9911796707
TMI Blog2002 (5) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... exercise of the powers conferred by section 14 of the Industries (Development and Regulation) Act, 1951 and Rules made thereunder. (b) The Ld. CIT(A) ought to have accepted the submission of the assessee that the Central Government has conferred authority on the Department of Electronics, to grant approval under section 14 of the Industries (Development and Regulation) Act, 1951 and Rules made thereunder pursuant to which the approval was given to the Nagarjuna Hills unit and as such benefit of exemption under section 10B in respect of the income therefrom was available to the assessee. He ought to have given an opportunity to the assessee to produce necessary evidence in this behalf. (c) The CIT(A) ought to have held that the benefit of exemption from tax in respect of income from STP unit at Nagarjuna Hills was available to it under section 10A by virtue of the fact that under letter dated 26-6-1995 of the Department of Electronics, the said unit was approved as its initial plant at Maithrivanam Complex which was approved as 100% Export Oriented Unit under letter dated 26-6-1991 of the said Department. (d) The CIT(A) erred in holding that the benefit of section 10A cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 93.36% 54867492 93.36 -------- 58767036 Deduction u/s 80HHE @ 93.36% 19258249 Gross Total income after 80HHE 1369096 2. U/s 80-IA @ 3096 of 1369696 410909 Taxable income 958787 Tax @ 43% 412278 Less: TDS/Advance/Self asst. tax/tax 2628702 payable/refund - 2216414" It separately computed the minimum alternative tax (M.A.T.) at Rs. 26,28,700 as follows: "M.A. T working Profit as per P & L A/c 24495763 Less: Profit from private STP at Nagarjuna Hills Exempt u/s 10B 4118367 -------- (working sheet enclosed) 20377396 Taxable book profits (30%) 6113220 Tax under M.A.T. @ 43% 2628700 Less: TDS/Advance Tax paid 2093142 Tax payable 535558 Rounded off to 535560 Less: paid u/s 140A on 28-11-1997 535560" The assessee gave a separate computation of the claim for exemption of the profit from the operations at Nagarjuna Hills u/s 10B of the Act which reads as under: "Computation of Taxable Income Net profit as per Profit & Loss A/c 4118367 Add: Inadmissible exp./allowances to be considered separately 1. Depreciation as per books of account 84131 2. Provision for Bonus 0 Less: paid before filing IT return 0 3. Entertainment allowed upto Rs. 10,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nagarjuna Hills Unit was not exempted under section 10A/10B of the Income-tax Act and the grievance was not that as the entire income was not exempted under section 10A/10B of Income-tax Act. This position has, however, been given up in the course of the hearing before us as we shall mention presently and the claim for exemption is extended to the entire income of the assessee. 5. The assessee came into existence as an unit under the Software Technology Park Scheme (STP Scheme) at Maithrivanam, Hyderabad vide approval granted to the assessee by the Department of Electronics, Software Development Division, New Delhi vide its letter dated 26th September, 1991 which reads as under: "Sub : Application for setting up your operation under Software Technology Park Scheme, for development and 100% export of soft ware, using data communication channels, in the Software Technology Park, Hyderabad sponsored by the Department of Electronics. Dear Sir, This has reference to your above application for setting up your operation in the Software Technology Park, Hyderabad sponsored by the Department of Electronics, under the Software Technology Park Scheme for the development and 100% export o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be produced along with the original letter of approval No. 17(40)/91 -SDA dated 26-9-1991. Yours faithfully, sd/= (J.A. Chowdary) Director It may be observed that it was only in the year 1995, the assessee expanded its operations to a separate complex situated at Nagarjuna Hills, Hyderabad and this expansion was not in the nature of setting up of a new unit. At any rate, it has not been claimed by the assessee before us that the expansion of operations to a new complex at Nagarjuna Hills, Hyderabad constituted the setting up of a new unit. This claim, though apparently made before the A.O. and the CIT (Appeals), has been specifically given up before us. It is in the context of these two letters i.e. letter dated 26th Sept., 1991 of Department of Electronics and the letter dated 26th June, 1995 of Software Technology Parks of India that the assessee's claim for exemption under sections 10A and 10B, has to be considered. As already mentioned, before the A.O. there was no claim for the exemption of the entire income of the assessee under section 10A/10B of the Act and the claim of exemption was limited to the income from the operations at Nagarjuna Hills, Hyderabad. The A.O. den ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s operations at Nagarjuna Hills, Hyderabad. In the course of hearing, the learned counsel for the assessee gave up its claim for exemption of the income of operations from Nagarjuna Hills, Hyderabad and claimed that its entire income is entitled for exemption under sections 10A and 10B of the Act, but did not file any revised grounds of appeal before us. Normally, we would not