2020 (8) TMI 367 - HC - Income Tax

Exemption u/s 10A - STP I unit and non-STP unit are using the same infrastructure, employees, etc - STPI unit was not a new unit and it was formed by splitting up and reconstruction of the already existing business and the products, customers and employees were common to the pre existing unit - total turnover computation for the purpose of Section 10A - HELD THAT - Both the issues decided in favour of assessee as relying on M/S. SERVION GLOBAL SOLUTIONS LTD. 2019 (6) TMI 1514 - MADRAS HIGH COURT

Summary

Issues:
1. Appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal for the assessment year 2009-10.
2. Substantial questions of law regarding exemption under Section 10A and exclusion of certain expenses from total turnover for arriving at eligible profit.

Analysis:
1. The appeal was filed by the revenue under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal for the assessment year 2009-10. The substantial questions of law raised in this appeal revolved around the entitlement for exemption under Section 10A and the exclusion of certain expenses from the total turnover for determining eligible profit under Section 10A.

2. The first substantial question of law focused on whether the assessee was entitled to exemption under Section 10A despite a violation of Section 10A(2)(ii) due to the formation of the STPI unit by splitting up and reconstruction of an existing business. The tribunal had to consider if the products, customers, and employees were common to the pre-existing unit and the unit seeking exemption. The second question delved into the exclusion of telecommunication and foreign currency expenses from the total turnover for calculating eligible profit under Section 10A, questioning the validity of such exclusion and its compliance with accounting principles.

3. The counsel for the respondent argued that the substantial questions of law raised by the revenue had already been decided against the revenue in the assessee's own case in previous judgments. The revenue contended that the Assessing Officer had independently decided the issue for the assessment year 2009-10. Upon examining the facts and previous judgments, the court found that the issues were previously addressed in T.C.A.Nos.241 and 647 of 2008, leading to a firm view that the substantial questions of law in the current appeal were covered by the earlier decision and should be answered against the revenue.

4. Consequently, the court dismissed the tax case appeal, ruling in favor of the respondent and holding that the substantial questions of law raised by the revenue were already settled in previous judgments. The judgment highlighted the importance of consistency in legal decisions and the application of precedents to ensure fairness and uniformity in tax matters.