9911796707
TMI Blog2015 (10) TMI 826X X X X Extracts X X X X X X X X Extracts X X X X ..... ted company, listed in India and US engaged in the business of software exports, computer peripherals, IT enabled services, manufacture and sale of vegetable oils, soaps, leather products, hydraulic cylinders and tippers, and manufacture of reagents as well as marketing and support of medical equipment and other related businesses. The business of the company is carried on through the various business units or divisions of the company. It is the case of the assessee that it runs each business unit as an independent profit center. Accordingly separate accounts are maintained for each business unit. The accounts of the assessee are compiled on the basis of consolidation of all accounts maintained at the business unit levels. 3. The facts of the case for each assessment year are set out in brief as under: Assessment Year 2001-02 - ITA Nos. 879 & 882/2008; 907 & 909/2008 The appellant filed its" return of income for the assessment year 2001-02 on 30.10.2001 disclosing a total income of Rs. 135,51,15,000/- after claiming deduction under Section, 10A of the Income Tax Act (for short, hereinafter referred to as the 'Act') to the extent of Rs. 620,17,27,569/-. 4. The case for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Income Tax (Appeals) [CIT(A)] which was disposed-off by the CIT(A) vide order dated 20.03.2006. Aggrieved by the said order, both the assessee and the Department preferred separate appeals before the ITAT. The ITAT, vide common order dated 30.05.2008 disposed of the appeals. Assessment Year 2003 04 - ITA Nos. 108 & 109/2009; 210 & 211/2009 8. The assessee-company filed its return of income for the assessment year 2003-04 on 27.11.2003 disclosing a total income of Rs. 164,86,92,630/- after claiming deduction u/s 10A of the Act to the extent of Rs. 763,34,75,604/-. The assessee had claimed relief under Double Taxation Avoidance Agreement u/s 90 in the return amounting to Rs. 20,99,63,631/-. The assessee also claimed TDS of Rs. 9,55,12,095/- and advance tax payment of Rs. 69,40,50,000/-. The assessee claimed refund of Rs. 39,36,31,184/-. The return of income was processed u/s 143(1) on 15.07.2004 and the case was selected for scrutiny and notice u/s 143(2) was issued on 15.07.2004. A questionnaire was issued on 16.8.2005 calling for certain details and the compliance was fixed on 22.8.2005. The assessee-company also had international transactions with Associated Enterpri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -04 - ITA No. 209/2009; 12. There are two more substantial questions of law arising out of the order dated 26.09.2007 passed by the Commissioner u/s 263 of the Act. Assessee filed an appeal to the ITAT in ITA No. 1178/2007 and ITAT disposed-off the appeal vide order dated 31.10.2008. Against the order of the ITAT, department has filed an appeal in this Hon'ble Court u/s 260A of the Act. Substantial questions raised therein are connected with this batch of appeals. 13. Several substantial questions of law do arise for consideration in these batch of appeals. Some of the substantial questions of law are already answered either in favour of the revenue or in favour of the assessee in the very assessee's case. Some of the substantial questions of law are already answered by the Apex Court. However, some of the substantial questions of law do arise for consideration for the first time in these appeals. They are now first taken up for consideration. Substantial question of law No. 1 [Question of law No. (e) in ITA No. 879/2008, 880/2008 and 334/2009; Question of law No. (d) in ITA No. 108/2009 (Assessee's appeal)] "Whether the Tribunal was right in holding that credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Department has accepted. Since the claim for foreign tax credit is an entitlement like any other pre-paid tax, no revised return as contemplated under Section 139(5) was required. The limitations of the domestic tax law, if any, would also not apply where relief is to be allowed as per the provisions of DTAA. 16. By a letter dated 10.02.2004, request was made to allow tax credit of Rs. 24,94,67,448/- at the fag end of the assessment proceedings which was erroneously not claimed earlier. . Therefore, the assessee raised a claim for tax credit for the tax paid in foreign countries. The assessing authority relying on Section 139(5) of the Act held that the claim is not admissible at this juncture. Section 139(5) of the Act defines the mandatory requirements and the time limit for rectification and the assessee has not filed any revised return for claim of tax credit with reference to income computed under Section 10A. 17. Thereafter, the Assessing Authority proceeded to decide the claim on merits also. Insofar as assessment year 2001-02 is concerned, as the assessee has not filed any detailed break-up of the income being taxed in India and other countries, he has held that he i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid order, the revenue preferred an appeal to the Tribunal. The Tribunal taking note of Section 90(1)(a) prior to its amendment held the word "paid" has been defined under Section 43(2) of the Act. The said definition is for the purpose of Section 28 to 41. But the said meaning of the word can be imported for Section 90(1)(a). As per Section 43(2) "paid" means actually paid or incurred according to the method of computing upon the basis on which the profit or gains are computed under the head profit and gains of business or profession. In respect of the income of the unit qualifying for deduction under Section 10-A, income tax is neither paid nor incurred. The Apex Court in the case of CIT v. Williamson Financial Services & Ors. (297 ITR 17) dealing with computation of deduction under Section 80HHC in respect of profits from export of tea held that Section 10 groups in one place various incomes which are exempt from tax. In respect of incomes on which deductions under Chapter VI-A are allowed, such incomes are wholly or partly tax free incomes. Section 10-A provides deduction out of the total income and it is not the income which is exempt from tax. Hence, the deduction which is -a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, subject to the assessee satisfying the conditions prescribed income under Section 10-A is exempted from making such payment. Once the assessee is made to pay tax on such exempted income in the other contracting State then Section 90(1)(a) (ii) enables him to claim credit of the tax paid in the contracting country. Though this provision 90(1)(a)(ii) came on the statute book from 01.04.2004, it is clarificatory in nature. As per Section 90(2) of the Act, the assessee-company was always entitled to the said benefit as the provisions of the agreement was more beneficial than the statutory provisions. India has entered into DTAA with various countries. The expression used in some of the agreements is "subjected to tax". The other expression used is "chargeable to tax". Therefore, the benefit to which the assessee is entitled to is dependant on the expressions used in these contracts in the background of Section 90(1)(a)(ii). He further submitted that in cases where income is subjected to tax, there is no difficulty. The entire amount subjected to tax is given credit which is known as "ordinary tax credit". Further, in the case of the agreements where expression used is subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pported the impugned order. He contended that, admittedly the assessee is not liable to pay any tax in respect of the income which falls under Section 10A. Therefore, it is not a case of assessee having paid tax or assessee is liable to pay tax under the Act. When that being so, he is not entitled to credit of any tax paid in the contracting country. He submits that the idea behind the foreign tax credit is that the same income should not suffer taxation twice. When an income suffers taxation in both source and resident jurisdiction, tax paid in first jurisdiction needs to be allowed as tax credit in other jurisdiction. Consequently, if a source of income is taxed only in one jurisdiction, no tax credit or relief is required for other jurisdiction. The assessee's contention is that the entire profit under Section 10A is not exempted as only that part of profit which pertains to export turnover is exempted under the Act. The foreign tax credit cannot be permitted on profit pertaining to domestic turnover because the domestic profit of Section 10A has not suffered double taxation. He also pointed out that Section 14A of the Act categorically states no deduction shall be allowed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the Income Tax Act and income-tax in that country, or for the avoidance of double taxation of income under that Act and under the corresponding law in force in that country, etc. It is proposed to substitute clause (a) of sub-section (1) of the said section to provide that the Central Government may enter into an agreement with the Government of any country outside India for the granting of relief inter alia, in respect of income-tax chargeable under the Income-tax Act or under the corresponding law in force in that country to promote mutual economic relations, trade and investment." 