Asst. CIT, Circle-7, Pune V. Symantec Software India Pvt. Ltd., (formerly VERITAS Software India Pvt. Ltd.,), Pune

ITA 962/PUN/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7217 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-10-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 03-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUHAS S KULKARNI
• Assessee Lawyers: RAJENDRA
• Keywords: Transfer pricing; International transaction; Difference of opinion
• Section: 143(3); 234B; 15

Judgement Text

1 ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , ! ' , # $ BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.962/PUN/2013 % % / ASSESSMENT YEAR : 2006-07 ASST.COMMISSIONER OF INCOME TAX, CIRCLE-7, PUNE. . APPELLANT VS. SYMANTIC SOFTWARE INDIA PVT. LTD. (FORMERLY VERITAS SOFTWARE INDIA PVT LTD.), PUNE. S.NO.210/1A SYMPHONY, RANGE HILLS, PUNE 411 020. PAN: AAACV6015F . RESPONDENT C.O.NO.71/PUN/2014 (ARISING OUT OF ITA NO.962/PUN/2013 % % / ASSESSMENT YEARS : 2006-07 SYMANTIC SOFTWARE INDIA PVT. LTD. (FORMERLY VERITAS SOFTWARE INDIA PVT LTD.), PUNE. S.NO.210/1A SYMPHONY, RANGE HILLS, PUNE 411 020. PAN: AAACV6015F . APPELLANT VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 7, PUNE. . RESPONDENT / APPELLANT BY : SHRI SUHAS S. KULKARNI. / RESPONDENT BY : SHRI PRAMOD ACHUTAN, SHRI SWAPNIL BEFNA AND SHRI RAJENDRA AGIWAL. 2 & / ORDER PER ANIL CHATURVEDI, AM: THE PRESENT APPEAL FILED BY THE REVENUE AND THE CROSS- OBJECTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-IT/TP, PUNE DT.06.02.20 13 FOR THE ASSESSMENT YEAR 2006-07. 1. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT SERVICES RENDERING TECHNICAL SUPP ORT SERVICES AND RELATED SERVICES. ASSESSEE FILED IS RETURN OF INCOME FOR A.Y. 2006-07 ON 30.10.2006 DECLARING TOTAL INCOME OF RS.22,56,05,340/-. THE ASSESSEE REVISED THE RETURN OF INCO ME ON 23.10.2007 WHEREIN IT REVISED THE TOTAL INCOME TO RS.24,31,56,915/-. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) DT.15.09.2008 WAS ISSUED AND SERVED ON THE ASS ESSEE. THEREAFTER REFERENCE TO THE TRANSFER PRICING OFFICER (TPO) W AS MADE FOR DETERMINING THE ARMS LENGTH PRICE (ALP) OF INTERNATION AL TRANSACTIONS. ACCORDINGLY, DCIT(TPO) VIDE ORDER DT.29.10.2 009 PASSED ORDER U/S 92CA(3) AND DETERMINED THE TOTAL ADJUS TMENTS OF RS.4,24,01,314/- TO THE INTERNATIONAL TRANSACTIONS RELATING TO THE PROVISION OF SOFTWARE DEVELOPMENT SERVICES. THEREAFTER AS SESSMENT WAS FRAMED U/S 143(3) VIDE ORDER DT.26.02.2010 AND THE TOT AL INCOME WAS DETERMINED AT RS.42,01,20,690/-. AGGRIEVED BY T HE / DATE OF HEARING : 21.12.2016 / DATE OF PRONOUNCEMENT: 20.01.2017 3 ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A), WHO BY A CONSOLIDATED ORDER DT.06.02.2013 FOR A.YS. 2005-06 TO 2008- 09 PASSED THE ORDER. FOR A.Y. 2006-07 HE GRANTED PARTIAL R ELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS FILED THE FOLLOWING GROUNDS IN ITA NO.962/PUN/2013. