TaxTMI 
TaxTMI 
2013 (1) TMI 110
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....f its Bangalore unit (STPI unit). It had incurred a loss in respect of its Mumbai Unit (Non STPI Unit) amounting to Rs.6,88,037/-. Besides this, the assessee company also had brought forward losses of STPI unit (Bangalore unit) to the extent of Rs.3,81,67,509/-. The assessee had claimed deduction under section 10A of the Act without setting off the carry forward losses as well as the loss of the current year pertaining to Non-STPI unit (Mumbai Unit). The Assessing Officer completed the assessment under section 143(3) of the Act by calculating deduction under section 10A of the Act after setting off the unabsorbed loss of the same unit and the current year's loss of the Mumbai unit (non-STPI unit). The observation of the Assessing Officer reads as follows:- "3.7 I also hasten to add here that by virtue of very words shall be allowed from the total income of the assessee makes it amply clear that all the losses whether relating to STP unit or otherwise should be set off. Though the S.10A speaks of deduction of profits derived from an undertaking exporting computer software, articles or things, it clearly specifies that it has to be allowed from the total income ....
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....ought forward losses while arriving at the business profits for the purpose of deduction under section 10A of the Act. ii) The learned CIT(A) failed to appreciate that for the assessment year 2003-04 and 2004-05, the company has opted out of the STPI scheme and has filed declaration under section 10A(8) of the Act along with its return of income. As such, the losses of the previous years are deemed to be treated as non-STPI losses and thus, cannot be set off against the profits of the STPI unit while computing deduction under section 10A of the Act. iii) The learned CIT(A) also erred in stating and upholding the Assessing Officer's contention that the assessee company failed to produce the evidence to support that the undertaking under section 10A(8) was filed for the earlier years. He should have taken cognizance of the fact that the sad undertaking was filed with the Assessing Officer along with return of income for assessment years 2003-04 and 2004-05. The learned CIT(A) ought to have appreciated that the requirement under section 10A(8) is procedural in nature and the filing of the 10A(8) undertaking along with the return of income is....
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....its and gains of the undertaking would not arise. 3.6.1 It was submitted that the Hon'ble High Court, in the case of Yokagawa, has not made any distinction between 10A and non-10A units. All through the order, it talks of an unit. After giving a finding that the losses/unabsorbed depreciation cannot be set off against the profits for 10A computation, it analyses non-10A units and gives a finding that the decision applies to non-10A unit (para 30). Hence, the decision applies to single STP unit cases also. 3.6.2 It was further submitted by the learned AR that the Hon'ble Bangalore Bench of the Tribunal has given two contrasting decisions/orders after considering the judgment of the Hon'ble Karnataka High Court in the case of Himatsingike Seide Ltd. 286 ITR 255. Those two decisions are - i) 24/7 Customer Pvt. Ltd. assessment year 2004-05 (ITA No. 295/09 dated 7/8/2009); ii) Intellinet Technologies assessment year 2004-05 (ITA No. 1021/09 dated 12/3/2010) It was submitted by the learned AR that in the case of Intellinet Technologies, the Hon'ble Tribunal had placed total reliance on Himatsingike Seide Ltd., while in the case of 24/7....
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....ear will not be counted for reckoning the 10 years mentioned in 10A(1) - if the declaration is not filed, even the loss year will be counted for the 10 years. Therefore the declaration under section 10A(8) has no relevance for the issue whether brought forward losses of earlier years has to be set off from profits, while computing 10A deduction. The CIT(A) has mentioned that proper evidence was not produced to prove that the declaration was filed. It is not mentioned as to what was the evidence he perused and why he considers it not proper. The only evidence available is the return of income filed. Along with the return, several annexures were also filed, including inter alia, the declaration under section 10A(8). From the list of annexures also filed, it can be seen that the declaration was at S.No.4, whereas there were totally 9 annexures. So, the claim cannot be an afterthought. When the return of income is filed, the dept. gives acknowledgement by affixing the seal on the first page. The dept. does not affix the acknowledgement seal on all the an....
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.... income of an assessee as arrived at. Chapter VI-A deductions are the last stage of giving effect to all types of deductions permissible under the Act. At the end of this exercise, the total income is arrived at. Total income is thus, a figure arrived at after giving effect to all deductions under the Act. There cannot be any further deduction from the total income as the total income is itself arrived at after all deductions. 20. From the aforesaid discussion it is clear that the income of 10A unit has to be excluded before arriving at the gross total income of the assessee. The income of 10A unit has to be deducted at source itself and not after computing the gross total income. The total income used in the provisions of section 10A in this context means the global income of the assessee and not the total income as defined in section 2(45). Hence, the income eligible for exemption u/s 10A would not enter into computation as the same has to be deducted at source level. -------------------------------------------------------------- 31. After making all such computation the assessee would be entitled to the benefit of....