29. The memorandum explaining provisions in the Finance Bill 2003 reads as follows: "Double Taxation Avoidance Agreements-extending the scope to include agreements for developing mutual trade and investment Under the existing section 90, the Central Government may enter into an agreement with the Government of any country outside India for granting of relief in respect of income on which have been paid both income-tax under the Income-tax Act and income-tax in that country, or for the avoidance of double taxation of income under this Act and under the corresponding law in force in that countr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are not beneficial to him. (3) Any term used but not defined in this Act or in the agreement referred to in sub-section (1) shall, unless the context otherwise requires, and is not inconsistent -with the provisions of this Act or the agreement, have the same meaning as assigned to it in the notification issued by the Central Government in the Official Gazette in this behalf" 30. Sub-section (1) lays down that the Central Government may enter into an agreement with the Government of another country. Clause (a) (i) contemplates situation when tax is already paid on the same income in both the countries and it empowers the Central Government to grant relief in respect of such double taxation. Clause (b) which is wider than clause (a) provides that any agreement may be made for the avoidance of the double taxation of income under the Act and under the corresponding law in force in that country. Clauses (c) and (d) essentially deals with the agreements made for the exchange of information, investigation of cases and recovery of income tax. With effect from 1.4.2004, clause (a)(ii) was substituted to provide for entering into an agreement for granting relief in respect of income ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the rates are equal. 34. In fact, the circular No.333 dated April 2, 1982 clarifies the legal position. The said circular reads as under:- "The correct legal position is that where a specific provision is made in the Double Taxation Avoidance Agreement, that provision will prevail over the general provisions contained in the Income Tax Act, 1961. In fact the Double Taxation Avoidance Agreements which have been entered into by the Central Government under Section 90 of the Income Tax Act, 1961, also provide that the laws in force in. either country will continue to govern the assessment and taxation of income in the respective country except where provisions to the contrary have been made in the. agreement. Thus where a Double Taxation Avoidance Agreement provided for a particular mode of computation of income, the same should be followed, irrespective of the provisions in the Income Tax Act. Where there is no specific provision in the agreement, it is the basic law i.e., Income tax Act that will govern the taxation of income." 35. It is necessary to notice that if no tax liability is imposed under this Act, the question of resorting to the agreement would not arise. No provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. But making of law under that authority is necessary when the treaty or agreement operates to restrict the rights of the citizens or others or modifies the law of the State. If the rights of the citizens or others which are justiciable are not affected, no legislative measure is needed to give effect to the agreement or treaty. When it comes to fiscal treaties dealing with double taxation avoidance, different countries have varying procedures. In the United States such a treaty becomes a part of municipal law "upon ratification by the Senate. In the United Kingdom such a treaty would have to be endorsed by an order made by the Queen in Council. Since in India such a treaty would have to be translated into an Act of Parliament, a procedure which would be time consuming and cumbersome, a special procedure was evolved by enacting section 90 of the Act." 37. It is in this background, when we notice Section 90 of the Act - relief from double taxation is granted in the following circumstances. Firstly, Section 90 (1)(b) of the Act speaks about avoidance of double taxation i.e., Central Government may enter into an agreement with the Government of any country for the avoidance of do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the exemption and the benefit in the other country is not extended. Thus when exemption is granted in respect of the income chargeable to tax. under this Act in respect of which no benefit is granted in the corresponding country the assessee gets no benefit. However, if the benefit is extended to a portion of the income say for example 90% and 10% is subjected to tax then to that extent the assessee would be entitled to benefit of tax credit as he has paid tax in the foreign jurisdiction as per Section 90 (1)(a)(i) of the Act. 41. In this connection, it is contended on behalf of the Revenue that if the income is chargeable to tax in India, then only the assessee can have the benefit of tax credit in respect of the tax paid in foreign jurisdiction. In respect of exemption under Section 10A, the income derived is not included in the total income. It is not charged to income tax. Therefore, Section 90 of the Act has no application at all. 42. Section 4 of the Act is the charging section. It provides, "Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing falling under Section 10A has to be deducted from the total income. 45. Chapter IV deals with the computation of total income under various heads of income. Section 14 provides for classification of income under various heads of income for the purposes of charge of income-tax and computation of total income. It reads as under :- "Save as otherwise provided by this Act, all income shall, for the purposes of charge of income-tax and computation of total income, be classified under the heads of income". 46. The Apex Court in the case of AZADI BACHAO ANDOLAN's case at page 724 and 725 clarifying the legal position regarding the effect of Section 90 vis-à-vis Sections 4 and 5 held as under:- "A survey of the aforesaid cases makes it clear that the judicial consensus in India has been that section 90 is specifically intended to enable and empower the Central Government to issue a notification for implementation of the terms of a double taxation avoidance agreement. When that happens, the provisions of such an agreement, with respect to cases to which where they apply, would operate even if inconsistent with the provisions of the Income-tax Act. We approve of the reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in S.2(45). 