TaxTMI 
TaxTMI 
2009 (1) TMI 884
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.... erred in directing the AO/TPO to rework the additions on account of ALP adjustment. He ought to have appreciated that the rate adopted in the TPO's order is arm's length rate as it represents uncontrolled transactions; 2) The CIT(A) erred in directing the AO to delete the disallowance of depreciation on imported software. He ought to have appreciated that:- i. the payments made on account of software import for in house utilization are in the nature of royalty within the meaning of Explanation 2 under section ii. the assessee has failed to deduct tax at source as per the provisions of sec. 195. iii. Applying the provisions of section 40(a)(i) that the depreciation on software imports is disallowable 3)the CIT(A) erred in deleting the warranty provision amounting to Rs. 6,98,28,965/- disallowed by the AO, following the decision of the ITAT in the case of Wipro Ge Medical Systems Ltd. in ITA No: 322 to 328/B/94. He ought to have appreciated that the decision relied on him in the case of Wipro Ge Medical Systems Ltd. has not become final and appeal before the High Court is pending. The CIT(A) ought to have appreciated that the warranty ....
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....exclude gain on exchange rate fluctuation amounting to Rs. 15,52,56,290/- from the profits eligible for deduction u/s.10A. He ought to have appreciated that as per the ratio of decision of apex Court in 237 ITR 579 in the case of CIT v. Sterling Foods and Pandian Chemicals v. CIT 262 ITR 278 the source of a particular income on which exemption is sought must directly emerge from the running of that undertaking yielding profits. The CIT(A) erred in directing the AO not to exclude interest income received amounting to Rs. 69,61,059/- from the profits eligible for deduction u/s.10A. He ought to have appreciated that as per the ratio of decisions referred above, the source of a particular income on which exemption is sought must directly emerge from the running of that undertaking yielding profits. He ought to appreciated that the decision of the ITAT in the case of the assessee relied on by him has not become final and an appeal before High Court is pending. The CIT(A) erred in remitting back the issue regarding other income, commission and rental income to the AO to evaluate the claim based on the findings given in the appellate order. He ought to have appreciated tha....
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....o the facts of the assessee's case and the decision has not been accepted by the Department and has not become final. The CIT(A) has failed to appreciate that:- i. As per section 80HHE there are two aspects to the software development business. The first limb of the business will be export of computer software which was produced by the assessee itself and exported. The second aspect is that of providing technical services in developing the computer software as per the specification of the client. ii. unlike section 80HHE section 10A applies only to profits derived by an under-taking from the export of articles or things or computer software and not for providing technical services. Even explanation 2(i)(a) to section 10A referred by the CIT(A) is with regard to any computer programme recorded on any disc, tape, perforated media or other information storage device and not with regard to providing technical services. The CIT(A) had failed to appreciate that: i. the assessee filed annual returns before STPI authorities showing that the company had earned export income through data communication as well as onsite consultancy. In view of the above, it....
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....ther erred in holding that the AO has overlooked specific requirement of section 10A(2) but has evaluated the claim u/s 10A by imposing conditions not found in section 10A(2). The CIT (A) was wrong in holding that the decision os the Hon'ble Apex Court reported in 107 ITR 195 is clearly applicable. The CIT(A) erred in holding that the issue before the ITAT in 85 ITD 325 was not whether the expansion resulted in a new unit as no claim to that effect was made by the assessee in that case. He has erred in observing that the Tribunal for the AYs 98-99 and 99-00 in ITA Nos:895 and 896/B/2005 has given a finding on the eligibility of deduction u/s 10A by extensively bringing the details of eligible units, year of commencement, the approval granted by STP and the AO had admitted the claim for earlier years. He ought to have appreciated that the question of allowability of exemption u/s 10A in respect of Bangalore units was not an issue either in the regular assessment or in the appellate proceedings for the AYs 98-99 and 99-00. Further, he ought to have appreciated that the AO on the basis of material available on record had taken a decision that the Bangalore units are eligib....
