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2012 (8) TMI 698 - AT - Income TaxDeduction u/s. 80HHF in addition to treating an amount as exemption u/s. 10B of the I.T. Act by applying the provisions of Section 80HHC to the export turnover - While computing deduction under section 80HHF it included export profit of EOU Held that - Profit derived from EOU should be reduced because profit derived by EOU was exempt from tax under section 10B express intention of Legislature with regard to sections 10B and 80HHF is not to allow deduction under both sections and further, both of said sections expressly prohibits to allow deduction other than allowable under respective sections order of Commissioner (Appeals) was to be confirmed Claim for deduction u/s. 10B - assessee have set up a new unit for production of media content software alleged that production of a media content program on a beta-cam tape could not be equated with an article or thing and, therefore, assessee did not satisfy basic condition of manufacture and production of an article or a thing prescribed in section 10B - Held that - Incorporeal rights contained in beta-cam tapes are goods or merchandise and, hence, entitled to deduction under section 10B
Issues Involved:
1. Claim for deduction under Section 10B. 2. Allowance of deduction under Section 80HHF. 3. Depreciation on office premises. 4. Computation of deduction under Section 80HHF by including turnover of sponsored telecast business. Issue-wise Detailed Analysis: 1. Claim for Deduction under Section 10B: The Revenue challenged the CIT(A)'s direction to allow the assessee's claim for exemption of income under Section 10B of the I.T. Act, 1961. The Assessing Officer (AO) had denied the exemption on the grounds that the production of media content software on beta-cam tape did not qualify as "manufacture and production of an article or a thing" as required under Section 10B. However, the CIT(A) found that the assessee had established a 100% Export Oriented Unit (EOU) and had necessary approvals, and that the beta-cam tapes were considered "Goods" or "Merchandise" by the Hon'ble Mumbai High Court in the case of A.A. Nadiadwala. The ITAT upheld the CIT(A)'s decision, citing the jurisdictional High Court's ruling and the Madras High Court's similar stance in CIT v. V.C. Kuganathan, concluding that the assessee was entitled to the deduction under Section 10B. 2. Allowance of Deduction under Section 80HHF: The Revenue contested the CIT(A)'s allowance of the assessee's claim for deduction under Section 80HHF. The CIT(A) had calculated the eligible profits and worked out the deduction as per Section 80HHF(3). The ITAT noted that in the assessee's own case, the methodology for computation of deduction under Section 80HHF had been discussed by the Tribunal in a prior order. The ITAT remitted the matter back to the AO for computing the deduction as per the Tribunal's directions, emphasizing the interests of justice. 3. Depreciation on Office Premises: The Revenue disputed the CIT(A)'s allowance of depreciation at 10% on office premises not owned by the assessee. The CIT(A) had directed the AO to work out the depreciation based on the correct Written Down Value (WDV). The ITAT referred to a prior Tribunal decision in the assessee's case for AY 2000-01, which had decided the issue in favor of the assessee. Following the coordinating bench's order, the ITAT dismissed the Revenue's ground. 4. Computation of Deduction under Section 80HHF by Including Turnover of Sponsored Telecast Business: The assessee appealed against the CIT(A)'s decision to reduce the profit derived by the EOU while computing the profit eligible for deduction under Section 80HHF, arguing that from AY 2001-02, Section 10B was a deduction provision, not an exemption provision. The ITAT examined Sections 10B and 80HHF, noting that both sections prohibited double deductions. The ITAT upheld the CIT(A)'s decision, emphasizing that the prohibition in the sections was mandatory and not discretionary. The ITAT also distinguished the cases cited by the assessee, concluding that the CIT(A)'s decision was as per law. The ITAT dismissed the assessee's ground and decided the issue against the assessee. Conclusion: The ITAT upheld the CIT(A)'s decision on the claim for deduction under Section 10B and the computation of deduction under Section 80HHF, remitted the matter regarding the allowance of deduction under Section 80HHF back to the AO, and decided the issue of depreciation on office premises in favor of the assessee. The appeal filed by the Revenue was partly allowed, while the appeal filed by the assessee was also partly allowed.
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