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Income Tax Appellate Tribunal, MUMBAI BENCH “B” MUMBAI
Before: SHRI VIKAS AWASTHY & SHRI OM PRAKASH KANT
PER OM PRAKASH KANT, AM
This appeal by the assessee is directed against order dated 16.12.2010 passed by the Ld. Commissioner of Income-tax (Appeals)-19, Mumbai for assessment year 2006-07, raising following grounds:
That on the facts and circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred in upholding the order of the Assessing Officer ('AO') in not allowing the deduction under section 10A of the Income-tax Act, 1961 ('Act') on the standalone
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business profits of the year before adjustment of the business profits of the year before adjustment of the business profits of the year before adjustment of the brought forward business losses and unabsorbed brought forward business losses and unabsorbed brought forward business losses and unabsorbed depreciation amounting to Rs. 58,943,598 and depreciation amounting to Rs. 58,943,598 and depreciation amounting to Rs. 58,943,598 and 123,408,595 respectively with the income of the 123,408,595 respectively with the income of the 123,408,595 respectively with the income of the current year. current year. 2. That on the facts and circumstances of the That on the facts and circumstances of the case, the That on the facts and circumstances of the Ld. Commissioner of Income Tax (Appeals) erred in Ld. Commissioner of Income Tax (Appeals) erred in Ld. Commissioner of Income Tax (Appeals) erred in upholding the order of the AO of disallowing upholding the order of the AO of disallowing upholding the order of the AO of disallowing payments/provisions payments/provisions payments/provisions towards towards towards lease lease lease line line line and and and communication expenses, IT allocation expenses communication expenses, IT allocation expenses communication expenses, IT allocation expenses and travel expenses amounting to Rs. 154,302,109 and travel expenses amounting to Rs. 154,302,109 and travel expenses amounting to Rs. 154,302,109 paid/payable paid/payable to its affiliate companies under to its affiliate companies under section 40(a)i) of the Act. section 40(a)i) of the Act. 2. Briefly stated facts of the case are that the assessee company Briefly stated facts of the case are that the assessee company Briefly stated facts of the case are that the assessee company i.e. M/s CFC India Services Pvt. Ltd., CFC India Services Pvt. Ltd., was a subsidiary of Countr s a subsidiary of Country wise Financial Corporation wise Financial Corporation ( now merged with M/s ( now merged with M/s BA Continuum Solutions Pvt. Ltd ) ) and is engaged in the business of providing and is engaged in the business of providing information technology services (software development application information technology services (software development application information technology services (software development application maintenance, testing and support services) and IT Enabled Services maintenance, testing and support services) and IT Enabled Services maintenance, testing and support services) and IT Enabled Services (date entry and transaction processing services ; telephony and call (date entry and transaction processing services ; telephon (date entry and transaction processing services ; telephon centre services) to Countrywide Group companies. The assessee centre services) to Countrywide Group companies. The assessee centre services) to Countrywide Group companies. The assessee company is 100% export oriented unit and is registered under the company is 100% export oriented unit and is registered under the company is 100% export oriented unit and is registered under the STP Scheme for development of computer software/IT enabled STP Scheme for development of computer software/IT enabled STP Scheme for development of computer software/IT enabled services. The offices of the assessee company are located i of the assessee company are located in Mumbai of the assessee company