have allowed the assessee to take up pleas which were not taken up before the CIT(A), but as no investigation into fresh facts is required, we have allowed the assessee to take up the pleas mentioned and we have proceeded to consider the pleas taken in the course of the hearing as grounds taken before us. In other words, we proceed to dispose of the appeal on the basis that the main ground taken up before us is that tile entire income is exempt either under section 10A or under section 10B of the Act. 6. We shall first consider the claim of the assessee for exemption under section 10A of the Act. In support of this plea, the Ld. counsel for the assessee relied upon Circular No. 694 of C.B.D.T. dated 23rd November, 1994 which reads as under: "Subject : Tax holiday under sections 10A and 10B for units produci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n consonance with the intention of the Government, Finance Act, 1993, extended the scope of the tax holiday to units in STPs but did not curtail the scope, in respect of existing software exporting units in EPZs/EOUs, already availing of the incentive. The Explanation of the term "produce" is clarificatory in nature and was inserted in 1993 primarily because in that year, the tax holiday was extended to units in STPs - which produce only computer software. 10. Accordingly, it is clarified that units in EPZs/EOUs which export software are as much eligible for availing of the five-year tax holiday under sections 10A and 10B as any other units in EPZ/EOU, even for the period prior to the previous year relevant to the assessment year 1994-95. The conditions stipulated in the provisions have, of course, to be fulfilled. The insertion of the Explanation of the term "produce" in 1993 should not be taken as a ground for denying the tax holiday to such units for earlier years. (Sd) K.M. Sultan Director (TPL-II)" In the light of the above Circular, it is contended that though the assessee came into existence as a unit set up under STP Scheme vide letter dated 26th Sept., 1991 by the Depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be included in the total income of the assessee. (2) This section applies to any industrial undertaking which fulfils all the following conditions, namely : (i) it has begun or begins to manufacture or produce articles or things during the previous year relevant to the assessment year (a) commencing on or after the 1st day of April, 1981, in any free trade zone; or (b) commencing on or after the 1st day of April, 1994, in any electronic hardware technology park or, as the case may be, software technology park" The Explanation to section 10A reads as under: "For the purposes of this section (i) "free trade zone" means the Kandla Free Trade Zone and the Santa Cruz Electronics Export Processing Zone and includes any other free trade zone which the Central Government may, by notification in the Official Gazette, specify for the purposes of this section; (ii) "relevant assessment years" means the ten consecutive assessment years referred to in sub-section (3); (iii) "manufacture" includes any - (a) processor (b) assembling, or (c) recording of programmes on any disc, tape, perforated media or other information storage device; (iv) "electronic hardware technology park" m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the income from operations at Nagarjuna Hills can be exempted under clause (i)(b) of sub-section (2) of section 10A, as no separate claim in respect of the unit at Nagarjuna Hills has been made before us and as already mentioned, the Ld. counsel for the assessee has given up the claim that the operations at Nagarjuna Hills constituted a separate unit. 10. Now, we shall consider the plea of the learned counsel for the assessee for the exemption of income of the assessee under section 10B of the Act. The Ld. counsel for the assessee pleaded before us that the assessee is an EOU within the definition of EOU given in clause (i) of Explanation to section 10B of the Act which we have already reproduced hereinabove. It is mentioned that, if the income from the operations at Maithrivanam is eligible for exemption under section 10B, the income from operations at Nagarjuna Hills also automatically becomes eligible for exemption under section 10B of the Act as the latter unit is only an extension of the former. So what is required to be seen is whether the operations in Maithrivanam are eligible for exemption under section 10B and whether the said unit under Maithrivanam can qualify a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gard to the maximisation of production, better utilisation of existing plant and machinery and other factors, the Ministries concerned may dispose of such application without reference to the Committee. (2) The Ministry of Industrial Development may, by notification ill the Official Gazette, appoint one or more Committees, Consisting of such number of members as it may think fit to represent - (a) the Ministries of the Central Government dealing with (i) the industries specified in the First Schedule to the Act; (ii) Finance; (iii) Company Affairs; and (iv) the Planning Commission (3) A Committee appointed under sub-rule (2) may co-opt one or more representatives of other Ministries of the Central Government or of any State Government concerned, wherever it is necessary." It may be observed that under the above Rule, various Committees can be appointed for the purpose of examining the licences to be granted under this Act. The paper books filed by the learned counsel for the assessee which contains the Registration and Licensing of Industrial Undertaking Rules, 1952 itself refers to the various Committees appointed under Rule 10 of RLIU Rules, 1952 and they are the followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shed in the Gazette of India, Extraordinary, 1980, Part I, section 1 dated the 31st December, 1980. 