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE AO TO ACC EPT ACE SOFTWARE EXPORTS LIMITED AS A COMPARABLE COMPANY, DISREGARDING THE FINDING OF THE TRANSFER PRICING OF FICER (TPO), THAT THERE IS NOTHING SIMILAR BETWEEN THE ASSESSEE COMPANY AND ACE SOFTWARE EXPORTS LIMITED AS FAR AS FUNCTION S ARE CONCERNED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) HAS ERRED IN HOLDING THAT THE ASSES SEE IS ENTITLED TO CLAIM DEDUCTION U/S.10A ON THE PROFIT O F UNIT B ALSO. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO RED UCE THE TELECOMMUNICATION CHARGES NOT ONLY FROM THE EXPORT TURNOVER BUT ALSO FROM THE TOTAL TURNOVER. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE GAIN FROM FLUCTUATION OF FOREIGN EXCHANGE IS DIRECTLY RELATED WITH THE EXPORT ACTIVI TIES AND SHOULD BE CONSIDERED AS INCOME DERIVED FROM EXPORT IN THE YEAR IN WHICH EXPORT TOOK PLACE. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROU NDS OF APPEAL ON OR BEFORE THE APPEAL IS HEARD AND DISPOSE D OFF. 2. ASSESSEE ALSO FILED CROSS-OBJECTIONS AND THE CROSS- OBJECTIONS RAISED BY THE ASSESSEE IN ITA NO.962/PUN/201 3 READS AS UNDER : 1. ERRONEOUSLY ACCEPTING CERTAIN COMPANIES AS COMPARABLE TO THE RESPONDENT ERRED BY ACCEPTING CERTAIN COMPANIES AS COMPARABLE TO THE RESPONDENT IN SPITE OF THE FACT THAT THESE COMPANIE S ARE FUNCTIONALLY NOT COMPARABLE TO THE RESPONDENT. FURTHER, WITHOUT PREJUDICE TO THE FACT THAT ACE SOF TWARE EXPORTS LIMITED IS COMPARABLE TO THE RESPONDENT, IN CASE ACE SOFTWARE EXPORTS LIMITED IS REJECTED AS FUNCTIONALLY NON- COMPARABLE AS APPEALED BY DEPARTMENT THEN VISHAL 4 INFORMATION TECHNOLOGIES LIMITED SHOULD ALSO BE REJE CTED SINCE BOTH THE COMPANIES ARE ENGAGED IN SIMILAR BUSI NESS ACTIVITIES. 2. INAPPROPRIATE APPLICATION OF TURNOVER FILTER FOR REJECTION OF COMPARABLE COMPANIES ERRED IN LAW IN APPLYING ARBITRARY TURNOVER FILTER AND THEREBY REJECTING COMPARABLE COMPANIES WITHOUT ANY JUSTIFIC ATION FOR THE APPLICATION OF TURNOVER FILTER ADOPTED. 3. INAPPROPRIATELY REJECTION OF BENCHMARKING OF TECHNI CAL SUPPORT AND IS&T SERVICES ON AN AGGREGATED BASIS ERRED BY REJECTING THE BENCHMARKING ANALYSIS FOR TE CHNICAL SUPPORT SERVICES AND IS&T SERVICES CONDUCTED BY RES PONDENT ON AN AGGREGATED BASIS. 