are located i and Hyderabad. For the year under consideration, the assessee and Hyderabad. For the year under consideration, the assessee and Hyderabad. For the year under consideration, the assessee company filed return of income on 23.11.2006 declaring total company filed return of income on 23.11.2006 declaring total company filed return of income on 23.11.2006 declaring total income at Rs.18,48,378/ income at Rs.18,48,378/- under regular provisions of the Income under regular provisions of the Income- tax Act, 1961 (in short ‘the Act’) and tax Act, 1961 (in short ‘the Act’) and book profit u/s 115JB u/s 115JB of the Act at Rs. Nil. In the return of income filed, the assessee company Act at Rs. Nil. In the return of income filed, the assessee company Act at Rs. Nil. In the return of income filed, the assessee company declared income from VPO operations at Rs.81,79,98,000/- ; declared income from VPO operations at Rs.81,79,98,000/ declared income from VPO operations at Rs.81,79,98,000/
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income from software services income from software services at Rs.36,02,54,000/ Rs.36,02,54,000/- and declared net profit at Rs.29,92,28,000/ net profit at Rs.29,92,28,000/-. The assessee company cla . The assessee company claimed deduction u/s 10A of the Act at Rs.6,05,74,580/ of the Act at Rs.6,05,74,580/-, after claiming set fter claiming set off of brought forward business loss brought forward business loss of last year i.e. AY 2005 last year i.e. AY 2005-06. During the course of assessment proceedings, the assessee revised During the course of assessment proceedings, the assessee revised During the course of assessment proceedings, the assessee revised its computation of the total income its computation of the total income and enhance enhanced claim of deduction u/s 10A deduction u/s 10A amounting to Rs.23,75,27,069/ to Rs.23,75,27,069/- as against original claim of Rs.6,05,74,380/ original claim of Rs.6,05,74,380/-. The said revision was done on . The said revision was done on the ground that the assessee is the ground that the assessee is eligible for deduction u/s 10A eligible for deduction u/s 10A before set off of brought forward business loss and deprec brought forward business loss and deprec brought forward business loss and depreciation. The said claim was denied by the Assessing Officer in the The said claim was denied by the Assessing Officer in the The said claim was denied by the Assessing Officer in the assessment order passed u/s 143(3) of the Act dated 30.12.2009 assessment order passed u/s 143(3) of the Act dated 30.12.2009 assessment order passed u/s 143(3) of the Act dated 30.12.2009 and assessed total income at Rs.5,55,73,544/ assessed total income at Rs.5,55,73,544/- under regular provisions provisions provisions of of of the the the Act Act Act and and and book book book profit profit profit u/s u/s u/s 115JB 115JB 115JB at at at Rs.3,36,82,375/-. On further appeal, the Ld. CIT(A) allowed part . On further appeal, the Ld. CIT(A) allowed part . On further appeal, the Ld. CIT(A) allowed part relief to the assessee. Aggrieved relief to the assessee. Aggrieved, the assessee is before the Income before the Income- tax Appellate Tribunal (ITAT), tax Appellate Tribunal (ITAT), raising the grounds raising the grounds as reproduced above.
Before us, the assessee has filed a Paper Book containing Before us, the assessee has filed a Paper Book containing Before us, the assessee has filed a Paper Book containing pages 1 to 226.
4.1 Before us, the Ld. Counsel of the assessee submitted that Before us, the Ld. Counsel of the assessee submitted that Before us, the Ld. Counsel of the assessee submitted that assessee is not interested in pursuing the ground No. 2 of the assessee is not interested in pursuing the ground No. 2 of the assessee is not interested in pursuing the ground No. 2 of the appeal and accordingly same is dismissed as not pressed. appeal and accordingly same is dismissed as not pressed. appeal and accordingly same is dismissed as not pressed.
