TaxTMI 
TaxTMI 
2012 (11) TMI 586
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.... the order of the ITAT dated 10.10.2008 in four appeals, heard and disposed of through a common order. 3. The brief facts are that the assessee, which had claimed and was granted the benefit of Section 80HHE during an earlier year, claimed benefit of Section 10A for the assessment year 2001-02. The Assessing Officer considered the returns for that year and by his order framed under Section 143(3) on 31.03.2004 disallowed several items. This included the improvements of leased premises which the assessee claimed under Section 37(1). It had spent Rs. 2,76,87,887/- towards expenditure for lease hold premises. A sum of Rs. 2,05,08,030 was claimed as revenue expenditure and the balance was treated as capital expenditure on which depreciation was claimed. The Assessing Officer disallowed this expenditure to the extent of Rs. 2,05,08,030 and allowed the depreciation claimed on the balance. As regards Section 10A the Assessing Officer was of the opinion that the assessee's claim was impermissible on the ground that the assessee has already secured deduction under Section 80HHE for the assessment year 2000-01 and consequently was not permitted deduction under Section 10A for the subseque....
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....pital. Further, the owners were directors of the assessee company. Yet, relying on the decision of Hon'ble Supreme court in the case of Madras Auto Services (P.) Ltd. (supra), it was held that the expenditure incurred on construction of a leased premises by the assessee was deductible as revenue expenditure. This decision may apparently seem to be in contradiction with the decision of Hon'ble Supreme Court in the case of Sarvana Spinning Mills (P.) Ltd., but that is not the case, the reason being that in the latter case the Hon'ble Supreme Court refused to express any opinion on applicability of section 37(1). Thus, the ratio of this case comes to the aid of the assessee even when the expenditure incurred by the assessee on the leased premises extended the capacity of the building to be utilized in a more useful manner for the business. in the case of T V S Lean Logistics Ltd. (supra), the expenditure was incurred by the assessee on construction of a building on the lease-hold land. The Hon'ble Court pointed out that the assessee had incurred expenditure on land and the building was not taken on lease. Therefore, the fiction created by Explanation-1 to section 32(1). The ratio of t....
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....als (P.) Ltd. (supra), pertaining to assessment year 1991-92, squarely covers the case of the assessee except in respect of brick works, which may or may not get covered by the decision of jurisdictional High Court in the case of Hotel Diplomat (supra). In these circumstances, we remand the matter to the AO to find out whether any extra facility was created by way of brick works and connected expenditure, in terms of the decision in the case of Hotel Diplomat, and if yes, the same would be capital expenditure on which depreciation will be deductible. If not, the expenditure would be revenue in nature. Apart from that, the expenditure would be covered by sections 30(a)(ii) in terms of the decision in the case of Ayesha Hospitals (P.) Ltd. (supra). Since it is covered under this provision, there will be no question of invoking the provision contained in Explanation-1 to section 32, as it deals with deduction of depreciation and this conclusion will be in line with the decision of Hon'ble Supreme court in the case of Core Health Care Ltd. (supra). Thus, this ground is treated as allowed for statistical purposes." 6. It was urged that the expenditure in the present case was capital ....
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....ion under Section 10A from the assessment year 1997-98 itself. This Court finds no principle of law or factual basis for such an assumption. The assessee's case throughout has been that it sought to open a unit and was granted permission to do so in a Software Technology Park on 27.4.2004 in Chennai; such being the case, the Assessing Officer appears to have adopted a restrictive interpretation of Section 10A to hold that the assessee can claim the benefit under Section 10A only from the inception of its unit under Section 80HHE. No such implied or express provision to support the findings in that regard can be seen from the Act. 10. As regards the finding of the Assessing Officer vis-à-vis the splitting up of the unit, the assessee's claim was that it set up a unit in Chennai for the first time in March, 2000. Besides a mere statement that the setting up of the unit in Chennai amounted to splitting up of an already existing unit, the Assessing Officer does not seem to have recorded any other finding. This Court is of the opinion that the Section 10A(2)(ii) states that the provision is applicable to an undertaking which "is not formed by the splitting up, or the reconstru....
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....ion 10(2) of the Act." 12. In appeal, the CIT (Appeals) sought a remand report. He also noticed that the assessee filed a certificate during the assessment proceedings to the effect that the "project management services" rendered by the assessee are actually software development services rendered in and outside India, thus eligible to deduction under Section 10A of the Act. The CIT (Appeals) further noticed that the quarterly return filed by the STP unit, Chennai and the documents filed with it showed cumulative export of software, type of software, name of the country to which the exports were made and that 35 software engineers were employed by it for providing the services. The CIT (Appeals) sought a remand report which was given in 16.02.2005. The CIT (Appeals) noticed that in the remand report the Assessing Officer had not taken any objection in respect of the compliance of various conditions or that they have not been fulfilled by the assessee under Section 10A. The relevant discussion is at page 36 of the paper-book: - "Therefore, both the names, i.e. the name of EDS Electronic Data System (India) Private Limited and Electronic Data Systems (India) Private Limited are ....
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....ssessee has claimed deduction of Rs. 3,14,90,305/- in the computation of total income on account of Bad Debts written off not passed through the profit and loss account. Under the provision of section 36(1)(vii), amount of any bad debt or part thereof, which is written off as irrecoverable in the accounts of the assessee for the previous year, is allowable as deduction subject to the following conditions laid down in section 36(2): - (a) The debt has been taken into account in computing the income of the assessee of the previous year in which the amount is written off or of an earlier previous year, or (b) It represents money lent in the ordinary course of business of money-lending which is carried on by the assessee. No deduction in respect of bad debt is allowable under section 36(1)(vii) unless it is written off as irrecoverable in the books of the assessee in the previous year in which claim for deduction is made. No evidences have been furnished to establish that the debts have in fact become bad. In view of the same, the claim of the assessee on account of bad debt is hereby disallowed." 15. The order of the CIT (Appeals) analysed the material availabl....