Bodhtree Consulting Ltd.,, Hyderabad v. ACIT, Hyderabad

ITA 1554/HYD/2008 | 2004-2005
Pronouncement Date: 14-05-2010 | Result: Dismissed

Appeal Details

RSA Number 155422514 RSA 2008
Assessee PAN AABCB3103D
Bench Hyderabad
Appeal Number ITA 1554/HYD/2008
Duration Of Justice 1 year(s) 6 month(s) 28 day(s)
Appellant Bodhtree Consulting Ltd.,, Hyderabad
Respondent ACIT, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 14-05-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 21-05-2010
Date Of Final Hearing 07-04-2010
Next Hearing Date 07-04-2010
Assessment Year 2004-2005
Appeal Filed On 16-10-2008
Judgment Text
ITA NOS.1591 & 1554/HYD/2008 SHRI BODHTREE CONSULTING LTD. HYDERABAD IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B HYDERABAD BEFORE SHRI G.C. GUPTA VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NO.1591/HYD/2008 A.Y. 2004-05 ACIT RANGE 1 HYDERABAD VS BODHTREE CONSULTING LTD. HYDERABAD (PAN AABCB 3103 D) (APPELLANT) (RESPONDENT) ITA NO.1554/HYD/2008 A.Y. 2004-05 BODHTREE CONSULTING LTD. HYDERABAD (PAN AABCB 3103 D) VS ACIT RANGE 1 HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. NIVEDITA BISWAS DR RESPONDENT BY : SHRI K. VASANT KUMAR O R D E R PER CHANDRA POOJARI ACCOUNTANT MEMBER THESE TWO APPEALS ONE BY THE REVENUE AND THE ANOT HER BY THE ASSESSEE ARE DIRECTED AGAINST THE DIFFERENT ORDERS PASSE D BY THE CIT(A) II HYDERABAD DATED 18.8.2008. SINCE COMMON I SSUES ARE INVOLVED IN THE TWO APPEALS THEY ARE CLUBBED TOGETHE R HEARD TOGETHER AND DISPOSED OFF VIDE THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE WILL TAKE UP THE APPEAL OF THE ASSESSEE. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY HAD FILED THE R ETURN OF INCOME ON 28.10.2004 DECLARING AN INCOME OF RS.1 44 58 3/- DURING THE ITA NOS.1591 & 1554/HYD/2008 SHRI BODHTREE CONSULTING LTD. HYDERABAD 2 2 COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD CLAIMED EXEMPTION U/S 10B TO THE TUNE O F 53 18 173/- BEFORE SETTING OFF THE BROUGHT FORWARD LOSSES OF EARLIE R YEARS. ACCORDINGLY THE ASSESSEE WAS ASKED TO SUBSTANTIATE WHY THE EXEMPTION U/S 10B SHOULD NOT BE ALLOWED AFTER SET OFF OF BROUGH T FORWARD LOSSES. IN REPLY THE ASSESSEE STATED THAT THE EXEMPTION WHICH T HE ASSESSEE IS ENTITLED TO FOR ITS CURRENT YEAR INCOME ARE TO BE DEDU CTED FROM ITS CURRENT YEARS BUSINESS PROFIT AND ONLY THE BALANCE INCOM E HAS TO BE CONSIDERED FOR SET OFF OF B/F LOSSES. IT WAS ALSO STATED TH AT THE QUESTION OF SETTING OFF OF B/F LOSSES ARISES ONLY WHEN THE ASSESSEE HA S A POSITIVE TAXABLE INCOME. AND THE POSITIVE INCOME FIGURE HAS TO BE ARRIVED ONLY AFTER DEDUCTING INCOME WHICH IS EXEMPT FROM TAX. HENCE SECTION.10B INCOME HAS TO BE REDUCED FROM THE CURRENT YEAR PROFIT BEFORE POSITIVE FIGURE IS ARRIVED AND FROM THIS POSITIVE FIGURE B/F LO SSES ARE TO BE SET OFF. THE ASSESSEE ALSO REFERRED TO THE PROVISION