9911796707
TMI Blog2010 (10) TMI 1083X X X X Extracts X X X X X X X X Extracts X X X X ..... that the set off was not allowable u/s. 10A/10B. 2. On the facts and in the circumstances of the case and in law, the CIT (A) erred in not upholding the action of the Assessing Officer in not allowing deduction under Section 10B of the Act on receipt of Rs. 3,60,04,610/- without appreciating the facts of the case. 3. On the facts and in the circumstances of the case and in law, the CIT (A) erred in not upholding the action of the Assessing Officer in not allowing deduction under Section 10B of the Act on proportionate amount worked out at Rs. 1,74,34,738/-." 3. The facts in brief are that the assessee is a private Ltd. Company engaged in the business of 100% export of computer software services and software development, mainly to USA and other countries. Initially the assessee company was incorporated in 1985 in the name and style of M/s.Gebbs Micro systems Pvt. Ltd. and was in the business of manufacturing computer monitors only. From the year 1999, its name was changed to M/s.Gebbs Infotech Ltd. and it started developing software, for exports. Further, the promoters incorporated another company viz., Gebbs Data Products Pvt. Ltd. in 1986, which was non-functional. In the ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such unit in that year, could be set off against the profits of the 10B unit. 6. The learned counsel for the assessee submitted that the loss of Rs. 47,75,070/- was assessed and allowed to be carried forward for A.Y. 2002-03. Since, no deduction u/s.10A of the Act was claimed for A.Y. 2002-03, the loss can be set off against the profits determined as taxable in the subsequent years. He contended that w.e.f. 1/4/2001, section 10A is a deduction provision and not an exemption provision. To support his claim, the learned counsel relied on the decision of Honeywell International (India) P. Ltd. Vs. DCIT [2007] 108 TTJ 924 (Del.) for the proposition that the retrospective amendment by Finance Act 2003, w.e.f. 1/4/2001 to section 10A(6) does away with restriction of carry forward and set off of losses. 7. We have heard rival contentions. Section 10A(6)(ii) reads as follows : " Notwithstanding anything contained in any other provision of this Act, in computing the total income of the assessee of the previous year relevant to the assessment year immediately succeeding the last of the relevant assessment years, or of any previous year, relevant to any subsequent year,- (i) - - - - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EPZ Unit. The A.O further observed that the assessee was having two units, one which was located in SEEPZ i.e., on SEZ and one which was outside the SEZ i.e., STPI Unit on which it claimed deduction u/s. 10A in earlier years. The A.O. allowed the deduction u/s. 80HHE on balance profits. On appeal, the CIT (A) allowed the claim of deduction u/s. 10B of the Act. Aggrieved by the same the Revenue is in appeal before us. 10. The learned DR submitted that in the case of the assessee, none of the employees who were working, onsite, left India after the date of set up of SEEPZ and SEZ Unit. He drew the attention of the Bench to para 5.3.5 to 5.3.9 of the assessment order at pages 3 and 4. He vehemently contended that this is a case where child is born before the mother is born for the reason that the employees were born before the assessee has come into existence. He vehemently contended that these employees had already gone abroad as employees of another Company. He also alleged that the payments are not made at arm's length price. 11. The learned counsel for the assessee, on the other hand, submitted that these persons were employees of the assessee company and they were earlier worki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord and the orders of the authorities below as well as the case laws cited, we hold as follows. 13. From the facts it is clear that the finding of the AO that the employees do not belong to the Company is incorrect. All the employees belong to the company. They are the employees of M/s Geebs Software International P. Ltd. which has amalgamated to the assessee company. Just because the employees were allocated to an other unit of the company which is exempt u/s 10A in the earlier years, and because these employees were assigned duties of the SEZ units in the impugned assessment year, it does not lead to a conclusion that the assessee cannot claim exemption u/s 10B. The AO has granted exemption u/s 80HHE. The allegation that the payments not made are at arm's length is also not correct because for the assessment year 2003-04 the Transfer Pricing Officer has passed an order u/s 92CA(3) upholding the price paid by the assessee as that which is an another employee. On these facts, we uphold the following finding of the CIT(Appeals); " There is merit in the case of the appellant, in as much as, it is a fact that the A.O. has indeed allowed deduction u/s 80HHE of the Act and has also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inding whatsoever in the assessment order that what was contributed to the assessee company by the job work contractors, was part of a module and not the module itself. He argued that there is no prohibition laid down in the Act for getting jobs done on job work basis. He contended that the software development cycle consists of more than 20 different facts and only part of the software development was outsourced. He relied on the decision of Hon'ble Bombay High Court in the case of CIT vs. Penwalt India Ltd. 196 ITR 813 (Bom.) as well as on the decision of the Hon'ble Bombay High court in the case of CIT vs. New Pharma Private Ltd. 137 ITR 879 (Bom.). Similarly he relied on the decision in the case of CIT vs. Anglo French Drug Co. (Eastern) Ltd. 191 ITR 92 (Bom.). 17. Rival contentions heard. On a careful consideration of the facts and circumstances of the case and a perusal of the papers on record and the orders of the authorities below as well as the case laws cited, we are of the considered opinion that the order of the first appellate authority on this issue has to be upheld for the following reasons. 18. Nowhere in the assessment order, the AO has given a finding, that what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his ground of the Revenue is dismissed. 21. Ground No. 4 is general in nature. 22. In the result, the appeal of the Revenue is dismissed. 23. ITA No. 7738/Mum/2007 & 7196/Mum/2008. Facts in brief : The assessee claimed deduction u/s 10B while filing a return of income on 31-10-2004. 90% of the profit was claimed as a deduction u/s 10B and the balance amount was set off against brought forward losses of the year 2001- 02. The AO disallowed the claim u/s 10B on the following grounds : a) Out of 5000 sq.ft. premises, 2,000 sq.ft. was earmarked for the new unit, which received permission from the Development Commissioner on 17-11-2001. Thus he concluded that the SEEPZ unit was a restructuring of an existing unit. b) The employees who has done onsite development were not appointed by SEEPZ unit. c) Part of the software was done by outsourcing the job on job work basis. The first appellate authority considered the submissions of the assessee and at pages 8, 9 and 10 of the order followed his decision for the assessment year 2003-04. While doing so, he observed that during the current year, in addition to the points raised by the AO in the earlier assessment year, one more iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance sheets and schedule of assets. I do not see any discrepancy in the facts presented before me and I am of the view that the AO erred in holding that there was a restructuring of the 10B Unit located in the SEEPZ-SEZ area and the old assets had been utilized in this particular Unit. The two units continued to be exclusive and distinct unit during the year and the Schedule of assets clearly shows that there was no restructuring. The stand of the AO cannot be upheld. To conclude, in view of the above discussion and in view of the appellate order dated 09.02.2007 in the case of the appellant itself, I am of the view that the AO erred in disallowing the claim of the appellant u/s 10B, which in my view, is held to be in order. Ground Nos. 1, 2 & 3 are accordingly allowed in favour of the assessee." We are in agreement with these findings. The assessee in this case had started a new line of business i.e. software programming and services, after closing down the earlier business of manufacturing colour monitors in the year 1997. Initially the assessee carried out activities at MIDC, Nelor which is a STIP unit and a claim for deduction u/s 10A was allowed to this unit for one year. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
