D.C.I.T. RG.8(3), MUMBAI vs. STATE STREET SYNTEL SERVICES PVT. LTD., MUMBAI

This appeal by the Revenue is directed against the order of the CIT(Appeals)-18, Mumbai dated 02/08/2011 for Asst year 2007-08.

2.1 The facts of the case, briefly, are as under:-

(Assessment Year 2007-08) 2.1 The assessee, a company engaged in providing business process outsourcing (‘BPO’), IT enabled services, filed its return of income for Assessment year 2007-08 on 31/10/2007 declaring income of Rs.53,23,340/-. The return of income was processed u/s. 143(1) of the Income Tax Act, 1961 (in short ‘the Act’) and the case was subsequently taken up for scrutiny. The assessment was concluded under section 143(3) of the Act vide order dated29/10/2010, wherein the assessee’s interest income of Rs.53,23,340/- was brought to tax in the assessee’s hands under the head ‘ income from other sources’.

2.2 Aggrieved by the order of assessment for assessment year 2007- 08 dated 29/10/2010, the assessee preferred an appeal before the CIT(Appeals)-18, Mumbai. The Ld. CIT(A) allowed the assessee’s appeal vide order dated 202/08/2011 following the decision of the Co-ordinate Bench of this Tribunal in the case of the assessee’s sister concern M/s.Syntel Limited in dated 31/8/2015 and of the Hon’ble Mumbai High Court holding that interest income earned by the assessee was derived from assessee’s business and was to be considered as part of the assessee’s business income while computing the deduction under section10A of the Act.

3.1.1 Revenue, being aggrieved by the order of the CIT(Appeals)- 18, Mumbai dated 02/08/2011 for assessment year 2007-08 has preferred this appeal raising the following grounds:- "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing interest income of Rs.53,23,340/- as profits eligible for deduction u/s.10A/10B though the same were not derived from export of ITES services without appreciating the facts of the case.",

(Assessment Year 2007-08) "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the ratio, of the judgement of the Hon'ble Apex Court in the case of Liberty India Ltd. vs. CIT (317 ITR 218) wherein it is held that certain income may constitute profit from business under section 28 but it cannot be construed as profits derived from Industrial undertaking and the decision of Hon'ble ITAT, 'E' Bench, Mumbai, in the case of Tricom India Limited vs. 'ACIT (36 SOT 302) wherein it is held that interest income is not eligible for deduction u/s.10A/10B". The Appellant prays that the order of the CIT(A) on the above ground be set aside and that of the ITO/ACIT/DCIT be restored. The Appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.” 3.1.2 The Ld. Departmental Representative appearing for the Revenue was heard in support of the grounds raised (supra). He placed strong reliance on the Assessing Officer’s action in treating the interest income earned by the assessee as income from other sources, since it was not derived from the assessee’s business of export of ITES Services and, therefore, not eligible for deduction u/s.10A of the Act.

3.2 Per contra, the Ld. Representative for the assessee strongly contended that there was no error in the impugned order of the Ld. CIT(A) as he had followed the judicial precedent in this regard. It was submitted that the same issue of whether the interest income earned by the assessee was to be treated as being derived from the assessee’s business and, therefore, entitled to be eligible for deduction under section 10A of the Act was covered in favour of the assessee by the decision of the co-ordinate bench of this Tribunal in the case of the assessee’s sister concern, M/s. Syntel Limited in dated 31/8/2015. The Ld. Representative for the (Assessment Year 2007-08) assessee submitted that in view of the above, Revenue’s appeal was liable to be dismissed.

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.