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TMI Blog2019 (2) TMI 1781X X X X Extracts X X X X X X X X Extracts X X X X ..... Working capital adjustment is required to be given on actual basis for the purpose of determining the ALP as the adjustment is required to be given which had a bearing on the profit and margin of the comparables. Undoubtedly the working capital [receivable inventory, trade debtor and trade creditor, etc] have the impact on the profit and margin and therefore with a view to bring the parity between the assessee and the comparables it is necessary to give adjustment to work out the average PLI of the comparables Denying the benefit u/s.10B - permission was not granted for two separate and independent activities - Deviation from the specification without a written prior approval - HELD THAT:- The manufacturing of Active Pharmaceutical Ingredients (API) and intermediaries and carrying out of R D for the same AE { as a contract service provider}, are two distinct activities and therefore the assessee should have taken two distinct approval from the DC by filing two separate project reports for carrying out these two activities. Only one project report in respect of manufacture of API and others for chlorobenzene and other chemicals were submitted and therefore there was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anel is opposed to law and the facts and circumstances of the case. 2. The DRP erred in directing to include M/S. Max Neeman Medical Intl. Ltd. as a comparable without appreciating that the company has not been treated as a comparable for several years as it has been incurring losses continuously for the past 3 years and the company has been incurring substantial part of its expenses towards development which distinguishes it from other companies as the benefit of the expenditure would accrue for many years. 3. The DRP erred in directing to provide working capital adjustment without appreciating the fact that when companies have multiple segments providing working capital adjustment would result in factually incorrect results and that it would not be feasible to accept the figures at face value as appearing in the balance sheet in the absence of precise characterization as there is no uniformity in respect of the definition of receivables and payables as these are categorized differently by each company. 4. The DRP erred in directing to provide working capital adjustment without appreciating the fact that according to the OECD commentary working capital benefit cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of M/S Regency Creations Ltd. dtd 17/9/2012 (353 ITR 326) (Delhi) the Hon'ble High Court of Delhi has held that the pre-conditions laid down u/s 10B have to be met for claiming deduction. 5. The Ld. CIT(A) erred in not appreciating the fact that in the Hon'ble High Court of Delhi Order in the case of Enable Exports Pvt. Ltd (ITA No. 1072 of 2011) relied upon by the CIT (A), the Hon'ble Court has laid emphasis on CBDT circular clarifying deduction u/s 10B wherein it is mentioned that the approval granted by the Development Commissioner in the case Of an 1000/0 EOIJ will be considered valid, once such an approval is ratified by the BOA for EOLJ Scheme and in the instant case of the assessee company, since no such ratification was received during the F.Y under consideration, the assessee company was not eligible to claim deduction u/s 10B w.r.t. F. Y. 2010-11. Grounds of appeal raised by the Assessee for AY 2009-10 : Transfer pricing 2. That on the facts and in circumstances of this case and in law, the learned AO and the learned Panel erred in not following the ruling of the Honble Income Tax Appellate Tribunal ( ITAE) in the case of Apot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Appellant by contending that R D sewices provided by the Appellant are not covered as 'any customized electronic data or product or service' under the definition in section 10B of the Act. 5.2. That on the facts and in circumstances of this case and in law, the learned AO and the learned Panel erred in holding that the Appellant has made an illegal and undue claim under section 10B of the Act whereas, the amount claimed by the assessee is supported by the computation methodolog,' provided as per the provisions of law. 5.3. That on the facts and in circumstances of this case and in law, the learned AO and learned Panel erred in concluding that the Appellant's claim of deduction under section 10B of the Act is not appropriately supported by the Accountant's Report in Form 56G. 5.4. Without prejudice to the above, the learned AO and learned Panel erred in disallowing the deduction under section 10B of the Act on the manufacturing services carried out by the Appellant. 6. That on the facts and in circumstances of this case and in law, the learned AO and learned Panel erred in holding out that deduction under section 10B of the Act is to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... --- ₹ 96,33,000 Reimbursement of expenses ₹ 124,396 Payment of Interest towards ECBs ₹ 25,976,827 Total ₹ 93,082,708 ₹ 444,000,023 Total International Transaction : ₹ 537, 082,731/- 03. Functions performed by the assessee : APIPL and Apotex PharmacemInc have entered into an arrangement whereby APIPL was engaged to perform R D activities, which are a pre-requisite for undertaking manufacturing of pharmaceutical products on behalf of Apotex Pharmachem Inc. The range of activities performed by APIPL include development of synthetic chemical processes in the field of APIs, development and preparation of Drug Master Filed (DMF s), and analytical services like stability studies, validation studies, analytical method development. Hence, the assessee rendered R D services in this segment. 