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TMI Blog2011 (6) TMI 735X X X X Extracts X X X X X X X X Extracts X X X X ..... ctors by the assessee to whom assessee paid from its bank account maintained abroad which only provided services to the assessee and have not exported anything by themselves and it would not be considered as exports, unless provision of those services from one STP unit to another unit that exports is considered as exports within the meaning of the Act. Since it is accepted that it is the assessee who had exported computer software for which it was paid, the entitlement of exemption u/s 010A is satisfied. In conformity with the reasoning of the Hon ble Bench, we are of the considered view that the assessee is entitled to relief u/s 010A of the Act in respect of the work subcontracted by IBM India. It is ordered accordingly. Deduction on bad debts - In the case of CIT v. Star Chemicals (Bombay) P. Ltd. [ 2008 (2) TMI 399 - BOMBAY HIGH COURT] held that u/s 036(1)(vii) and Circular No.551 dated January, 23, 1990 if the assessee had written off the debt as a bad debt that would satisfy the purpose of the section. Accordingly, we hold that the bad debts written off by the assessee in its books of account shall be allowed as a deduction. It is ordered accordingly. Disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, in the business of development of computer software for export, maintenance of computer equipment, consultancy in information technology systems integration etc., for the AY under challenge, had furnished its return of income, admitting an income of ₹ 2.21 crores after claiming deduction u/s 10A of the Act. However, the Ld. AO, for the reasons recorded in his impugned order, determined the assessee s income at ₹ 64.46 crores thereby making additions of ₹ 12.72 crores on account of bad debts and ₹ 101.51 crores as disallowance of claim u/s 10A of the Act. 4. Aggrieved, the assessee took up the issues with the Ld. CIT (A) for solace. After due consideration of the assessee s contentions, extensively quoting various case laws and also analyzing the issues in depth, the Ld. CIT (A) had recorded his findings which are extracted as under: (i) Non-maintenance of separate books of accounts: Extensively quoting the amendment to s. 10A(1) of the Act, it was observed that 10.3. Thus, I conclude that even if the Act does not stipulate for separate books for each STPI Unit, the Legislative intention of amendment brought in by FA 2000 w.e.f. 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct work done by the sub-contractor u/s 10Aof I.T. Act. Thus facts before CIT (A) and ITAT while deciding the appeal of AY 2000-2001 has changed. On changed finding of fact by the AO, the grounds that the appellant is entitled for relief even on sub-contracted project are dismissed. (iii) With regard to reduce expenses on freight, insurance charges etc., from export turnover: Following his earlier finding and elaborately extracting the same in the case of Jaipuria silk Mills (P) Ltd., CIT (A) had concluded thus 14.2. The sum and substance of the above is that ss.80HHC/80HHE wherein the term total turnover has been explained cannot be imported to s.10A of I.T. Act because these sections operate in different fields and have different denotations and connotations and also contextually different. 14.2.1. The legislative intention of the substitution brought out in s.10A of I.T. Act by the FA 2000 w.e.f. 1.4.2001 was that even the 100% EOUs must pay some tax on the export profit earned by them. This is only possible when the numerator export turnover and denominator total turnover are not equal or same even in case of an undertaking doing only export business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... STP Units and non-STP Units and the only matter disputed by the AO was on the allocation of indirect costs between units on the basis of turnover. It would be clear from Form 56F and the P L a/c that the assessee had maintained the accounts unit-wise; that it was the admitted position of the AO that the direct expenses have been property recorded and it was similar to the earlier year s assessment position of the assessee. The only grievance of the AO was that the indirect costs are being allocated on the basis of unit-wise turnover. However, it was clear from the unit-wise profit and loss account that the profits have been computed unit-wise and that the Hon ble Tribunal in assessee s own case held that allocation of the indirect costs on the basis of turnover could be the only reasonable basis for arriving at the unit-wise profits and, thus, the case of the assessee stands squarely covered by the earlier year s decision; - to counter the Ld. CIT (A) s observation that before the amendment in April, 2001, the requirement was to compute the profits for the whole business and, therefore, there