2020 (9) TMI 1102

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....ation 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 that the issue in question is squarely covered by the judgment of the....

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....ting 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 The grounds relating to TP issues were with withdrawn since the assessee had received Resolution under the Mutual Agreement Procedure (MAP) and the same was accepted.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/10AA of the Act. b. The learned AO and DRP has erred in not placing reliance on various judicial precedents including the juri....

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....rward 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. Considering above the objection of the assessee cannot be accepted." 4.1.3 Aggrieved, the assessee is in appeal before the Tribunal. The ld. AR relied on the judgment of the Hon'ble Apex Court in the case of Yokogawa India Ltd. [2017] 77 taxmann.com 41 (SC) . The ld. DR supporte....

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.... 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 assessment order holding the same to be capital expenditure. 4.2.2 The DRP in its directions confirmed the view of the AO. The relevant finding of the DRP reads as follows:- "16.1 The assessee has made submissions on these objections and the same have duly been considered. When a Company buys back share....