2007 (7) TMI 441 - AT - Income Tax

Summary

Issues Involved:
1. Reopening of assessment u/s 148.
2. Computation of exemption u/s 10B.
3. Levy of interest u/s 234B and 234C.

Summary:

Reopening of Assessment u/s 148:
The assessee argued against the reopening of the assessment for AY 1998-99, claiming it was beyond four years. However, since the original assessment was processed u/s 143(1) and not u/s 143(3), the Tribunal upheld the reopening as valid, applying the judgment of the Apex Court in Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500.

Computation of Exemption u/s 10B:
For AY 1998-99, the Tribunal held that income from the sale of import licenses does not qualify as "profits and gains derived from 100 per cent EOU" and thus is not eligible for exemption u/s 10B, referencing CIT v. Sterling Foods [1999] 237 ITR 579.

For AY 2000-01, the Tribunal addressed multiple grounds:
- Interest Income: Interest from deposits and advances is taxable under "Income from business" but not eligible for exemption u/s 10B as it is not derived from the export-oriented undertaking.
- Professional Fees: The Tribunal found that professional fees received for developing and implementing ICRM modules are operational income and should be included in the total sales for exemption computation.
- Training Income: Training income was deemed intrinsically connected to the software development business and thus eligible for exemption u/s 10B.
- Alternative Ground: The Tribunal agreed that if certain incomes are excluded from exemption, only the net income after deducting related expenses should be considered.

Levy of Interest u/s 234B and 234C:
The Tribunal dismissed the assessee's grounds against the levy of interest u/s 234B and 234C, stating it is mandatory and consequential.

Conclusion:
The appeal for AY 1998-99 was dismissed, while the appeal for AY 2000-01 was allowed in part.