DCIT, BANGALORE vs. PROCESSOR SYSTEMS INDIA PVT. LTD.,, BANGALORE

This appeal by the Revenue is against the order dated 17.2.2014 of the CIT(Appeals)-IV, Bangalore relating to assessment year 2005-06.

The two issues that arise for consideration in this appeal are as to whether the CIT(A) was justified in directing the AO to exclude reimbursement of certain expenses both from the export turnover as well as the total turnover for the purpose of computation of deduction u/s. 10A of the Act; and as to whether the CIT(A) was justified in directing the AO to compute deduction u/s. 10A of the Act on the profits of the 10A unit without setting off loss pertaining to non-10A unit against the profits of 10A units.

In respect of the first issue, the CIT(A) , following the decision of the Hon'ble High Court of Karnataka in CIT v. Tata Elxsi Ltd., 349 ITR 98 (Kar), held that whatever is excluded from the export turnover, has also to be excluded from the total turnover while computing deduction u/s. 10A of the Act and allowed the claim of the assessee.

In so far as the second issue is concerned, the CIT(A) followed the decision of Hon'ble High Court of Karnataka in Yokogawa India Ltd., 345 ITR 385 (Kar), wherein it was held that section 10A is an exemption provision and therefore losses of non-10A units cannot be set off against profits of 10A units which are eligible for deduction u/s. 10A.

Aggrieved by the order of CIT(A), the Revenue has preferred the present appeal before the Tribunal.

We have heard the submissions of the ld. DR, whose only stand was that both the decisions of Hon'ble High Court of Karnataka have not been accepted by the Revenue and SLPs have been filed before the Hon'ble Supreme Court. We are of the view that pendency of SLP before the Hon'ble Supreme Court will not be a ground, not to follow the decisions of the jurisdictional High Court. In the circumstances, we are of the view that the appeal by the Revenue is without any merit. Consequently, the same is dismissed.