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Income Tax Appellate Tribunal, “J” BENCH, MUMBAI
Before: SHRI JOGINDER SINGH, JM & SHRI MANOJ KUMAR AGGARWAL, AM
Per Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeals by revenue for Assessment Years [AY] 2011-12 & 2012-13 contest separate orders of Ld. first appellate authority. Since common issues are involved, we dispose-off the same by way of this common order for the sake of convenience and brevity. First we take up AY 2011-12 wherein the grounds raised
by the revenue reads as under: - i) “On the facts and circumstances of the case and in law, the CIT(A) has erred in allowing the deduction u/s.10A of the I.T.Income-tax Act, 1961 ignoring the fact that the assessee had not claimed the same in the validly filed return of income and as such, scrutiny assessment proceedings are not meant for the admission of fresh claim benefitting the assessee.” ii) “On the facts and circumstances of the case and in law, the CIT(A) has erred in allowing interest income of Rs.28,84,58,703/- as profits eligible for deduction u/s.10A & 10AA of the Act without appreciating the fact that the said income was not derived from export of computer software and hence was not eligible for deduction under the said sections.” iii) “On the facts and circumstances of the case and in law, the CIT(A) has erred in not appreciating the ratio of the judgment of the Hon’ble Apex Court in the case of Liberty India Ltd. Vs. CIT (317 ITR 218) wherein it is held that though certain income may constitute profit from business u/s.28, yet the same cannot be construed as profits derived from an industrial undertaking and hence would not be eligible for deduction u/s 10A/10AA of the Act.” iv) “On the facts and circumstances of the case and in law, the CIT(A) has erred in allowing interest income earned from EEFC account as profits eligible for deduction u/s 10A & 10AA of the Act relying upon the decision of ITAT in assessee’s own case without appreciating that Hon’ble Bombay High Court in the case of CIT Vs Shah Originals (327 ITR
19. (2010) had categorically held that the interest accrued to the assessee on the deposits held in EEFC account falls for classification as income from other sources and cannot be treated as business income.” v) “On the facts and circumstances of the cae and in law, whether the CIT(A) was correct in relying upon Hon’ble ITAT in the assessee’s own case for assessment years 2008-09 to 2010-11 which has not been accepted by the Department on merits which was pending before High Court for adjudication.” vi) “On the facts and circumstances of the case and in law, the CIT(A) has erred in holding that the loss incurred by one of the SEZ units was not eligible for set off against eligible profits of SEZ units for the purpose of computation of deduction u/s.10A of the Act.”
& 2179/Mum/2017 State Street Syntel Services Pvt.Ltd. Assessment Years-2011-12 & 2012-13 vii) “On the facts and circumstances of the case and in law, the CIT(A) has erred in not appreciating that the deduction u/s 10A is to be allowed after computing the overall profits and gains of business of SEZ units and as such, the AO was justified in setting off the unabsorbed depreciation pertaining to rental business of SEZ units.” viii) “The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the A.O. be restored.” ix) “The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.” The assessment for impugned AY was framed by Ld. Deputy Commissioner of Income Tax-11(2)(2), Mumbai u/s 143(3) on 26/02/2015 wherein the income of the assessee has been determined at Rs.24.16 crores under normal provisions after certain adjustments as against returned income of Rs.23.67 crores e-filed by the assessee on 29/11/2011. During impugned AY, the assessee being resident corporate assessee was engaged in the providing information technology enabled services [ITES] & business process outsourcing services. The material on record reveal that the assessee was eligible to claim deduction u/s 10A/10AA. 2.1 During assessment proceedings, it was noted that the assessee credited interest income of Rs.22.31 crores which was credited to Profit & Loss Account under the head other income. In the statement of computation of income, the assessee placed a note to the effect that interest income was in the nature of business income and therefore, qualify for deduction u/s 10A / 10AA, however, out of abundant caution the said deduction is not being claimed. The assessee raised the same plea during assessment proceedings. However Ld. AO opined that deduction u/s 10A / 10AA was allowable only in respect of profits of the undertaking from export of article or thing or computer software & 2179/Mum/2017 State Street Syntel Services Pvt.Ltd. Assessment Years-2011-12 & 2012-13 manufactured or produced in specified zone and therefore, interest income not being derived out of export was not eligible for the said deduction. 2.2 The second issue under the appeal arises out of the fact that the assessee claimed exemption u/s 10A / 10AA for Rs.161.98 crores which was before setting-off of unabsorbed losses of other business units. The assessee contended that the unabsorbed losses of other units was available for set-off against other taxable income. However, not convinced, Ld. AO relying upon CBDT circular File No. 279/Misc./ /M- 116/2012-ITJ dated 16/07/2013 restricted the deduction to business income of Rs.161.49 Crores as against Rs.161.98 Crores as claimed by the assessee.
Aggrieved, the assessee contested the same with success before Ld. CIT(A) vide impugned order dated 30/12/2016 wherein the deduction against interest income was allowed to the assessee by relying on the decision of this Tribunal rendered in assessee’s own case for AYs 2008- 09 to 2010-11. The higher deduction u/s 10A / 10AA was allowed by placing reliance on the decision of Hon’ble Bombay High Court rendered in assessee’s sister concern case titled as CIT Vs. Syntel Ltd. for AY 2005-06. Aggrieved, the revenue is in further appeal before us.