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....5 and 896/B/2003 which has been challenged before the High Court. The CIT(A)erred in directing the AO to consider only the total turnover and profit of the assessee which are eligible for deduction u/s 80HHC for the purpose of computing deduction u/s 80HHC following the decision of the ITAT in ITA No:881, 882, 895 and 896/B/2003 which has been challenged and pending before the High Court. He ought to have appreciated that while computing the deduction u/s 80HHC total profit of the assessee's business has to be considered and not the profit of the eligible business. The CIT(A) erred in directing the AO not to consider the difference in exchange of Rs. 22.90 crores for exclusion while computing the deduction u/s 80HHC on the ground that the same would fall within the ambit of operational income and exclusion is not warranted. He has erred in directing the AO not to consider Brand fees of Rs. 2.20 crores for exclusion while computing the deduction u/s 80HHC on the ground that the same would fall within the ambit of operational income and exclusion is not warranted. The CIT(A) erred in directing the AO not to consider provision for doubtful debts written back amount....
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...., vide letter dated 8-7-2008 has filed Form of Memorandum of cross objections along with enclosures. The Chairman's letter is reproduced as under: "This is with reference to the above referred appeals filed by the Department against the order dated 9.7.07 of the learned Commissioner of Income-tax (Appeals)-VI, Bangalore [CIT(A)] in our case for assessment year 2004-05. In the said appellate order of the CIT(A) which was received by us on 16.7.2007, relief was granted in respect of many issues and the additions/disallowances made in the order of the assessing officer were sustained only in respect of three principle issues. The grounds of appeal in respect of these issues confirmed by the CIT(A) were finalized by us in consultation with our counsels but it appears that the actual filing of the appeal in the statutory Form 36 was inadvertently omitted. On receipt of notice dated 04.6.2008 (received on 11.6.2008) posting a hearing date only for the department's appeal for the said assessment year, we made enquiries for posting our appeal as well, however, we were informed that the same is not on record. Therefore, we are filing the enclosed Memorandum of cross-objectio....
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....ion 10A: a) the Ld. CIT(A) having appreciated that the amount reckoned as deemed exports are exports as per the EXIM policy erred in excluding the same from the purview of export turnover and thereby concluding that the same is not entitled to deduction under section 10A. (3) Issue of exclusion of foreign taxes (VAT/GST) from export and total turnover: The learned authorities below erred in excluding the foreign tax (VAT/GST) from the export turnover and total turnover and thereby granting a lower deduction under section 10A for the undertaking in software technology parks. Without prejudice, similar amount should have been reduced not only from the total turnover but also from the expenditure incurred by the units under section 10A. (4) Software development centre outside India: a) The learned authorities below erred in stating that on-site is only client's site and the development of computer software in software development centers of the assessee outside India cannot be construed as on-site development of computer software referred to in Explanation 3 to section 10A. Without prejudice, in as much as a proceeding initiated under sectio....
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....essment. (b) Without prejudice to the appellant's right of seeking waiver before the appropriate authority, the appellant begs for consequential relief in the levy of interest under section 234B. 5. Since most of the issues raised by the Revenue as well as the assessee company are common, for the sake of convenience, these appeals are disposed off in a common order. 6. Most of the issues agitated by the either parties in these appeals have since been considered by the Hon'ble Tribunal in the earlier assessment years. Let us first take up the Revenue's appeal for consideration. 7. In the first effective ground, the grievance of the revenue was that the CIT(A) erred in directing the AO/TPO to rework the additions on account of adjustment. He ought to have appreciated that the rate adopted in the TPO's order is arm's length rate as it represents uncontrolled transactions. 7.1. We find that an identical issue was considered by the Hon'ble Tribunal ITA No: 624 and 1178/Bang/2007 dated: 31-10-08 for the AY 2003-04 in the assessee's own case. The Hon'ble Tribunal while confirming the finding of the Ld.CIT(A) had quoted the same and the r....