4. INAPPROPRIATE USE OF NON-CONTEMPORANEOUS FINANCIAL DATE OF COMPARABLE COMPANIES FOR TRANSFER PRICING ANALYSIS ERRED IN COMPUTING THE ARMS LENGTH PRICE USING THE FINANCIAL INFORMATION OF COMPARABLE COMPANIES AVAILABLE AT TH E TIME OF ASSESSMENT PROCEEDINGS, ALTHOUGH SUCH INFORMATION W AS NOT AVAILABLE AT THE TIME WHEN THE RESPONDENT COMPLIED WITH THE TRANSFER PRICING REGULATIONS. 5. INAPPROPRIATE USE OF SINGLE YEAR FINANCIAL DATA OF COMPARABLE COMPANIES FOR TRANSFER PRICING ANALYSIS ERRED IN CONSIDERING THE OPERATING MARGINS ON OPERA TING COST OF THE COMPARABLE COMPANIES BASED ON THE FINANCIAL DATA PERTAINING ONLY TO FINANCIAL YEAR ENDED 31 MARCH 20 06 AND REJECTING USE OF FINANCIAL DATA OF COMPARABLE COMPA NIES FOR MULTIPLE I.E. THREE YEARS INCLUDING 31 MARCH 2004 A ND 31 MARCH 2005. 6. ERRONEOUSLY REJECTING RISK ADJUSTMENT TO ACCOUNT FO R DIFFERENCE IN RISK PROFILE OF COMPARABLE COMPANIES VIS- -VIS THE RESPONDENT ERRED IN NOT MAKING ANY ADJUSTMENTS FOR DIFFERENCE IN RISK PROFILE OF COMPARABLE COMPANIES VIS--VIS THE RESPO NDENT AND THEREBY COMPARING THE OPERATING MARGINS OF THE COMP ARABLE COMPANIES ASSUMING HIGH BUSINESS RISK WITH THE RESPONDENTS CAPTIVE RISK MITIGATED OPERATIONS WITH OUT MAKING ANY ADJUSTMENT FOR DIFFERENCE IN FUNCTIONAL AND RISK PROFILES. 7. COMPUTATION OF BENEFIT OF VARIATION OF +/- 5 PERCEN T AVAILABLE UNDER PROVISO TO SECTION 92C(2) OF THE AC T ERRED ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE BY COMPUTING THE ARMS LENGTH PRICE OF THE INTERNATION AL TRANSACTIONS OF THE APPELLANT AS THE MEAN ARMS LEN GTH PRICE DETERMINED, WITHOUT TAKING INTO ACCOUNT THE LOWER 5 PERCENT VARIATION (AS STANDARD DEDUCTION) FROM THE MEAN ARM S LENGTH PRICE DETERMINED, WHICH IS PERMITTED TO AND WHICH HAS BEEN OPTED FOR BY THE APPELLANT UNDER THE PROVISION S OF PROVISO TO SECTION 92C(2) OF THE ACT. 5 8. ERRONEOUS LEVY OF INTEREST UNDER SECTION 234B OF TH E ACT ON TRANSFER PRICING ADJUSTMENT WITHOUT PREJUDICE TO THE ABOVE GROUNDS OF APPEAL, I F THE TRANSFER PRICING ADJUSTMENT IS SUSTAINED THEN THE L EARNED AO HAS ERRED IN LEVYING INTEREST UNDER SECTION 234B OF THE ACT, WITHOUT CONSIDERING THE FACT THAT THE ADDITION ON A CCOUNT OF TRANSFER PRICING ADJUSTMENT IS DUE TO DIFFERENCE OF OPINION AND AS AT THE DUE DATE OF PAYMENT OF ADVANCE TAX BY NO MEANS THE APPELLANT COULD HAVE ESTIMATED SUCH ADJUS TMENTS AND CONSEQUENTIAL TAX ON SUCH ADJUSTMENT. CROSS OBJECTIONS WITH REFERENCE TO GROUND 4 OF THE DEPARTMENTS APPEAL [REDUCTION OF TELECOMMUNICATION EXPENSES FROM TOTAL TURNOVER] 9. TELECOMMUNICATION CHARGES OUGHT NOT TO HAVE BEEN REDUCED FROM EXPORT TURNOVER ERRED IN REDUCING THE TELECOMMUNICATION CHARGES OF RS.18,19,836 FROM EXPORT TURNOVER WITHOUT APPRECI ATING THE FACT THAT THE SAME WERE NOT INCURRED IN FOREIGN CUR RENCY. THE RESPONDENT CRAVES, TO CONSIDER EACH OF THE ABOV E GROUNDS OF CROSS OBJECTIONS WITHOUT PREJUDICE TO EA CH OTHER AND CRAVES, LEAVE TO ADD, ALTER, DELETE OR MODIFY A LL OR ANY OF THE ABOVE GROUNDS OF CROSS OBJECTIONS. 