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TMI Blog2019 (3) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... should not be disallowed. Since the investment has been made, some amount of follow up actions, record keepings, discussions and consultations are bound to happen which will lead to some administrative expenses. Such administrative expenses are to be computed at the rate of 5% of average investment. In the case of appellant, the AO has computed such which is in accordance with the law and hence confirmed. - Decided against revenue. - ITA No. 5861/Del/2014 - - - Dated:- 15-1-2019 - Shri Amit Shukla, Judicial Member And Shri L.P. Sahu, Accountant Member For the Appellant : Sh. Shailesh Kumar Sr. DR For the Respondent : Sh. Divyanshu Agarwal, Advocate ORDER PER L.P. SAHU, A.M.: This is an appeal filed by the Revenue against the order passed by the CIT(A)-IX, New Delhi dated 12.08.2014 on the following grounds : 2. The brief facts of the case are that the assessee filed a return of income on 29.09.2011. The assessee is engaged in the business of software development and export services. The case was selected for scrutiny and statutory notices were served upon the assessee. In the scrutiny proceedings, the Assessing Officer noted that the assessee is cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to disallowance made u/r 8D(2)(ii) of the IT Rules. Aggrieved, the Revenue is in appeal before the ITAT. 5. The ld. DR relied on the order of the Assessing Officer and submitted that the ld.CIT(A) has wrongly interpreted the provisions of section 10A . The exemption u/s. 10A should be given after calculating total income of the assessee which has not been done. The case law relied by the Assessing Officer is squarely covered in favour of the Revenue. The intention of the legislature has not been correctly appreciated by the ld. CIT(A) for introduction of section 10A. He further submitted that Rule 8D cannot be read in isolation, but it is a mechanism for inclusion of disallowance u/s. 14A. If the assessee satisfied the conditions of Rule 8D, the Assessing Officer is bound to calculate according to the Rules. The ld. CIT(A) has given relief under rule 8D(2)(ii) where the assessee has incurred interest expenditure of ₹ 15,41,040/- during the year. Therefore, the disallowance made by the Assessing Officer has to be restored. 6. On the other hand, the ld. AR relied on the order of the ld. CIT(A) and reiterated the submissions made before him. He stated that the ld. CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e unit ... from the total income of the assessee . The retention of section 10A in Chapter III of the Act after the amendment made by the Finance Act, 2000 would be merely suggestive and not determination of what is provided by the section as amended, in contrast to what was provided by the unamended section. The true and correct purport and effect of the amended section will have to be construed from the language used and not merely from the fact that it has been retained in Chapter III. The introduction of the word deduction in section 10A by the amendment, in the absence of any contrary material, and in view of the scope of the deductions contemplated by section 10A has to be understood as embodying a clear enunciation of the legislative decision to alter the nature of the section from one providing for exemption to one providing for deductions. Though the difference between the two expressions exemption and deduction , broadly may appear to be the same, i.e., immunity from taxation, the practical effect of it in the light of the specific provisions contained in different parts of the Act would be wholly different. The above implications, would be obvious where lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns 10A and 10B shall be of the undertaking located in specified zones or 100 per cent export oriented undertakings, as the case may be, and this shall not have any material relationship with the other business of the assessee outside these zones or units for the purposes of this provision. If the specific provisions of the Act (the first proviso to sub-section (1) of section 10A and sub-sections (1A) and (4) of section 10A provide that the unit that is contemplated for grant of benefit of deduction is the eligible undertaking and that is also how the contemporaneous circular of the Department understood the situation, it is logical and natural that the, deduction of the profits and gains of the business of an eligible undertaking has to be made independently and, therefore, immediately after the stage of determination of its profits and gains. At that stage the aggregate of the incomes under other heads and the provisions for set off and carry forward contained in sections 70, 72 and 74 of the Act would be premature for application. The deduction under section 10A therefore would be prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving ..... X X X X Extracts X X X X X X X X Extracts X X X X
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