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....so decided in favour of the assessee company. 9. The third effective ground is with regard to the provision for warranty. The assessee had provided for the incremental warranty expenses in its books amounting to Rs. 6,98,28,965/-. It was the contention of the assessee that such warranty expenses were allowed by the Hon'ble Tribunal for the AYs.98-99 and 99-00. However, the Ld.AO rejected the assessee's contention on the ground that the order of the Hon'ble Tribunal is being challenged before the Hon'ble High Court. Aggrieved, the assessee has reiterated before the Ld.CIT(A) that since this issue is covered by the appellate orders for earlier years, it should be decided in its favour. The Ld.CIT(A) was of the view that the facts of the current year are similar to the facts of the earlier years and following the decision of the Hon'ble Tribunal, he directed the AO to allow the deduction as claimed by the assessee. 9.1. Before us, the Ld.D.R has reiterated what has been stressed by the Ld.AO that the order of the Hon'ble Tribunal had not become final as the Department is pursuing an appeal before the Hon'ble High Court and, as such, the decision of the Ld....
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....ully argued that the Ld. CIT(A) had grossly erred in deleting the addition made following the decisions of the Hon'ble Tribunal which has been challenged before the Hon'ble High Court. On the other hand, the Ld.A.R has brought to our reference that a similar issue was deliberated by the Hon'ble Tribunal for the AY 2000-01 which was followed for the AYs 2001-02 and 02-03 wherein the issue was restored back on the file of the Ld. A.O for re-computation and, therefore, prayed that the same treatment may be handed out for this AY too. 10.3. Rival submissions were carefully considered. We have also critically perused the earlier years' orders of the Hon'ble Tribunal on which strong reliance was placed by the assessee company. The Hon'ble Tribunal had in fact went to the root of the issue and elaborately analysed the matter with a hypothetical example. The relevant portion of its analysis, for ready reference, is reproduced as under: "15.9. As per section 145A of the I.T. Act, it has been made clear that the valuation of purchase and sale of goods and inventory for the purpose of determining the income chargeable under the head "profit and gains of busine....
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....l have to be debited in the manufacturing account. As per decision of Apex Court in the case of Berger Paints India Ltd. 266 ITR 99 provisions of section 43B are also applicable in respect of amount included in closing stock. If Modvat credit available on closing stock is set off before the due date of filing of return, then such amount is available for set off u/s 43B of the I.T.Act. It means that if modvat credit of Rs. 1,32,50,765/- is availed before the due date of filing of return, then there will be no addition. For re-computation, the matter is restored back on the file of the assessing officer." 10.4. Considering the facts and circumstances of the issue and respectfully following the decisions of Hon'ble Tribunal referred supra, for the purpose of re-computation the matter is restored back on the file of the Ld.A.O. 11. The fifth effective ground pertains to allocation of corporate expenses. It was the contention of the assessee company that Wipro Corporate is a set up which evolves the growth plans of the company and the manner in which the plans will be achieved. The medium term and long term vision of the company is defined by the Corporate Division and it evaluate....
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....sidered the submissions of both the parties. We have also perused the decisions of the Hon'ble Tribunal on which the assessee company has placed strong reliance. The order of the Hon'ble Tribunal for the AY 97-98 in assessee's own case in ITA No:651/B/94 has decided the issue in favour of the assessee and relevant findings of the Tribunal is reproduced as under: "27.14. In view of these entire facts of the case and, in the absence of any specific finds by the authorities below that the expenditure is incurred for the various units claiming exemption/deduction in an artificial way of allocating the expenses and that too on surmises is not justifiable. We are, therefore of the opinion that the profits of the undertaking eligible for exemption u/s 10A is correctly worked out and no artificial working can be attributed thereto. The ground taken by the assessee is, therefore, allowed and the order of the Commissioner (Appeals) is reversed in this aspect." 11.5. The Hon'ble Tribunal in its decision in ITA Nos:426,427,468 and 469/Bang/2006 dt:30.5,2008 in assessee's own case has dealt with this issue exhaustively and had concluded that - "6. Another is....
