS IN EARLIER YEARS. THERE IS NO CHANGE IN FACTS IN THE I MPUGNED YEAR AS NOTHING COULD BE BROUGHT ON RECORD BY LD. CIT-DR TO SHOW THAT THERE WAS CHANGE IN FACTS IN THIS YEAR. THEREF ORE, RESPECTFULLY FOLLOWING ORDERS OF COORDINATE BENCH O F EARLIER YEARS IN ASSESEES OWN CASE, WE HOLD THAT INTEREST INCOME, WOULD BE ASSESSABLE UNDER THE HEAD INCOME FROM BUSI NESS. 5.6. HAVING DECIDED THE INTEREST INCOME AS INCOME FROM BUSINESS, THE NEXT STEP IS TO COMPUTE THE AMOUNT OF DEDUCTION AVAILABLE U/S 10A ON THE AMOUNT OF AFORESAID INTERE ST INCOME. IT IS NOTED THAT THIS ASPECT HAS NOT BEEN DECIDED I N EARLIER YEARS. THEREFORE, THIS ISSUE NEEDS TO BE DECIDED BY US, AS PER PROVISIONS OF SECTION 10A. IT IS FURTHER NOTED THAT IT IS A CASE OF 100% EXPORTER. THERE ARE NO OTHER LOCAL SALES DONE BY THE ASSESSEE. IT HAS BEEN RIGHTLY CONTENDED BY THE LD. COUNSEL J.P. MORGAN S. P. LTD. 17 THAT SUB-SECTION (4) HAS PROVIDED MECHANISM TO COMP UTE THE AMOUNT OF PROFIT ELIGIBLE FOR DEDUCTION U/S 10A. FO R THE SAKE OF READY REFERENCE SUB-SECTION (4) IS REPRODUCED HEREI N: (4) FOR THE PURPOSE OF [SUB-SECTIONS (1) AND (1A)] , THE PROFITS DERIVED FROM EXPORT OF ARTICLES OR THINGS O R COMPUTER SOFTWARE SHALL BE THE AMOUNT WHICH BEARS TO THE PRO FITS OF THE BUSINESS OF THE UNDERTAKING, THE SAME PROPORTIO N AS THE EXPORT TURNOVER IN RESPECT OF SUCH ARTICLES OR THINGS OR COMPUTER SOFTWARE BEARS TO THE TOTAL TURNOVER OF TH E BUSINESS CARRIED ON BY THE UNDERTAKING. 5.7. IN OUR CONSIDERED VIEW, SINCE THE INCOME FROM INTE REST HAS BEEN TREATED AS PART OF BUSINESS INCOME, IT SHA LL BE INCLUDED FOR DETERMINING THE AMOUNT OF TOTAL TURNOV ER OF THE BUSINESS AND ACCORDINGLY THE BENEFIT OF DEDUCTION U /S 10A SHALL BE PROVIDED ON THE AMOUNT OF INTEREST INCOME PROPORTIONATELY, IN TERMS OF MECHANISM PROVIDED IN SUB- SECTION (4). IN OTHER WORDS THE AMOUNT OF PROFIT EL IGIBLE FOR DEDUCTION U/S 10A SHALL BE THE AMOUNT WHICH BEARS T O THE PROFITS OF THE BUSINESS OF UNDERTAKING, THE SAME PR OPORTION AS EXPORT TURNOVER BEARS TO THE TOTAL TURNOVER THE BUS INESS OF THE UNDERTAKING OF THE ASSESSEE. THE AO IS DIRECTED TO GRANT THE BENEFIT OF DEDUCTION U/S 10A BY RE-COMPUTING THE SA ME IN TERMS OF OUR DIRECTIONS AS GIVEN ABOVE. 