Tribunal grants relief: separate books, sub-contracted work, foreign currency expenses, bad debts.

The Tribunal partly allowed the appeal by granting relief under section 10A for non-maintenance of separate books and sub-contracted work, allowing exclusion of foreign currency expenses from both export and total turnover, and permitting the deduction of bad debts written off in the books.

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Issues Involved:
1. Denial of claim of relief under section 10A due to non-maintenance of separate books of account.
2. Ineligibility to claim relief under section 10A for sub-contracted work.
3. Reduction of expenses pertaining to freight, insurance, and communication charges from 'export turnover' in computing relief under section 10A.
4. Disallowance of bad debts amounting to Rs. 12.72 crores.

Detailed Analysis:

I. Denial of Claim of Relief Under Section 10A Due to Non-Maintenance of Separate Books of Account:
The assessee contended that separate books of account were not required under section 10A as long as the profit/loss of each STP unit could be derived from consolidated books. The CIT (A) had denied the claim citing the need for separate books post the amendment effective from 1.4.2001. However, the Tribunal noted that the requirement for separate books was not explicitly stated in section 10A and referred to the earlier decision in the assessee's own case for AY 2000-01, which held that allocation of indirect costs based on turnover was reasonable. The Tribunal cited the ruling in Smt. Tarulata Shyam v. CIT (108 ITR 345 SC) emphasizing that legislative intent should be gathered from the statute's words without presumption. The Tribunal concluded that the CIT (A) was not justified in denying the claim under section 10A based on non-maintenance of separate books.

II. Ineligibility to Claim Relief Under Section 10A for Sub-Contracted Work:
The CIT (A) held that the assessee was not eligible for relief under section 10A for sub-contracted work as the sub-contractors were also claiming relief under the same section. The Tribunal referred to its earlier decision in the assessee's case for AY 2000-01, which granted relief under section 10A for sub-contracted work, stating that the benefit should be considered based on the assessee's exports. The Tribunal upheld that the assessee was entitled to relief under section 10A for sub-contracted work.

III. Reduction of Expenses Pertaining to Freight, Insurance, and Communication Charges from 'Export Turnover':
The CIT (A) excluded foreign currency expenses from export turnover but not from total turnover, citing his reasoning in the case of Jaipuria Silk Mills (P) Ltd. The Tribunal, however, referred to the decision in iGate Global Solutions Ltd. v. ACIT (112 TTJ 1002) and the Special Bench decision in ITO v. Sak Soft Ltd. (313 ITR AT 353), which held that such expenses should be excluded from both export turnover and total turnover. The Tribunal agreed with these precedents, allowing the exclusion of foreign currency expenses from both export and total turnover.

IV. Disallowance of Bad Debts:
The CIT (A) disallowed the bad debts, stating that the assessee did not follow the proper procedure for write-off. The Tribunal, referencing various judicial pronouncements, including the Supreme Court decision in T.R.F. Ltd. v. CIT (323 ITR 397 SC), held that after the amendment to section 36(1)(vii) effective from 1.4.1989, it was sufficient for the bad debt to be written off in the accounts without proving it had become irrecoverable. The Tribunal concluded that the bad debts written off by the assessee should be allowed as a deduction.

Conclusion:
The Tribunal partly allowed the appeal, granting relief under section 10A for non-maintenance of separate books and sub-contracted work, allowing exclusion of foreign currency expenses from both export and total turnover, and permitting the deduction of bad debts written off in the books.

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