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As far as Ground No. 1 of the appeal of the assessee As far as Ground No. 1 of the appeal of the assessee As far as Ground No. 1 of the appeal of the assessee is concerned the Ld. CIT(A) declined the claim of the assessee for not concerned the Ld. CIT(A) declined the claim of the assessee for not concerned the Ld. CIT(A) declined the claim of the assessee for not setting off of the business loss of the depreciation from the profit of setting off of the business loss of the depreciation from the profit setting off of the business loss of the depreciation from the profit eligible unit, while computing deduction u/s 10A computing deduction u/s 10A of the Act. The relevant finding of the Ld. CIT(A) is reproduce relevant finding of the Ld. CIT(A) is reproduced as under: d as under:
“13. I have very carefully considered the matter. In the return 13. I have very carefully considered the matter. In the return 13. I have very carefully considered the matter. In the return of income as filed, the appellant itself claimed deduction of income as filed, the appellant itself claimed deduction of income as filed, the appellant itself claimed deduction unders. 10A from its total income, after set unders. 10A from its total income, after set-off of carried off of carried forward forward forward business business business loss loss loss and and and unabsorbed unabsorbed unabsorbed depreciation. depreciation. depreciation. Thereafter, while the assessment proceedings were in Thereafter, while the assessment proceedings were in Thereafter, while the assessment proceedings were in progress the appellant progress the appellant revised its computation of its total revised its computation of its total income, through a revised statement of Computation, income, through a revised statement of Computation, income, through a revised statement of Computation, claiming claiming claiming deduction deduction deduction on on on the the the standalone standalone standalone profit profit profit before before before adjustment of any brought forward loss o adjustment of any brought forward loss of earlier years. f earlier years. There is no dispute that the There is no dispute that the unabsorbed depreciation and unabsorbed depreciation and brought forward loss pertain to its software unit under the brought forward loss pertain to its software unit under the brought forward loss pertain to its software unit under the STPI Scheme. Hence we are concerned, with unabsorbed STPI Scheme. Hence we are concerned, with unabsorbed STPI Scheme. Hence we are concerned, with unabsorbed depreciation and business loss of the eligible unit. The depreciation and business loss of the eligible unit. The depreciation and business loss of the eligible unit. The decision in Changepond Technologies (P) Ltd as relied on by Changepond Technologies (P) Ltd as relied on by Changepond Technologies (P) Ltd as relied on by the appellant is distinguishable in that in the said case the the appellant is distinguishable in that in the said case the the appellant is distinguishable in that in the said case the Bench was concerned with set Bench was concerned with set-off of brought forward loss of off of brought forward loss of non-s. 10A unit. In fact, an identical issue had come up for 10A unit. In fact, an identical issue had come up for 10A unit. In fact, an identical issue had come up for consideration before the consideration before the Hon'ble ITAT, Delhi Bench in Global Hon'ble ITAT, Delhi Bench in Global Vantedge (P) Ltd. Vs. DCIT (2010) 37 SOT 01, wherein the Vantedge (P) Ltd. Vs. DCIT (2010) 37 SOT 01, wherein the Vantedge (P) Ltd. Vs. DCIT (2010) 37 SOT 01, wherein the Hon'ble Bench, has distinguished the decision as rendered in Hon'ble Bench, has distinguished the decision as rendered in Hon'ble Bench, has distinguished the decision as rendered in Changepond Technologies (P) Ltd. Tho said decision can be Changepond Technologies (P) Ltd. Tho said decision can be Changepond Technologies (P) Ltd. Tho said decision can be of no help to the appellant since the disput of no help to the appellant since the dispute here is whether e here is whether unabsorbed depreciation and business loss of same eligible unabsorbed depreciation and business loss of same eligible unabsorbed depreciation and business loss of same eligible unit ie.of 10A unit, brought forward from earlier years can be unit ie.of 10A unit, brought forward from earlier years can be unit ie.of 10A unit, brought forward from earlier years can be set off from the profits of the same eligible unit for the set off from the profits of the same eligible unit for the set off from the profits of the same eligible unit for the purpose of determining allowable deduction under s. 10A. purpose of determining allowable deduction under s. 10A. purpose of determining allowable deduction under s. 10A. Drawing attention to sub Drawing attention to sub-section (6) of s. 10A, the Hon'ble (6) of s. 10A, the Hon'ble Delhi Bench in Global