OF SEC.72(1) RE LATING TO CARRY FORWARD AND SET OFF OF LOSSES AND ALSO DISTINGUISHED THE P ROVISION OF SEC.10B WHICH IS INCLUDED IN CHAPTER III FROM THE DEDUCTI ON U/S 80HHC AND 80I WHICH FORM PART OF CHAPTER VI OF THE IT ACT. THE EXPLANATION OFFERED BY THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFI CER. THE ASSESSING OFFICER HELD THAT SEC.10B HAS BEEN AMENDED W.E.F. 1.4.2001 AND THE SAME IS TREATED AS A DEDUCTION INSTEAD OF EXEMP TION. ACCORDINGLY THE CLAIM OF DEDUCTION U/S 10B HAS TO BE ALL OWED BEFORE ITA NOS.1591 & 1554/HYD/2008 SHRI BODHTREE CONSULTING LTD. HYDERABAD 3 3 ALLOWING SUCH DEDUCTION. THE ASSESSING OFFICER RELIED ON T HE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CAMBAY ELECTRICITY SUPPLY CO.VS. CIT (GUJ)-II (113 ITR 84). ACCORDINGLY THE ASSESSING OF FICER CONCLUDED THAT THE EXEMPTION U/S 10B IS TO BE ALLOWED AFTER SETT ING OFF OF THE B/F LOSSES. THE ASSESSING OFFICER ALSO FOUND FROM THE TAX AUD IT REPORT THAT OUT OF TOTAL EXPORT TURNOVER OF RS.3 81 00 420/- TUR NOVER OF RS.2 26 30 000 WAS FOR CONSIDERATION IN THE FORM OF EQ UITY SHARES IN A FOREIGN COMPANY. IT WAS STATED THAT THIS AMOUNT WAS A LSO TREATED AS FOREIGN EXCHANGE RECEIVED IN INDIA IN TIME. WHEN ASKE D TO EXPLAIN THE ASSESSEE HAD ENCLOSED A COMMUNICATION FROM RBI WHICH REFER RED TO OVERSEAS DIRECT INVESTMENT IN A JOINT VENTURE IN USA. THE CONTENTION OF THE ASSESSEE THAT THIS AMOUNT IS TO BE TREATED AS FOREIGN EXCHANGE RECEIVED IN INDIA WAS NOT ACCEPTED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE WAS ALLOTTED EQU ITY SHARES IN AN AMERICAN COMPANY IN VIEW OF THE ABOVE SALES. SIN CE THERE WAS NO INFLOW OF FOREIGN EXCHANGE INTO INDIA THE ASSESSING OFF ICER REDUCED THE AMOUNT OF RS.2 26 30 000 FROM THE EXPORT TURNOVER. FURTHER THE ASSESSING OFFICER OBSERVED THAT FROM OUT OF THE EXPENDITU RE INCURRED BY THE ASSESSEE AN AMOUNT OF RS.7 16 389/- WAS TOWARDS INTE RNET/WEB SERVICES WHICH WAS NOTHING BUT COMMUNICATION CHARGES. ACCORDI NGLY PROPORTIONATE AMOUNT FROM OUT OF THE SAME WAS REDUCED FROM THE EXPORT TURNOVER. THE ASSESSING OFFICER MADE A NOTHING T HAT ITA NOS.1591 & 1554/HYD/2008 SHRI BODHTREE CONSULTING LTD. HYDERABAD 4 4 COMMUNICATION EXPENDITURE WAS ALLOWED PROPORTIONATELY ONLY IN RESPECT OF ACTUAL EXPORT TURNOVER CONSIDERED TO HAVE BEEN RECEI VED IN INDIA. CONSIDERING ALL ABOVE THE TOTAL INCOME WAS COMPUTED AT RS.9 22 853/- AND A TAX DEMAND OF RS.3 40 886/- WAS RAISED. 3. ON APPEAL THE CIT(A) DIRECTED THE ASSESSING OFFICER TO COMPUTE THE DEDUCTION U/S 10B BEFORE SETTING OFF OF THE BROUGHT FORWARD BUSINESS LOSS. AGAINST THIS THE REVENUE IS IN APPEAL BEFOR E US. FURTHER THE CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO EXCLUDE TH E COMMUNICATION EXPENSES AT RS.4 25 505/- FROM THE EXPORT TURNOVER AS WELL AS FROM THE TOTAL TURNOVER FOR THE PURPOSE OF CO MPUTING DEDUCTION U/S 10B. AGAINST THIS DIRECTION OF CIT(A) FOR EXCLUSION OF COMMUNICATION EXPENSES FROM THE TOTAL TURNOVER THE REVENUE IS IN AP PEAL BEFORE US. THE ASSESSEE IS IN APPEAL BEFORE US ON THE DIRECTION OF TH E CIT(A) TO EXCLUDE COMMUNICATION EXPENSES AND RS.2 26 30 000/- BEIN G EXPORT EARNINGS RECEIVED IN THE FORM OF EQUITY INVESTMENT IN AN AMERICAN COMPANY FROM THE EXPORT TURNOVER. 