14. The phrase "Total income" has been used in the IT Act in several places with different connotations and shades. The phrase "total income" used in S.10A is one such variant. The phrase need not necessarily mean the total income as computed in accordance with the provisions of the Act. The relief under this section is with reference to the STP undertakings and not to the assessee. In other words, the relief travels with the undertaking irrespective of who owns the same. The computation of relief as provided in S.10A(4) is also with reference to the undertaking. A business might have several undertakings and S.28 does not envisage computation of income of each such undertaking. In other words, the profits of the business of the undertaking cannot be computed in isolation. The profits are computed under the head "profits and gains of business or profession", as under the above head, the income from business as a whole has to be computed. The phrase "total income" used in Section 10A(1) is, therefore, to be understood as the total income of the STP unit. This-is-clear from the first proviso to Section 10A(1) which makes a reference to the total income of the undertaking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taking. A business might have several undertakings and section 28 does not envisage computation of income of each such undertaking. In other words, the profits of the business of the undertaking cannot be computed in isolation. The profits are computed under the head "Profits and gains of business or profession". Under the above head, the income from business as a whole has to be computed. The phrase "total income" used in section 10A(1) is, therefore, to be understood as the total income of the STP unit. This is clear from the first proviso to section 10A(1) which makes a reference to the total income of the undertaking and not to the total-in-come of the assessee. The definition of any term given in section 2 will apply only when the context does not otherwise require. The placement, language and setting of section 10A cannot mean the total income computed in accordance with the provisions of the Act. Instead, such a phrase in the context of section 10A, means profits and gains of the STP undertaking as understood in its commercial sense. 50. The substituted section 10A continues to remain in Chapter III. It is titled as "Incomes which do not form part of total income". It may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, the total income before allowing the said deduction includes the profits and gains from the business referred to in Section 10A(1). Section 5 of the Act explains the scope of total income to mean all income from whatsoever source derived. Section 4 of the Act charges this total income. However, Section 10A (1) provides that, subject to the provisions of the said Section, profits and gains derived by an undertaking referred to in that Section shall be allowed as deduction from the total income of the assessee. Therefore, by virtue of the aforesaid statutory provision namely Section 10A of the Act, the income of the assessee from exports in respect of the said unit is exempted from payment of income tax. The very fact that it is exempted from payment of tax means but for that exemption such income is chargeable to tax. This relief under Section 10A is in the nature of exemption although termed as deduction. But for this exemption, the said income namely profits and gains derived by an undertaking, is chargeable to tax under the Act. The said exemption is only for a period of ten years. After the expiry of the said ten years the said income is taxable. When such exemption is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature is susceptible of being revoked or modified or subjected to other conditions. The supersession or revocation of an exemption notification in the "public interest" is an exercise of the statutory power of the State under the law itself as is obvious from the language of Section 25 of the Act." 55. Similarly, the Apex Court in the case of Wallace Flour Mills Co. Ltd., v. Collector of Central Excise, Bombai, Division III reported in 44 ELT 598 at para 4 has held as under: "Excise is a duty on manufacture or production. But the realization of the duty may be postponed for administrative convenience to the date of removal of goods from the factory. Rule 9A of the said Rules merely does that. That is the scheme of the Act. It does not, in our opinion, make removal the taxable event. The taxable event is the manufacture. But the liability to pay the duty is postponed till the time of removal under Rule 9-A of the said Rules. In this connection, reference may be made to the decision of the Karnataka High Court in Karnataka Cement Pipe Factory v. Supdt. of Central Excise (1986 23 ELT 313) (Karn HC)), where it was decided that the words 'as being subject to a duty of excise' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t speak of any income tax being paid by the resident Indian under the Income-tax Act as a condition precedent for claiming the said benefit. Where the Indian resident pays no tax on such income derived, whereas the said income is taxed in the United States, India shall allow as a deduction from the tax on the income of that resident an amount equal to the income-tax paid in the United States. Therefore, this provision is in conformity with Section 90(1) (a) (ii) of the Act i.e., the income tax chargeable under the income-tax Act and in the corresponding law in force in United States of America. "V Therefore, it is not the requirement of law that the assessee, before he claims credit under the Indo - US convention or under this provision of Act should pay tax in India on such income. However, the said provision makes it clear that such deduction shall not, however, exceed that part of the income tax (as computed before the deduction is given) which is attributable to the income which is to be taxed in United States. Therefore, an embargo is prescribed for giving such tax credit. In other words, the assessee is entitled to such tax credit only in respect of that income, which is taxe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in India as well as in Canada on the same income. Then the agreement provides the tax paid in Canada shall be allowed as a credit against the Indian tax payable in respect of such income. However, the said benefit is confined only to the extent of an amount not exceeding that proportion of Indian tax, which such income bears to the entire income chargeable to Indian tax. In other words if the income tax paid in India is less than the income tax paid in Canada, the assessee would be entitled to relief only to the extent of tax paid in India and not to the extent of tax paid in Canada. Therefore, this clause is in conformity with Section 90(1)(a)(i) of the Act. As a corollary if the assessee is exempted from payment of tax in India, then if the same income is subjected to tax in Canada, according to the treaty, there is no double taxation. Therefore, the benefit of this treaty is not available to the Indian assessee. 62. It is submitted on behalf of the assessee that by virtue of the formulae prescribed under Section 10-A (4), entire export profits had not got exempted under Section 10-A, residuary surplus being subjected to tax both in India and Canada. This residuary surplus coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... untry. 