5.8. BEFORE WE PART WITH THIS ISSUE, WE SHALL LIKE TO CLARIFY THAT WE HAVE METICULOUSLY PONDERED OVER THIS ISSUE. IN CA SE, CLEAR MANDATE OF SUB-SECTION (4) IS NOT FOLLOWED AND FULL DEDUCTION IS J.P. MORGAN S. P. LTD. 18 ALLOWED U/S 10A ON THE INTEREST INCOME, THEN IT MAY YIELD ABSURD RESULTS AND ALSO PROVIDE BENEFITS TO ASSESSE ES WHICH WERE NOT INTENDED TO HAVE BEEN PROVIDED BY THE LEGI SLATURE, KEEPING IN VIEW OBJECTIVE OF ENACTMENT OF SECTION 1 0A. AT TIMES, THERE MAY BE SITUATIONS WHERE INTEREST INCOM E WOULD BE OF SIZEABLE AMOUNT, SOMETIMES EVEN MORE THAN AMOUNT OF PROFITS, AND IN SUCH A SITUATION, IF 100% DEDUCTION IS GRANTED TO THE ASSESSEE, ON THE INTEREST INCOME OR ANY OTHE R SIMILAR INCOME, WITHOUT FOLLOWING MANDATE OF SUB-SECTION (4 ), IT MAY FRUSTRATE THE OBJECTIVE OF SECTION 10A. THEREFORE, TO AVOID ANY SUCH SITUATION, CLEAR MECHANISM HAS BEEN PROVIDED U NDER SUB-SECTION (4) FOR COMPUTATION PURPOSES. THEREFORE , OUR DECISION IS IN LINE WITH EXPRESS AS WELL AS IMPLIED PROVISIONS OF SECTION 10A. 6. GROUND NO.4: IN THIS GROUND, THE ASSESSEE HAS CHALLENGED THE ACTION OF LOWER AUTHORITIES IN NOT ACCEPTING TH E ASSESSEES CLAIM THAT BOOK PROFIT U/S 115JB OF THE ACT HAS TO BE COMPUTED INTER ALIA BY REDUCING THE AMOUNT OF INTEREST INCOME ON DEPOSITS OF RS.2,05,03,390/- CREDITED TO PROFIT AND LOSS ACCOUNT, TO WHICH PROVISIONS OF SECTION 10A APPLY, IN TERMS OF CLAUSE (II) TO EXPLANATION 1 TO SECTION 11JB OF THE ACT. IT WAS SUBMITTED BY THE LD. COUNSEL THAT THIS ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2005-06. J.P. MORGAN S. P. LTD. 19 6.1. WE HAVE GONE THROUGH THE ORDERS OF THE TRIBUNAL OF ASSESSMENT YEAR 2005-06. THE RELEVANT PARA OF THE T RIBUNAL IN ITA NO. 5547/M/2009 DATED 23.4.2013 IS REPRODUCED B ELOW: 2. GROUND NO. 1 RELATES TO COMPUTATION OF BOOK PROF IT U/S. 115JB OF THE ACT. 3.FACTS GIVING RISE TO THIS GRIEVANCE SHOW THAT WHI LE COMPUTING THE INCOME FOR THE YEAR UNDER CONSIDERATI ON AND ALSO WHILE COMPUTING BOOK PROFIT U/S. 115JB OF THE ACT, THE ASSESSING OFFICER HAS REDUCED THE AMOUNT O F DEDUCTION U/S. 10A AS RECOMPUTED BY HIM UNDER THE NORMAL PROVISIONS OF THE ACT WHEREAS THE ASSESSEES CONTENTION IS THAT BOOK PROFIT U/S. 115JB OF THE AC T HAS TO BE COMPUTED , INTER ALIA , BY REDUCING THE AMOUNT O F INCOME CREDITED TO PROFIT AND LOSS ACCOUNT TO WHICH SEC. 10A APPLY AND BY INCREASING THE AMOUNTS OF EXPENDIT URE DEBITED TO PROFIT AND LOSS ACCOUNT RELATABLE TO ANY INCOME TO WHICH SEC. 10A APPLY IN TERMS OF CALUSE (II) AND CLAUSE (F) TO EXPLANATION TO SEC. 115JB OF THE ACT. 4. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE ISSUE NOW STANDS COVERED IN FAVO UR OF THE ASSESSEE. TO SUBSTANTIATE HIS CLAIM, THE LD. CO UNSEL DREW OUR ATTENTION TO 3 DECISIONS NAMELY (I)MOSER B AER INDIA LTD. VS DCIT (2007) 17 SOT 510(DEL), (II) DCI T VS ROXY INVESTMENTS (P) LTD (2008) 24 SOT 227 (DEL) AN D (III) THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF AJANTA PHARMA LTD VS CIT (2010) 327 ITR 305. J.P. MORGAN S. P. LTD. 20 5. THE LD. DEPARTMENTAL REPRESENTATIVE FAIRLY CONCE DED THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSE SSEE. 6. WE HAVE CAREFULLY PERUSED THE ORDERS REFERRED TO BY THE LD. COUNSEL FOR THE ASSESSEE IN THE CASE OF MOSER B AER INDIA LTD (SUPRA) IN WHICH IT HAS BEEN HELD THAT FO R DETERMINING OF BOOK PROFIT ANY MODE AND MANNER OF COMPUTATION OF TOTAL INCOME UNDER ACT HAS NOT TO BE APPLIED AND REFERENCE IS TO BE MADE ONLY TO PROFIT AND LOSS ACCOUNT PREPARED IN ACCORDANCE WITH PROVISIONS OF P ARTS II AND III OF SCHEDULE VI OF COMPANIES ACT THEREFORE W HILE COMPUTING BOOK PROFIT U/S. 115JB OF THE ACT, AMOUNT TO BE REDUCED WAS THE INCOME WHICH IS ELIGIBLE FOR EXEMPT ION U/S. 10A/10B AS COMPUTED ON THE BASIS OF BOOK PROFI T AS PER PARTS II AND III OF SCHEDULE VI OF COMPANIES AC T AND NOT ON BASIS OF PROVISIONS OF THE I.T. ACT. SIMILAR VIEW HAS BEEN TAKEN IN THE CASE OF ROXY INVESTMENTS (P) LTD (SUPRA) WHEREIN THE CO-ORDINATE BENCH OF DELHI HAS HELD THA T WHILE COMPUTING BOOK PROFIT U/S. 115JB OF THE ACT, AMOUNT OF INCOME WHICH CAN BE REDUCED BY THE AO FOR COMPUTING BOOK PROFIT UNDER CLAUSE (II) OF EXPLANATION TO SEC TION 115JB(2) WILL BE AMOUNT WHICH IS CREDITED TO PROFIT AND LOSS ACCOUNT AND NOT AMOUNT OF INCOME WHICH IS CLAI MED BY THE ASSESSEE OR DETERMINED BY ASSESSING OFFICER WHILE ASSESSING INCOME UNDER REGULAR PROVISIONS OF ACT. H ONBLE SUPREME COURT IN THE CASE OF AJANTA PHARMA LTD (SUP RA) HAS FORTIFIED THE VIEW TAKEN BY THE CO-ORDINATE BEN CHES. CONSIDERING THE FACTS OF THE CASE, IN THE LIGHT OF THE ABOVE JUDICIAL PRONOUNCEMENT, WE HAVE NO HESITATION TO HO LD THAT J.P. MORGAN S. P. LTD. 21 FOR THE PURPOSE OF COMPUTING BOOK PROFIT U/S.115JB OF THE ACT, INCOME HAS TO BE COMPUTED AS PER PARTS OF SCHE DULE VI OF COMPANIES ACT AND NOT ON BASIS OF PROVISIONS OF I.T. ACT. GROUND NO. 1 & 2 ARE ACCORDINGLY ALLOWED. 6.2 LD. CIT-DR HAS RELIED UPON THE ORDER OF THE AO ON THIS ISSUE, AND NOTHING HAS BEEN BROUGHT ON RECORD TO MA KE ANY DISTINCTION ON FACTS OR LAW. 6.3. THEREFORE, RESPECTFULLY FOLLOWING THE JUDGMENT OF COORDINATE BENCH IN ASSESSEES OWN CASE, WE HOLD TH AT FOR THE PURPOSE OF COMPUTING TO PROFIT U/S 115JB OF THE ACT , INCOME HAS TO BE COMPUTED AS PER THE SCHEDULE VI OF THE CO MPANIES ACT AND NOT ON THE BASIS OF PROVISIONS OF INCOME TA X ACT. ACCORDINGLY, GROUND NO. 4 IS ALLOWED. 