Tribunal Decision: Appeals Partly Allowed, Assessments Reviewed, Tax Relief Considered

The Tribunal partly allowed the appeals, with some issues restored for fresh consideration and others decided in favor of the assessee based on consistent judicial reasoning. The Tribunal directed the AO to consider the Double Taxation Avoidance Agreement with New Zealand and Japan for relief under sections 90 and 91. Deduction of common management and facility expenses under section 10A was dismissed as not pressed. The Tribunal allowed the claim for exemption under section 10A for the relevant assessment year and directed the AO to compute deductions under sections 80HHC and 80HHE based on separate books of account.

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Issues Involved:
1. Deduction of common management and facility expenses in computing income eligible for exemption u/s 10A.
2. Claim for relief u/s 90 and 91.
3. Deductibility of taxes paid outside India under sec. 37(1) r.w.s 40(a)(ii) and section 2(43).
4. Claim for deduction u/s 80HHC.
5. Claim for exemption u/s 10A.
6. Claim for deduction u/s 80HHE.
7. Disallowance of provision for pension made for the Managing Director.
8. Head of income under which interest income is assessable to tax.

Detailed Analysis:

1. Deduction of Common Management and Facility Expenses in Computing Income Eligible for Exemption u/s 10A:
The assessee did not press this issue during the hearings, and thus, it was dismissed as not pressed.

2. Claim for Relief u/s 90 and 91:
The appellant contested the denial of relief under section 90 for taxes paid outside India, arguing that the CIT (A) wrongly concluded there was no double taxation due to the 100% deduction under section 80HHE. The Tribunal noted that similar issues had been restored to the file of the AO in previous years, directing the AO to consider the Double Taxation Avoidance Agreement (DTAA) with New Zealand and Japan. The Tribunal followed its earlier decisions and restored the matter to the AO for fresh consideration, treating the grounds as allowed for statistical purposes.

3. Deductibility of Taxes Paid Outside India:
The Tribunal upheld the decision that taxes paid outside India are not deductible under sec. 37(1) r.w.s 40(a)(ii) and section 2(43), referencing its earlier decision for AY 1993-94 and relevant case law, including the Supreme Court's decision in Smith Kline and French (India) Ltd. and the Madras High Court's decision in CIT vs. Kerala Lines Ltd.

4. Claim for Deduction u/s 80HHC:
The assessee's claim for deduction u/s 80HHC was initially restricted by the AO, who included the total turnover of the entire company rather than just the unit making the export. The Tribunal, referencing decisions of the Madras High Court and its own previous decisions, directed the AO to compute the deduction based on the separate books of account maintained for the specific unit, thus allowing the ground.

5. Claim for Exemption u/s 10A:
For AY 1998-99, the Tribunal denied the claim for exemption u/s 10A based on the amendment effective from 1.4.1999, which was not applicable for that year. However, for AY 1999-2000, the Tribunal allowed the claim as the amended provisions were applicable from the first day of the assessment year. The Tribunal followed the Karnataka High Court's decision in CIT vs. M/s. DSL Software Ltd.

6. Claim for Deduction u/s 80HHE:
The Tribunal decided in favor of the assessee, directing the AO to compute the deduction u/s 80HHE based on the separate books of account maintained for the specific unit, following its decision on a similar issue under section 80HHC.

7. Disallowance of Provision for Pension:
The Tribunal allowed the assessee's claim for provision for pension for the Managing Director, following its earlier decision for AY 1996-97 and the Supreme Court's ruling in Bharat Earth Movers, which established that a business liability, though to be discharged in the future, is deductible if it is capable of being estimated with reasonable certainty.

8. Head of Income Under Which Interest Income is Assessable:
The Tribunal upheld the decision to assess interest income under the head "income from other sources," but accepted the assessee's alternative contention to deduct expenses incurred for earning the interest income, thereby directing the AO to exclude only the net interest income from business profits for computing deduction u/s 80HHC.

Conclusion:
The Tribunal's order addressed multiple issues across different assessment years, providing detailed directions for the AO on each matter, largely following precedents and established case law. The appeals were partly allowed, with some issues restored for fresh consideration and others decided in favor of the assessee based on consistent judicial reasoning.

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