Vantedge (P) Ltd. Vs. DCIT Delhi Bench in Global Vantedge (P) Ltd. Vs. DCIT Delhi Bench in Global Vantedge (P) Ltd. Vs. DCIT (2010) 37 SOT 01 has observed that this section is of an over SOT 01 has observed that this section is of an over SOT 01 has observed that this section is of an over-riding nature, specifically providing that during each of the nature, specifically providing that during each of the nature, specifically providing that during each of the assessment year in the assessment year in the tax holiday period, this provision will tax holiday period, this provision will be applied as if undertaking is an independent unit and is be applied as if undertaking is an independent unit and is be applied as if undertaking is an independent unit and is the one and only source of income. The Hon'ble Delhi the one and only source of income. The Hon'ble Delhi the one and only source of income. The Hon'ble Delhi Tribunal, relying on the decision of Hon'ble High Court of Tribunal, relying on the decision of Hon'ble High Court of Tribunal, relying on the decision of Hon'ble High Court of
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Karnataka in Himata Karnataka in Himata-Singike-Seide Ltd. (2006) 286 IT 255, 286 IT 255, has held that the unabsorbed depreciation or unabsorbed has held that the unabsorbed depreciation or unabsorbed has held that the unabsorbed depreciation or unabsorbed loss in respect of eligible 10A unit or division or undertaking loss in respect of eligible 10A unit or division or undertaking loss in respect of eligible 10A unit or division or undertaking is to be set-off against the profit of the same eligible 10A unit off against the profit of the same eligible 10A unit off against the profit of the same eligible 10A unit or undertaking for the purpose of determining the amount or undertaking for the purpose of determining the amount or undertaking for the purpose of determining the amount of deduction available under s. 10A of the Act. It is pertinent to deduction available under s. 10A of the Act. It is pertinent to deduction available under s. 10A of the Act. It is pertinent to point out here that the Hon'ble Delhi Bench has observed point out here that the Hon'ble Delhi Bench has observed point out here that the Hon'ble Delhi Bench has observed that the decision of the ITAT, Bangalore Bench, in the case of that the decision of the ITAT, Bangalore Bench, in the case of that the decision of the ITAT, Bangalore Bench, in the case of KPIT Cummins Infosystems (Bangalore) P KPIT Cummins Infosystems (Bangalore) Pvt. Ltd. Vs. ACIT Ltd. Vs. ACIT (2009) 120 TT (2009) 120 TTJ (Bangalore) 956, was rendered in favour of J (Bangalore) 956, was rendered in favour of the assessee without applying the ratio of decision of the the assessee without applying the ratio of decision of the the assessee without applying the ratio of decision of the Hon'ble Karnataka High Court in the case of Himata Hon'ble Karnataka High Court in the case of Himata Hon'ble Karnataka High Court in the case of Himata-Singike- Seide Ltd (2006) 286 ITR 255. The Hon'ble Delhi Tribunal Seide Ltd (2006) 286 ITR 255. The Hon'ble Delhi Tribunal Seide Ltd (2006) 286 ITR 255. The Hon'ble Delhi Tribunal has also further observed that the d has also further observed that the decision of the Hon'ble ecision of the Hon'ble ITAT, Mumbai Bench, in the case of Eneron Wind Farms ITAT, Mumbai Bench, in the case of Eneron Wind Farms ITAT, Mumbai Bench, in the case of Eneron Wind Farms (Krishna) Ltd. Vs. ACIT (Krishna) Ltd. Vs. ACIT (2008) 21 SOT 29, was rendered in (2008) 21 SOT 29, was rendered in respect of setting off the business loss brought forward from respect of setting off the business loss brought forward from respect of setting off the business loss brought forward from A.Y. 1999-2000, and hence stands on a different footing, in 2000, and hence stands on a different footing, in 2000, and hence stands on a different footing, in the light of insertion of words "ending before 1.4.2001" in the light of insertion of words "ending before 1.4.2001" in the light of insertion of words "ending before 1.4.2001" in sub-section (b) of s. 10A by the Finance Act 2000. After the section (b) of s. 10A by the Finance Act 2000. After the section (b) of s. 10A by the Finance Act 2000. After the amendment w.e.f. 1.4.2001, on ward, the brought forward amendment w.e.f. 1.4.2001, on ward, the brought forward amendment w.e.f. 1.4.2001, on ward, the brought forward loss pertaining to the specific undertaking for deduction loss pertaining to the specific undertaking for deduction loss pertaining to the specific undertaking for deduction under s. 10A are under s. 10A are allowed to be carried forward and set wed to be carried forward and set-off against the income of such undertaking against the income of such undertaking Fie in the future Fie in the future assessment year and set off within the block period itself. assessment year and set off within the block period itself. assessment year and set off within the block period itself. 