66. The said provision provides for deduction of the tax paid in any country from the Indian Income tax payable by him of a sum calculated on such doubly taxed income even though there is no agreement under Section 90 for the relief or avoidance of double taxation. Explanation (iv) defines the expression income tax in relation to any country includes any excess profit tax or business profits tax charged on the profits by the Government of any part of that country or a local authority in that country. Therefore the intention of the Parliament is very clear. The Income Tax in relation to any Country includes Income Tax paid in any part of the country or. a local authority. It applies to cases where in a Federal structure a citizen is made to pay Federal Income tax and also the State Income Tax. The Income tax in relation to any country includes income tax paid not only to the Federal Government of that Country, but also any income tax charged by any part of that country meaning a State or a local authority, and the assessee would be entitled to the relief of double taxation benefit with respect to the latter payment also. Therefore, even in the absence of an agreement under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion came into existence from 1.4.2004. In fact, the amendment is giving effect to the terms of agreement of 1990. In other words, the terms of agreement was more beneficial than the provision of the Act prior to amendment. After amendment, the amended provision is in conformity with the benefit agreed to be given under the agreement. In fact, the Apex Court (in Azadi Bachao Andolan) dealing with the aforesaid amended provisions has held as under: "........... said clause is to enable the Central Government to issue a notification under Section 90 towards implementation of the terms of DTAs which would automatically over-ride the provisions of Income Tax Act in the matter of ascertainment of chargeability to income tax and ascertainment of total income, to the extent of inconsistency with the terms of DTAC". 69. Therefore, if prior to the. amendment, there was no thorough provision granting the said benefit as the said benefit was conferred on the assessee under DTAs, the assessee was entitled to the said benefit as DTAs over-ride the provisions of Income Tax Act. 70. In that view of the matter, it is not necessary to go into the question whether the amended provision is retrospe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the assessee. The issue is with regard to allowing a credit on account of tax paid outside India in respect of which particulars were furnished to the assessing authority during the course of assessment proceedings before the assessment is passed. It is bound to be entertained and dealt with on merits. Once the return is filed and the income tax officer commences the assessment proceedings, the assessing authority is not the tax payer's opponent, in the strictly procedural sense of the term. The assessment functioning involves the adjustment of the tax ... liability of the assessee in accordance with the facts on record and in accordance with the law laid down by the legislature. The assessment is nothing but another name for adjustment of the tax liability to accord with the taxable event in the particular tax payer's case. While determining the tax liability of the assessee, the assessing authority shall allow the credit for all prepaid taxes referred to in Section 234B. 73. The CBDT Circular No. 14 (XL-35) dated 11.4.1955 states to the effect that it is the duty of the assessing officer to make available to the assessee any legitimate and legal tax relief to w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erits also. 74. In view of the aforesaid discussions, the said substantial question of law is answered in favour of the assessee and against the revenue and the assessee is entitled to the tax benefit to the extent set out above. Substantial question No.2 "Whether the Tribunal was right in directing that only that part of the MODVAT credit that is availed of prior to the due date for filing the return of income is deductible under Section 43B when it is apparent that MODVAT credit availed on goods purchased by the appellant is not a sum payable by the appellant and accordingly Section 43B itself is not applicable to the MODVAT credit?" [Question of law No. (c) in ITA Nos. 879/2008, 880/2008 and 108/2009; Question of law No. (d) in ITA 334/2009 - (assessee's appeal)) 75. The case of the assessee is that the finished goods are liable to excise duty. The company has opted for MODVAT scheme for the payment of excise duty on the finished goods manufactured. Under the scheme, the excise duty paid on the purchase of raw materials and components is held as advance i.e., as MODVAT credit. In other words the purchase of raw-materials and components is accounted for as part of cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... figure to balance the item of purchase left at the end of the year. If MODVAT credit available on closing stock is set-off before the due date of filing of return, then such amount is available for deduction and not restricted under Section 43B of the Act. It means the unavailed MODVAT credit of Rs. 1,32,50,765/- is availed before the due date of filing of returns, then there will be no addition. Therefore for re-computation, the matter was restored back to the assessing officer. Aggrieved by the said order, the assessee is in appeal. 76. The learned Senior counsel appearing for the assessee submitted that if excise duty is included in the cost of raw- materials and as such reflected in the opening balance, then the same is to be reflected in the closing balance as well as in the opening balance of the next year. Though earlier they were maintaining accounts on the basis of net value of raw-material without including the Excise duty, in view of Section 145A if excise duty is added it makes difference insofar as the valuation of the goods are concerned but no difference in the profit for the year. But the question is whether the unavailed MODVAT credit can be added back as the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondition as on the date of valuation. Therefore, prior to this introduction of the provision, if the assessee has followed a particular accounting practice where the cost of raw-material is taken into consideration as net value, even while determining the value of the finished products that net value could have been adopted. There was no obligation to include any tax, duty, cess or fee in the cost of raw-material. Having regard to the confusion on the conflicting views expressed by various Courts, the Parliament thought it fit to amend the law and introduce Section 145A taking away the decision which was in favour of the assessee. Now it is made clear that whatever may be the accounting practice adopted by the assessee, the cost price of the raw-material should include tax, duty, cess or fee and correspondingly, the said amount should be reflected in the opening stock as well as in the closing stock. Under the MODVAT scheme, once an assessee pays excise duty when the finished goods are liable for excise duty, he is entitled to set-off that duty payable by him as against the duty he has paid while purchasing the raw material. If for any reason, the assessee is not able to exhaust th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of profits earned by each unit. The following table shows the allocation made by the assessee and re-allocation made by the assessing authority. Name Commission Payment (Rs.) Unit allocated to Allocation to Wipro Technologies (Rs.) Remark/Bas is Azim H. Premji 3,16,74,625 Corporate 259,73,500 82% Vivek Paul 2,37,61,102 Wipro Technologies 1,9484,103 18% reduced from Wipro Technologies Arun Thyagarajan 52,33,294 Wipro Infotech 4291301.08 82% P.S. Pai 79,18,656 Wipro Consumer Care 6493297.9 82% 81. Aggrieved by the said re-allocation of the commission, the assessee preferred an appeal to the Commissioner of Income-tax appeals. 82. The appellate authority declined interference with the said order of the assessing authority. Aggrieved by the same, assessee has preferred an appeal to the Tribunal. 