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TMI Blog2019 (8) TMI 1195X X X X Extracts X X X X X X X X Extracts X X X X ..... e allowed on the assessed income. The AO is accordingly directed. Deduction u/s 10A Expenses to be reduced from both Export Turnover and Total Turnover - HELD THAT:- Respectfully following the decision of the Hon'ble Apex Court in the case of CIT Vs. HCL Technologies L td. [ 2018 (5) TMI 357 - SUPREME COURT] , we direct the AO to allow assessee' s claim for deduction u/s 10A. Consequently, the grounds raised by revenue are dismissed. - ITA Nos. 452 to 454/Bang/2019 - - - Dated:- 21-8-2019 - Shri N. V. Vasudevan, Vice President And Shri Jason P Boaz, Accountant Member For the Assessee : Shri. K. R. Vasudevan, Advocate For the Revenue : Shri. C. H. Sundar Rao, CIT(DR)(ITAT), Bengaluru ORDER PER BENCH: These three appeals by the assessee are directed against the separate orders of CIT(A)-4, Bengaluru, dated 28.11.2018 for Assessment Year 2008-09; dated 24.11.2018 for Assessment Year 2009-10 and dated 22.11.2018 for Assessment Year 2010-11. As the issues involved in these appeals are similar, they were heard together and we deem it appropriate to dispose them off by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing the issues appealed against by placing reliance on the decision of the Hon'ble Supreme Court in the case CIT Vs Vs. Himat singike, 286 ITR 255, without appreciating that the issue appeal against was the quantum of deduction u/s 10A and not whether deduction u/s 10A is allowable, when the A.0 has himself allowed the deduction. 3. The Learned CIT(A) erred in not appreciating that the facts of the case of CIT Vs Vs. Himat singike (supra) are distinguishable from the facts of the appellant in that there was only one STPI unit in that case whereas the appellant had both STPI and Non-STPI units 4. The Learned CIT(A) erred in not appreciating that the decision of the Hon'ble Karnataka High Court in the case of CIT Vs Yokogawa, 341 ITR 385 is squarely applicable to the facts of the appellant's case, which has been since confirmed by the Hon'ble Supreme Court 5. The Learned CIT(A) erred in not appreciating that the settled legal position is that the deduction u/s 10A for the STPI unit has to be granted without adjusting the loss of the Non-STPI unit. 6. The Learned CIT(A) erred in not appreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Non-STPI Unit and in this regard placed reliance on the decision of the Hon ble Karnataka High Court in the case of CIT Vs. Yokogawa India Ltd., in 341 ITR 385 (Kar). The CIT(A), however, placed reliance on the decision of the Hon ble Karnataka High Court in the case of Himat Singke Seide Ltd., Vs. CIT (286 ITR 255) (Kar) wherein it was held that unabsorbed depreciation and the business loss of the same unit brought forward from earlier years have to be set-off against the profits before computing the exempt profits. The CIT(A) observed that the facts of the case on hand are different and distinguishable from that of Yokogawa India Ltd., (supra) but similar to those in the case of Himat Singke Seide Ltd., (supra) and went on to hold that the losses of one Unit can be set-off against the profits of other Units. 5.2.3 The learned AR for the assessee contends that the CIT(A) has got both the facts and the legal position wrong. According to the learned AR, it can be seen from the impugned order of CIT(A) itself that the decision in the case of Himat Singke Seide Ltd., (supra) was on the issue of unabsorbed depreciation and business loss of the same type of Units; wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll not be adjusted against the profits of the STPI Unit for the purposes of computation of the deduction under section 10A of the Act to be allowed to the assessee. We hold and direct accordingly. Consequently, ground Nos. 2 to 5 of the assessee s appeal are allowed. 6. Ground No.6 : Deduction under section 10A of the Act on Assessed income 6.1.1 In this ground (supra), the assessee assails the order of the CIT(A) in not appreciating that it is settled position of law that deduction under section 10A of the Act has to be granted on the assessed income; which includes the additions made to the returned income. 6.1.2 The learned AR for the assessee submitted that in its return of income for Assessment Year 2009-10, the assessee had claimed deduction of ₹ 6,17,15,259/- under section 10A of the Act. In the order of assessment dated 25.03.2010 for Assessment Year 2009-10, the AO had made various additions / disallowances, whereby the assessee s business income had increased; but however allowed the assessee deduction under section 10A of the Act to the extent of ₹ 6,17,15,259/- as claimed by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cerned, learned counsel for the Revenue submitted that the ITAT in its Order dated Date of Judgment 11-07-2018 I.T.A.No.228/2013 Commissioner of Income Tax Anr. Vs. M/s. M PACT Technology Services Pvt. Ltd. 21.12.2012 has recorded the findings, the rele*nt portion of which is extracted below for ready reference:- 14. Having heard both the parties and having considered their rival contentions, we find that the disallowance u/s 4oa (ia) is to be made of the expenses incurred and claimed by the assessee but before the payment of which, the assessee has failed to deduct tax at source. The genuineness of the expenditure is not in dispute. The dispute is whether TDS was to be made before making the payment. Without going into the nature of the transaction, we are inclined to accept the alternate plea of the assessee that the disallowance of the expenditure would automatically enhance the taxable income of the assessee and the assessee is eligible for the deduction u/s loA of the Income-tax Act on the enhanced income. Thus, this ground of appeal is allowed . 