13.1 In the light of the above stated position, the action of the 13.1 In the light of the above stated position, the action of the 13.1 In the light of the above stated position, the action of the A.O. in setting A.O. in setting-off the brought forward loss and unabsorbed ward loss and unabsorbed depreciation of the eligible unit, against the profit of the same depreciation of the eligible unit, against the profit of the same depreciation of the eligible unit, against the profit of the same eligible unit for the purpose of computing available deduction eligible unit for the purpose of computing available deduction eligible unit for the purpose of computing available deduction under s. 10A, is accordingly upheld. under s. 10A, is accordingly upheld.” 5.1 Before us, the Ld. Counsel of the assessee has relied on the Before us, the Ld. Counsel of the assessee has relied on the Before us, the Ld. Counsel of the assessee has relied on the decision of the Hon’ble Bombay High Court in the case of CIT v. decision of the Hon’ble Bombay High Court in the case of decision of the Hon’ble Bombay High Court in the case of Techno Tarp and Polymers Pvt. Ltd. Income Tax Appeal No. Techno Tarp and Polymers Pvt. Ltd. Income Tax Appeal No. Techno Tarp and Polymers Pvt. Ltd. Income Tax Appeal No. 2134 of 2013 and decision of Hon’ble Supreme Court decision of Hon’ble Supreme Court decision of Hon’ble Supreme Court in the case of CIT v. Yokogawa India Ltd. [2017] 77 taxmann.com 41 (SC), CIT v. Yokogawa India Ltd. [2017] 77 taxmann.com 41 (SC) CIT v. Yokogawa India Ltd. [2017] 77 taxmann.com 41 (SC) wherein it is held that deduction u/s 10A would be eligible is held that deduction u/s 10A would be eligible on gross is held that deduction u/s 10A would be eligible total income under Chapter total income under Chapter IV of the Act and not of the Act and not at the stage of
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total income under chapter total income under chapter VI of the Act. Thus deduction u/s 10A Thus deduction u/s 10A has to be computed before set off of carry forward business loss if has to be computed before set off of carry forward business loss if has to be computed before set off of carry forward business loss if any. The relevant finding of the Hon’ble Supreme Court The relevant finding of the Hon’ble Supreme Court The relevant finding of the Hon’ble Supreme Court (supra) is reproduced as under: reproduced as under:
“13. The retention of 13. The retention of Section 10A in Chapter III of the Act in Chapter III of the Act after the amendment made by the after the amendment made by the Finance Act, 2000 would , 2000 would be merely suggestive and not determinative of what is be merely suggestive and not determinative of what is be merely suggestive and not determinative of what is provided by the Section as amended, in contrast to what was provided by the Section as amended, in contrast to what was provided by the Section as amended, in contrast to what was provided by the un provided by the un-amended Section. The true and correct amended Section. The true and correct purport and purport and effect of the amended Section will have to be effect of the amended Section will have to be construed from the language used and not merely from the construed from the language used and not merely from the construed from the language used and not merely from the fact that it has been retained in Chapter III. The introduction fact that it has been retained in Chapter III. The introduction fact that it has been retained in Chapter III. The introduction of the word ‘deduction’ in of the word ‘deduction’ in Section 10A by the amendment, by the amendment, in the absence of any contrary material, and in view of the in the absence of any contrary material, and in view of the in the absence of any contrary material, and in view of the scope of the deductions contemplated by scope of the deductions contemplated by Section 10A Section 10A as already discussed, it has to be understood that the Section already discussed, it has to be understood that the Section already discussed, it has to be understood that the Section embodies a embodies a clear enunciation of the legislative decision to clear enunciation of the legislative decision to alter its nature from one providing for exemption to one alter its nature from one providing for exemption to one alter its nature from one providing for exemption to one providing for deductions. providing for deductions. 