83. The Tribunal held that the profit from the undertaking which is 'qualifying for deduction under Section 10(A) is a source of making payment of commission to the directors. The payment of commission is directly debitable to the said undertaking. Therefore, the assessing officer has rightly allocated the commission expenditure to the undertaking elig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ximum managerial remuneration payable to the directors which reads as under: "[198. Overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits. (1) The total managerial remuneration payable by a public company or a private company which is a subsidiary of a public company, to its directors and its managing agent, secretaries and treasurers or manager in respect of any financial year shall not exceed eleven per cent. of the net profits of that company for that financial year computed in the manner laid down in sections 349, 350 and 351, except that the remuneration of the directors shall not be deducted from the gross profits: Provided that nothing in this section shall affect the operation of sections 352 to 354 and 356 to 360. (2) The percentage aforesaid shall be exclusive of any fees pay- able to directors under sub-section (2) of section 309. (3) Within the limits of the maximum remuneration specified in sub- section (1), a company may pay a monthly remuneration to its managing or whole- time director in accordance with the provisions of section 309 or to its manager in accordance with the provisions of section 387. (4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an employee in respect of any period of leave not availed of by him; (vi) the annual accretion to the balance at the credit of an employee participating in a recognized provident fund, to the extent to which it is chargeable to tax under rule 6 of Part A of the Fourth Schedule; (vii) the aggregate of all sums that are comprised in the transferred balance as referred to in sub-rule(2) of rule 11 of Part A of the Fourth Schedule of an employee participating in a recognized provident fund, to the extent to which it is chargeable to tax under sub-rule(4) thereof; and (viii) the contribution made by the Central Government (or any other employer) in the previous year, to the account of an employee under a pension scheme referred to in section 80CCD." 89. The aforesaid provisions make it clear that salary includes commission. When the salary paid to a director by the assessee is allocated to the unit which the said director is heading as full time director, the commission paid to him which is a part of salary also needs to be allocated to the units which he is heading. When the salary paid to whole-time director is not dependent on profit the unit which the director is heading is mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gible for exemption under Section 80IB of the Act? 93. The assessee is manufacturing computers. For the purpose of sale of these computers manufactured they have two schemes. The first scheme is, on the payment of a certain discounted amount, the assessee affords a three year warranty against sales of computers. The second scheme is, the warranty period is restricted to one year and the customer is permitted to take out an annual maintenance contract (AMC) for the balance of two years. The assessee claims that AMC charges are also derived from the sale of computers and eligible for deduction under Section 80IB. The assessing authority was of the view that the units at Pondicherry are mainly production units and it is incorrect to conclude that AMC income is integrally connected with those units. Accordingly, he excluded AMC income and recomputed deduction under Section 80IB of the Act. Both the Commissioner of Income Tax (Appeals) and the Tribunal have upheld the said order of the assessing officer. Aggrieved by the said orders, the assessee is before us. 94. The learned senior Counsel appearing for the assessee, assailing the said finding, contends that the income derived from A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under Section 80-IB. Sub-section (3) provides for the percentage of deduction such an industrial undertaking is entitled to out of the profits and gains derived from such industrial undertaking for a period of ten consecutive assessment years. Sub-section (4) provides for the benefit being extended to an industrially backward State specified in the Eighth Schedule. 98. A reading of the aforesaid provision makes it clear that, the benefit is granted on profits and gains derived from such eligible business. The "Apex Court in the case of Liberty India v. Commissioner of Income Tax [(2009) 317 ITR 218] explaining the meaning of the word 'derived' in Section 80IB held that, the words "derived from" is narrower in connotation as compared to the words "attributable to". In other words, by using the expression "derived from", Parliament intended to cover sources not beyond the first degree. Such profits are to be computed as if such eligible business is the only source of income of the assessee. Any industrial undertaking, which becomes eligible on satisfying sub-section (2), would be entitled to deduction under sub-section (1) only to the extent of profits derived from such i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract for computers which are not manufactured by them, they are not claiming any benefit under Section 80IB as it has no direct nexus with the manufacturing activity. The department has given the benefit of profits derived from one year warranty and three year warranty. In respect of computers for which one year warranty is fixed, the assessee is also giving two years AMC contract. The amount received under that AMC contract is for the purpose of servicing the computers which they have manufactured and sold to the customer with one year warranty. Though the said amount does not form part of the sale consideration of the computer, the services rendered under the AMC contract is in continuation of the sale of computers manufactured by them. Though it does not represent the cost of manufacturing, it is a part of the business income of the undertaking. Any manufacturing product without warranty after sale maintenance may not have high standing in the market: Customers would get attracted to a product, because of the warranty and the after sales maintenance and hence warranty/after sales maintenance is integral to the manufacturing and business of the undertaking. When the considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative details of Monitors (for assessment year 2002-2003) Industrial undertaking Opening Stock Purchases Sales of only monitors Sales along with computers Closing Stock Industrial undertaking at Thirubuvanai, Pondicherry 2451 54114 25681 27736 3148 Value - 257082167 194693,285 Note - Industrial undertaking at Thattanchavady, Pondicherry 363 50 - 413 - Value 337500 - - - - Total Note: Breakup cannot be given as they form part of composite value of computers. 106. After the aforesaid information was furnished, the assessing authority proceeded with the assessment order holding that the assessee has furnished incomplete details, only value of monitors which have been sold separately are given and details of monitors sold as a component with the computer has not been furnished. Therefore, he took the average value on the basis of the furnished filed in Annexure and did not extend the benefit of Section 80IB in respect of the monitors which were sold as a part of the computer. In the aforesaid tabular column, it is shown that the assessee has sold 25,681 monitors, i.e., they are purchased and sold as monito ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the jurisdiction. It is inexplicable that it is part of turnover and an integral 'part of the export turnover. Therefore the assessee contended there is no requirement to eliminate VAT/GST from export turnover as defined in clause (4) of Explanation 2 under Sec. 10A. However, the assessing officer was of the view, the tax paid and collected does not have profit element and therefore does not form part of turnover. The said stand of the assessing authority is confirmed both by the Commissioner of Income tax (Appeal) as well as the Tribunal. Aggrieved by the said order, the assessee is before this Court. 