3. WE FIRST TAKE UP ASSESSEES CROSS-OBJECTIONS. 3.1 ASSESSEE VIDE LETTER DT.15.12.2016 HAS MADE A REQUEST FOR WITHDRAWAL OF CROSS-OBJECTIONS WHEREIN, INTER-ALIA , IT IS SUBMITTED THAT THE ASSOCIATED ENTERPRISES OF THE ASSESSEE BASED OUT OF USA, HAD APPLIED FOR MUTUAL AGREEMENT PROCEDURE (MAP) WITH THE COMPETENT AUTHORITIES OF THE USA. THE COMPETENT AUTHOR ITIES OF USA AND INDIA HAVE REACHED A CONCLUSION ON THE MAP AN D THE ASSESSEE WISHES TO ACCEPT THE PROPOSED RESOLUTION UNDE R MAP RECEIVED FROM COMPETENT AUTHORITIES OF INDIA. IT WAS FURT HER SUBMITTED THAT IN ORDER TO ENABLE THE AO TO GIVE EFFECT T O THE RESOLUTIONS AGREED UNDER MAP, THE ASSESSEE WOULD NEED T O FULFILL CERTAIN CONDITIONS AS PROVIDED UNDER RULE 44H OF THE INCO ME TAX RULES, 1962 WHICH INTER-ALIA REQUIRES THE WITHDRAWAL OF APPEAL IF 6 ANY, PENDING ON THE ISSUE. THE ASSESSEE THEREFORE SOUG HT TO WITHDRAW THE OBJECTIONS RAISED IN THE CROSS-OBJECTIONS FILE D BY THE ASSESSEE. LD. D.R. FOR THE REVENUE SUBMITTED THAT THE DEPARTMENT HAS NO OBJECTION IN CASE, THE ASSESSEE WISHES TO WITHDR AW THE APPEAL. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN VIEW OF THE SUBMISSIONS MADE BY TH E ASSESSEE IN ITS LETTER DT.15.12.2016 AND THE SUBMISSIONS MA DE BY LD.A.R, THE CROSS-OBJECTIONS OF THE ASSESSEE ARE DISMISSED AS WITHDRAWN. 5. IN THE RESULT, THE CROSS-OBJECTION OF THE ASSESSEE IS DISMISSED. 6. NOW WE TAKE UP REVENUES APPEAL IN ITA NO.962/PUN/2013. 6.1 FIRST GROUND IS WITH RESPECT TO THE DIRECTIONS OF LD. CI T(A) TO AO TO ACCEPT ACE SOFTWARE EXPORTS LIMITED AS A COMPARA BLE COMPANY. 6.2 FROM THE DETAILS AND THE TRANSFER PRICING STUDY REPO RT THAT WAS SUBMITTED BY ASSESSEE, IT WAS NOTICED BY TPO THAT INTERNATIONAL TRANSACTION TOWARDS PROVISION OF TECHNICAL SUP PORT SERVICES AMOUNTED TO RS.32,26,760/- AND PROVISION OF INFORM ATION SYSTEM AND TECHNICAL SUPPORT SERVICES AMOUNTED TO RS.28,47,30,958/- AND BOTH THESE TRANSACTIONS WERE COMBIN ED AND BENCH-MARKING WAS DONE ON AGGREGATE BASIS BY ADOPTING SINGLE SET OF COMPARABLES TAKING WEIGHTED AVERAGE OF PLI (OPERATING PROFIT / 7 OPERATING COST). THE COMPARABLE COMPANIES SELECTED BY TH E ASSESSEE INCLUDED ACE SOFTWARE EXPORTS LIMITED WHOSE WEIG HTED AVERAGE MARGIN WAS 8.69%. THE TPO CONCLUDED THAT ACE SOFTWARE EXPORTS LIMITED WAS NOT COMPARABLE