2. The Board shall review the progress of implementation of letters of intent and industrial licences granted under the said scheme upto the stage of actual commissioning of capacity. 3. The Board shall consider policy questions arising from applications received under the said scheme or from the implementation of individual proposals thereunder and resolve them in accordance with the policy laid down by the Central Government from time to time. 4. The Board may refer any matter in its discretion for the consideration and decision of the appropriate authority in respect of matters falling within its competence. 5. The Board shall exercise the powers of the Licensing Committee appointed under sub-rule (2) of rule 10 of the Registration and Licensing of Industrial Undertaking Rules, 1952, in respect of industrial undertaking registered or registrable under the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969) and report to the Central Government in regard to notices of applications under sections 21 and 22 of the said Act." The Scheme relating to the setting up of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ange. The customs authorities shall provide bond facilities to such units wherever located. (ii) Import of capital goods, components, and raw materials shall be exempt from import duty. Finished products shall also be exempt from excise and other central levies. (iii) No export benefits like cash assistance, replenishment licences would be admissible on these exports. (iv) Import of capital goods, components, raw materials and consumables, as required will be permitted. (v) Imports of necessary capital goods shall be allowed against free foreign exchange or bilateral credits in such a way that the cost of units is not unduly raised. (vi) Foreign collaboration may be permitted on merits of each case. (vii) The conditions for dilution of foreign equity as stipulated in the Department of Economic Affairs Press Note of 19th Feb. 1972 will not be enforced in 100 per cent export-oriented cases. (viii) So as to keep rates of return on export production competitive, exporting units including Large Houses/MRTP units may be permitted to borrow from financial institutions at normal debt/equity ratio. (ix) Indigenously available capital goods, components and raw materials will be allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty, if any, under the Import Trade Control Regulations. Illustrative list of products which would be eligible for special facilities on the ground of 100 per cent exports 1. Engineering goods 1.1 Engineering goods (excluding prime and non-ferrous metals) 1.2 Electronic products including electronic software 2. Chemicals, Plastics and allied products, namely: (a) Inorganic chemicals, organic chemicals and miscellaneous chemicals (b) Drugs and drug intermediates, including crude drugs (c) Dyes and dye intermediates (d) Toiletries and perfumeries (excluding processed talc) (e) Paints and allied products (f) Safety matches, fireworks, explosives and detonators (g) Ceramic products (h) Glass and glassware (i) Wood products and processed wood (j) Asbestos cement, including clinkers and cement products (k) Rubber manufacturers (l) Paper, paper products and stationery (m) Pesticides and preservatives (n) Agarbattis 2.2 Culinary oleo resins 2.3 Refractories 2.4 Plastic and Linoleum products 3. Furniture 4. Leather and sports goods 4.1 Finished leather and leather manufactures, including footwear and paint brushes 4.2 Sports goods 5. Food, agriculture and forest p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IMSC) was originally constituted by Gazette Notification No. 294 dated 30-8-1991 to consider the licences under STP Scheme. In this context, he invited our attention to the STP Scheme notified on 22-3-1994, the relevant portion of which reads as under: "Software Technology Parks (STP) Scheme Notification No. S.O. 243(E), dated 22nd March, 1994. In exercise of the powers conferred by subsection (1) of section 3 of the Foreign Trade (Development and Regulation) Act, 1992** the Central Government hereby notifies the following scheme, which is a sequel to resolution No. 17(38)/Comp./84(Part), dated December 18, 1986, of the Department of Electronics announcing the policy on computer software, software development and training and also resolution No. 17(38)/Comp./93 dated 22nd February, 1993, the Department of Electronics for Software Exports. 2.0 Software Technology Parks (STP) Scheme 2.1 The Software Technology Park (STP) Scheme is a 100% export oriented scheme for undertaking of software development for export using data communication link or in the form of physical exports including export of professional services. 2.2 A Software Technology Park (STP) may be set up by the Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.1 .............. 