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....l (A) in the above table] was considered by the assessee for computing profit eligible for deduction u/s 10A for the STP units forming part of Wipro Technologies Division. However, the Ld.AO took a stand that only the income which can be held to be directly attributable to the business activity of the units claiming 10A can be treated as part of total turnover. Source of a particular income on which exemption is sought must directly emerge from the running of the undertaking yielding profits. 12.2. After considering the submissions of the either parties, the Ld. CIT(A) had analysed the term "profits derived from export of computer software" referred to in sub-section 1 of section 10A of the Act and also following the yardstick laid down by the Hon'ble Tribunal in assessee's own case for the AY 97-98 for the items such as scrap sales and income were in the nature of reduction of expenses incurred under these heads, the Ld.CIT(A) held that these are to be included in the "profits of the business" for the purpose of computing the deduction u/s 10A. Further, he held that profits on sale of fixed assets have already been excluded by the appellant in computing profits of the bus....
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....mount is received because the sale proceeds when received are more as compared to the price at which the goods were exported on account of exchange rate fluctuation. The exports are made at a price in foreign exchange and the amount is received in India subsequently and, therefore, some gain is there on account of fluctuation. For the purpose of section 80-HHC, the Mumbai Bench in the case of ACIT vs Muthu Mandir Tardev Road, Mumbai (2006) 10 SOT 148 held that exchange gain itself is to be considered as part of the export turnover. Hence, following the decision of the Bench in the case of the assessee for the earlier years, it is held that exchange fluctuation is to be considered as part of the profit of the undertaking eligible for deduction u/s 10A." (3) With regard to interest income also, the Hon'ble Tribunal in its decision referred supra, after deliberating the issue at length has, arrived at a conclusion that - "10.2.................The treatment to be meted out to interest had been under dispute while computing profits of the business u/s 80HHC of the I.T.Act. as per Explanation (baa) to section 80HHC, 90% of the interest is not to be included in the pro....
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....of the opinion that the Ld.CIT(A) was justified in directing the assessing officer not to exclude rent from the receipts for the purpose of computing deduction u/s 10A." 12.8. As the issue dealt with by the Hon'ble Tribunal is similar to the issue on hand, respectfully following the said decision, we direct the AO not to exclude the rent receipt for the purpose of computing deduction u/s 10A. 12.9. With regard to commission and other income, the Revenue has vehemently agitated that the Ld.CIT(A) had no power as per the amended provisions of section 251 of the Act to remit back to the AO. We are in total agreement with the Revenue. As per the amended provisions of section 251 of the Act [Finance Act, 2001 w.e.f. 1/6/2001], the power of CIT(A) in remitting back or set-aside certain issues to lower authorities has been dispensed with. However, we find that no tangible evidence has been brought to our reference by the Ld.A.R to substantiate his claim. In view of the above, the issues of "commission and other income" are restored on the file of Ld.CIT(A) with a direction to decide the issues on merits after affording reasonable opportunities to either parties of being heard. 13.....
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.... quoting Rule 15 of RBI Regulations came to a conclusion that the Ld.CIT (A) was justified in directing the AO to include in export turnover the collections made after the expiry of six months. As the issue before hand is similar which was decided by the Hon'ble Tribunal and respecting its view, we have no hesitation in upholding the action of the Ld. CIT(A) in the matter. 14. The next effective eighth ground is with regard to reimbursement of communication links, incentives, rewards, telecommunication expenses etc., In respect of reimbursement of communication links and other sales performance incentives, the Ld. AO had stated that only the consideration in respect of export of article or things is liable to be taken for the purposes of section 10A. Thus, the AO had concluded that the amount received by the assessee as communication link charges or other rewards and incentives were not a consideration for the export of the software. However, the assessee company's contention was that - "15.1...........The reimbursement of certain expenses was also in the nature of export as the same was paid pursuant to the contract of sale of computer software. Alternatively, if ....
