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TMI Blog2020 (1) TMI 920X X X X Extracts X X X X X X X X Extracts X X X X ..... rance and travel expenses from the total turnover relying on the decision of the Hon‟ble Bombay High Court in the case of Gem Plus Jewellery India Ltd. whereas the Department has not accepted the decision of Bombay High Court and filed SLP before the Hon‟ble Supreme Court. 3. The Ld. CIT(A) erred on the facts and circumstances of the case in holding that the interest income is eligible for deduction u/s.10A denying the facts of the case that the interest was earned on bank deposits kept in the normal course of business. 4. The Ld. CIT(A) erred on the facts and circumstances of the case in holding that foreign exchange gain is eligible for deduction u/s.10A relying on the decision of the Hon‟ble Bombay High Court in the case of Jem Plus Jewellery India Ltd. whereas the Department has not accepted the decision of Bombay High Court and filed SLP before the Hon‟ble Supreme Court." 2. Ground No.1 relates to the deduction u/s.10A of the Income Tax Act, 1961 (hereinafter referred to as "the Act‟) being granted for unit II treating it as a separate eligible unit by the Ld. CIT(Appeals). The Revenue is against this allowance of deduction u/s.10A of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thereafter, the Assessing Officer worked out the chronology of events and derived findings that claim of deduction which was not made in the previous year was not an inadvertent mistake on the part of the assessee but it was an afterthought. The Assessing Officer vide Para 4.5.6, 4.5.7, 4.5.8 and 4.5.9 of the assessment order has observed that the claim of deduction u/s.10A of the Act should not be allowed to the assessee which is on record. Basically, the Assessing Officer arrived at a finding that the assessee has not started up a new unit but has rather expanded the existing unit or split the existing business into another part and therefore, there is no entity of a new separate unit in the case of assessee and therefore, deduction u/s.10A of the Act was rejected by the Assessing Officer with respect to Unit II and addition was made in the hands of the assessee at Rs. 4,28,97,730/-. 4. Being further aggrieved, the assessee took up this matter before the Ld. CIT(Appeals) wherein detailed written submissions were filed which are on record. The CIT(Appeals) after considering the submissions of the assessee, assessment order and facts of the case has observed and held from Para 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer observed that vide letter dated 25.04.2007, the STPI had given approval only for expansion as sought for by the assessee. That further, the assessee has not furnished any separate Master Service Agreement and statement of work which would have necessitated the purposes/work assignment of Unit II. This Agreement was not furnished before the Department instead as evident from Para 4.5.9 of the Assessing Officer‟s order that the assessee had enclosed a few sample copies of purchase orders for the relevant assessment year which are enclosed at Page 66 to 70 of the paper book. That on perusal of these purchase orders, nothing is clear whether Unit II is new unit of the assessee or is expanded of the earlier unit which was being carried out for assessment year 2008-09. The assessee himself disclosed that they had not claimed deduction u/s.10A of the Act during that period i.e. A.Y. 2008-09. Therefore, there was ambiguity in the submissions of the assessee. The Ld. DR further submitted that the assessee never furnished this relevant agreement before the Assessing Officer for verification. 6. Per contra, the Ld. AR of the assessee took up to the remand report issued b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself has confirmed that Unit II exists separate and independent of Unit 1 and the Assessing Officer categorically states in the said remand report that he has perused the approval given by the STPI and the same is free for any mistakes. 7. We have perused the case records and heard the rival contentions. We have also analyzed the facts and circumstances of this case. That on perusal of the remand report placed on record, it is absolutely clear that there were existence of two units i.e. Unit 1 is for creating products for higher education industry and Unit 2 is for creating products for banking and finance industry. That apart, the STPI has confirmed that Unit 2 exists separate and independent of Unit 1 of which approval, the Assessing Officer in his remand report arrived at findings that the same is free for any mistakes. The Ld. AR further submitted that STPI being an independent authority would accord its approval to a new unit only after due verification of the application and credentials of an applicant. In the case of the assessee, the approval was granted by STPI only after due verification of the facts of the case. The Ld. AR addressed another objection raised by