14. The difference between the two expressions ‘exemption’ 14. The difference between the two expressions ‘exemption’ 14. The difference between the two expressions ‘exemption’ and ‘deduction’, though broadly may appear to be the same and ‘deduction’, though broadly may appear to be the same and ‘deduction’, though broadly may appear to be the same i.e. immunity from taxation, the practical effect of it in the munity from taxation, the practical effect of it in the munity from taxation, the practical effect of it in the light of the specific provisions contained in different parts of light of the specific provisions contained in different parts of light of the specific provisions contained in different parts of the Act would be wholly different. The above implications the Act would be wholly different. The above implications the Act would be wholly different. The above implications cannot be more obvious than from the case of Civil Appeal cannot be more obvious than from the case of Civil Appeal cannot be more obvious than from the case of Civil Appeal Nos. 8563/2013, 856 Nos. 8563/2013, 8564/2013 and civil appeal arising out of 4/2013 and civil appeal arising out of SLP(C) No. 18157/2015, which have been filed by loss SLP(C) No. 18157/2015, which have been filed by loss SLP(C) No. 18157/2015, which have been filed by loss making eligible units and/or by non making eligible units and/or by non-eligible assessees eligible assessees seeking the benefit of adjustment of losses against profits seeking the benefit of adjustment of losses against profits seeking the benefit of adjustment of losses against profits made by eligible units. made by eligible units. 15. Sub-section 4 of Sect section 4 of Section 10A which provides for pro rata ion 10A which provides for pro rata exemption, necessarily involving deduction of the profits exemption, necessarily involving deduction of the profits exemption, necessarily involving deduction of the profits arising out of domestic sales, is one instance of deduction arising out of domestic sales, is one instance of deduction arising out of domestic sales, is one instance of deduction provided by the amendment. Profits of an eligible unit provided by the amendment. Profits of an eligible unit provided by the amendment. Profits of an eligible unit pertaining to domestic sales would have to ente pertaining to domestic sales would have to ente pertaining to domestic sales would have to enter into the computation under the head “profits and gains from computation under the head “profits and gains from computation under the head “profits and gains from business” in Chapter IV and denied the benefit of deduction. business” in Chapter IV and denied the benefit of deduction. business” in Chapter IV and denied the benefit of deduction. The provisions of Sub The provisions of Sub-section 6 of Section 10A, as amended section 6 of Section 10A, as amended
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by the Finance Act Finance Act of 2003, granting the benefit of 003, granting the benefit of adjustment of losses and unabsorbed depreciation etc. adjustment of losses and unabsorbed depreciation etc. adjustment of losses and unabsorbed depreciation etc. commencing from the year 2001 commencing from the year 2001-02 on completion of the 02 on completion of the period of tax holiday also virtually works as a deduction period of tax holiday also virtually works as a deduction period of tax holiday also virtually works as a deduction which has to be worked out at a future point of time, namely, which has to be worked out at a future point of time, namely, which has to be worked out at a future point of time, namely, after the expiry of period of tax holiday. The absence of any after the expiry of period of tax holiday. The absence of any after the expiry of period of tax holiday. The absence of any reference to deduction under reference to deduction under Section 10A in Chapter VI of in Chapter VI of the Act can be understand by acknowledging that any such the Act can be understand by acknowledging that any such the Act can be understand by acknowledging that any such reference or mention would reference or mention would have been a repetition of what have been a repetition of what has already been provided in has already been provided in Section 10A. The provisions . The provisions of Sections 80HHC Sections 80HHC and 80HHE of the Act providing for of the Act providing for somewhat similar deductions would be wholly irrelevant and somewhat similar deductions would be wholly irrelevant and somewhat similar deductions would be wholly irrelevant and redundant if deductions under redundant if deductions under Section 10A were to be were to be made at the stage of operation of Chapter VI of the Act made at the stage of operation of Chapter VI of the Act made at the stage of operation of Chapter VI of the Act. The retention of the said provisions of the Act i.e. retention of the said provisions of the Act i.e. retention of the said provisions of the Act i.e. Section 80HHC and and 80HHE, despite the amendment of , despite the amendment of Section 10A, in our view, indicates that some additional benefits to , in our view, indicates that some additional benefits to , in our view, indicates that some additional benefits to eligible Section 10A Section 10A units, not contemplated by units, not contemplated by Sections 80HHC and and 80HHE, was intended by the legislature. Such , was intended by the legislature. Such a benefit can only be understood by a legislative mandate to a benefit