STATE STREET SYNTEL SERVICES P.LTD ( FORMERLY KNOWN AS SYNTEL SOURCING P.LTD),MUMBAI vs. ASST CIT RG 8(3), MUMBAI

Aforesaid appeal of the assessee is directed against the order dated 20th March 2013, passed by the learned Commissioner (Appeals)–18, Mumbai, for the assessment year 2008–09. The effective ground raised by the assessee is as under:–

“On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in upholding /

2 State Street Syntel Services Pvt. Ltd. confirming the order of the ACIT of not considering the appellant company’s claim that the interest income aggregating to ` 1,70,23,282 is in the nature of business income and is derived from the industrial undertaking and not allowing deduction under section 10A of the Act in respect of the said interest income.”

3 State Street Syntel Services Pvt. Ltd. the interest income, but, in the note submitted to the computation of income, assessee had explained the reason for doing so and had stated that as otherwise assessee is eligible for claiming exemption under section 10A, on the interest income. Further, it was submitted by the assessee that in its own case for assessment year 2007–08, learned Commissioner (Appeals) relying upon a decision of Hon'ble Jurisdictional High Court in case of assessee’s sister concern viz. Syntel Ltd. had allowed exemption under section 10A on interest income. The learned Commissioner (Appeals) observed that in the decision of the Hon’ble High Court referred to by the learned Commissioner (Appeals), the appeal preferred by the Department was dismissed on the ground of limitation, thus, the High Court did not lay down any principle in respect of claim of exemption under section 10A. On the contrary, learned Commissioner (Appeals) relying upon the decision of the Hon'ble Madras High Court in CIT v/s Menon Impex Pvt. Ltd., [2003] TIOL–354–HC dated 2nd September 2002, held that as interest income earned by the assessee is not derived from industrial undertaking, it is not eligible to claim deduction under section 10A of the Act on such income.

4 State Street Syntel Services Pvt. Ltd. covered by the decision of the Tribunal, Mumbai Bench, in assessee’s own case for the immediately preceding assessment year. Further explaining, learned Sr. Counsel submitted, similar issue arose in the case of assessee’s sister concern Syntel Ltd. for assessment years 1997–98, 1998–99 and 2001–02 and the Tribunal while deciding the issue held that as the interest earned by the assessee is directly related to the business of the industrial undertaking, it is eligible for exemption under section 10A of the Act. He submitted, the Department’s appeal against the aforesaid order of the Tribunal was dismissed by the Hon'ble Jurisdictional High Court on the finding that no substantial question of law arose. He submitted, following the view expressed by the Tribunal and High Court in case of assessee’s sister concern Syntel Ltd., similar view was again expressed by the co– ordinate bench in assessment year 2003–04 to 2008–09 in ITA no.3413/Mum./2007 and others dated 5th August 2015. Learned Sr. Counsel submitted in assessee’s own case for the assessment year 2007–08, co–ordinate bench following the decision of the Tribunal, Mumbai Bench, and Bombay High Court in the case of assessee’s sister concern Syntel Ltd., has decided the issue in favour of the assessee by dismissing the appeal. Learned Sr. Counsel submitted, Hon’ble High Court having decided the issue in assessee’s sister concern’s case on merit for assessment years 1997–98, 1998–99 and 2001–02, learned

5 State Street Syntel Services Pvt. Ltd. Commissioner (Appeals) was wrong in observing that the High Court has not decided the issue on merit. Learned Sr. Counsel submitted, in any case of the matter, learned Commissioner (Appeals) was not justified in disallowing assessee’s claim of exemption under section 10A by relying upon the decision of the Hon'ble Madras High Court in Menon Impex Pvt. Ltd. (supra) as the ratio laid down therein is in the context of deduction claimed under section 80HHC, provisions of which are different from section 10A, hence, not applicable to the facts of the assessee’s case. For such proposition, learned Sr. Counsel relied upon the decision of Hon'ble Delhi High Court in CIT v/s Hritnik Exports Pvt. Ltd., judgment dated 13th November 2014 in and 239 of 2014.

6 State Street Syntel Services Pvt. Ltd. on the reasoning that it was derived from the business of undertaking. Per–contra, it is the stand of the Department that the interest income having not been derived from the business of the undertaking, it is to be assessed as income from other sources and assessee is not eligible for claiming deduction under section 10A. However, as could be seen, similar issue arose in case of assessee’s sister concern M/s. Syntel Ltd. for the assessment years 1997–98, 1998–99 and 2001–02. The Tribunal, while deciding the issue accepted assessee’s claim by allowing deduction under section 10A, in respect of interest income as well as some other income such as exchange fluctuation gain and reversal of provisions. Against such order of the Tribunal, the department preferred appeal before the High Court vide Income Tax Appeals no.1974, 1976 and 1978 of 1009. The High Court in order dated 15th December 2009, dismissed the appeal of the Department rejecting the contention that the issue is covered by the decision of the Hon'ble Supreme Court in Liberty India Ltd. v/s CIT. While doing so, the Hon'ble High Court observed that no substantial question of law arise out of the appeals preferred by the Department. As could be seen, following orders of the co–ordinate bench and High Court in case of M/s. Syntel Ltd. as aforesaid, the Tribunal in assessee’s own case for assessment year 2007–08 in ITA no.7610/Mum./2011 dated 6th

7 State Street Syntel Services Pvt. Ltd. January 2016, has allowed deduction under section 10A, observing as under:–

“3.3.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial decisions cited. We find that the very same issue as the issue before us has been considered and decided by a Co- ordinate bench of this Tribunal in the case of the assessee’s sister concern, M/s. Syntel Limited, in dated 31/08/2015 at para 5 and 5.1 thereof. The Co-ordinate bench has held that interest income earned by the assessee has a direct nexus and was derived from the assessee’s business and was, therefore, entitled to be considered for deduction u/s.10A of the Act. Following the aforesaid decision of the Co- ordinate Bench in the case of M/s. Syntel Limit (supra), we uphold the impugned order of the Ld. CIT(A) in directing the Assessing Officer to consider the interest income of Rs.53,23,340/- earned by the assessee in the relevant period as having a direct nexus with and being derived from its ITES business and, therefore, to include it while computing the eligible deduction u/s.10A of the Act. It is accordingly ordered. Consequently, the grounds of appeal raised by Revenue are dismissed.”