TO THE ASSESSEE COM PANY AS ITS BUSINESS ACTIVITIES WAS DIFFERENT FROM THAT OF THE ASSESSEE. AGGRIEVED BY THE REJECTION OF ACE SOFTWARE EXPORTS LIMITE D AS A COMPARABLE COMPANY, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A). LD. CIT(A) DIRECTED THE AO TO ACCEPT ACE SOFTWARE EXPORT S LIMITED BY OBSERVING AS UNDER : 3.5.5 I HAVE CONSIDERED THE ARGUMENTS OF THE LEARN ED TPO AND OF THE APPELLANT. I FIND THE LEARNED TPO HAS B EEN INCONSISTENT IN SELECTION OF THE COMPARABLE COMPANI ES. THE LEARNED TPO HAS TO COMPARE FINANCIAL RESULTS OF THE ITES SEGMENT OF THE APPELLANT WITH THE ITES SEGMENT OF COMPARABLE COMPANIES. ALL ABOVE THREE COMPANIES PE RTAIN TO ITES SEGMENT. THE LEARNED TPO DOES NOT HAVE ANY AR GUMENT ON REJECTION OF ACE SOFTWARE EXCEPT THAT IT IS NOT FUNCTIONALLY SIMILAR. HOWEVER, IT WOULD BE INCORRECT TO CONCLUD E THAT THE ACE SOFTWARE IS NOT FUNCTIONALLY COMPARABLE BECAUSE E- PUBLISHING AND DATA BASE CREATION FALL UNDER ITES A CCORDING TO THE NOTIFICATION ISSUED BY THE CBDT. ACCORDINGL Y, I DIRECT THE LEARNED AO TO ACCEPT ACE SOFTWARE EXPORTS LIMIT ED AS A COMPARABLE COMPANY. 7. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN A PPEAL BEFORE US. 8. BEFORE US, LD. D.R. SUPPORTED THE ORDER OF AO. LD.A.R. ON THE OTHER HAND REITERATED THE SUBMISSIONS MADE BEFORE LOWER AUTHORITIES AND SUPPORTED THE ORDER OF LD. CIT(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) AFTER CONSIDERI NG THE NOTIFICATION ISSUED BY CBDT HAS GIVEN A FINDING THAT E-PUBLIS HING AND DATA BASE CREATION FALLS UNDER ITES SEGMENT AND WA S THEREFORE FUNCTIONALLY COMPARABLE WITH THAT OF ASSESSEE. BEFORE US, R EVENUE 8 HAS NOT PLACED ANY MATERIAL ON RECORD TO CONTROVERT TH E FINDINGS OF LD. CIT(A). IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON T O INTERFERE WITH THE ORDER OF LD. CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 10. SECOND GROUND IS WITH RESPECT TO CLAIM OF ASSESSEE FOR DEDUCTION U/S 10A ON THE PROFIT OF UNIT B. 10.1 AO NOTICED THAT ASSESSEE WAS CARRYING OUT ITS OPER ATION FROM DIFFERENT PLACES AS LISTED IN PAGE 4 OF THE ASSESSMENT OR DER, THOUGH IT HAD TAKEN APPROVAL FROM STPI AUTHORITIES FOR ALL THOSE PLACES. HE ALSO NOTICED THAT ASSESSEE HAD TREATED ALL THE DIFFERENT P LACES AS BRANCHES UNDER UNIT A AND FOR WHICH DEDUCTION U/S 10A W AS CLAIMED BY THE ASSESSEE. AO NOTICED THAT OFFICE AT PUNE IT PARK, AUNDH ROAD, PUNE AND BIND VIEW OFFICE, NEAR SADHU VASWANI CHOWK, PUNE FOR WHICH STPI AUTHORITIES APPROVAL WAS RECEIV ED ON 08.10.2003 AND 05.11.2004 RESPECTIVELY BUT ASSESSEE, TH OUGH HAD NAMED IT AS UNIT B, BUT HAD CLAIMED THE PROFITS FROM IT AS