108. The learned Senior Counsel appearing for the assessee contended, having regard to the definition of export turnover contained in Explanation 2(iv) under Section 10A, that the consideration in respect of export of articles or things or computer software received in or brought into India by the assessee in convertible foreign exchange in accordance with sub-sec. (3) is eligible for exemption. What are to be excluded are also specified in the said proviso. They are freight, tele-communication charges or insurance attributable to the delivery of articles or things or compute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or things or computer software exported out of India are received in, or brought into India by the assessee in convertible foreign exchange, within a period of six months from the end of the previous year or, within such further period as the competent authority may allow in this behalf" 112. Therefore, in view of the aforesaid two definitions, to be eligible for benefit under Sec. 10A, an assessee should receive the sale proceeds in, or bring into India in convertible foreign exchange. It is that foreign exchange which was received in or brought into India which is eligible for the said exemption. However, clause (iv) of explanation 2 explicitly excludes certain aspects such as freight, telecommunication charges or insurance. Even though the assessee receives in or brings into India amount by way of convertible foreign exchange for the aforesaid purposes, the same shall not be taken into consideration for granting the benefit under Sec. 10A. The argument is, the. foreign exchange should be received in India or brought into India. In respect of GST and VAT, though the assessee collected the same as part of the sale consideration in foreign jurisdiction, it was paid to the appropri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In that formula, the entire business profits is not given deduction. It is the business profit which is proportionately reduced by the above fraction/ratio of export turnover which constitutes 80HHC concession (deduction). Income in the nature of "business profits" was, therefore, apportioned. The above formula fixed a ratio in which "business profits" under Section 28 of the Act had to be apportioned. Therefore, one has to give weightage not only to the words "total turnover", but also to the words "export turnover", "total export turnover" and "business profits". That is the reason why we have quoted herein above extensively the illustration from the (Direct Taxes (Income Tax) Ready Reckoner of the relevant word In the circumstances, we cannot interpret the words "total turnover" in the above formula with reference to the definition of the word "turnover" in other laws like Central Sales Tax or as defined in the accounting principles. Goods for export do not incur excise duty liability. As stated above, even commission and interest ' formed a part of the profit and loss account, however, they were not eligible for deduction under section 80HHC Even if the assessee was an excl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. As such, the said judgment has no application. 119. Reliance was also placed on the judgment of the Apex Court in the case of State of Punjab and others v. Guranditta Mal Shauti Prakash reported in 2004 STC Vol 136 pg. 12. The Apex Court held that: "under the Punjab Agricultural Produce Markets Act, 1961, there is no obligation on the part of the seller to pay the market fee. It is duty of the buyer to pay the market fee and the seller can realize it from the buyer. The market fee paid by the buyer does not form part of the purchase turnover of the buyer. Therefore there is no liability on the part of the dealer who purchases agricultural produce in the market area to pay purchase tax under the Punjab General Sales Tax Act, 1948, on the element of market fee." 120. That is the law laid down by the Apex Court while interpreting Sec. 2(ff) under the Punjab General Sales Tax. Act and Sec. 23 under the Punjab Agricultural Produce Markets Act, which has no application to the facts of this case. 121. Again the Supreme Court in the case of State of Punjab and others v. Chhabra Rice Mills and others reported in 2006(60) Kar.L.J. 222 (SC) held, interpreting Sec.2(i) of the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid to the seller by the purchaser should not be treated as the consideration for the sale and included in the turnover." 125. Following the said judgment, the Apex Court in the case of Sinclair Murray and Co. Pvt. Ltd., v. CIT reported in 97 ITR 615 held that : sales tax should not be treated to be a part of the price realized by the assessee from the purchaser .is not well founded. Sales tax should be treated as a part of 'the price realized by the assessee from the purchaser. Therefore, ultimately in order to find out whether a tax paid is included in the sale consideration or not has to be decided in the light of the definition used in the statute and also in the context for which it is used. 126. So, if a seller offers goods for sale, it is for him to quote a price which includes the tax if he desires to pass it on to the buyer. If the buyer agrees to the price, it is not for him to consider how it is made up, or whether the seller has included tax or not. When the dealer collects any amount by way of tax, that cannot be part of the sale price. So far as the purchaser is concerned, he pays for the goods what the seller demands, viz., price even though it may include ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion of law No.6: "Whether the Tribunal was right in holding that the transfer of stock took place during the year ended 31.03.2001 and not during the years when the execution and registration of the sale deeds took place?" [Question of Law No.(h) in ITA Nos.879/2008 -(assessee's appeal)] 130. The assessee acquired immovable property at Brunton Road, Bangalore, with a land bearing area 43,979 square feet for a cost of Rs. 1.97 crores in the assessment year 1989-90. The said immovable property was acquired and held as capital asset. The cost of acquisition of Rs. 1.97 crores is accounted and reported as part of capital assets in the balance sheet. On 31st March 1995, the assessee converted/treated the immovable property as stock in trade. The fair market value on the date of the conversion was Rs. 45 crores. Stock in trade of Rs. 45 crores was reported as inventory in the balance sheet. Capital reserve of Rs. 43.03 crores was shown under reserves and surplus in the balance sheet. Over the period, the value of the land declined from Rs. 45 crores to Rs. 17.70 crores. The closing stock in trade year to year was valued at lower of cost or market price. As on 31st March 1999, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tries were recorded in books of accounts as a sale. In appeal, the Commissioner of Income Tax (Appeals) held that there is no transfer within the meaning of Section 45(2) of the Act and the capital gains of conversion of the property into stock in trade cannot be taxed in the assessment year 2001-02 and that it has to be taxed on the date of execution of the deed of conveyance, i.e., in 2004-05 and 2005-06. Aggrieved by the said order, the revenue preferred an appeal to the Tribunal. 131. The Tribunal reversed the order of the Appellate Commissioner on the ground that when the assessee himself has shown such stock in trade as sold and credited the sale proceeds in the assessment year 2001-02, the Order passed by the assessing authority levying tax on capital gains in the assessment year 2001-02 was correct and therefore, the Tribunal set aside the Order of the Appellate Authority and restored the assessment Order. Aggrieved by the said order, the assessee is before this Court. 132. The learned senior counsel appearing for the assessee, assailing the impugned Order, contends Section 2(47) of the Act defines transfer in relation to a capital asset. Section 45(1) deals with any prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the power of attorney, i.e., in the assessment year 2001-02?" 135. The facts are not in dispute. The assessee acquired immovable property at Brunton Road to an extent of 43,979 square feet at a cost of Rs. 1.97 crores. This falls within the definition of a capital asset. Section 2(47) defines transfer in relation to a capital asset. Sub-clause (4) declares that in a case where the asset is converted by the owner thereof into or is treated by him as the stock in trade of a business carried on by him, such conversion or treatment falls within the definition of transfer within Section 2(47) of the Act. In the instant case, admittedly, on 31st March 1995, the assessee converted/treated the said immovable property as stock in trade and assessed the value of the stock in trade on conversion at Rs. 45 crores. Accordingly, stock in trade of Rs. 45 crores was reported under inventory in the balance sheet. Now, the dispute is regarding the capital gain tax payable on sale of such stock in trade and the year in which the tax is payable. In order to answer the said question, we have to look at Section 45 which deals with capital gains. It reads as under: "Any profits or gains arising fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded as income of the depository who is deemed to be the registered owner of securities by virtue of sub-section (1) of Section 10 of the Depositories Act, 1996, and for the purposes of - (i) section 48; and (ii) proviso to clause (42A) of section 2, the cost of acquisition and the period of holding of any securities shall be determined on the basis of the first-in-first-out method. 