04. The TPO determined the TP adjustment u/s.92C as under : The arithmetic mean of the Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rimary business segment is software development services. On the basis of the above, it was submitted that the functions performed by Celestial Lab Ltd, is not comparable with the finding of the assessee, therefore it is required to be excluded. Further the Ld. AR also relied on the decision of the sister entity in the matter of Appotex Research P. Ltd v. ITO [IT(TP)A.40/Bang/2014, dt.04.11.2016 for A Y 2009-10, wherein at para 11 and 12, at page 968 of the paper book, the Tribunal had recorded the finding to the following effect : 11. Having carefully examined the orders of lower authorities in the light of rival submissions, we find that the profile of Celestial Biolabs Ltd., IDC India Ltd. and Oil field Instrumentations (India) Ltd. were examined by the Tribunal in assessee s own case for the AYs 2007-08 2008-09 and the Tribunal has categorically held that these comparables cannot be considered to be good comparables for the purpose of computing the ALP, therefore, they have to be excluded from the list of comparables. The relevant observations of the Tribunal for AY 2008-09 with respect to Celestial Biolabs Ltd., IDC India Ltd. and Oil field Instrumentations (India) L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t comparable to the functional profile of the assessee and accordingly ought not to be considered a comparable. (emphasis supplied) 4. Oil Field Instrumentation (India) Limited (Oil field): Oil Field is the largest Mud Logging services provider in India. Oil Field offers Mud Logging services with real time data acquisition and monitoring of data with alarm on critical parameters, data storage option, computerized logs and web enabled transmission. Important parameters measured are Total Depth, Rate of Penetration, Weight on Hook, Heave, Weight on Bit, Rotation per minute, Stand Pipe Press, Stroke per minute, Mud Flow, Conductivity, Total Gas, Chromatographic analysis and H2S etc. Oil Field provides Customized Mud logging solutions for Exploratory, Developmental, Deepwater and CBM drilling locations. Oil Field is engaged in supply of equipment and rendering services mainly for geological operations for oil, gas and mineral exploration. Also as per the website of Oil Field, Oil Field provides Rig Instrumentation and services for drilling rigs like pressure indicators, diaphragms, drillers console, recorder, etc. It also provides accurate, timely and reliable drilling data. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic portal dedicated to B28 C market with online live consulting with our Ayurvedic consultants. It provides excellent platform for trading of herbal products, with identification of raw herbs, scientific data, market trade data, monographs, policy, laws, good manufacturing practices, DNA finger printing etc. It facilitates contacts with suppliers, manufacturers and dealers of herbal Pharma industry. The activities undertaken Celestial Labs are in the nature of providing host of IT related services and some trading activity which is not comparable to the Assessee. Hence it is clear that it is not comparable to the functional profile of the Company and accordingly ought not to be considered a comparable. (emphasis supplied) The learned D.R. however drew our attention to page-389 of the paper book which is an extract from the Directors report which reads as follows: The Company as developed a de novo drug design tool CELSUITE to drug discovery in, finding the lead molecules for drug discovery and protected the IPR by filing under the copy if right/patent act. (Apprised and funded by Department of Science and Technology New Delhi) Based on our in silico experti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med by the assessee are therefore held to be not proper and these companies are excluded for the purpose of comparability. 12. Since the profile of assessee company and the comparables remains the same and there is no change in the activities. We therefore following the order of the Tribunal in the earlier years in assessee s own case, hold that the aforesaid 3 comparables are not good comparables. Therefore, the AO/TPO is directed to exclude these comparables from the list of comparables for the purpose of computing the ALP. On the basis of the above, it was submitted that as the Tribunal in the case of the sister concern of the assessee (supra) had examined the functional profile of the comparable and therefore this comparable is requested to be excluded from the list of comparables. 