2.8.2 .............. 2.9 ................ 2.10 The provisions of paragraphs 111 to 117 of Chapter IX of the Export and Import Policy (1992-97) applicable to Export Oriented Units (EOUS) and units in Export Processing Zones (EPZS) shall also apply mutatis mutandis to STP scheme subject to the following modifications: (a) The words "Development Commissioner" wherever they occur, shall be substituted by the words "Chief Executive of STP Society". (b) The letter "BOA", wherever they occur, shall be substituted by the letters "IMSC" 2.11 Export obligation on the STP unit on net foreign exchange terms in US dollar value will be as follows: Export obligation = 1.5 X (CIF value of the hardware imported + 1.5 X wage bill Notes : (i) The obligation on the hardware part will be fulfilled over a period of four years. (ii) The obligation on wage bill will be on annual basis (iii) Net foreign exchange for this purpose will be defined as below: "Net foreign exchange earned for this purpose is defined as foreign exchange inflow as a result of software export loss foreign exchange outflows on account of all expenditure whatsoever other than initial hardware" 2.12 Us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... units in the Electronic Hardware Technology Parks (EHTP) under the scheme of special facility (hereinafter referred to as the said scheme framed under the Government of India, Ministry of Commerce, Notification No. 42 (N-8)/1992-97 dated the 14th September, 1992). The Committee shall also consider all applications for setting up of units under Software Technology Park Scheme operated under customs Notification Nos. 138 and 140 dated 22-10-1991. The Committee shall consider proposals for industrial licence, foreign technical collaboration agreements and import of capital goods. The Committee shall not consider applications involving foreign equity with or without any other industrial approvals. (ii) The Committee shall review the progress of implementation of letters of intent and industrial licences granted under the said scheme upto the stage of actual commissioning of capacity. (iii) The committee shall consider and make a report, on policy questions arising from applications received under the said scheme or from the implementation of individual proposals thereunder in accordance with the policy laid down by the Central Government from time to time. (iv) The Committee may re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rumentation (CCI) Wing of the Department of Electronics will continue to be the Secretariat for this committee. All applications should also be made directly to the CCI Wing of DOE." In the light of the above, it is contended that Inter Ministerial Standing Committee under the Department of Electronics is authorised to consider all licences relating to computer or software units and so it is claimed that the approval by the Inter-Ministerial Standing Committee tantamounts to approval by Board under clause (i) of Explanation to section 10B of the Act. 14. The learned counsel for the assessee also filed before us a copy of Resolution dated 18th December, 1986 in the Gazette of India, December 27th, 1986 at page 809, in which it was mentioned as under: "XII. Procedures 1. The Inter-Ministerial Standing Committee (IMSC) of the Department of Electronics will function as an effective instrument for single point clearance and for coordination of action of all cases of software development and software export. 2. For software export project, the entrepreneur will apply to CCI Wing of DOE in the form prescribed in appendix II-C of Handbook of Import and Export Procedures, 1985-88. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t at Nagarjuna Hills and as such were much less than the stipulated percentage of 25%. 16. The Ld. Departmental Representative, on the other hand, pleaded that a unit under the STP Scheme is totally different from an EOU unit. Units set up under the STP Scheme or the Export Processing Zone or a free trade zone or as EOUs are all separate categories and they are covered under separate incentive schemes. It is mentioned that the assessee was clearly a unit under the STP Scheme and not an EOU unit and so it is stumbling between two stools. It is not eligible for exemption under section 10A of the Act because it was not established in free trade zone as required u/s 10A. The exemption u/s 10A of the -Act was extended as already mentioned, to the Units under SI'P Scheme only from 1-4-1994 and this exemption is not available to units like that of the assessee which were established in earlier years. As it is a unit set up under the STP Scheme and not a 100% Export Oriented Unit within the meaning of clause (i) of Explanation to section 10B of the Act, it is not eligible for exemption even under section 10B. The Inter Ministerial Standing Committee (IMSC) even if appointed under RLIU Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, 100% EOU is only that which is so approved by the Board appointed by Central Government in exercise of powers conferred in section 14 of IDAR Act, 1951. 