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TMI Blog2025 (1) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... on 14(A) of the Act?" Accordingly, the memo is disposed of. 3. The following substantial questions of law have been raised for consideration in the appeal:- "1. "Whether on the facts and in the circumstances of the case, the Tribunal's order is perverse in nature in allowing relief to the assessee on account of royalty income while computing deduction under section 10A/10AA by holding that royalty income from licensing of software productions should be considered as profits of business of eligible units for the purposes of deduction under section 10A/10AA of the Act ignoring that conditions for granting 10A/10AA relief was not satisfied by assessee and the income was not derived from export activity of assessee. 2. "Whether on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in failing to appreciate that assessing authority denied 10A/10AA claim in respect of royalty income as same is not derived from export business of the 'Undertaking' and as such conditions set out in said sections were not satisfied in facts of present case"? 3. "Whether on the facts and in the circumstances of the case, the Tribunal's o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of Income-tax, Central Circle vs. Motorola India Electronics (P.) Ltd., ((2014) 46 taxmann.com 167 (Karnataka)); 5) Commissioner of income-tax VII, New Delhi US. Punjab Stainless Steel Industries [(2014) 46 taxmann.com 68 (SC)]; 6) Commissioner of Income-tax vs. Hewlett Packard Global Soft Ltd., [(2017) 87 taxmann.com 182 (Karnataka) (FB)]; 7) Commissioner of Income tax, Central - III vs. HCL Technologies Ltd., [(2018) 93 taxmann.com 33 (SC)); 8) M/s. Tata Elxsi Limited vs. The Assistant Commissioner of Income Tax, Bangalore (ILR 2015 KAR 1739). 4. It is not in dispute that the judgment of this Court in ITA No.264/2017 dated 05.11.2018 has been carried by the revenue in appeal before the Hon'ble Apex Court in SLP No.21055/2019 which is pending consideration. In view of the aforesaid, we are not inclined to either differ from the judgment of the co-ordinate bench or venture to sit in judgment over the said decision to adjudicate upon the issues fully covered and decided, referring to the judgments now cited by the revenue. Accordingly, answering the substantial questions of law raised herein, against the revenue and in favour of the assessee, we dismi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax Act". 15. What is taxable under Section 5 of the Act is the "total income" which is neither notional nor speculative. It has to be 'real income'. The subsequent amendment to Section 14A does not particularly clarify whether the disallowance of the expenditure would apply even where no exempt income is earned in the AY in question from investments made, not in that AY, but earlier AYs. 16. Rule 8D (1) of the Rules is helpful, to some extent, in understanding the above issue. It reads as under: "8D. (1) Where the Assessing Officer, having regard to the accounts of the assessee of a previous year, is not satisfied with (a) the correctness of the claim of expenditure made by the assessee; or (b) the claim made by the assessee that no expenditure has been incurred, in relation to income which does not form part of the total income under the Act for such previous year, he shall determine the amount of expenditure in relation to such income in accordance with the provisions of sub-rule (2)." 17. The words "in relation to income which does not form part of the total income under the Act for such previous year" in the above Rule 8 D (1) indicates a corre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... volving direct as well as indirect attribution. Thus, accepting the submission of the Revenue would result in the imposition of an artificial method of computation on notional and assumed income. We believe thus would be carrying the artifice too far. xxx xxx xxx xxx" 9. The submission of Mr. Suryanarayana is that, the High Court of Delhi has relied upon an earlier judgment of a Co-ordinate Bench, in the case of the PRINCIPAL CIT VS IL AND FS ENERGY DEVELOPMENT CO. LTD., TAXMANN.COM (2017) 84 TAXMANN.COM. 10. Mr. Suryanarayana has also relied upon the judgment of Co-ordinate bench of this Court in ITA No.133/2015, The Commissioner of Income Tax and Anr., Vs. M/s. Quest Global Engineering Services Pvt. Ltd., wherein an identical issue was decided against the revenue and in favour of the assessee. In paragraph No. 14, the Co-ordinate Bench of this Court has stated as under: "14. Now we may advert to the second substantial question of law. It is pertinent to note that for Assessment Year 2009-10 the assessee has not earned dividend income. The aforesaid fact has not been disputed by the revenue. It is also relevant to mention that Circular No. 5/2014 dated 11.02.2014 is not ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g them to earn profits. The situation here is therefore, different from the case like Maxopp Investment Ltd. where the assessee would continue to hold those shares as it wants to retain control over the investee company. In that case, whenever dividend is declared by the investee company that would necessarily be earned by the assessee and the assessee alone. Therefore, even that the time of investing into those shares, the assessee knows that it may generate dividend income as well and as and when such dividend income is generated that would be earned by the assessee. In contrast, where the shares are held as stock-in-trade, this may not be necessarily a situation. The main purpose is to liquidate those shares whenever the share price goes upon order to earn profits. In the result, the appeals filed by the revenue challenging the judgment of the Punjab and Haryana High Court in State Bank of Patiala also fail, though law in this respect has been clarified hereinabove." 11. Mr. Sanmathi. E, learned counsel would not contest the aforesaid factual aspect, as highlighted by Mr. Suryanarayana. 12. If that be so, the substantial question of law No. 4 is also without merit and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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