08. Per contra, the Ld. DR had drawn our attention to the expenses at page 683, where the total expenditure incurred by the assessee was mentioned in raw material. The Ld. DR in the written submissions has mentioned as under : During the hearing of the above appeals on 8/01/2019, Hon'ble Bench directed the undersigned to submit a note on the specific arguments made on behalf of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of Apotex which means that end result is not the criterion for making the payment of fees. Thus the assessee can be termed as a professional service provider in the sphere of Pharmaceutical R D. The natural conclusion that follows is that the assessee failed to satisfy the condition of manufacture of article or thing so as to become eligible for the deduction u/s 10B on profits from R D activity. Another aspect argued was whether the assessee has SEZ approval in so far as claiming deduction of profit from R D services. According to the assessee, it was registered as 100% EOU by Cochin SEZ for this activity and thus eligible for deduction u/s 10B. The assessee claims that it got approval for R D services also vide letter dated 31.08.2004 issued by the Development Commissioner, Cochin SEZ. It is important to note that in the original letter of approval dated 16.04.2004 issued by DC, Cochin SEZ, the items of manufacture approved were Chloro Benzene and 3 other items whereas the item of manufacture was amended vide letter dated 31.08.2004 as Research Development centre with an associated production facility of Chloro Benzene and other chemicals. Here it is relevant to point ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be ready for manufacturing or licensing by next year. The cloning and purification under wet lab conditions have been completed with our collaborative Institute, CCMB Hyderabad. In the industrial biotechnology area, the company has signed the Technology transfer agreement with IMTECH CHANDIGARH (a very reputed CSIR organization) to manufacture and market initially two Enzymes, Alpha Amylase and Alkaline Protease in India and overseas. Now your company has developed two more Industrial enzymes in house and has been validated at Department of Biotechnology JNTU Hyderabad, these 4 products shall make the investment and expansion feasible, On the basis of the above it was submitted that the company is into R D and is therefore cannot be compared with that of the assessee. 09. We have heard the rival contentions and perused the material on record. Though this company was considered by the Tribunal in the case of sister concern (supra), but the finding recorded by the Tribunal in the said case was on the basis of the order passed by the Tribunal for the earlier assessment year in the case of the assessee. If we examine the expenditure incurred by Celestial Labs Ltd, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out while Iran project started in June 08. During the year the company also received repeat order for Mud Logging Services from TTOPCO, Iraq and extension of contracts received from Medco (Oman), ONGC (MUMBAI) and British Gas. Efforts in enhancing the company s business internationally have continued to remain aggressive in countries of interest i.e. in Middle East countries etc., It was submitted by the Ld. AR that this company was considered by the coordinate bench in the matter of the sister concern of the assessee (supra) at pages 960 to 980 of the paper book, where this company was excluded from the list of comparables. 11. Per contra the Ld. DR had relied upon the order passed by the lower authorities. 12. We have heard the rival contentions and perused the material on record. The functions performed by Oil Field Instrumentation (India) Ltd, during the current year continues to be the same as it was doing in the earlier year 2008-09, which was so mentioned by the Tribunal, though in the matter of sister concern (supra). As there is neither change in profile or the functions, therefore following the decision of the coordinate bench in the matter of the sister ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inventory, trade debtor and trade creditor, etc] have the impact on the profit and margin and therefore with a view to bring the parity between the assessee and the comparables it is necessary to give adjustment to work out the average PLI of the comparables. Moreover this issue is fairly covered in favour of the assessee in view of the decisions of the coordinate bench referred above. Hence, this ground raised by the Revenue is dismissed. IT(TP)A.249/Bang/2014 A. Y. 2009-10 By the Assessee : 21. The corporate tax issues are raised vide ground nos.5.1 to 5.4 which is reproduced elsewhere in this order. 22. The assessee filed its return of income declaring net income from business and profession of ₹ 547.46 lacs after claiming deduction u/s.10B of the Act amounting to ₹ 103.13 lacs in respect of its manufacturing activities. Further the assessee also recorded income from other sources (consisting of interest on deposits) amounting to INR 19.31 lacs. The net taxable income of the Company was arrived at INR 17.93 lacs after set-off of brought forward losses. Subsequently, the Appellant revised its return of income for FY 2008-09 on September 27, 2010. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10B of the Act on the below mentioned reasoning/assumptions: a) Since the board approval (i.e. ratification) to the permission granted by Development Commissioner was given only on January 18, 2011 (inadvertently mentioned as March 25, 2011) and hence, the same would be effective only from the FY 2011-12 (i.e. AY 2012-13) and accordingly, the AO denied deduction u/s. ioB with respect to both manufacturing and research activities. b) Further, the AO denied the deduction u/s. section 10B of the Act with respect to Research Development services on the ground that: i) The same does not amount to manufacturing or producing articles or things; ii. The approval was not granted by Development Commissioner w.r.t. R D activities; 23. The AO in the draft assessment order had denied the benefit of 10B and the reason recorded by the AO were mentioned in para 5.7 to 5.9 of the order, which is as under : 5.7 It is explicit from the provisions that such a deduction is only for the newly, export-oriented undertakings that manufactures or produces any items / computer software. By no stretch of imagination can R 1) services tantamount to manufacture or production of an art ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he submissions made by the assessee and in para 23 has recorded the reasons as under: 23.We have duly considered the facts of the case, submissions of the assessee and the draft assessment order. We observe that the assessee was a 100% EOU, engaged in the manufacturing of Active Pharmaceutical Ingredients (APIs) and Intermediates for Apotex Group. Apart from this, the assessee was also providing (lie Apotex Group certain contract R D services which apparently fell outside the manufacturing activities carried on by the assessee and they, rather, constituted contract services having no nexus with the manufacturing of APIs. Though its submissions, the assessee sought to emphasize that the R D services would he covered by Explanation 2 to section 1013, precisely by clause (b) of the said Explanation 2 i.e., any customized electronic data or any product or service of similar nature as may be notified by the Board. On a careful perusal of the provisions of section 10B and CBDT's Notification No. SO 890(E) dated 26.09.2000, we are of the view that what was sought to be covered by clause (b) of Explanation 2 to section 1011 is in the context of 'computer software and in view o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proval, it will relate back to the date on which the approval was granted by the Development Commissioner and, therefore, the deduction u/s. ioB of the Act ought to have been allowed by the AO. 2.1.4 In this regards, the Appellant relies on the decision of the Hon'ble Gujarat High Court in the case of ECI Technologies Pvt. Ltd. (Tax Appeal No 203 of 2015) wherein the Hon'ble High Court after relying on CBDT notification no. 178/19/2008-ITA dated 9 March 2009 has held as follows: it is not in dispute that vide Circular /instruction of the CBDT dated 09/03/2009 it was clarified that the approval granted by the Development Commissioner in the case of Export Oriented Unit set up in an Export Processing Zone will be considered valid, once such an approval is ratified by the Board of Approval for EOU Scheme. In the present case, it is not in dispute that the permission / approval granted by the Development Commissioner has been ratified by the Board of Approval, may be subsequently. The moment the decision / approval of the Development Commissioner is ratified by the Board of Approval it will relate back to the date on which the approval was granted by the Development Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... granted by the Development Commissioner has been ratified by the Board of Approval, may be subsequently. The moment the decision / approval of the Development Commissioner is ratified by the Board of Approval it will relate back to the date on which the approval was granted by the Development Commissioner. 29. With respect to the ratification by the Board giving effect from 31.08.2004, in our view, there should not be any quarrel as the issue stands covered in favour of the assessee by the authoritative pronouncement by the Board. In our view, initial permission is required to be granted by the DC in accordance with the Rules framed for the purpose of Section 2. Once the said permission has been granted then the ratification by the Board is merely a formality and therefore would relate back to the date of actual grant, as the assessee cannot be permitted to wait till eternity, if there is a delay / latch on the part of the Board for not ratifying within the time sanctioned by the DC. 30. Having said so, we shall examine the other aspect raised by the assessee in para 2.2 onwards of the written submissions. For the purpose of completeness, we are reproducing herein below th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment of Hon'ble Calcutta High Court in the case of CIT v. Air Survey Co. of India (P.) Ltd. [1998] 232 ITR 707. The question before Hon'ble Calcutta High Court was whether business of surveying, mapping and aerial photography which resulted in photographs was production of article or thing. Revenue had rejected assessee's claim for investment allowance on the ground that the activity of the assessee could not be called as manufacture or production and that in the nature of the assessee's business no thing or article was produced as such. The Tribunal, in appeal, however, reversed the aforesaid finding and allowed the relief in favour of the assessee by holding that the activity of the assesse was such that it would fall within the purview of the expressions manufacture or production and that the ultimate photographs which came to be produced as a result of the business activity of the assessee came within the expressions article or thing . This view was upheld by Hon'ble Calcutta High Court. v) Further, according to Webster Dictionary, meaning of the word 'thing' is the product of work or activity which in Appellant's case is the research ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thing. The same is documented in the form of an electronic report and transmitted electronically. x) In this regards, the Appellant relies on the decision of Bangalore Tribunal in the case of in the case of DCIT vs Syngene International Limited (I.T.A. Nos. 11o6 1107/ Bang! 2012) wherein the Hon'ble Tribunal on the exact similar facts has held that an assessee engaged in the business of contract research and development services is entitled to deduction under section 10B since the R D activity tantamount to manufacture. xi) The chart showing comparison between the Appellant's case and Syngene International Limited's is tabulated as below: xii) It can he observed from the above chart that the facts of the Appellant is exactly similar to the Syngene International Limited (Supra) and hence, the decision of the Hon'ble Bangalore Tribunal is squarely applicable to the Appellant's case. The relevant para of the order is reproduced hereunder for Your Honour's ready reference: 23. Research conclusions can be considered as documentations of the analysis and steps done during the research process. Or in other words the end result is the analysi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 'article' or 'thing' as defined under section 10B of the Act, the Appellant wishes to submit that the activities carried out are covered within the meaning of the term 'computer software' and hence, eligible for deduction under section 10B of the Act. The term 'computer software' has been specifically defined in terms of Explanation 2 to section 10B of the Act to mean: i) any computer programme recorded on any disc, tape, perforated media or other information storage device; or ii) any customized electronic data or any product or service of similar nature, as maybe notified by the Board, which is transmitted or exported from India to any place outside India by any means . xv) As mention above, the findings of research is documented in the form of an electronic report and transmitted electronically. Therefore, given the fact that the data exported (i.e. the report) is largely a summary of the research data which are customized, it should fall under the category 'customized electronic data' as envisaged in clause (i)(b) of explanation 2 to section 10B of the Act and therefore, the benefit of section 10B should be given to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um to the letter dt.16.04.2004 and it was mentioned that as against manufacture of chloro benzene item and other chemicals, now the letter mentioned the item as R D Centre with Associated Production facility of chlorobenzene and other chemicals. 37. The Ld. AR had canvassed before us that as the DC had mentioned the item of manufacture as R D Centre with Associated Production facility of chlorobenzene and other chemicals therefore both the activities namely, R D Centre with Associated Production facility of chlorobenzene and other chemicals are exigible to the benefit u/s.10B of the Act. It was the case of the assessee that the R D pharmaceuticals falls under the category of computer software as held by the Bangalore Bench of the Tribunal in Syngene International Ltd (supra). 38. Before we closely scrutinise and examine the permission initially granted and subsequently amended by the DC, it is necessary to mention the relevant provisions of SEZ Act, which are as under : 2(r) manufacture means to make, produce, fabricate, assemble, process or bring into existence, by hand or by machine, a new product having a distinctive name, character or use and shall include proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re for disposing of an appeal shall be such as may be prescribed: Provided that before disposing of an appeal, the appellant shall be given a reasonable opportunity of being heard. (8) The Central Government may prescribe,- (a) the requirements (including the period for which a Unit may be set up) subject to which the Approval Committee shall approve, modify or reject any proposal referred to in subsection (3); (b) the terms and conditions, subject to which the Unit shall undertake the authorised operations and its obligations and entitlements. (9) The Development Commissioner may, after approval of the proposal referred to in sub-section (3), grant a letter of approval to the person concerned to set up a Unit and undertake such operations which the Development Commissioner may authorise and every such operation so authorised shall be mentioned in the letter of approval. 19. Notwithstanding anything contained in any other law for the time being in force, the Central Government may, if required, - (a) prescribe a single application form for obtaining any licence, permission or registration or approval by a Developer, or an entrepreneur under one or more Central Acts; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entertained only after the processing area of the Special Economic Zone or Free Trade Warehousing Zone has been demarcated under rule 11. (4) The Letter of Approval shall be valid for one year within which period the Unit shall commence production or service or trading or Free Trade and Warehousing activity and the Unit shall intimate date of commencement of production or activity to Development Commissioner: Provided that upon a request by the entrepreneur, further extension may be granted by the Development Commissioner for valid reasons to be recorded in writing for a further period not exceeding two years: Provided further that the Development Commissioner may grant further extension of one year subject to the condition that two-thirds of activities including construction, relating to the setting up of the Unit is complete and a chartered engineer s certificate to this effect is submitted by the entrepreneur. (5) If the Unit has not commenced production or service activity within the validity period or the extended validity period under sub-rule (4), the Letter of Approval shall be deemed to have been lapsed with effect from the date on which its validity expired. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f chlorobenzene and other chemicals. The assessee in its TP study and also in Form 56G filed before the authorities had mentioned separate the export turnover in respect of article or thing of ₹ 15,46,15,965/-, whereas in the computer software / R D it was mentioned as ₹ 35,82,94,015/-. 41. If the argument of the Ld. AR that both the activities are interwoven, interconnected and integral of each other is correct, then there was no necessity for the assessee to mention separately about the Aricle Or Thing Manufactured and R D separately for the purpose of claiming the export turnover. The assessee itself was convinced that both the activities are distinct and separate and therefore the assessee has given two separate export turnovers in respect of each of the activity. 34. In our understanding, as mentioned hereinabove also, the manufacturing of Active Pharmaceutical Ingredients (API) and intermediaries and carrying out of R D for the same AE{ as a contract service provider}, are two distinct activities and therefore the assessee should have taken two distinct approval from the DC by filing two separate project reports for carrying out these two activi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall agree on a timetable for completion of each project constituting Research (each a Project ). APIPL shall allocate sufficient time and resources to complete each such Project. 2.3 APIPL shall complete each Project in accordance with the timetable for that Project, subject to any timetable revisions that may be agreed upon by Apotex and APIPL from time to time. 2.4 APIPL shall report to Apotex on the progress of each Project in the manner and at such times as may be agreed upon by Apotex and APTPL from time to time. 2.5 APIPL shall conduct the Research in compliance with any specifications that may be provided in writing to APIPL by Apotex, and any changes to these specifications made by APIPL, must be notified to and approved by Apotex in writing, prior to implementation. APIPL shall conduct the Research and provide any additional services requested by Apotex in accordance with Good Laboratory Practice and Good Manufacturing Practices, as commonly known and referred to in the pharmaceutical industry. 43. From a close scrutiny of the activities undertaken by the assessee, it is clear that the assessee is required to conduct the research in compliance with the sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In its decision the Hon ble High Court has held that as the income of sec. 10A unit has to be excluded at source itself before arriving at the gross total income, loss under non-section 10A unit cannot be set off against sec. 10A units u/s 72 of the Act. As the deduction u/s 10A of the Act has to be excluded from the total income of the assessee, the business loss being set off against such profit and gains of the undertaking as a whole could not arise. In this view of the matter and respectfully following the decision of the Hon ble Karnataka High Court in Yokogawa India Ltd. (341 ITR 385). We uphold the impugned order of the ld CIT(A) in directing the AO to compute the deduction u/s 10A of the Act in the case on hand without setting off the business losses from non section 10A units against the income of 10A units. We hold and direct accordingly. Consequently, the ground raised by assessee is allowed. IT(TP)A. 2204/Bang/2016 -Revenue appeal for AY 2011-12 : 20. In this appeal the grounds no.1 to 6 pertains to the issue of 10B. As we have dismissed the ground of the assessee for the assessment year 2009-10, in the superseding paragraphs, following the same, the grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X
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