100% EOU under the STP Scheme cannot, to our mind, be equated with 100% EOU approved by the Board under section 14 of the IDAR Act. The conditionalities that govern units set up under STP Scheme are different from those that govern the units set up as 100% EOUs and so approved by the Board. Some of the conditionalities are common and overlapping but other conditionalities like the satisfaction of employment criteria, foreign exchange etc., are apparently different. It may be that the Inter Ministerial Standing Committee set up for granting licences under STP Scheme is also appointed by the Central Government in exercise of powers conferred under section 14 of IDAR Act but that does not mean that the Board that has been appointed for granting licences and approval for 100% EOUs has been replaced. The plea taken by the learned counsel for the assessee that the Inter Ministerial Standing Committee has been replaced by the Board on the basis of the contents of para 2 of the Notification of the Ministry of Commerce dated 22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be sold in the DTA. Period of bonding 116. The bonding period for units under the EOU Scheme shall be 10 years. The period may be reduced to 5 years by the BOA in case of products liable to rapid technological change. On completion of the bonding period, it shall be open to the unit to continue under the scheme or opt out of the scheme. Such debonding shall, however, be subject to the industrial policy in force at the time the option is exercised. De-bonding 117. Subject to the approval of BOA, EOU/EPZ units may be debonded on their inability to achieve export obligation value addition or other requirements. Such debonding shall be subject to such penalty as may be imposed and levy of the following duties : (a) Customs duty on capital goods at depreciated value but at rates prevalent on the dates of import; (b) Customs duty on unused raw materials and components on the value on the dates of import and at rates in force on the dates of clearance." It is apparent that the Notification in question dated 22-3-1994 extended some incentives given to the EOUs to the units set up under the STP Scheme. Some of the above paragraphs like 114 talk of permission to be granted by the Dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cannot be assumed that the Legislature is unaware of such replacement as claimed by the assessee before us. 19. Further, para 93 of Chapter IX of EOUs and units in export processing Zones (Export and Import Policy 1992-97) reads as under: "Eligibility 93. Units undertaking to export their entire production of goods [except the sales in the Domestic Tariff Area (DTA)] as may be permissible under the Policy may be set up under the Export Oriented Unit (EOU) Scheme or Export Processing Zone (EPZ) Scheme, such units may be engaged in manufacture, production of software, agriculture, acquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry and sericulture. Units engaged in service activities may also be considered on merits." It is evident from the above that the various schemes like EOU /EPZ & STP are different from each other. Para 9.1 of Export and Import Policy 1997-2002 clarified the matter further as under : "Chapter 9 Export Oriented Units (EOUS) Units in Export Processing Zones (EPZ), Electronic Hardware Technology Park Units (EHTP) and Software Technology Park Units (STP). 9.1 Eligibility - Units undertaking to export their entire production of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 1994-95 gets automatically defeated because STPs which had commenced their operations on or before the stipulated date as mentioned above, become in any case eligible for exemption under section 10B of the Act. We do not find any reason to attribute such a self-defeating exercise to the Legislature. 21. Regarding the plea of the learned counsel for the assessee that an STP unit may also be an EOU and vice versa, it may be so. But it requires compliance with the rules of both the schemes and in the absence of compliance with both the schemes, an STP unit cannot automatically be regarded as an 100% EOU. In other words, registration under the STP & EOU schemes are not automatically interchangeable. 22. For these reasons, we are of the view that the assessee is not entitled for exemption under section 10B of the Act also. Perhaps, the assessee was aware of this position, that is how, it did not claim exemption under sections 10A and 10B in the original computation filed by it. Such a claim was not advanced in any of the earlier years. The new unit at Nagarjuna Hills was set up in the year of account relevant for assessment year 1997-98 and it was only from 1997-98 onwards th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch, 1995 or such further period as the Central Government may, by notification in the official Gazette, specify with reference to any particular industrial undertaking;" 25. The CIT(A) denied the claim for deduction under section 80-I with the following observations : "I have considered the submissions but I am not persuaded to accept the same. One of the prerequisites for getting deduction under section 80-I is that the industrial undertaking should manufacture or produce article or thing. In the present case, appellant develops software. The same cannot be termed as manufacture or production of an article or thing. It will be relevant to point out here that Explanation to section 10A/10B specifically defines manufacture and produce to include computer programmes. The aforesaid clarificatory definition is not there in section 80-I. Accordingly, the appellant will not be entitled