can only be understood by a legislative mandate to a benefit can only be understood by a legislative mandate to understand that the stages for working out the deductions understand that the stages for working out the deductions understand that the stages for working out the deductions under Section Section 10A 10A and 80HHC and 80HHE 80HHE are substantially different. This is the next aspect of the case substantially different. This is the next aspect of the case substantially different. This is the next aspect of the case which we would now like to turn to. which we would now like to turn to. 16. From a reading of 16. From a reading of the relevant provisions of the relevant provisions of Section 10A it is more than clear to us that the deductions it is more than clear to us that the deductions it is more than clear to us that the deductions contemplated therein is qua the eligible undertaking of an contemplated therein is qua the eligible undertaking of an contemplated therein is qua the eligible undertaking of an assessee standing on its own and without reference to the assessee standing on its own and without reference to the assessee standing on its own and without reference to the other eligible or non other eligible or non-eligible units or undertakings of the eligible units or undertakings of the assessee. The benefit of deduction is given by the Act to the assessee. The benefit of deduction is given by the Act to the assessee. The benefit of deduction is given by the Act to the individual individual individual undertaking undertaking undertaking and and and resultantly resultantly resultantly flows flows flows to to to the the the assessee. assessee. assessee. This This This is is is also also also more more more than than than clear clear clear from from from the the the contemporaneous Circular No. 794 d contemporaneous Circular No. 794 dated 9.8.2000 which ated 9.8.2000 which states in paragraph 15.6 that, “The export turnover and the states in paragraph 15.6 that, “The export turnover and the states in paragraph 15.6 that, “The export turnover and the total total total turnover turnover turnover for for for the the the purposes purposes purposes of sections of of 10A and 10B 10B shall be of the undertaking located in dertaking located in specified zones or 100% Export Oriented Undertakings, as specified zones or 100% Export Oriented Undertakings, as specified zones or 100% Export Oriented Undertakings, as the case may be, and this shall not have any material the case may be, and this shall not have any material the case may be, and this shall not have any material relationship with the other business of the assessee outside relationship with the other business of the assessee outside relationship with the other business of the assessee outside these zones or units for the purposes of this provision.” these zones or units for the purposes of this provision.” these zones or units for the purposes of this provision.”
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If the specific provisions of the Act provide [first proviso f the specific provisions of the Act provide [first proviso f the specific provisions of the Act provide [first proviso to Sections 10A(1) Sections 10A(1); 10A (1A) and 10A (4)] that the unit that is ; 10A (1A) and 10A (4)] that the unit that is contemplated for grant of benefit of deduction is the eligible contemplated for grant of benefit of deduction is the eligible contemplated for grant of benefit of deduction is the eligible undertaking and th undertaking and that is also how the contemporaneous at is also how the contemporaneous Circular of the department (No.794 dated 09.08.2000) Circular of the department (No.794 dated 09.08.2000) Circular of the department (No.794 dated 09.08.2000) understood the situation, it is only logical and natural that understood the situation, it is only logical and natural that understood the situation, it is only logical and natural that the stage of deduction of the profits and gains of the the stage of deduction of the profits and gains of the the stage of deduction of the profits and gains of the business of an eligible undertaking has to be made business of an eligible undertaking has to be made business of an eligible undertaking has to be made independently and, therefore, immediately after the stage of independently and, therefore, immediately after the stage of independently and, therefore, immediately after the stage of determination of its profits and gains. At that stage the determination of its profits and gains. At that stage the determination of its profits and gains. At that stage the aggregate of the incomes under other heads and the aggregate of the incomes under other heads and the aggregate of the incomes under other heads and the provisions provisions provisions for for for set set set off off off and and and carry carry carry forward forward forward contained contained contained in Sections 70 Sections 70, 72 and 74 of the Act would be premature of the Act would be premature for