DEDUCTION U/S 10A OF THE ACT. HE ALSO NOTICED THE CLAIM OF 10A DED UCTION WAS DISALLOWED BY HIS PREDECESSOR FOR THOSE 2 UNITS IN A.Y. 2004 -05 AND 2005-06. HE THEREFORE, FOLLOWING THE VIEWS OF HIS PREDECES SOR FOR A.Y. 2004-05 AND 2005-06, HELD THAT UNIT B WAS AN EXTENS ION OF THE EXISTING BUSINESS OF THE ASSESSEE AND WAS NOT ELIGIBLE FOR DEDUCTION U/S 10A. HE ACCORDINGLY DENIED THE EXCESS CLA IM OF DEDUCTION OF RS.36,98,818/-. 11. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A). LD. CIT(A) FOLLOWING HIS OWN ORDER FOR A.Y. 2005-06 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER: 9 ASSESSMENT YEAR 2005 06 GROUND 1 DENIAL OF DEDUCTION U/S 10A ON PROFITS OF UNIT B 2.1.1 THE LEARNED AO RESTRICTED THE DEDUCTION CLAIMED U/S 10A AS ACCORDING TO HIM, APPELLANTS UN IT-B WAS AN EXTENSION OF THE EXISTING BUSINESS. HE STATED T HAT UNIT-B IS CLAIMING DEDUCTION U/S 10A BEYOND TEN YEARS AND HENCE IS NOT ELIGIBLE TO CLAIM THE DEDUCTION. ON THIS GRO UND, 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 A Y 2004-05. ACCORDINGLY, HE RESTRICTED THE DEDUCTION CLAIMED U/S 10A. 2.1.2 THE APPELLANT SUBMITTED THAT THIS ISSUE IS COVERED IN ITS FAVOUR BY THE ORDER OF THE HONOURABL E ITAT IN ITS OWN CASE FOR 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 DISTIN CT UNIT FROM UNIT-A, WHICH IS ELIGIBLE TO CLAIM DEDUCTION U /S 10A. THE TRIBUNAL HAS GIVEN ITS DECISION IN PARA 12 OF I TS ORDER AFTER CONSIDERING THE ARGUMENT OF THE LEARNED AO TH AT UNIT-B WAS CLAIMING DEDUCTION BEYOND THE PERIOD OF TEN YEAR S. FOLLOWING THE DECISION OF THE JURISDICTIONAL TRIBUN AL, I HOLD THAT THE APPELLANT IS ENTITLED TO CLAIM DEDUCTION U /S 10A ALSO ON THE PROFITS OF UNIT-B. GROUND 12 SEPARATE EXISTENCE OF UNIT-B 3. 12.1. THIS GROUND OF APPEAL IS ALREADY DECIDED VIDE GROUND 1 IN A.Y. 2005-06. SAME FINDINGS WILL BE AP PLICABLE HERE. 12. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 13. BEFORE US, LD. D.R. SUPPORTED THE ORDER OF AO. ON THE OTHER HAND LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD. CIT(A) AND SUPPORTED THE ORDER OF LD. CIT(A). 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR CLAIM OF DEDUCTION ON THE PROFITS OF UNIT B 10 HAD FOLLOWED THE DECISION OF HONBLE TRIBUNAL IN ASSESSEES O WN CASE. BEFORE US, NO MATERIAL HAS BEEN PLACED ON RECORD B Y THE REVENUE TO DEMONSTRATE THAT THE DECISION OF THE TRIBUNA L THAT WAS FOLLOWED BY LD. CIT(A) HAS BEEN SET- ASIDE BY THE HONBLE HIG H COURT. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A). THUS, THIS GROUND OF THE REVENUE IS DISMISSED. 15. THIRD GROUND IS WITH RESPECT TO REDUCTION OF TELE- COMMUNICATION CHARGES FROM TOTAL TURNOVER. 