2020 (12) TMI 1300 - HC - Income Tax

Set-off of losses of a 10A/10AA unit against other business income - Whether tribunal was right in excluding the computer software sales made to STP/SEZ units in India from export turnover for the purpose of computing deduction under Section 10A/10AA - excluding the VAT / GST from export turnover and total turnover for the purpose of computing deduction under Section 10A/10AA - tribunal concluding that 80% of the up linking charges had to be excluded from the definition of turnover when even the respondent had limited such exclusion to 5% of the telecommunication charges in earlier years? - Tribunal concluding that purchase and sales of monitors constituted a trading activity and thus excludible from the profits of the Pondicherry unit for the purposes of computing deduction under Section 80-IB of the Act when such monitors were part of the computers manufactured and sold by the units - HELD THAT - When the matter was taken up today learned counsel for the assessee submits that this appeal may be disposed of in terms of the judgment passed in 2020 (12) TMI 687 - KARNATAKA HIGH COURT .

Summary

Issues:
1. Set-off of losses of a 10A/10AA unit against eligible profits in a subsequent year.
2. Exclusion of computer software sales from 'export turnover' for deduction under Section 10A/10AA.
3. Exclusion of VAT/GST from export turnover and total turnover for deduction under Section 10A/10AA.
4. Exclusion of uplinking charges from turnover.
5. Exclusion of purchase and sales of monitors as trading activity for computing deduction under Section 80-IB.

Analysis:

1. The appeal under Section 260-A of the Income Tax Act, 1961 raised questions regarding the set-off of losses of a 10A/10AA unit against eligible profits in a subsequent year. The Tribunal's decision to direct the re-carrying forward and set-off of such losses was challenged. The issue was whether the Tribunal's direction was justified or not.

2. Another substantial question of law involved the exclusion of computer software sales made to STP/SEZ units in India from 'export turnover' for the purpose of computing deduction under Section 10A/10AA of the Act. The appellant contested this exclusion and sought clarity on the correct interpretation of the relevant provisions.

3. The Tribunal's decision to exclude VAT/GST from export turnover and total turnover for the purpose of computing deduction under Section 10A/10AA was also a point of contention. The appellant raised concerns about this exclusion and its impact on the computation of deductions under the Act.

4. The issue of excluding 80% of the uplinking charges from the definition of turnover was also raised. The appellant questioned the Tribunal's conclusion in this regard, especially in comparison to the respondent's previous limitation of such exclusion to 5% of the telecommunication charges in earlier years.

5. Lastly, the Tribunal's decision to consider the purchase and sales of monitors as a trading activity and exclude them from the profits of the Pondicherry unit for computing deduction under Section 80-IB was challenged. The appellant argued that such monitors were integral to the computers manufactured and sold by the units, raising questions about the correct treatment of these transactions.

The matter was disposed of based on a submission by the assessee's counsel to align with a previous judgment. The judgment passed in ITA No.315/2012 dated 09.12.2020 was referred to for the resolution of the issues raised in the appeal.