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....itted that the issues stand covered by the decision of the Tribunal in the case of the assessee company for the AYs. 01-02 and 02-03. On the other hand, the ld. D.R urged that the action of the Ld. AO is in order which may be upheld. 14.6. We have carefully considered the submissions of the either parties. We find that the Hon'ble Tribunal has dealt with these issues comprehensively. After considering the pros and cons of the issues, the Hon'ble Tribunal has decided thus - "24.5...........In respect of expenditure incurred on on-site development, the issue stands covered by the order of this Tribunal in the case of lnfosys Technologies Limited. This Bench in the case of Insosys Technologies vide order dated 31st March, 2005 in ITA NO.50/Bang/2001 held in that case that the assessee is involved in developing software. The assessee was not involved in rendering of technical services. Such software are provided through the computer programmes developed by them. Hence, expenses in foreign currency were not to be reduced for ascertaining the export turnover. This bench in the case of M/s.Relq software Pvt. Ltd. in ITA No:767/Bang/2007 vide order dated 16th May 2008 has ....
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....elecom P. Ltd. vs. ITO vide order dated 11th January, 2008 in ITA NO.5/Hyd/2005 and 354/Hyd/2006 held that expenditure incurred on travel and allowances for the purpose of development of software at clients site outside India cannot be excluded from the export turn-over. Similar finding has been given by Chennai Bench vide order dated 15th February 2008 in ITA NO.731/Mad in the case of Changepond Technologies P.Ltd vs ACIT wherein it has been held that expenses on salaries, traveling and other perquisites are to be included in the export turnover. Hence, following the decision of this Bench and considering the decisions of other Benches on this issue, the expenses on traveling etc. cannot be excluded from the export turnover. Income-tax Act does not provide any bifurcation of the expenses incurred outside India. The assessing officer has not brought on record any expenditure which may not be relevant for the purpose of export. Hence, the apportionment is not desirable. We confirm the finds of the learned CIT(A) that such apportionment cannot be done. 24.7. In respect of telecommunication expenses, only those expenses which are relevant for the delivery of software are to be....
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.... u/s 10A. 15.2. Protesting against the action of the Ld. CIT(A), the Revenue has brought up this issue before us for redressal. It was the case of the Revenue that the Ld.CIT(A) has grossly erred in deciding the issue in favour of the assessee by following the decision of Hon'ble Tribunal in the case of Infosys Technologies Limited which has been challenged before the Hon'ble High Court. Another point on which the Revenue found fault with the CIT(A) was that the decision relied on by him was rendered with regard to deduction u/s 80HHC whereas the issue before him was the claim u/s 10A of the Act. It was, further, submitted that the assessee had filed annual returns before the STPI authorities showing the assessee had earned export income through data communication as well as onsite consultancy which shows that it had rendered technical services. The agreements entered into by the assessee with the clients for exporting computer software clearly provides software application development, deployment and support services. To strengthen its stand, the Revenue, further, submitted that the assessee provides technical services in developing software as per the specifications of t....
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....in 161 ITR 320. 16.3. Agitated, the Revenue has come up with the present appeal. The Ld. D.R. had opposed the finding of the Ld.CIT(A) who solely relied on his decision for the AYs.2001-02 and 02-03 in the assessee's own case and merely followed the decision of the Hon'ble Tribunal which has been challenged before the Hon'ble High Court and, therefore, pleaded that the order of the Ld. AO may be upheld on this count. On the other hand, the learned AR submitted that the issue stands covered in favour of the assessee by the decision of the Hon'ble Tribunal referred supra and, as such, the Revenue has no valid point which should be addressed to. 16.4. We have carefully considered the contentions of the either parties and also carefully perused the order of the Hon'ble Tribunal. While deciding an identical issue, the Hon'ble Tribunal cited the following decisions - (1) [12.5.] ITA No: 669 and 804/Ban/05 dated: 22.3.2006 for the AY 2000-01 in the case of assessee company wherein it was concluded that 'we direct the AO to allow set off of loss from 10A units against the other business income of the assessee or income from other sources." &n....