136. Section 45(1) deals with profits or gains arising from the transfer of a capital asset. Therefore, it does not deal with transfer of a business asset or a stock in trade. It provides that the profits and gains arising from the transfer of the capital asset shall be chargeable to income tax under the head 'capital gains' and shall be deemed to be the income of the previous year in which the transfer took place. It is here that the definition of transfer under Section 2(47) assumes importance. The definition of transfer contemplated in the provision is only in relation to the capital asset and not in relation to the stock in trade or a business asset. However, sub-section (2) contains a non-obstante clause by saying not withstanding anything contained in sub-section (1), the profits or g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions in the same section is to prevent avoidance of payment of capital gains by the owners thereof by resorting to modes which are not recognized in law, but which in substance has the same effect. In other words, if the owner by such transfer ceases to have any interest in the property and transfers all his interest in the property to the transferee and earns profits and gains, but declines to pay the capital gain, on the ground that such transfer is not one such transfer recognized in law, then the law in such cases to plug the loop hole has used the term otherwise transferred. Once it is sold, the question of considering whether it has been otherwise transferred would not arise. 138. In the instant case, the assessee entered into an agreement with M/s. Prestige estates Pvt. Ltd. on 09-02-2000 to sell the aforesaid property for a sum of Rupees twelve crores fifty thousand. Clause (6) of the said agreement provides that, as desired by the purchasers, in order to enable the purchasers to process with the preparation of the plan, sanction and other orders required for commencement of the construction in the schedule property, the vendors have this day executed a power of att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eported in Special Leave Petition No.13917/2009 explaining the scope of power of attorney has held as under : "a power of attorney is not an instrument of transfer in regard to any right, title or interest in an immovable property. A power of attorney is creation of an agency whereby the grantor authorises the grantee to do the acts specified therein, on behalf of grantor, which when executed will be binding on the grantor as if done by him (Sec. 1A and 2 of Power of Attorney Act, 1882). It is revocable or terminable at any time unless it is made irrevocable in a manner known to law Even an irrevocable attorney does not have the effect of transferring title to the grantee." 141. In State of Rajasthan and others v. Basant Nahata 2005(12) SCC 77, the Court held as follows : "A grant of power of attorney is essentially governed by Chapter X of the Indian Contract Act. By reason of a deed of power of attorney, an agent is formally appointed to act for the principal in one transaction or a series of transactions or to manage the affairs of the principal generally conferring necessary authority upon another person. A deed of power of attorney is executed by the principal in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was received under Sec. 45(2). The income tax is charged in the previous year in which such stock-in trade is sold. Sale took place in the assessment year 2004-05 and 2005-06. The power of attorney had been executed in assessment year 2001-02. When stock-in-trade is sold by executing a deed for conveyance and duly registered, the question of the said stock-in-trade being otherwise transferred would not arise at all. Therefore, the argument of the Revenue, that on the day the power of attorney was executed when the entire consideration due under the agreement of sale was received and by virtue of the power of attorney, the power of attorney holder is authorized to develop the property, to sell the property and to receive the entire consideration, it amounts to the stock-in-trade being otherwise transferred leading to the said income being chargeable to income tax in the previous year in which the power of attorney is executed is without any substance. As the stock-in-trade is sold by way of a registered deed, there is no intention to avoid payment of capital gains. On receipt of such capital gains, the capital gain tax has been paid in the previous year in which the stock-in-trade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the Tribunal. Therefore, the said substantial question is answered in favour of the assessee and against the revenue. Substantial Question No.8: "Whether the Tribunal was right in excluding the computer software sales made to STP units in India from "export turnover" for the purpose of computing deduction under section 10A of the Act?" [Question of law No. 'c' in ITA Nos.881 & 882/2008, 109/2009 & 333/2009 - (assessee's appeal)] 147. The said question came up for consideration before this Court in the case Tata Elxsi v. Asst. Commissioner of Income Tax in ITA 411/2008. This Court has answered the said substantial question in favour of the assessee and against the revenue. Accordingly, the said substantial question of law is answered in favour of the assessee and against the revenue. Substantial Question No.9: "Whether appellate authority were correct in holding that the expenses incurred by the Corporate Division cannot be allocated in respect of various business units of the assessee based on the turn over, but at an ad hoc percentage of 20% as held in the earlier assessment years?" [Question of law No.20 in ITA Nos.907 & 909/2008; Question of law No. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee's case ITA No.507/2002 disposed on 25.08.2010. Based on the aforesaid facts it is clear that the assessee. wanted allocation of actual expenditure incurred by each unit. When the Assessing Authority did not agree, they came forward and agreed that each of the units could be allocated 20% of the total expenditure incurred by corporate division. However, the Assessing Authority is of the view that, the allocation of the expenditure related to salary, wages and allowances and directors' fee should be dependent on the revenue generated and therefore he did not accept the allocation of 20% of expenditure to each of the unit. There is no provision of law which is pointed out to us which states that the allocation of expenditure should be proportionate to the revenue generated by a unit when an assessee runs several units. Either it should be actual expenditure incurred or expenditure which is distributed equally to all the units of the assessee. In the instant case when department did not accede to the allocation of the actual expenditure, the assessee has come forward to distribute the entire expenditure equally to all the units and the said procedure is followed consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the assessment order of allocation of expenditure under the head 'selling and general administration' of Wipro Infotech Division and lighting factory to the eligible undertaking claiming deduction under Section 80-1B of the Act was to be deleted?" [Question of Law No. 17 in ITA Nos.210 & 211/2009 (Department's appeal)] 152. In fact, this Court while answering the substantial question of law No.