was no requirement to maintain separate books of account and after the amendment (f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified in sub-section 2 of s.10A of the Act. The section states that all the following conditions are to be satisfied which indicates that the provisions are exhaustive and not inclusive or illustrative. When the Revenue had not codified that these conditions have not been complied with, no other conditions can be imposed into the law [Tarulata shyam 108 ITR 345 (SC)]; - that the compliance of provisions of the STP scheme by the STP Units is to be overseen by the STP authorities and it was not for the Revenue authorities to deny the claim of tax holiday on account of the alleged violation of the provisions of the STP Scheme with respect to non-maintenance of books of account, non-maintenance of project-wise accounts etc., - relies on the case laws (a) Gestetner Duplicators Pvt. Ltd. v. CIT (117 ITR 1 (SC); (b) ITO v. e-Infochips Ltd. 124 TTJ 176) ITAT, Ahmedabad (ii) With regard to sub-contracted work: - the Hon ble earlier Bench in the assessee s own case for the AY 2000-01 in ITA No.3464/Bang/2004 dated 31-10-2007 had granted relief u/s 10A of the Act in respect of the work sub-contracted by the assessee; (iii) In respect of exclusion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount was not a pre-condition finding a place in the provisions of s.10A of the Act. The Commissioner of Income-tax(A)'s statement that there was substantive change in law w.e.f.1.4.2001 is correct. However, his further observation that law has moved to 'undertaking' specific deduction, which indicates that the books of accounts should be maintained unit wise, is without any legal basis. Section 10A tax holiday provisions were always 'undertaking' specific (even pre amended provisions up to 2001). Sub-section (1) of Section 10A (prior to the amendment by Finance Act, 2000 was an exemption provision which also clearly refers to the profits of the undertaking. Hence, the Commissioner of Income-tax(A) has misunderstood that the provisions were not 'undertaking' specific. The pre-amended provisions cited by the Revenue was never codified as the law, (as it was overwritten by the subsequent amendment) (See A. N. Iyer's 'IT Laws, 2001'). Therefore, the Revenue is incorrect to cite that preamended provisions did not require separate books of account as there was no reference to 'undertaking', but the post-amended section does. In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lausible manner available for allocation of expenditure is in the ratio of turnover which is possibly the only indicator available and is a reasonable method of arriving at the expenses. Further, we venture to quote the ruling of the Hon ble Supreme Court in the case of Smt. Tarulata Shyam and others v. CIT reported in 108 ITR 345 (SC) wherein it has been made implicitly clear that - To us, there appears no justification to depart from the normal rule of construction according to which the intention of the Legislature is primarily to be gathered from the words used in the statute. It will be well to recall the words of Rowlatt J. in Cape Brandy Syndicate v. Inland Revenue Commissioners [1921] 1 KB 64 (KB) at page 71, that : ...... in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax: There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. II. In view of the fact that the maintenance of separate books of account for STP Units is not a condition laid down in the provisions of s. 10A of the Act and also in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s.Jaipuria Silk Mills (P) Ltd. However, the earlier Hon ble Bench in the case of iGate Global solutions Limited v. ACIT reported in 112 TTJ 1002 had observed that 9. Reliance was also placed on the number of judgments of the High Courts, vide which, it has been held that excise duty and sales-tax should not be included in the total turnover, as the same are not includible in the export turnover. The learned apex Court in the case of CIT vs. Lakshmi Machine Works (2007) 210 CTR (SC) 1 : (2007) 290 ITR 667 (SC) and in the case of CIT vs. Catapharma (India) (P) Ltd. (2007) 211 CTR (SC) 83 : (2007)292 ITR 641 (SC) has held that excise duty and sales-tax are not includible in the total turnover. It was, therefore, held in the cases of Tata Elxsi and Infosys Technologies that expenditure incurred in foreign currency by the assessee should be excluded from the total turnover, as the same is not to be considered in export turnover. Following the same reasoning, it is held that up-linking charges which are reduced for ascertaining the export turnover are also not to be considered for the purposes of total turnover, as total turnover is sum total of export turnover and internal t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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