TaxTMI 
TaxTMI 
2012 (10) TMI 117
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....sions of law that in order to be eligible for exemption u/s 10A, the undertaking should not be established by splitting up / reconstruction of the existing business of the assessee." 2. The relevant undisputed facts narrated by the Ld CIT(A) in para Nos. 2.1 to 2.4 of the first appellate order are being reproduced hereunder : "2.1 The facts of the case as discussed in the assessment order are that Persistent Systems Pvt. Ltd. (Persistent) commenced its operations during March, 1991 from the Software Technology Park located at Electronic Sadan, MIDC Bhosari, Pune. The appellant claimed that during the year 2000, it had set up a new undertaking called a STP Unit- 2. In the current year, the appellant claimed that Unit-1 was discontinued and all activity is carried out only from Unit. In this context, the Assessing Officer referred to the STP registrations over the years and noted that the first year of the appellant was F.Y. 1990-91 relevant to the Assessment Year 1991-92 and thereafter the activity was carried out from several locations. The appellant had treated all these locations as extension or modification to the first STP unit. The appellant claimed that it had started secon....
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....ating a small part of the income for the F.Ys. 2000-01 & 2001-02 as part of the new unit and exemption was claimed on the same. 2.2. The appellant filed an intimation to STPI stating that it was closing its first unit vide letter dated 26-3-2002, to claim that the entire income for the F.Y. 2002-03 was only income from the 2nd unit operating from Bhagirath building as exempt under section 10A of the Act. According to the Assessing Officer, the appellant made the said application to STPI to treat the existing Panini building of unit-1 as part of new unit 2. The Assessing Officer noted that as the new unit started in F.Y. 2000-01, the income was treated as arising from the 1st unit and from 2nd unit for the F.Ys. 2000-01 & 2001-02 and the appellant claimed that both the units were in operation. In this context, referring to details of turnover of unit-1 & unit-2 and profits thereon fro the A.Ys.2000-01 to 2003-04 on page-7 of the assessment order, the Assessing Officer noted that while unit-1 had turnover of Rs.15.61 crores in A.Y. 2000-01 which went up to Rs. 27.45 crores in the next year, the appellant showed huge decline in turnover of this unit and finally in A.Y. 2003-04 claime....
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....from old unit to new unit as per detailed submitted by the appellant. According to the Assessing Officer, the most important thing was that the appellant started unit-1 in F.Y. 2000-2001 from rented buildings, namely Panini & Corporate Plaza and own building Kapilvastu and started unit-2 in Panini building after its renovation in F.Y. 2002-03, the operations in rented building Corporate Plaza had been stopped and thus, the entire premises of the old unit were used for the new unit started in the F.Y. 2002-03. The Assessing Officer also referred to the cumulative position of the assets transferred as on 31-3-2003 as submitted by the appellant on page-11 of the assessment order, where the Assessing Officer noted that out of the value of net block of Rs.34,72,53,703/-, value of assets transferred was Rs.3,31,80,557/-, suggesting that the ratio of value transferred from old unit to new unit was 9.5%. The Assessing Officer observed from the list of customers for the A.Y. 2001-02 of the unit-1 and unit-2 that Informix and TeamOn were common customers of the appellant in so far as sales to Informix in unit-1 were Rs.47,02,908/- and TeamOn were Rs.2,30,81,935/- as well as sales of Rs.19,54....
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....elief given by the Ld CIT(A) on the above grounds of the present appeal whereas the assessee has questioned the first appellate order whereby the Ld CIT(A) has sustained the disallowance u/s. 10A in respect of turnover of Rs.4,62,95,445/- vide grounds of the appeal filed by it (ITA No. 33/PN/2009). Thus, the issue involved in the grounds of the appeals preferred by the party is as to whether A.O was justified in disallowing the deduction claimed u/s. 10A in respect of Rs.9,87,88,632/-. 4. In support of the grounds of the appeal preferred by the Revenue, the Ld. D.R. has basically placed reliance on the assessment order. His main argument remained that there is a link between the old unit and new unit by way of continuation of old building, 44% of the employees from the old units working in the new unit, transfer of certain old plant and machinery in the new undertaking when the assessee had no separate asset registered and 244 items were transferred, the turnover of the older unit increasing from 15.61 Crores in A.Y. 2000-01 to Rs. 27.45 Crores in A.Y. 2001-02 which declined and then was ultimately closed in 2002. The old customers were being serviced from the new unit to claim de....
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....sallowed claimed deduction u/s. 10A of the Act on the sales of Rs.9,87,88,632/-. The Ld CIT(A) has restricted the disallowance of the deduction upto sales turnover of Rs.4,62,95,445/-. While doing so, the authorities below had failed to appreciate that for consideration of deduction u/s. 10A of the Act, the test was as to which unit had executed the work under the contract. He submitted that contract is received by assessee and not by unit-1 or unit-2 as the customer does not know unit-1 or unit-2. The execution of work by the eligible unit is important ignoring the old contract/old customers. The Ld. A.R. asserted that the assessee had not claimed deduction u/s. 10A on the work executed by old unit as not eligible due to lapse of time. In the A.Y. 2003-04, only unit No.2 was in existence. 7. Having gone through the contents of provisions laid down u/s. 10A, we find substance in the above contention of Ld. A.R. that deduction u/s. 10A is available on the profits and gains derived by an undertaking from the export of articles or things or computer software for a period of 10 consecutive Assessment Years. For a ready reference, the relevant extract of Section 10A(1) of the Act is be....
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....2009 9. The assessee questioned first appellate order on the following grounds : "1. The learned Commissioner of Income Tax (Appeals) erred in confirming the action of the learned assessing officer in denying the claim under section 10 A in respect of revenues of Rs.4,62,95,445/- on the ground that the contracts with the customers from whom these revenues were earned were entered in to prior to the commencement of the new unit. 2. The learned Commissioner of Income Tax (Appeals) failed to appreciate that the contracts entered into were only master services agreements containing the broad terms of engagement, and the actual work from which the revenue of Rs.4,62,95,445/- was earned was executed from the new unit." 10. The issue involved in these grounds has already been adjudicated hereinabove in ITA No. 290/PN/2009. Following the decision taken therein, these grounds are allowed. 11. Besides, the following additional grounds have been raised by the assessee with request to allow the same adjudication of the Bench : "That the learned assessing officer has erred in law and facts in not considering interest income as eligible for deduction under Section 10A of the Income tax Act....