15.1 AO NOTICED THAT FOR CLAIMING THE DEDUCTION U/S 10A TH E EXPENSES INCURRED IN FOREIGN CURRENCY AND TELECOMMUNICATIO N EXPENSES WERE DEDUCTED BY THE ASSESSEE FROM EXPORT T URNOVER AS WELL AS TOTAL TURNOVER. AO WAS OF THE VIEW THAT THESE E XPENSES ARE TO BE REDUCED FROM THE EXPORT TURNOVER BECAUSE BENE FIT OF SEC.10A IS PROVIDED FOR NET REALIZATION OF FOREIGN-EXCHANGE IN INDIA AND GENERALLY THE EXPENSES ARE NOT PART OF TURNOVER AND HENCE, THE EXPENSES ARE NOT REQUIRED TO BE REDUCED FROM THE TOT AL TURNOVER. HE ACCORDINGLY RE-WORKED THE DEDUCTION U/S 10A BY RED UCING THE TELECOMMUNICATION EXPENSES OF RS.18,19,936/- ONLY FROM EXPO RT TURNOVER. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARR IED THE MATTER BEFORE LD. CIT(A), WHO DECIDED THE ISSUE IN FAVOUR OF THE ASS ESSEE BY HOLDING AS UNDER: 2.5.1 ON REDUCTION OF TELECOMMUNICATION EXPENSES AND EXPENSES INCURRED IN FOREIGN CURRENCY, I FIND THAT THE LEARNED AO HAS RELIED ON THE INFORMATION CONTAINED IN THE F ORM 56F FILED BY THE APPLICANT. IN VIEW OF THIS FACTS AND CLEAR PROVISIONS OF LAW ON THIS SUBJECT, I UPHOLD THE DEC ISION OF THE LEARNED AO TO REDUCE EXPENSES FROM THE EXPORT TURNO VER. 2.5.2 IT IS SEEN THAT THE ISSUE OF REDUCING THE SAM E AMOUNTS ALSO FROM THE TOTAL TURNOVER HAS BEEN COVERED IN TH E 11 APPELLANTS FAVOUR BY THE ORDER OF THE HONOURABLE I TAT IN THE APPELLANTS OWN CASE OF AY 2004-05. IN VIEW OF THE DECISION OF THE HONOURABLE TRIBUNAL IN THE APPELLANTS CASE, I DIRECT THE AO TO REDUCE THE ABOVE ITEMS OF INCOME ALSO FRO M THE TOTAL TURNOVER. GROUND 12 SEPARATE EXISTENCE OF UNIT-B 3. 12.1. THIS GROUND OF APPEAL IS ALREADY DECIDED VIDE GROUND 1 IN A.Y. 2005-06. SAME FINDINGS WILL BE AP PLICABLE HERE. GROUND 13 TELECOMMUNICATION EXPENSES OF RS.18,19,9 36/- GROUND 14 COMPUTATION OF DEDUCTION U/S 10A GROUND 15 FOREIGN EXCHANGE FLUCTUATION GAIN 2,41,30,641/-. 16. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN A PPEAL BEFORE US. 17. BEFORE US, LD. D.R. SUPPORTED THE ORDER OF AO. ON THE OTHER HAND LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD. CIT(A) AND SUPPORTED THE ORDER OF LD. CIT(A). 18. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE DECIDING THE ISSUE HAD FOLLOWED THE ORDER OF THE CO-ORDINATE BENCH OF THE TR IBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2004-05. BEFORE US, REVEN UE HAS NOT PLACED ANY MATERIAL ON RECORD TO DEMONSTRATE THAT THE AFORESAID ORDER OF THE TRIBUNAL HAS BEEN SET-ASIDE BY THE HONBLE HIGH COU RT. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFER E WITH THE ORDER OF LD. CIT(A). THUS, THIS GROUND OF THE REVENUE IS DISMISSED. 