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.... set off against the income of 10-A unit u/s 72. The loss incurred by the assessee under the head profits and gains of business or profession has to be set off against the profits and gains if any, of any business or profession carried on by such assessee. Therefore as the profits and gains under section 10-A is not be included in the income of the assessee at all, the question of setting off the loss of the assessee of any profits and gains of business against such profits and gains of the undertaking would not arise. Similarly, as per section 72(2), unabsorbed business loss is to be first set off and thereafter unabsorbed depreciation treated as current years depreciation u/s 32(2) is to be set off. As deduction u/s 10A has to be excluded from the total income of the assessee, the question of unabsorbed business loss being set off against such profit and gains of the undertaking would not arise. In that view of the matter, the approach of the assessing authority was quite contrary to the aforesaid statutory provisions and the appellate Commissioner as well as the Tribunal were fully justified in setting aside the said assessment order and granting the benefit of section 10A to be....
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....n under section 10A of the Act without setting off the loss incurred in the current year pertaining to the non-STPI unit (Mumbai Unit). The Assessing Officer completed the assessment under section 143(3) of the Act by calculating deduction under section 10A of the Act after setting off the loss of the current year in respect of the Mumbai Unit. 5.3 Aggrieved, the assessee carried the matter in appeal before the first appellate authority. 5.4 The first appellate authority partly allowed the appeal of the assessee. The CIT(A) directed the Assessing Officer not to set off the loss of non-STPI unit amounting to Rs.6,88,037/- against the income of STPI unit while calculating deduction under section 10A of the Act. The CIT(A) followed the orders of the Tribunal in the following cases:- * DCIT v Yokogawa India Ltd.; * ITO v M/s Aditi Technologies Pvt. Ltd. * Nous Infosystems Pvt. Ltd. v ITO ITA No.1042/Bang/07 & * ITO v SCT Software Solutions India Private Limited - ITA No.1014/Bang/2004. 5.5 The relevant finding of the CIT(A) reads as follows:- "Once it is an undisputed ....
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....supplied) 5.10 The finding of the Hon'ble High Court is reproduced at para 3.9 (supra) of the assessee's appeal. Hence, the same is not reiterated here. Respectfully following the dictum laid down by the Hon'ble jurisdictional High Court in the case of Yokogawa India Ltd. (supra), we hold that the deduction u/s 10A/10B of the Act is to be calculated without setting off of the loss incurred by the assessee in respect of the non-STPI unit. It is ordered accordingly. Hence, ground no.2 is rejected. 6. Ground No.3 : The Assessing Officer, while calculating deduction under section 10A of the Act, has excluded telecommunication expenses of Rs.2,31,06,882/- and travelling expenses of Rs.3,30,61,328/- incurred in foreign currency from the export turnover. As a result of exclusion of the above said expenses from the export turnover while calculating the deduction under section 10A of the Act, the quantum of deduction under section 10A of the Act was reduced. 6.1 Aggrieved, the assessee carried the matter in appeal before the first appellate authority. 6.2 It was submitted during the appellate proceedings that the Assessing Officer had erred in reducing the telecommunication expe....
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.... ........In section 10A, not only the word 'total turnover' is not defined, there is no clue regarding what is to be excluded while arriving at the total turnover. However, while interpreting the provisions of section 80HHC, the courts have laid down various principles, which are independent of the statutory provisions. There should be uniformity in the ingredients of both the numerator and the denominator of the formula, since otherwise it would produce anomalies or absurd results. Section 10A is a beneficial section which intends to provide incentives to promote exports. In the case of combined business of an assessee, having export business and domestic business, the legislature intended to have a formula to ascertain the profits from export business by apportioning the total profits of the business on the basis of turnovers. Apportionment of profits on the basis of turnover was accepted as a method of arriving at export profits. In the case of section 80HHC, the export profit is to be derived from the total business income of the assessee, whereas in section 10-A, the export profit is to be derived from the total business of the undertaking. Even in the cas....
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.... sub-section (4). Export turnover also forms a constituent element of the denominator in as much as the export turnover is a part of the total turnover. The export turnover, in the numerator must have the same meaning as the export turnover which is constituent element of the total turnover in the denominator. The legislature has provided a definition of the expression "export turnover" in Expln.2 to s.10A which the expression is defined to mean the consideration in respect of export by the undertaking of articles, things or computer software received in or brought into India by the assessee in convertible foreign exchange but so as not to include inter alia freight, telecommunication charges or insurance attributable to the delivery of the articles, things or software outside India. Therefore in computing the export turnover the legislature has made a specific exclusion of freight and insurance charges. The submission which has been urged on behalf of the revenue is that while freight and insurance charges are liable to be excluded in computing export turnover, a similar exclusion has not been provided in regard to total turnover. The submission of the revenue, however, misses the....