(9) following the Judgment of this Court in ITA 507/02 dated 25.8.2010 in the case of assessee itself has answered the said substantial question of law in favour of the assessee and against the revenue and accordingly, the said substantial question of law is answered in favour of the assessee and against the revenue. Substantial Question No. 11: "Whether the Appellate Authorities were correct in holding that units which had got approval from STPI as expansion of old undertakings commenced operations prior to 01.04.1993 will also be entitled to claim u/s 10A of the Act as a new industrial undertaking?" [Question of law No.24 in ITA Nos.907 & 909/2008; Question of law No.20 in ITA Nos.904 & 905/2008; Question of law No. 10 in ITA Nos.210 & 211/2009 and Question of law No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of tax. Therefore, the Tribunal was not justified in characterizing this transaction as a legitimate tax planning. The observation of the Tribunal that the shares transactions of Wipro Finance Limited had happened at different times in the past is not factually correct. It is not a case where the assessing authority came to such a conclusion merely because of the proximity of the dates and it was done hurriedly but the assessing authority on careful consideration of the entire material on record, in particular, the explanation offered by the assessee for his queries has arrived at the finding that it is a colourable devise and a sham transaction which finding has been affirmed by the Appellate Commissioner on re-appreciation of the entire material on record after making note of the entire case law on the point. It is the Tribunal which has interfered with such a concurrent finding of fact without properly appreciating the mechanism adopted by the assessee to avoid payment of tax. In that view of the matter the finding of the Tribunal on this issue requires interference and accordingly, the same is set aside. The said substantial question of law is answered in favour of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e but purchased on account of the previous contract and thereby the assessee incurred any loss in the business, is a matter to be gone into by the Tribunal. 161. The Tribunal had not gone into the said question and, therefore, the matter is remanded back to the Tribunal to decide the said question and record a finding thereon. Substantial QUESTION No. 13: [Question of law No. 'e' in ITA No.333/2009 -(Assessee's appeal)]. "Whether the Tribunal erred in not disposing off the ground pertaining to deductibility of net receipts of the software development centres located outside India, under Section 10A? Whether the appellant is entitled to such deduction?" 162. The learned Counsel for both the parties contended that the Tribunal at paras 220 and 221 has considered a wrong question and answered the same and remanded the matter back to the assessing officer which is wholly erroneous. The said order has to be set aside and this question has to be remanded back to the Tribunal for fresh consideration and in accordance with law. Accordingly, the finding recorded by the Tribunal at paras 220 and 221 is hereby set aside. This question is remanded to the Tribunal for fresh c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessee and against the revenue. Substantial Question of Law No. 15: ''Whether the Appellate Authorities were correct in holding that the items like difference in foreign exchange, royalty, provision for doubtful 'debts written off, scrap sales, sundry creditors written back etc, should be included when computing deduction/s 80HHC of the Act?" [Question of law No.32 in ITA Nos.907 & 909/2008 and Question of law No.25 in ITA Nos.904 & 905/2008 - (Department's Appeal)]. [Question of law No.27 in ITA Nos.907 & 909/2008; Question of law No.23 in ITA Nos.904 & 905/2008; Question of law No. 12 in ITA Nos.210 & 211/2009 and Question of law No. 14 in ITA No.363 /2008 - (Department's Appeal)]. [Question of law No.29 in ITA Nos.907 & 909/2008 - (Department's Appeal)]. [Question of law No.31 in ITA Nos.907 & 909/2008 and Question of law No. 13 in ITA Nos.210 & 211/2009 - (Department's Appeal)]. [Question of law No. 14 in ITA Nos.210 & 211/2009 - (Department's Appeal)]. 165. In the connected cases similar questions were raised which are treated as substantial questions of law No. 15, 16, 17 and 20. The said substantial question of law arose for con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the current assessment year and the assessee not following actuarial method of accounting?" [Question of law No.25 in ITA Nos.907 & 909/2008; Question of law No.21 in ITA Nos.904 & 905/2008; Question of law No. 11 in ITA Nos.210 & 211/2009 and Question of law No. 10 in ITA No.363/2009 - (Department appeal)] "Whether the Appellate Authorities were correct in holding that the provision for warranty was held to be an allowable deduction despite the unit was on the brink of closure as no manufacturing activity was carried on?" [Question of law No. 15 in ITA Nos.210 & 211/2009 - (Department's appeal)] 170. The said questions arose for consideration before this Court in the, assessee's case in ITA No.3198/2005 which was decided on 28.2.2012 where the substantial questions of law were answered in favour of the assessee and against the revenue. Following the said Judgment, said questions of law are answered in favour of assessee and against the revenue. Substantial Question No. 18: "Whether the Appellate Authorities were correct in holding that the payments made by the assessee for import of software cannot be disallowed u/s 40(a)(i) of the Act for failing to deduct tax at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee's appeal)] 174. Learned Counsel appearing for both the parties did not dispute the fact except for the relevant year, the assessee has been allowed exclusion of 5% of telecommunication expenses consistently for all other years. Only in so far as this year is concerned, relying on a judgment which is unconnected, the exclusion has been enhanced to 80%. Absolutely no reasons are forthcoming for deviating from the consistent practice. Under these circumstances, it would be proper to set aside the finding recorded by the Tribunal and remand the matter to the Tribunal to decide the matter afresh taking into consideration the consistent practice followed by the authorities in the case of the assessee itself. That would meet the ends of justice. Substantial Question No.21: "Whether the Tribunal was right in remanding the issue pertaining to prior period items without noting the submissions of the appellant?" [Question of law No'.'g' in ITA No.879/2008 -(Assessee's appeal)] 175. Learned Counsel for both the parties submit that this question does not arise for consideration. Accordingly, it is deleted. Question No.22: "Whether the Tribunal was right in up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal and consequently recorded a perverse finding? [Question of law No.1 in ITA No.209/2009 -(Department's appeal)] "Whether the Tribunal was correct in reversing the finding of the CIT (A) u/s 263 of the Act, when the assessee itself had taken a contention in the appeal (CIT) against the assessment order that the AO had allowed a sum of Rs. 19.68 crores (without examining the details) and the expenses of Rs. 10.67 crores (issue remitted back to AO by CIT(A) to examine the details furnished by the /assessee and allow expenses in accordance with law) being similar in nature should also be allowed?" [Question of law No.2 in ITA No.209/2009 -(Department's appeal)] 178. The said questions arose for consideration before this Court in assesssee's case itself in ITA 3202/05 by order dated 28.2.2012, it was held that loss incurred on discontinuance of business does not involve a substantial question of law. Here again, the same questions arise. They do not constitute substantial questions of law. We decline to answer the same. Substantial Question No.24: "Whether the Tribunal was right in holding that interest received under Section 244-A would be taxable in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