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....f each undertaking established by the assessee in various years, the AO had followed the earlier years order's versions. 17.1. After considering the submissions of either parties exhaustively, critically analyzing the applicability of the provisions of relevant sections of the Act, legal implications and also perusing the various decisions of the Hon'ble Courts on which strong reliance was placed, the Ld.CIT(A) came to the conclusion that the under-takings at Bangalore are eligible for deduction u/s 10A and, accordingly, directed the AO to allow deduction u/s 10A . In respect of the undertakings outside Bangalore, the AO was directed to consider the deduction u/s 10A for each of the undertakings individually as claimed by the assessee and not to treat them as one in each city. 17.2. Aggrieved, the Revenue has come up before us. The elaborate submission of the Revenue has been listed out under ground No. 11 supra. The Ld.D.R had drawn our attention to the fact that the Ld. CIT(A) had decided the issue against the revenue by placing reliance on the decisions of the Hon'ble Tribunal which have not become final as they have been challenged before the Hon'ble High Cour....
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....39;ble Madras Tribunal reported in 85 ITD 442 on his action. On the other hand, the assessee company in its written submission had mainly rebutted the AO's justification in drawing strength from the decision of the Madras Tribunal which had dealt with the issue pertaining to the AYs 87-88 and 88-89 whereas section 90 had undergone a sea change by amendments made to the Act by the Finance Act 1991 and as such the case law relied on by the AO has no relevance to the issue on hand. It was, further, brought on record by the assessee that a similar issue was dealt by the Hon'ble ITAT, Bangalore in assessee's own case for the AYs 98-99 and 99-00 in ITA Nos:881, 882, 895 and 896/Bang/2003 and decided the issue in favour of the assessee. 18.1. Considering the submissions of both the parties and following his earlier finding for the AY 2002-03 and the ruling of the Hon'ble Tribunal for the AYs 98-99 and 99-00 in the assessee's own case, the Ld.CIT(A) directed the AO to grant full foreign tax credit of Rs. 37.28 crores. 18.2. Aggrieved, the revenue has come up before us with a plea that the Ld.CIT(A) was not justified in deciding the issue in favour of the assessee by f....
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....tored back on the file of the learned CIT(A)." 18.5. In view of the above and also the issue before us is a similar one on which the Hon'ble Tribunal has deliberated and arrived at a conclusion cited supra, we are of the considered opinion that this issue should go back to CIT(A) for reconsideration. Accordingly, the issue is restored on the file of the Ld. CIT(A) for reconsideration. 19. The effective thirteenth ground raised is with regard to deduction u/s.80HHC. The Ld.AO had included excise duty and sales tax in the total turnover and adopted the total turnover and profits of the assessee company as the total turnover and profits for the purpose of computing deduction u/s 80HHC. Further, the AO had reduced 90% of other income and profits of offices abroad in arriving at the profits eligible for deduction u/s 80HHC. Reliance is placed on the decision of the special Bench in the case of Pearl Polymers vs DCIT reported in 80 ITD 1 and in the case of CIT vs. Parry Agro Industries Limited reported in 257 ITR 41(Kerr). 19.1. The assesee company's objections are summarized as under: (i) inclusion in total turnover: As per the decision of the Bombay High Court report....
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....tax: "20.1. The above-referred issue stands decided by the apex Court in the case of CIT v. Lakshmi Machine Works 290 ITR 667 and in the case of CIT v. Catapharma (India) P.Ltd. 292 ITR 641. The Apex Court has held that excise duty and sales tax are not to be included in the total turnover. In view of the decision of the Apex Court, the order of the learned CTT(A) on this issue requires no interference ". 19.5. Respectfully following the decisions of Hon'ble Supreme Court which were relied on by the Hon'ble Tribunal referred supra, we are of the considered view that no interference is called for on this issue. Computation of deduction u/s 80HHC. The Ld.CIT (A) directed the Ld.AO to consider only the total turnover and profit of the assessee which are eligible to claim deduction u/s 80HHC for the purpose of computing deduction u/s 80HHC. The Ld.D.R submitted that the Ld.CIT(A) was wrong in deciding the issue by placing reliance on the decision of Hon'ble Tribunal in ITA Nos:881,882,895 and 896/B/2003 which has been challenged before the Hon'ble High Court. However, the Ld.A.R urged that the Hon'ble Tribunal in its decision referred supra for the AYs 2001....
