Section 10B computation and related tax issues followed settled precedent, leaving the Revenue's appeals unsuccessful.
Foreign currency expenditure and telecommunication charges attributable to delivery of software outside India were treated as excludible from both export turnover and total turnover for section 10B computation, following binding precedent. Interest under section 234D was held leviable from assessment year 2004-05 onwards in line with earlier decisions. An unreasoned 2% disallowance under section 14A of exempt income was not sustained. Current losses of an eligible unit were required to be set off against profits of other eligible units before deduction under sections 10A and 10B, as already settled by the Supreme Court. On all substantial questions, the Revenue's appeals failed.
Issues: (i) Whether foreign currency expenditure and telecommunication charges relatable to delivery of software outside India are to be excluded from both export turnover and total turnover for deduction under section 10B; (ii) whether interest under section 234D is leviable from assessment year 2004-2005 onwards; (iii) whether disallowance under section 14A of exempt income at 2% without assigning reasons is sustainable; (iv) whether current losses of the eligible unit must be set off against profits of other eligible units before allowing deduction under sections 10A/10B.
Issue (i): Whether foreign currency expenditure and telecommunication charges relatable to delivery of software outside India are to be excluded from both export turnover and total turnover for deduction under section 10B.
Analysis: The controversy was covered by binding precedent holding that amounts excluded from export turnover cannot be included in total turnover for the purpose of computing deduction under the export-oriented unit provision.
Conclusion: The issue was answered in favour of the assessee.
Issue (ii): Whether interest under section 234D is leviable from assessment year 2004-2005 onwards.
Analysis: The question had already been decided against the Revenue in earlier binding decisions of the Court on the same legal point.
Conclusion: The issue was answered in favour of the assessee.
Issue (iii): Whether disallowance under section 14A of exempt income at 2% without assigning reasons is sustainable.
Analysis: The question stood covered by prior precedent which upheld the assessee's challenge to such an unreasoned percentage-based disallowance.
Conclusion: The issue was answered in favour of the assessee.
Issue (iv): Whether current losses of the eligible unit must be set off against profits of other eligible units before allowing deduction under sections 10A/10B.
Analysis: The question had already been concluded by the Supreme Court in favour of the assessee, and the same legal position governed the appeals.
Conclusion: The issue was answered in favour of the assessee.
Final Conclusion: As all substantial questions stood covered against the Revenue, the tax case appeals failed and were dismissed.
Ratio Decidendi: Where the controlling question of law is already settled by binding precedent in favour of the assessee, the same view must be applied in subsequent appeals on identical issues.
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AI Drafter ✕
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