the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.2, the contentions of the Revenue is that the Ld. CIT(Appeals) had erred in holding that the exemption u/s.10A of the Act should be computed after excluding communication expenses, insurance and travel expenses from the total turnover. The contention raised by the assessee with regard to this ground is that the Assessing Officer has erred in reducing following expenses only from "Export Turnover‟ without appreciating that such expense should also be reduced from "Total turnover‟ while computing benefit u/s.10A of the Act. 10. The brief facts with regard to this issue are that the Assessing Officer during assessment proceedings found that as against the export turnover, the total turnover is not defined in the Act. Hence, the Assessing Officer contended that the intention of the legislature was to consider the turnover in its totality without any exclusion. The very fact that the total turnover is not defined in comparison with export turnover proves this and hence, as per provisions of section 10A of the Act, there is no scope for any adjustment to total turnover. Further any reference to section 80HHC is not acceptable as they are specifically applicable to section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction u/s.10A of the Act after reducing the expenses which are reduced from export turnover, from total turnover as well. Thus, relief provided to the assessee by the Ld. CIT(Appeals) is hereby sustained. Thus, ground No.2 raised in appeal by the Revenue is dismissed. 14. Ground No.3 pertains to "whether the Ld. CIT(Appeals) erred in holding that interest income is eligible for deduction u/s.10A of the Act when the facts of the case are that interest was earned on bank deposits. 15. The facts relating to Ground No.3 are that in financial year 2008-09, the assessee received following interest income: Particulars Amount ( in Rs.) Interest on bank deposits 42,48,636/- Interest on deposits with custom authorities. 37,833/- Total 42,86,469/- The Assessing Officer held that interest from bank deposits in a bank was not income derived from export business within the meaning of section 10A of the Act. It was treated by the Assessing Officer as "income from other source‟ by placing reliance on the decision in the case of Shams Tabrez Vanti (2005) 273 ITR 299 (AAR New Delhi). The assessee on this context submitted that the interest income on bank deposits of Rs. 42,4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon‟ble Bangalore Tribunal in the Appellant‟s own case, the AO is hereby directed to allow deduction u/s.10A on interest income of Rs. 42,86,469/-. Ground No.5 raised by the appellant is accordingly allowed." 17. We have perused the case records and given considerable thought to the findings of the Ld. CIT(Appeals). We find the Ld. CIT(Appeals) has based his decision following the judgment of the Hon‟ble Karnataka High Court (supra.) and the decision of the Co-ordinate Bench of the Tribunal, Bangalore in assessee‟s own case (supra.) while directing the Assessing Officer to allow deduction u/s.10A of the Act on interest income of Rs. 42,86,469/-. The Ld. DR could not bring any contrary decision of any Higher Forum in support of the Revenue nor could bring any relevant documents/materials opposing the already established facts in favour of the assessee. Therefore, we do not find any infirmity with the findings of the Ld. CIT(Appeals) which is thereby upheld. Thus, ground No.3 raised in appeal by the Revenue is dismissed. 18. Ground No.4 pertains to "whether the Ld. CIT(Appeals) had erred in holding that foreign exchange gain is eligible for deduction u/s.10A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... After considering the rival contentions, I am of the view that the facts in respect of this ground are squarely covered by Hon‟ble Jurisdictional Bombay High Court‟s judgment in the case of CIT Vs. Gem Plus Jewellery India Ltd. (330 ITR 175) (2011). Respectfully following judgment of the Hon‟ble High Court and other decisions quoted by the Appellant in its favour, the Assessing Officer is hereby directed to allow deduction u/s.10A of the Act on interest income of Rs. 2,95,28,156/-. Ground No.6 raised by the appellant is accordingly allowed." 21. We have perused the case records and given considerable thought to the findings of the Ld. CIT(Appeals). We find the Ld. CIT(Appeals) has based his findings relying on the decision of Hon‟ble Jurisdictional High court in the case of CIT Vs. Gem Plus Jewellery India Ltd. (330 ITR 175) wherein the Hon‟ble Bombay High Court has held as follows: "The gains from foreign exchange fluctuation realized within stipulated period forms part of the sales proceeds and is directly related with the export activities and such gains should be considered as income derived from export activities eligible for exemption u/s.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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