7. GROUND NO.5: IN THIS GROUND, THE ASSESSEE HAS CONTENDED THAT THE AO HAS ERRED IN NOT FOLLOWING THE DIRECTIO N OF DRP OF ALLOWING SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO EXPLAIN ITS CASE IN RESPECT OF THE DEDUCTION OF BUSINESS EXPEND ITURE OF RS. 2,04,64,709/-, WHICH WAS DISALLOWED AS PRIOR PERIOD EXPENDITURE FOR A.Y.2007-08, WHILE COMPUTING INCOM E UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OF PROFESSI ON OF IMPUGNED ASSESSMENT YEAR I.E. A.Y. 2006-07. 7.1. IT WAS CONTENDED BY THE LD. COUNSEL THAT, BUSINESS EXPENDITURE OF THE AFORESAID AMOUNT WHICH WAS DISAL LOWED AS PRIOR PERIOD EXPENDITURE FOR ASSESSMENT YEAR 2007-0 8, SHOULD BE ALLOWED NOTIONALLY, FOR THE YEAR UNDER CONSIDERA TION. IT WAS J.P. MORGAN S. P. LTD. 22 FURTHER SUBMITTED THAT DRP HAS ALREADY GIVEN REQUIS ITE DIRECTIONS TO THE AO IN THIS REGARD, BUT THE SAME H AS NOT BEEN FOLLOWED BY THE AO, AND THEREFORE, THE TRIBUNAL SHO ULD REINFORCE THE DIRECTION OF THE DRP. 7.2 WE HAVE GONE THROUGH THE ORDERS OF THE DRP AND SUBMISSIONS MADE BY BOTH THE SIDES ON THIS ISSUE. F OR THE SAKE OF READY REFERENCE, THE RELEVANT PARA OF THE D RP ORDER ON THIS ISSUE IS REPRODUCED BELOW: THE GROUND OF OBJECTION NO.7 RELATED TO CLAIM OF EXPENDITURE DISALLOWED IN A.Y. 2007-08 AS PRIOR PER IOD EXPENDITURE. THE PRIOR PERIOD EXPENDITURE IS DISALL OWED ON THE BASIS OF MATCHING CONCEPT THAT IT IS TO BE ALLO WED IN THE YEAR TO WHICH IT RELATES. NO SPECIFIC MENTION OF TH E NATURE OF EXPENDITURE OR PERIOD OF ITS ACCRUAL HAS BEEN IN DICATED. THEREFORE, THE AO IS DIRECTED TO EXAMINE THIS ISSUE AND ANY EXPENDITURE WHICH RELATES TO THE CURRENT ASSESS MENT YEAR AND QUALIFIED TO THE ALLOWED U/S.37 OF THE I.T . ACT SHOULD BE ALLOWED IN THE CURRENT YEAR. THIS GROUND OF OBJECTION IS DISPOSED OFF ACCORDINGLY. 7.3. IT IS NOTED, FROM THE ABOVE, THAT DRP HAS ALREADY ISSUED REQUISITE DIRECTIONS IN THIS REGARD. KEEPING IN VIE W REQUEST OF THE ASSESSEE, WE DIRECT THE AO TO LOOK INTO THIS AS PECT, RE- EXAMINE THE ISSUE AND ADJUDICATE THE SAME AFTER GRA NTING PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS , GROUND NO. 5 IS SENT BACK TO THE FILE OF THE AO IN TERMS O F OUR DIRECTIONS AS GIVEN ABOVE. J.P. MORGAN S. P. LTD. 23 8. GROUNDS NO.6 & 7 ARE CONSEQUENTIAL AND DISMISSED. NOW WE TAKE UP ITA NO.7822/MUM/2011 FOR A.Y.2007-08 . 