19. NEXT GROUND IS WITH RESPECT TO CONSIDERING THE FOREIGN FLUCTUATION AS INCOME DERIVED FROM EXPORTS. 12 19.1 AO ON PERUSING THE CLAIM OF DEDUCTION OF 10A NOTICED THAT ASSESSEE HAD EARNED RS.2,41,30,641/- AS EXCHANGE GAIN AND HAD CONSIDERED IT FOR DEDUCTION U/S 10A. AO WAS OF THE VIEW THAT SINCE IT WAS NOT DERIVED FROM EXPORT OF ARTICLES OF THINGS OR COMPUTER SOFTWARE, IT WAS NOT ELIGIBLE FOR DEDUCTION. HE ACCORDINGLY DENIED THE CLAIM OF THE ASSESSEE. 20. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE M ATTER BEFORE LD. CIT(A), WHO DECIDED THE ISSUE IN FAVOUR OF THE ASS ESSEE BY HOLDING AS UNDER: 2.2.3 I HAVE CONSIDERED THE ARGUMENTS OF THE APPEL LANT AND GONE THROUGH THE CASE-LAWS RELIED ON BY IT. AS FAR AS FOREIGN EXCHANGE GAIN IS CONCERNED, IT HAS BEEN HELD BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V GEM PLUS JEWELLERY INDIA LTD (2011) 330 ITR 175 (BOM) THAT T HE GAIN FROM FLUCTUATION OF FOREIGN EXCHANGE IS DIRECTLY RE LATED WITH THE EXPORT ACTIVITIES AND SHOULD BE CONSIDERED AS I NCOME DERIVED FROM EXPORT IN THE YEAR IN WHICH THE EXPORT TOOK PLACE. ACCORDINGLY, DEDUCTION U/S 10A ON FOREIGN E XCHANGE GAIN IS ALLOWABLE. I DIRECT THE LEARNED AO TO ALLO W THE DEDUCTION ON FOREIGN EXCHANGE GAIN. 21. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN A PPEAL BEFORE US. 22. BEFORE US, LD. D.R. SUPPORTED THE ORDER OF AO. ON THE OTHER HAND LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD. CIT(A) AND SUPPORTED THE ORDER OF LD. CIT(A). 23. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE DECIDING THE ISSUE IN FAVOUR OF ASSESSEE HAD FOLLOWED THE DECISION OF JURISDICTION AL OF HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. GEM PLUS JEWELLERY INDIA LTD REPORTED IN (2011) 330 ITR 175. BE FORE US, 13 REVENUE HAS NOT PLACED ANY CONTRARY BINDING DECISION IN IT S SUPPORT. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASO N TO INTERFERE WITH THE ORDER OF LD. CIT(A). THUS, THIS GROUND OF THE REVENUE IS DISMISSED. 24. THUS, THE APPEAL OF THE REVENUE IS DISMISSED. ,, 25. IN THE RESULT, CROSS-OBJECTION AND APPEAL OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THE 20 TH DAY OF JANUARY, 2017. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER # / ACCOUNTANT MEMBER PUNE; DATED : 20 TH JANUARY, 2017. YAMINI & ' (!)* +*! / COPY OF THE ORDER FORWARDED TO : 1 . / THE APPELLANT 2. / THE RESPONDENT 3 . 4. 5 6. THE CIT(A)-IT/TP, PUNE CIT-IV / DIT(TP/IT), PUNE. !'# 1 #$%&' $% & / DR, ITAT, A PUNE; '()*+ GUARD FILE & / BY ORDER, // // TRUE COPY // // T // TRUE COPY // , -./0 / ASSISTANT REGISTRAR, ' $% , / ITAT, PUNE.