application. The deductions under for application. The deductions under Section 10A Section 10A therefore would be prior to the commencement of the exercise to be would be prior to the commencement of the exercise to be would be prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving at the undertaken under Chapter VI of the Act for arriving at the undertaken under Chapter VI of the Act for arriving at the total income of the assessee from the gross total income. The total income of the assessee from the gross total income. The total income of the assessee from the gross total income. The somewhat discordant use of the expression “total somewhat discordant use of the expression “total somewhat discordant use of the expression “total income of the assessee” in the assessee” in Section 10A has already been dealt with has already been dealt with earlier and in the overall scenario unfolded by the provisions earlier and in the overall scenario unfolded by the provisions earlier and in the overall scenario unfolded by the provisions of Section 10A Section 10A the aforesaid discord can be reconciled by said discord can be reconciled by understanding the expression “total income of the assessee” understanding the expression “total income of the assessee” understanding the expression “total income of the assessee” in Section 10A Section 10A as ‘total income of the undertaking’. as ‘total income of the undertaking’. 18. For the aforesaid reasons we answer the appeals and 18. For the aforesaid reasons we answer the appeals and 18. For the aforesaid reasons we answer the appeals and the questions arising therein, as formulated at the outset of e questions arising therein, as formulated at the outset of e questions arising therein, as formulated at the outset of this order, by holding that though this order, by holding that though Section 10A, as amended, , as amended, is a provision for deduction, the stage of deduction would be is a provision for deduction, the stage of deduction would be is a provision for deduction, the stage of deduction would be while computing the gro while computing the gross total income of the eligible ss total income of the eligible undertaking under Chapter IV of the Act and not at the stage undertaking under Chapter IV of the Act and not at the stage undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI. All the of computation of the total income under Chapter VI. All the of computation of the total income under Chapter VI. All the appeals shall stand disposed of accordingly. appeals shall stand disposed of accordingly.” 5.2 Since, the issue in dispute involved in the present Since, the issue in dispute involved in the present Since, the issue in dispute involved in the present appeal before us, is identical identical to the facts of case of Yokogawa India Ltd. facts of case of Yokogawa India Ltd. (supra), therefore respectfully following the Hon’ble Supreme Court therefore respectfully following the Hon’ble Supreme Court therefore respectfully following the Hon’ble Supreme Court (supra), we set aside the finding of the Ld. CIT(A) on the issue in , we set aside the finding of the Ld. CIT(A) on the issue in , we set aside the finding of the Ld. CIT(A) on the issue in dispute and direct the Assessing Officer to g dispute and direct the Assessing Officer to grant deduction u/s 10A t deduction u/s 10A of the Act as per the finding of the Hon’ble Supreme Court in the s per the finding of the Hon’ble Supreme Court in the s per the finding of the Hon’ble Supreme Court in the
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case of Yokogawa India Ltd. (supra). T wa India Ltd. (supra). The ground No. 1 of the he ground No. 1 of the appeal is allowed.
In the result, the appeal of the assessee is partly allowed. In the result, the appeal of the assessee is partly allowed. In the result, the appeal of the assessee is partly allowed.
Order pronounced in Order pronounced in the open Court on 17/08/2023. /08/2023. Sd/ Sd/- Sd/ Sd/- (VIKAS AWASTHY VIKAS AWASTHY) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated:17/08/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai
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Date Initials Original dictation pad is enclosed at Original dictation pad is enclosed at the end of file 1. Draft dictated on: Draft dictated on: 11.08.2023 Sr. PS/PS 2. Draft placed before author: Draft placed before author: 16.08.2023 Sr. PS/PS 3. Draft proposed & placed before the Draft proposed & placed before the JM/AM second member: 4. Draft discussed/approved by Second Draft discussed/approved by Second JM/AM Member: 5. Approved Draft comes to the Sr. Approved Draft comes to the Sr. Sr. PS/PS PS/PS: 6. Order pronounced on: Order pronounced on: Sr. PS/PS 7. File sent to the Bench Clerk: File sent to the Bench Clerk: 8. Date on which file goes to the Head Date on which file goes to the Head Sr. PS/PS Clerk: 9. Date on which file goes to AR Date on which file goes to AR 10. Date of Dispatch of order Date of Dispatch of order