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TMI Blog2020 (11) TMI 379X X X X Extracts X X X X X X X X Extracts X X X X ..... the profit to a near accurate figure or a reasonable figure and has upheld the order of the Commissioner of Income Tax (Appeals) to the extent of ₹ 68,72,88,748/- holding the same to be a reasonable figure. The aforesaid concurrent findings of fact are based on meticulous appreciation of evidence on record. The tribunal has rightly held that the allocation of the overhead expenses have to be made on turnover basis. No perversity in the aforesaid concurrent findings of fact could be pointed out. For the aforementioned reasons, we answer the first and second substantial question of law against the revenue and in favour of the assessee. Requirement of holding of separate accounts for STP and non STP units - HELD THAT:- In the instant case, in sub-Section (2) of Section 10A of the Act, there is no requirement of maintenance of separate accounts and the assessee is entitled to exemption under Section 10A of the Act. Therefore, the assessee cannot be deprived of the benefit of Section 10A of the Act, on the ground that it had not maintained separate accounts. It is pertinent to note that even in the substituted section viz., under Section 10(2) of the Act, there is no requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act cannot be sustained. Accordingly, the fifth substantial question of law is answered. - I.T.A. NO. 286 OF 2010 - - - Dated:- 3-11-2020 - THE HON'BLE MR. JUSTICE ALOK ARADHE And THE HON'BLE MR. JUSTICE H.T.NARENDRA PRASAD FOR THE PETITIONER : BY SRI. K.V. ARAVIND, ADV. FOR THE RESPONDENT : BY SRI. PERCY PARDIWALLA, SR. COUNSEL A/W SMT. VANI H, ADV. JUDGMENT This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the revenue. The subject matter of the appeal pertains to the Assessment year 2000-01. The appeal was admitted by a bench of this Court vide order dated 28.03.2012 on the following substantial question of law: (i) Whether the Appellate Authority were correct in holding that estimated overhead expenses of STP units and non STP units should be taken into account for computing exemption u/s 10A of the Act despite the assessee having willfully chosen not to segregate the same in order to claim exemption as stated in his letter dated 18.03.2003 and as worked out for the earlier Assessment Years 1998-99 and 1999-00? (ii) Whether the appellate authority were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds between STP units and non STP units, in respect of cost of materials / services. However, in respect of payments to sub contractors, royalties, technical fees, communication expenses, the assessee estimated on the basis of turnover instead of actuals. It was also held that revised computation furnished by the assessee contradicts itself the correct STP turnover and turnover under Section 80HHE as well as domestic turnover has been suppressed. It was also held that the assessee has not fulfilled the stipulations laid down in Software Technology Parks of India Scheme (STPI) and the conditions laid down by Reserve Bank of India regarding maintenance of separate accounts and other conditions and therefore, the assessee is not entitled to exemption under Section 10A of the Act. It was further held that the audit report does not exclude payment made to sub contractors or other expenses incurred aboard. It was also held that turnover brought into the country is 56.056% which is below 75% as stipulated under Section 10A of the Act. Accordingly, the claim for exemption under Section 10A of the Act was denied. 3. The assessee thereupon approached the Commissioner of Income Tax (Appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors have claimed exemption under Section 10A of the Act, whereas, scheme of Section 10A of the Act provides for exemption / exemption only to manufacturing activity and it ought to have been appreciated that the assessee had entrusted the manufacturing activity to sub contractor and sub contractor has also claimed exemption under Section 10A of the Act, which does not provide for the benefit to the multiple assesses on the same manufacturing activity. It is also urged that even the EXIM policy issued by the Government, which was considered by this court has permitted benefit under Section 10A / 10B of the Act. Only in the circumstances where the assessee has produced certificate to the effect that other contract manufacturer has not claimed the exemption under Section 10A of the Act on the same manufacturing activity. It is pointed out that no finding on the aforesaid aspect has been recorded by the Commissioner of Income Tax (Appeals). With reference to substantial question of law No.5, it is argued that the assessee has to export 75% of the total manufactured items and in the instant case, the assessee has only exported to 56.056% and since, the assessee had violated the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in para 2.25 of the order of the Commissioner of Income Tax (Appeals). It is also argued that the finding recorded by the Assessing Officer that assessee has violated the conditions prescribed in Section 10A(2)(ia) of the Act is erroneous. It is stated that all the sales of the assessee from its STP units are export sales and there are no sales to domestic tariff area and therefore, it cannot be stated that exemption is not available on account of violation of the condition. It is also pointed out that Section 10A as it was in existence at the relevant time did not require that 75% of the total sales have to be exported under Section 10A(2)(ia) of the Act. In support of aforesaid submissions, reliance has been placed on Circular dated 17.01.2013 issued under Section 10A read with Section 10AA and Section 10B of the Act by the Central Board of Direct Taxes (CBDT) as well as decision of Supreme Court in 'T.R.F. LTD. VS. COMMISSIONER OF INCOME-TAX', (2010) 323 ITR 397 (SC) and decisions of this court in 'COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE VS. FUSION SOFTWARE ENGG. (P.) LTD.', (2012) 18 TAXMANN.COM 57 (KARNTAKA), 'COMMISSIONER OF INCOME TAX, BANGALORE VS. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stantial question of law against the revenue and in favour of the assessee. 9. Now we may advert to the third substantial question of law which pertains to requirement of holding of separate accounts for STP and non STP units. It is pertinent to note that assessee is entitled to exemption under Section 10A of the Act, which is a special provision in respect of newly established undertakings in Free Trade Zone (FTZ). Section 10A of the Act was substituted by Finance Act, 2000 with effect from 01.04.2001. The exemption under Section 10A of the Act is dependant on fulfillment of conditions mentioned in Sub-Section (2) of the Act. Sub-Section (2) of the Act, which was in existence at the relevant time, reads as under: 10(2) This section applies to any financial undertaking which fulfils all the following conditions, namely :-- (i) it has begun or begins to manufacture or produce articles or things during the previous year relevant to the assessment year-- (a) commencing on or after the 1st day of April, 1981, in any free trade zone; or (b) commencing on or after the 1st day of April, 1994, in any electronic hardware technology park, or, as the case may be, softw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial question of law is also answered against the revenue and in favour of the assessee. 11. The fourth substantial question of law pertains to double deduction. The Commissioner of Income Tax (Appeals) in para 2.25 has held that sub contractor has given software support activity to the assessee and not to the customers of the assessee. It has further been held that the employees of the sub contractors are operating from the STP unit itself and the sub contractors have claimed exemption under Section 10A of the Act on the basis of foreign inward remittance certificate, which has no bearing with regard to assessee's claim of exemption under Section 10A of the Act. It has further been held that the question of double deduction being claimed does not arise as to the extent the assessee has paid to the sub contractors the profits claimed as exempt by the assessee stand reduced. The aforesaid finding has been affirmed by the tribunal in para 22 of its order. Therefore, in the fact situation of the case, the question of double deduction does not arise. For the aforementioned reasons, the fourth substantial question of law is also answered against the revenue and in favour of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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