6. The relevant portion of the Circular No.37/2016 dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d thus: Date of Judgment 11-07-2018 I.T.A.No.228/2013 Commissioner of Income Tax Anr. Vs. M/s. M PACT Technology Services Pvt. Ltd. 13. By reason of the judgment of the Supreme Court in Commissioner of Income Tax v. Alom Extrusions Limited [2009] 319 ITR 306 the employer's contribution was liable to be allowed, since it was deposited by the due date for the filing of the return. The peculiar position, however, as it obtains in the present case arises out of the fact that the disallowance which was effected by the Assessing Officer has not, the Court is informed, been challenged by the assessee. As a matter of fact the question of law which is formulated by the Revenue proceeds on the basis that the assessed income was enhanced due to the disallowance of the employer's as well as the employees' contribution towards Provident Fund /ESIC and the only question which is canvassed on behalf of the Revenue is whether on that basis the Tribunal was justified in directing the Assessing Officer to grant the exemption under Section 10A. On this position, in the present case it cannot be disputed that the net consequence o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for Assessment Year 2009-10 8.1 For this Assessment Year 2009-10; the assessee filed its return of income on 17.04.2010 declaring income of ₹ 25,00,689/- under normal provisions and book profits of ₹ 11,69,69,890/- under MAT provisions. The case was selected for scrutiny and the assessment was concluded under section 143(3) of the Act vide order dated 30.12.2011 accepting the returned income of ₹ 11,69,69,890/-. Subsequently, the AO passed a rectification order under section 154 of the Act dated 09.03.2016, whereby he adjusted the losses of the Non-STPI Unit amounting to ₹ 7,84,96,835/- against the profits of the STPI Unit amounting to ₹ 20,76,15,242/- and thereby rendering the business loss at NIL with no business loss available for being carried forward. 8.2 Aggrieved by the order under section 154 of the Act dated 09.03.2016 for Assessment Year 2009-10, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee contended that the deduction under section 10A of the Act has to be computed before adjusting the losses of the non-STPI unit and in this regard placed reliance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant craves leave to add to and/or to alter, amend, rescind modify the grounds herein above or produce further documents before or at the time of hearing of this Appeal. 10. Ground Nos.1 and 6 (supra), being general in nature, no adjudication is called for thereon. 11. Ground Nos.2 to 5 Deduction under section 10A of the Act 11.1 These grounds (supra) are raised in respect to the computation of deduction under section 10A of the Act, wherein it is contended that the CIT(A) erred in not appreciating that the decision of the Hon ble Karnataka High Court in the case of Yokogawa India Ltd., (341 ITR 385) is squarely applicable to the facts of the assessee in the case on hand. 11.2 We have, in the earlier part of this order, while dealing with the assessee s appeal for Assessment Year 2008-09, on this very same issue, at paras 5 to. 5.4.2 (supra), decided this issue in favour of the assessee by following the decision of the Hon ble Apex Court in the case of CIT Vs. Yokogawa India Ltd., in Civil Appeal No.8498 of 2013 dated 16.12.2016. Respectfully following the aforesaid decision of the Hon ble Apex Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u, dated 22.11.2018 for Assessment Year 2010-11, the assessee has filed this appeal before the Tribunal, wherein it has raised the following grounds:- 15. Ground Nos.1 and 8 (supra), are general in nature and therefore no adjudication is called for thereon. 16. Ground Nos. 2 to 5 computation of Deduction under section 10A of the Act before set off of losses of non-STPI unit 16.1.1 The learned AR of the assessee submitted that the issue raised in these ground is similar to that raised in Assessment Year 2008-09 and contended that the deduction under section 10A of the Act should be computed without setting off the losses of the non-STPI unit against the profits of the STPI unit. 16.1.2 The learned AR further pointed out that for Assessment Year 2009-10, the AO had passed orders under section 154 of the Act adjusting the business losses of the non-STPI unit against the profits of the STPI unit and held that there was no business losses to be carried forward. It is submitted that if that order of the AO is reversed, then there will be business losses which will be carried forward to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I unit. According to the learned AR, it is settled principle that the deduction under section 10A of the Act has to be computed on the assessed income; resultant after the additions made to the returned income. In support of this proposition; reliance was placed on the judgments of the Hon ble Bombay High Court in the case of CIT Vs. Gem Plus Jewellery India Ltd., (2011) (330 ITR 175) (Bom) and of the Hon ble Karnataka High Court in the case of CIT Vs. M Pact Technology Services Pvt. Ltd., in ITA No.228/2013 dated 11.07.2018. 17.3 Per contra, the learned DR for Revenue supported the orders of the authorities below. 17.4.1 We have considered the rival contentions / submissions and perused the material on record; including the judicial pronouncements cited. We find that in the above cited judgments in the cases of the Hon ble Bombay High Court in the case of Gem Plus Jewellery India Ltd., (supra) and of the Hon ble Karnataka High Court in the case of CIT Vs. M Pact Technology Services Ltd., (supra), it has been held that the additions / disallowances of expenditures to returned income would automatically enhance the taxable income and the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over but not from the Total Turnover then, it would give rise to inadvertent, unlawful, meaningless and illogical result which would cause grave injustice to the Respondent which could have never been the intention of the legislature. 20. Even in common parlance, when the object of the formula is to arrive at the profit from export business, expenses excluded from export turnover have to be excluded from total turnover also. Otherwise, any other interpretation makes the formula unworkable and absurd. Hence, we are satisfied that such deduction shall be allowed from the total turnover in same proportion as well. 21. On the issue of expenses on technical services provided outside, we have to follow the same principle of interpretation as followed in the case of expenses of freight, telecommunication etc., otherwise the formula of calculation would be futile. Hence, in the same way, expenses incurred in foreign exchange for providing the technical services outside shall be allowed to exclude from the total turnover. 18.1.2 In this legal and factual matrix of the case, as discussed above, respectfully following the decision of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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