2015 (1) TMI 875

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....public limited company engaged in the business of development of software and export of software. It is an 100% EOU approved by the STP of India. The assessing officer noticed from Schedule "M" to the financial accounts that a sum of Rs. 17,27,385/- was shown as rent receipt. When that was sought to be clarified, the assessee stated that they were having a branch office at Canada for development of software product. They had entered into a non-cancelable lease for 36 months with the lessor from 01.06.2001 to 31.05.2004. As the company does not carry on any activity other than development of software in Canada and the letting out of the property is inextricably connected with its business operations, the rental income for the period had been....

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....ion 10A?          2. Whether on the facts and in the circumstances of the case, the Honourable Tribunal was right in law in holding while the rent received in respect of sublease should be charged to tax under the head 'income from other sources', the rent paid on principal lease of the very same premises should be allowed in computing the profits of the STP undertaking resulting in artificially lowering the profits of the STP undertaking eligible for deduction under Section 10A? 5. Learned counsel for the assessee contends that Section 10A (1) of the Act has to be read with Sub section (4) of the Act. If so read, the profits of the business of the undertaking as referred to in Section 1....

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....ort of articles or things or computer software shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking." 8. As could be seen from the aforesaid provisions, the opening words of Section 10A of the Act assumes importance. It commences with the words "subject to the provisions of this section". The opening words of sub section 4 of the Act clearly state that "for the purposes of [sub-sections (1) and (1A], the profits derived from export of articles or things or computer software shall be the amount which bears to the profits of the business....