to deduction under section 80-I in respect of domestic sales." Normally, we would have set aside the orders of Revenue authorities on this issue as the claim of the assessee has been considered under section 80-I of the Act and not under section 80-IA(2)(iv)(a), but we do not find it necessary to set a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r thing within the meaning of section 10A or 10B of the Act even before the insertion of the definition of 'produce' w.e.f. 1-4-1994. So it must be held that a software company produces an article or thing within the meaning of section 80-IA, as this section also uses the expression 'produce an article or thing' which is the same as that figuring in sections 10A and 10B. In other words, even without any resort to the inclusive definition of 'produce' given in sections 10A and 10B of the Act, software company is entitled for exemption under sections 10A and 10B of the Act even prior to assessment year 1994-95 and so, by analogous reasoning, it is also entitled for exemption under section 80-IA(2)(iv)(a) of the Act. In view of the above, there is no reason to deny the exemption under section 80-IA(2)(iv)(a) of the Act to the assessee. Further, we may mention here that there is no merit in the observations of the A.O. that the assessee cannot be granted deduction under section 80-IA because it is granted deduction under section 80HHE of the Act. The two sections operate in different spheres. Section 80HHE operates in respect of export income and 80-IA(2)(iv) in respect of income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant company. The Assessing Officer disallowed the expenditure on the ground that the expenditures were personal in nature and could not be considered as business expenditure. The AO has made detailed discussion in this regard in the assessment order. 5.1 Before me, the Ld. AR of the appellant had argued that Sri BGV Krishna was sponsored for foreign education with the clear understanding that on completion of the course, he would serve the appellant company. The learned AR had pleaded that the entire amount should be allowed as business expenditure. 5.2 There is no merit in the argument of the learned AR. During the course of appeal hearing, the appellant had filed a letter dated 27-7 2000. This letter shows that Sri BGV Krishna was sponsored for Bachelor of Science (Electrical Engineering) in Purdue University, USA. Sri BGV Krishna is the son of the Managing Director and he is not connected to the appellant company in any way. The case of Sri BGV Krishna is an isolated case where the appellant company has sponsored somebody for course in foreign university. There is no guarantee that Sri Krishna will complete the course and after completion, he will serve the appellant co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken by the learned counsel for the assessee. It is observed by the CIT(A) that Sri BGV Krishna is the son of the Managing Director and he is not connected to the assessee-company in any way and his foreign tour and education is not shown to have been financed under any scheme or policy of the company. At the time of financing him, there was no agreement between him and the company about any future employment. Therefore, financing the foreign education of Sri BGV Krishna is totally unconditional at the inception and we see more of personal benefit to the Managing Director by way of financing his son's education abroad than meeting the business requirements of the assessee-company. It is also immaterial that the amount has been treated as a perquisite in the hands of Managing Director of the Company. That does not bar the disallowance of the expenditure as not constituting a legitimate business expenditure in the hands of the company. For these reasons, we uphold the order of the CIT(Appeals). 29. In the light of the above, the appeal for assessment year 1997-98 is partly allowed. 30. Next, we will take up the matter for assessment year 1998-99. The grounds taken up before us re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puting relief under section 80HHE of Income-tax Act." Even for this year, there is variation between the grounds accompanying in form No. 36 and the grounds taken before us. In the course of hearing, the assessee mentioned that the unit at Nagarjuna Hills is only an extension of the earlier unit at Maithrivanam which was set up in the year 1991 and the income from the entire operations of the company is entitled for exemption under sections 10A and 10B of the Act. We have already discussed this issue for the earlier assessment year for 1997-98 in the assessee's own case and for the reasons recorded therein, we hold that the assessee is not entitled for exemption under sections 10A and 10B of the Act. This exemption under sections 10A and 10B of the Act cannot be extended even to the operations at Nagarjuna Hills as this unit is an extension of earlier unit of Maithrivanam. 31. The next effective ground is that the CIT(A) erred in holding that the interest earned on fixed deposit of Rs. 32,15,465 interest on staff loan at Rs. 51,403 and income from miscellaneous receipts of Rs. 55,625 are not income derived from the business of the assessee. Alternatively, it is claimed that the C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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