9. GROUNDS NO.1, 2 & 3 : DEAL WITH THE TRANSFER PRICING ADJUSTMENT OF RS.96,81,48,439/- MADE TO THE INCOME OF THE ASSESSEE BY THE AO. THESE GROUND ARE SIMILAR TO GRO UND NO.1 OF ASSESSEES APPEAL FOR A.Y. 2006-07. THE FACTS AN D LEGAL POSITION BEING THE SAME WE DIRECT TO FOLLOW OUR ORD ER OF ASSESSMENT YEAR 2006-07. THE ONLY CHANGE WOULD BE T HAT FOR A.Y. 2007-08, THE ALP MARGIN HAS BEEN DETERMINED UN DER MAP @ OF 15.54% AS AGAINST 14.38% FOR A.Y. 2006-07, AND THEREFORE EVERYTHING ELSE REMAINING THE SAME THE AL P MARGIN SHALL BE APPLIED @ OF 15.54%, AS AGAINST 29.67% AS WAS DETERMINED BY THE TPO. WE ORDER ACCORDINGLY. THE AS SESSEE GETS PART RELIEF ACCORDINGLY. 10. GROUND NO.4: IN THIS GROUND, THE ASSESSEE HAS CHALLENGED THE ACTION OF AO IN HOLDING THAT UNABSORBED DEPRECI ATION OF RS.2,91,67,191/- HAS EMANATED FROM EXEMPT UNIT AND ACCORDINGLY SET OFF OF THE SAME AGAINST THE TAXABLE INCOME COMPUTED AFTER ALLOWED EXEMPTION U/S 10A WAS DENIED . IT IS NOTED THAT THIS GROUND IS SIMILAR TO THE GROUND NO. 2 OF ASSESSMENT YEAR 2006-07. THE FACTUAL AND LEGAL POSI TION REMAINING SAME IN BOTH THE YEAR, WE DIRECT THE AO T O FOLLOW OUR ORDER FOR A.Y.2006-07, ON THIS ISSUE. 11. GROUND NO.5: IN THIS GROUND THE ASSESSEE HAS CHALLENGED THE ACTION FOR AO AND DENYING THE BENEFIT OF DEDUCT ION U/S J.P. MORGAN S. P. LTD. 24 10A ON THE AMOUNT OF INTEREST INCOME IN DEPOSITS WI TH THE BANK, AMOUNTING TO RS.2,28,50,823/-. FACTS AND LEGA L POSITION BEING IDENTICAL, WE DIRECT THAT OUR ORDER FOR A.Y. 2006-07 SHOULD BE FOLLOWED ON THIS ISSUE. 12. GROUND NO.6: THE ASSESSEE HAS CHALLENGED THE ACTION OF AO IN NOT ACCEPTING THE ASSESSEES CLAIM THAT BOOK PROFIT U/S 115JB OF THE ACT HAS TO BE COMPUTED, BY REDUCING T HE AMOUNT OF INTEREST INCOME ON DEPOSITS TO WHICH PROV ISIONS OF SECTION 10A APPLIED. 12.1 IT IS NOTED THAT THIS GROUND IS IDENTICAL TO GROUN D NO.4 OF ASSESSMENT YEAR 2006-07, ACCORDINGLY, WE DIRECT THA T OUR ORDER FOR A.Y. 2006-07 ON THIS GROUND SHOULD BE FOL LOWED. 13. GROUNDS NO.7, 8 & 9: ARE CONSEQUENTIAL, AND THEREFORE THESE ARE DISMISSED. 14. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER, 2015. SD/- (AMIT SHUKLA ) SD/- (ASHWANI TANEJA) ! / JUDICIAL MEMBER ' ! / ACCOUNTANT MEMBER MUMBAI; # DATED : 30/11/2015 CTX? P.S/. .. J.P. MORGAN S. P. LTD. 25 #$%&'(')% / COPY OF THE ORDER FORWARDED TO : 1. % &' / THE APPELLANT 2. ()&' / THE RESPONDENT. 3. * * ( % ) / THE CIT, MUMBAI. 4. * * / CIT(A)- , MUMBAI 5. -./ (01 , * % 012 , / DR, ITAT, MUMBAI 6. /34 5 / GUARD FILE. / BY ORDER, )-% ( //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI