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TMI Blog2018 (12) TMI 1806X X X X Extracts X X X X X X X X Extracts X X X X ..... d cannot be taxed separately under Section 56 of the Act. Treating export sale proceeds realized subsequently as part of current year export turnover by CIT-A - HELD THAT:- The finding of the ld. CIT(A) is in accordance with law laid down by the jurisdictional High Court in the case of Wipro Ltd. vs. DCIT [ 2015 (10) TMI 826 - KARNATAKA HIGH COURT] and nothing was brought to our notice that the judgment of the Hon ble High Court in the case of Wipro Ltd. (supra) was reversed by the Hon ble Supreme Court. Accordingly, we do not find any merit in the grounds of appeal filed by the revenue. This ground of appeal is dismissed. Not to set off loss of another eligible 10A unit against the profits of eligible 10A unit for the purpose of computing exemption u/s 10A - HELD THAT:- The decision of the ld. CIT(A) is in accordance with decision of the Hon ble Supreme Court in the case of CIT vs. Yokogawa India Ltd. [ 2016 (12) TMI 881 - SUPREME COURT] held that from a reading of the relevant provisions of Section 10A it is more than clear to us that the deductions contemplated therein is qua the eligible undertaking of an assessee standing on its own and without reference to the oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case are as under: The respondent-assessee is a company duly incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of distribution of computer systems etc. The return of income for the assessment year 2010-11 was filed on 30/09/2010 declaring nil income under normal provisions and book profits u/s 115JB of ₹ 7,77,33,533/-. Against the said return of income, the assessment was completed by the Deputy Commissioner of Income-tax, Circle 12(4), Bangalore, [hereinafter referred to as Assessing Officer (AO)] vide order dated 11/03/2013 passed u/s 143(3) of the Income-tax Act,1961 ['the Act' for short] at total income of ₹ 18,05,19,790/-. While doing so, AO, allowed exemption u/s 10A in respect of STPI, Bangalore unit after set off loss of ₹ 4,92,52,645/- in respect of 10A eligible unit of Bombay and other income in the form of sales of scrap of ₹ 62,65,142/- was excluded from the business profits for the purpose of computing exemption u/s 10A of the Act. AO also reduced the amount of ₹ 27,68,91,445/- from export turnover as the same was realized within due date prescribed nor was permission from RBI was furnis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 41,62,00,820/- incurred in foreign currency, the ld. CIT(A) held that same should be reduced from export turnover as well as total turnover following the decision of the Tribunal in the assessee s own case. 6.3 As regards expenditure in foreign currency, the ld.CIT(A) held that same was not incurred for the purpose of export of software and therefore should not be reduced from export turnover. 7. Being aggrieved, revenue is in appeal before us raising the following grounds of appeals: 1. The order of the learned CIT(A) is opposed to law and facts of the case. 2. Whether on the facts and circumstances of the case, the CIT(A) was justified in law in holding that the amount disallowed u/s 10A is not in the nature of other income and therefore it did not quality as profit of the undertaking for the purpose of computation of deduction u/s 10A placing reliance on the decision of the jurisdictional High Court in the case of M/s. Wipro Ltd. vs. CIT in holding that the which has not reached finally since Department has not accepted and appeal is pending before the Hon ble Supreme Court of India? ' 3. Whether on the facts and circumstances of the case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue, Mr. Aravind do not cover the cases under Sections 10-A and 10B of the Act which are special provisions and complete code in themselves and deal with profits and gains derived by the assessee of a special nature and character like 100% Export Oriented Units (EOUs.) situated in Special Economic Zones (SEZs), STPI, etc., where the entire profits and gains of the entire Undertaking making 100% exports of articles including software as is the fact in the present case, the assessee is given 100% deduction of profit and gains of such export business and therefore incidental income of such undertaking by way of interest on the temporarily parked funds in Banks or even interest on staff loans would constitute part of profits and gains of such special Undertakings and these cases cannot be compared with deductions under Sections 80-HH or 80-IB in Chapter VI-A of the Act where an assessee dealing with several activities or commodities may inter alia earn profits and gains from the specified activity and therefore in those cases, the Hon'ble Supreme Court has held that the interest income would not be the income derived from such Undertakings doing such special business activity. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exemption provisions to make a purposive interpretation, was also propounded by Hon'ble Supreme Court in the following cases:- [I] In Bajaj Tempo Ltd. v. CIT [1992] 196 ITR 188/62 Taxman 480, the Hon'ble Supreme Court held that:- 5. . . . . . Since a provision intended for promoting economic growth has to be interpreted liberally, the restriction on it, too, has to be construed so as to advance the objective of the section and not to frustrate it. But that turned out to be the, unintended, consequence of construing the clause literally, as was done by the High Court for which it cannot be blamed, as the provision is susceptible of such construction if the purpose behind its enactment, the objective it sought to achieve and the mischief it intended to control is lost sight of. One way of reading it is that the clause excludes any undertaking formed by transfer to it of any building, plant or machinery used previously in any other business. No objection could have been taken to such reading but when the result of reading in such plain and simple manner is analysed then it appears that literal construction would not be proper. [II] In R.K. Garg v. Union of Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssible situations or anticipate all possible abuses. There may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid.' 37. On the above legal position discussed by us, we are of the opinion that the Respondent assessee was entitled to 100% exemption or deduction under Section 10-A of the Act in respect of the interest income earned by it on the deposits made by it with the Banks in the ordinary course of its business and also interest earned by it from the staff loans and such interest income would not be taxable as 'Income from other Sources' under Section 56 of the Act. The incidental activity of parking of Surplus Funds with the Banks or advancing of staff loans by such special category of assessees covered under Section 10-A or 10-B of the Act is integral part of their export business activity and a business decision taken in view of the commercial expediency and the interest income earned incidentally cannot be de-linked from its profits and gains derived by the Undertaking engaged in the export of Articles as envisaged under Section 10-A or Section 10-B of the Act and cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for exemption to one providing for deductions. 14. The difference between the two expressions 'exemption' and 'deduction', though 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 cannot be more obvious than from the case of Civil Appeal Nos. 8563/2013, 8564/2013 and civil appeal arising out of SLP(C) No. 18157/2015, which have been filed by loss making eligible units and/or by non-eligible assessees seeking the benefit of adjustment of losses against profits made by eligible units. 15. Sub-section 4 of Section 10A which provides for pro rata exemption, necessarily involving deduction of the profits arising out of domestic sales, is one instance of deduction provided by the amendment. Profits of an eligible unit pertaining to domestic sales would have to enter into the computation under the head profits and gains from business in Chapter IV and denied the benefit of deduction. The provisions of Sub-section 6 of Section 10A, as amended by the Finance Act of 2003, granting the benefit of ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how the contemporaneous Circular of the department (No. 794 dated 09.08.2000) understood the situation, it is only logical and natural that the stage of 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 deductions under Section 10A therefore would be prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving at the total income of the assessee from the gross total income. The somewhat discordant use of the expression total income of the assessee in Section 10A has already been dealt with earlier and in the overall scenario unfolded by the provisions of Section 10A the aforesaid discord can be reconciled by understanding the expression total income of the assessee in Section 10A as 'total income of the undertaking'. 12. Ground Nos.5 6 challenge the finding of the ld. CIT(A) to reduce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Commissioner of Income tax (Appeals) Mysore has erred in confirming the levy of interest under section 234B and 234C of the Act. On the facts and in the circumstances of the case and law applicable, interest under section 234B and 234C is not leviable appellant denies its liability to pay interest under section 234B and 234C. 3.1 In view of the above and other grounds to be adduced at the time or hearing. the appellant company prays that the order passed by the learned Commissioner of Income tax (Appeals) Mysore. in so far it is prejudicial to the appellant, be quashed Or in the alternative (i) Customer advances written back to Profit and loss account amounting to ₹ 46,97,000 be held as eligible for deduction under section 10A. (ii) Interest levied under section 234B be deleted. (iii) Interest levied under section 234C deleted. The appellant Company prays accordingly, 17. The only issue in this appeal relates to write back of advances given to customers constitute business income or not. This issue is covered in favour of the assessee-company by the decision of the Hon ble High Court of Karnataka in the case of Hewlett Packard Global Soft Ltd. (su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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