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....Tribunal and the same are hold good for the year under appeal also. 20. The effective fourteenth and last ground of the Revenue is against the deletion of the allocation of selling and general administrative expenses of Wipro Infotech Division to the undertakings at Pondicherry for the purpose of computing deduction u/s 80-IB. 20.1. The Ld. AO had made adjustments to the deduction claimed u/s 80IB in respect of allocation of expenses of Wipro Corporate Division. Considering the issue, the Ld. CIT(A) was of the view that a similar issue had cropped in the assessment years 2001-02 and 02-03 which had been dealt with a finding. Following the same, he had vacated the artificial allocation made over as the above allocation already considered by the assessee in computing the deduction u/s 80-IB. 20.2. Aggrieved, the revenue has come up with the issue before us. The Ld. D.R. argued that the major expenses of Wipro Infotech Division are common and relates to undertakings at Pondicherry and, hence, the allocation of expenditure on the basis of turnover was required to arrive at the correct profit of the undertaking. It was wrong on the part of the Ld.CIT(A) to delete the allocation of co....
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....Act, to remit back to the AO. We are in agreement with the Revenue. As per the amended provisions of section 251 of the Act [Finance Act, 2001 w.e.f. 1/6/2001], the power of CIT(A) in remitting back or set-aside certain issues to lower authorities has been dispensed with. However, we find that no tangible evidence has been brought to our reference by either of the parties to substantiate their respective claims. In view of the above, the issues of "commission and other income", are restored on the file of Ld.CIT(A) with a direction to decide the issues on merits after affording reasonable opportunities to either parties of being heard. 22. Deemed exports not eligible for deduction under section 10A: It was the contention of the Ld. AR that the Ld. CIT(A), having appreciated that the amount reckoned as deemed exports are exports as per the EXIM policy erred in excluding the same from the purview of export turnover and thereby concluding that the same is not entitled to deduction under section 10A. 22.1. The Hon'ble Tribunal in assessee's own case for the AYs 2001-02 and 02-03 had an occasion to consider a similar issue. After an exhaustive deliberation and also drawing s....
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.... development centers of the assessee outside India cannot be construed as on-site development of computer software referred to in Explanation 3 to section 10A. Without prejudice, in as much as a proceeding initiated under section 263 of the Act, the issue was dropped by the learned commissioner of income-tax, Central Circle, Bangalore, the authorities below are precluded from pursuing a different view. It was, further contended that the software development centers outside India were only facilitating the on-site development of computer software in software technology parks. 24.1. After due consideration of the reasoning of the Ld. AO and also forceful arguments of the assessee, the Ld. CIT(A) had confirmed the action of the AO on the ground that the issue was squarely covered by his findings for the AYs. 2001-02 and 02-03. 24.2. We have carefully considered the argument put-forth by the Ld. A.R. and also the reasoning of the Ld. AO and the Ld. CIT (A) in their respective orders. The Hon'ble Tribunal, for the AYs 2001-02 and 02-03 in the assessee's own case had an occasion to deal with an identical issue. After deliberations, the Hon'ble Tribunal had concluded thus - ....
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.... monitors as an integral part of the computers manufactured in the industrial undertakings at Pondicherry and no consideration was either identified or received for the sale of such monitors. Without prejudice, the authorities below ought to have appreciated that if the supply of monitors as an integral part of computers manufactured was a trading activity, the financial result from such a trading could have been only a business loss as no consideration was realized for monitors so sold. It was, therefore, pleaded the actions of the lower authorities may be assailed. 25.2. On the other hand, the Ld.D.R. was of the firm opinion that the decisions taken by the lower authorities were in conformity with the provisions of law and, therefore, does not require any interference at this stage. 25.3. Rival submissions were duly considered. The Hon'ble Tribunal in its order referred supra, has dealt with a similar issue in the assessee's own case for the AYs.01-02 and 02-03, comprehensively. After taking into account the Ld.AO's action, the findings of the Ld. CIT(A) and also a detailed rebuttal submitted by the assessee, the Hon'ble Tribunal has observed thus:- 33.5....