The Ld. Departmental Representative [DR], supported the stand taken by Ld. AO but could not substantiate the same with any contrary judgment to controvert the stand of the assessee. Per Contra, the Ld. Authorized Representative for Assessee [AR], Ms. Meera Patil, submitted that the issues were squarely covered in assessee’s favor by earlier judicial pronouncements.
ITA Nos. 2115 & 2179/Mum/2017 State Street Syntel Services Pvt.Ltd. Assessment Years-2011-12 & 2012-13 5. We have carefully heard the rival contentions and perused relevant material on record including judicial pronouncements as cited before us. So far as the issue of deduction u/s 10A / 10AA against interest income is concerned, we find that the issue stood squarely covered in assessee’s favor by the order of this Tribunal for AY 2008-09, dated 29/02/2016, a copy of which has been placed on record. Similar view has been taken for AY 2009-10 vide ITA No. 6026/Mum/2013 dated 09/03/2016 and also for AY 2010-11 vide ITA N.6912/Mum/2014 dated 24/06/2016. The Ld. first appellate authority, following the same, has provided the relief to the assessee. There being no material difference in facts brought out to our notice by the Ld. departmental representative, respectfully following the consistent view of the Tribunal in assessee’s own case, we dismiss Ground Numbers 1 to 5 as raised under the appeal.
The second issue pertains to the issue of set-off of losses before computing deduction under Section 10A / 10AA. The Ld. CIT(A) has provided relief to the assessee by relying on the decision of Hon’ble Bombay High Court rendered in the case of assessee’s sister concern for AY 2005-06. The Ld. AR has submitted that revenue contested the aforesaid matter before Hon’ble Supreme Court in bunch of appeals titled as CIT Vs. Yokogawa India Limited [77 Taxmann.com 41] wherein the issue has been decided in favor of the assessee. The copy of the judgments has been placed on record. Upon perusal, we find that the matter has been concluded by Hon’ble court as follows:- 17. If the specific provisions of the Act provide [first proviso to Sections 10A(1); 10A (1A) and 10A (4)] that the unit that is contemplated for grant of benefit of deduction is the eligible undertaking and that is also how the contemporaneous Circular of the & 2179/Mum/2017 State Street Syntel Services Pvt.Ltd. Assessment Years-2011-12 & 2012-13 department (No. 794 dated 09.08.2000) understood the situation, it is only logical and natural that the stage of deduction of the profits and gains of the business of an eligible undertaking has to be made independently and, therefore, immediately after the stage of determination of its profits and gains. At that stage the aggregate of the incomes under other heads and the provisions for set off and carry forward contained in Sections 70, 72 and 74 of the Act would be premature for application. The deductions under Section 10A therefore would be prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving at the total income of the assessee from the gross total income. The somewhat discordant use of the expression "total income of the assessee" in Section 10A has already been dealt with earlier and in the overall scenario unfolded by the provisions of Section 10A the aforesaid discord can be reconciled by understanding the expression "total income of the assessee" in Section 10A as 'total income of the undertaking'.
For the aforesaid reasons we answer the appeals and the questions arising therein, as formulated at the outset of this order, by holding that though Section 10A, as amended, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI. All the appeals shall stand disposed of accordingly.
In view of the stated position of law, we find no infirmity in the order of Ld. first appellate authority. Ground Numbers 6 & 7 stand dismissed. The other grounds are general in nature.
Resultantly, the revenue’s appeal stand dismissed. AY 2012-13 8. The assessee has similarly been assessed in AY 2012-13 wherein deduction u/s 10A / 10AA against interest income of Rs.13.66 crores have been denied to the assessee but allowed by Ld. CIT(A) on similar reasoning. The revenue is in appeal against the same with similar grounds of appeal
. There being no change in facts or circumstances, we confirm the stand of Ld. CIT(A) and dismiss Ground Numbers 1 to 5 as raised before us.
9. An another issue which has cropped up in this year pertains to an addition of Rs.19.66 Lacs u/s 36(1)(va) read with Section 2(24)(x) During ITA Nos. 2115 & 2179/Mum/2017 State Street Syntel Services Pvt.Ltd. Assessment Years-2011-12 & 2012-13 assessment proceedings, it was noted that the assessee delayed the deposit of employee’s contribution [ESIC] for Rs.19.66 Lacs which resulted into impugned addition within the meaning of Section 36(1)(va) read with Section 2(24)(x). The Ld. CIT(A) has deleted the same by observing that the said amounts were deposited before due date of filing of return of income and therefore, allowable to assessee in terms of judgment of Hon’ble Bombay High Court rendered in CIT Vs. Hindustan Organics Chemicals Limited [48 Taxmann.com 421] and also in CIT Vs. Ghatge Patil Transporters Ltd. [368 ITR 749]. Before us, although Ld. DR placed reliance on the stand of Ld. AO but could not place any contrary judgment to controvert the same. This being the case, we find no reason to interfere with the stand of Ld. CIT(A), in this regard. Ground Numbers 6 & 7 stand dismissed. The other grounds are general in nature. The appeal stand dismissed.
Conclusion 10. Both the appeals stand dismissed.
Order pronounced in the open court on 03rd October, 2018.