2020 (9) TMI 1102

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....uce the expenditure incurred in travel, telecommunication etc, both from the Export Turnover as well as the Total Turnover for the purpose of computation of deduction u/s.10A and 10AA of the IT Act without appreciating the fact that the statue allows exclusion of such expenditure only from the Export turnover by way of specific definition of Export Turnover as envisaged by subclause( 4) of explanation 2 below sub-section 8 of section 10A. On the other hand, there is no specific provision in section 10A or 10AA warranting exclusion of above expenses from total turnover also." 2.1 The AO in his draft assessment order had recalculated the deduction u/s 10A/10AA of the Act by reducing the travelling & conveyance, legal & professional and other expenses incurred in foreign currency from the export turnover. 2.2 The DRP in its order dated 21.12.2015 directed the AO to compute the deduction u/s. 10A of the Act after reducing the impugned expenses both from the export turnover as well as from the total turnover. 2.3 The revenue being aggrieved is in appeal before the Tribunal. The ld. DR supported the draft assessment order passed by the AO. 2.4 The ld. AR submitted th....

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....ture that is reduced from the export turnover need to be reduced also from the total turnover, while computing deduction u/s. 10A of the Act. It is ordered accordingly. 3. In the result, the appeal filed by the revenue is dismissed. Assessee's appeal (IT(TP)A No. 686/Bang/2016) 4. The assessee in the original grounds had raised TP issues as well as corporate tax issues. The grounds relating to TP issues were with withdrawn since the assessee had received Resolution under the Mutual Agreement Procedure (MAP) and the same was accepted. Consequent to withdrawal of grounds relating to TP issues, the assessee has filed revised grounds and the same reads as follows:- "1. Re-computation of deduction under section 10A/10AA - Set off of brought forward losses from the profits of Bangalore unit and Mumbai unit prior to computing deduction under section 10A/10AA a. The learned Assessing Officer ("AO") and Dispute Resolution Panel ("DRP") has erred in re-computing the deduction under section 10A/10AA of the Act by reducing the brought forward business losses from the profits of business of Mumbai unit and Bangalore unit before computing deduction under section 10A/10....

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....,166 Less: Set off of brought forward Losses of AY 2005- 06, 2006-07 and AY 2010-11 1,01,40,720   1,01,40,720   Taxable business income 8,17,21,446   8,17,21,446   4.1.1 The AO has reduced the brought forward losses of Rs. 1,01,40,720 from Bangalore (10AA unit) and Mumbai (10A unit) before computation of deduction under section 10A/10AA of the Act. 4.1.2 The DRP in its directions affirmed the view of the AO in his draft assessment order. The relevant finding of the DRP reads as follows:- "14.2 Thus, the Circular has clarified that the losses, if any, are required to be set-off in respect of the profits of the unit eligible for tax holiday before the deduction under section 10A/10AA/1013/1013A of the Act is allowed. The circular is binding on the AO. So there is no infirmity in the action of the AO. As regards reliance of the Assessee on the decision of Jurisdictional High Court in the case of ClT v Yokogawa India (2012) 341 ITR 385 (Kar), the same is totally misplaced as the said decision was on different facts as the AO had adjusted losses of non eligible units from the profits of the eligible unit. Consider....

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....under section 10A is not included in the income of the assessee at all, the question of setting off the loss against such profits and gains of the undertaking would not arise. 4.1.7 The judgment of the Hon'ble High Court of Karnataka was confirmed by the Hon'ble Supreme Court (supra). The order of the Tribunal in assessee's own case, relied on by the ld. DR, is in favour of assessee. The Tribunal distinguished the judgment of the Hon'ble High Court in the case of CIT v. Himatsingike Seide Ltd. 286 ITR 265 and relied on the Hon'ble High Court judgment in the case of Yokogawa India Ltd. (supra) while holding that losses cannot be set off against profits of eligible unit. In view of the judgment of the Hon'ble Apex Court, we direct the AO to calculate the deduction u/s.10A/ 10AA of the Act, without setting off the brought forward losses. It is ordered accordingly. 4.1.8 In the result, ground Nos. 1(a) to 1(d) are allowed. 4.2 Buy-back of shares 4.2.1 During the previous year relevant to assessment year, the assessee had spent a sum of Rs. 8,90,961 on buy-back of shares and debited the same to Profit & Loss account. The expenditure was disallowed by the AO in his draft a....