M/S. VIKLELE ASSOCIATES,,PUNE vs. INCOME-TAX OFFICER, WARD - 3(4),, PUNE

The assessee has raised the following grounds of appeal:- 1) On the facts and circumstances of the case and in law the Ld. CIT(A) was not justified in disposing of the appeal exparte as the notices for hearing of the appear were not received due to change of address of the appellant. There was no intention to avoid the hearing of the appeal. The exparte order be set aside for doing the same afresh in order to give justice to the assessee.

The ground of appeal No.1 raised by assessee is not pressed, hence the same is dismissed as not pressed.

The issue in ground of appeal No.2 is against claim of deduction under section 10A of the Act on interest from fixed deposits amounting to ₹ 3,43,708/-.

The learned Authorized Representative for the assessee pointed out that the issue raised in the present appeal stands squarely covered by the order of Tribunal in assessee’s own case relating to assessment year 2009-10.

The learned Departmental Representative for the Revenue on the other hand, placed reliance on the orders of authorities below.

On perusal of record and after hearing both the learned Authorized Representatives, the issue raised vide ground of appeal No.2 is the claim of deduction under section 10A of the Act. The assessee was 100% Export Oriented Unit. For the year under consideration, the assessee had furnished return of income declaring total income of ₹ 7,170/-. The case of assessee was picked up for scrutiny. The Assessing Officer noted that the assessee was 100% EOU duly approved by Software Technology Park of India (STPI). The assessee had claimed deduction under section 10A of the Act at 20,05,769/-. The assessee during the year under consideration had received interest on fixed deposits of ₹ 3,43,708/-, which was shown as business income and had claimed as deductible under section 10A of the Act. The Assessing Officer

The CIT(A) upheld the order of Assessing Officer, against which the assessee is in appeal.

The limited issue which arises in the present appeal is against claim of deduction under section 10A of the Act on interest received from fixed deposits. Similar issue arose before the Tribunal in ITA No.752/PUN/2017, relating to assessment year 2009-10, order dated 15.05.2018 and the Tribunal in turn, following the decision of full Bench decision of the Hon’ble High Court of Karnataka in the case of CIT Vs. Hewlett Packard Global Soft Ltd. (2017) 100 CCH 0063 (Kar) had held as under:- “7. The first ground of appeal raised by assessee is against ex-parte order passed by CIT(A) without giving proper opportunity of hearing to the assessee. The second ground of appeal raised by assessee is against non allowance of deduction under section 10A of the Act on the interest income earned on fixed deposits. The assessee before us has stressed that the issue on merit stands covered in favour of assessee by the ratio laid down by the Full Court of Hon'ble Karnataka High Court in the case of CIT Vs. Hewlett Packard Global Soft Ltd (supra.). The Hon'ble High Court held that Incidental activity of parking of Surplus Funds with Banks or advancing of staff loans by such special category of assesses covered under section 10-A or 10-B was integral part of their export business activity. The Hon'ble High Court further held that Business decision taken in view of commercial expediency and interest income earned incidentally could not be de-linked from its profits and gains derived by Undertaking engaged in export of Articles as envisaged u/s 10-A or 10-B and could not be taxed separately u/s 56. The Hon'ble High Court also held that therefore all Profits and Gains of the Undertaking including the incidental income by way of interest on Bank Deposits or Staff loans would be entitled to 100% exemption or deduction u/s 10-A and 10-B of the Act. Such interest income arises in the ordinary course of export business of the Undertaking even though not as a direct result of export but from the Bank Deposits etc., and was therefore eligible for 100% deduction. 8. The issue raised before us is squarely covered by the decision of Hon'ble Karnataka High Court and following the same parity of reasons, we hold that the assessee is entitled for benefit of deduction under section 10A of the Act on

The issue arising in the present appeal is squarely identical to the issue before the Tribunal in assessment year 2009-10 and following the same parity of reasoning, the claim of assessee is allowed and the Assessing Officer is directed to re-compute deduction under section 10A of the Act, since the assessee is entitled to claim the aforesaid deduction under section 10A of the Act on interest from fixed deposits. The ground of appeal No.2 raised by assessee is thus, allowed.

In the result, appeal of assessee is partly allowed.