4. FIRST WE WILL TAKE UP ASSESSEES APPEAL. THE AUTHOR IZED REPRESENTATIVE SUBMITTED THAT THE AMOUNT HAS BEEN R ECEIVED AT RS.2 26 30 000/- ON ACCOUNT OF EXPORT TURNOVER IN THE FORM OF EQUITY INVESTMENT IN AN AMERICAN COMPANY FOR WHICH THE RESERVE BANK OF INDIA HAS GIVEN PERMISSION TO RECEIVE IN THAT FORM AND AS SUCH IT CANNOT BE ITA NOS.1591 & 1554/HYD/2008 SHRI BODHTREE CONSULTING LTD. HYDERABAD 5 5 REDUCED FROM THE EXPORT TURNOVER OF THE ASSESSEE AND THA T AMOUNT HAS TO BE CONSIDERED FOR THE PURPOSE OF DETERMINING THE DE DUCTION U/S 10B. 5. THE AUTHORISED REPRESENTATIVE DREW OUR ATTENTION TO THE HAND BOOK OF RULES AND PROCEDURES UNDER STP SCHEME BY Y. RANGAIAH AND AND SUBBA RAO P.V. RELATING TO UTILIZATION OF EXPORT VALUE FOR INVESTMENT ABROAD/EXPORTS OF GOODS TOWARDS EQUITY SPECIFI CALLY PARA 9.17: 1. AN INDIAN PARTY EXPORTING GOODS/SOFTWARE/PLANT AND MACHINERY FROM INDIA TOWARDS EQUITY CONTRIBUTION IN A JOINT V ENTURE OR WHOLLY OWNED SUBSIDIARY OUTSIDE INDIA SHALL DECLARE IT ON GR/SDF/SOFTEX FORM AS THE CASE MAY BE WHICH SHALL BE SUPER SCRIB ED AS EXPORTS AGAINST EQUITY PARTICIPATION IN THE JV/WOS/ABORAD AND ALSO QUOTING IDENTIFICATION NO. IF ALREADY ALLOTTED BY RESERVE B ANK. 2. NOTWITHSTANDING ANYTHING CONTAINED IN REGULATION 11 OF THE FOREIGN EXCHANGE MANAGEMENT (EXPORT OF GOODS AND SERVICES) REGULATION 2000 THE INDIAN PARTY SHALL WITHIN 15 DAYS OF EF FECTING THE SHIPMENT OF THE GOODS SUBMIT TO THE RBI A CUSTOM CERTIFIED COPY OF THE INVOICE THROUGH THE BRANCH OF AN AUTHORISED DEALER DESIGNAT ED BY IT. 3. AN ALL PARTY CAPITALIZING EXPORTS UNDER REGULATI ON 10 SHALL WITHIN SIX MONTHS FROM THE DATE OF EXPORT OR ANY FURTHER TIME AS ALLOWED BY RESERVE BANK SUBM IT TO RESERVE BANK COPIES OF THE SHARE CERTIFICATE/S OR ANY DOCUMENT ISSUED BY THE JOINT V ENTURE OR WHOLLY OWNED SUBSIDIARY OUTSIDE INDIA TO THE SATISFACTION OF RESERVE BANK EVIDENCING THE INVESTMENT FROM THE INDIAN PARTY TOG ETHER WITH THE DUPLICATE GR/SDF/SOFTEX FORM THROUGH THE BRANCH OF AN AUTHORISED DEALER DESIGNATED BY IT. (FEM TRANSFER OR ISSUE OF ANY FOREIGN SECURITY REGULATIONS). PARA 9.18 COUNTER TRADE: ANY ARRANGEMENT INVOLVING ADJUSTMENT OF VALUE OF THE GOODS IMPORTED INTO INDIA AGAINST THE VALUE OF GOODS EXPORTED FROM INDIA SHALL REQUIRE THE PRIOR APPROVA L OF THE RBI. ITA NOS.1591 & 1554/HYD/2008 SHRI BODHTREE CONSULTING LTD. HYDERABAD 6 6 6. THE AUTHORISED REPRESENTATIVE FOR THE ASSESSEE FURT HER RELIED ON THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF J.B. BODA & COMPANY (P) LTD. VS. CBDT (223 ITR 27 1) WHERE IN IT WAS HELD THAT WHEN AN ASSESSEE ACTING AS AGENT FOR FOREIGN RE -INSURER COLLECTING BROKERAGE FROM THE CEDING INSURANCE COMPANY IN INDIA AND REMITTING THE SAME TO THE FOREIGN INSURER IN FOREIG N EXCHANGE WITH THE PERMISSION OF THE RESERVE BANK OF INDIA AFTER RETAININ G ITS BROKERAGE IN FOREIGN EXCHANGE THE BROKERAGE INCOME RETAINED BY TH E ASSESSEE IS REPRESENTS INCOME IN CONVERTIBLE FOREIGN EXCHANGE QUALI FYING FOR DEDUCTION U/S 80 0 . FURTHER HE RELIED ON THE ORDER OF THE TRIBUNAL BOMBAY BENCH IN THE CASE OF RAYMOND LTD. VS. DCIT (86 I TD 791) FOR THE PROPOSITION THAT EVEN EQUITY INVESTMENT IN FOREIG N IS DEEMED TO BE RECEIVED BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE. HE RELIED ON MCLEOD RUSSEL (1) VS. DCIT (73 TTJ 349) FOR THE PROPOSI TION THAT EXPENDITURE INCURRED OUTSIDE INDIA IS TO BE INCLUDED FO R DETERMINING THE EXPORT TURNOVER FOR THE PURPOSE OF SEC.10B. 7. ON THE OTHER HAND THE DR SUBMITTED THAT ASSESSEE ST ATED THAT SINCE THE SALES PROCEED IS RECEIVED AND REINVESTED I N EQUITY IT IS DEEMED TO HAVE RECEIVED AND CAN CLAIM DEDUCTION OF SUC H AMOUNT U/S 10B. SHE SUBMITTED THAT SINCE THE SALES PROCEEDS NOT BRO UGHT INTO INDIA IT CANNOT CLAIM DEDUCTION U/S 10B. THE DEPART MENTAL ITA NOS.1591 & 1554/HYD/2008 SHRI BODHTREE CONSULTING LTD. HYDERABAD 7 7 REPRESENTATIVE FURTHER SUBMITTED THAT IT IS NOT DISP UTED THAT SALES PROCEEDINGS HAVE NOT BEEN REPATRIATED IN FOREIGN CONVE RTIBLE EXCHANGE INTO INDIA. THE ASSESSEE HAS NOT BROUGHT THE AMOUNT OF RS.2 26 30 000/- SALES TURNOVER INTO INDIA SINCE IT WAS INVESTED INTO PURCHASE OF EQUITY SHARES IN A FOREIGN COMPANY. THE HAN D BOOK OF RULES AND PROCEDURE UNDER ST SCHEME OF SEPT. 2004 AT PARA 9 .17 PAGE 28 REFERRED BY THE AUTHORISED REPRESENTATIVE TELLS ABOUT THE PROCEDURE FOR FDI IN EQUITY OF A FOREIGN COMPANY. IT DOES NOT SPELL OUT ANY IT BENEFIT FOR SUCH FDI INVESTMENT. HENCE AS PER THE SECTION SPECIFIED SPECIFICALLY MENTIONED THE CONCEPT OF REPATRIATION OF PR OFITS/SALES PROCEEDS INTO INDIA. ONLY THEN THE SOFTWARE COMPANIES CAN AVAIL THE DEDUCTION AND GOVERNMENT WILL NOT LOSE OUT REVENUE IN SUCH EXPORT INCENTIVE SCHEME. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. IN OUR OPINION EXPORT TURNOV ER MEANS THE SALE PROCEEDS OF ANY GOODS OR MERCHANDISE EXPORTED OUT OF IND IA BUT DOES NOT INCLUDE FREIGHT OR INCIDENCE ATTRIBUTABLE TO THE T RANSPORT OF GOODS OR MERCHANDISE BEYOND THE CUSTOMS STATIONS AS DEFINED IN THE CUSTOMS ACT. THE SEC. 10B WAS BROUGHT INTO STATUTE BOOK WITH A OBJECT TO GRANT INCENTIVE TO EXPORT ORIENTED UNDERTAKING ENGAGED IN EXPORT OF ARTICLE OF THINGS OR COMPUTER SOFTWARE. THE DEDUCTION IS MADE AVAI LABLE ON EXPORT ITA NOS.1591 & 1554/HYD/2008 SHRI BODHTREE CONSULTING LTD. HYDERABAD 8 8 OF SOFTWARE TURNOVER THE PROCEEDS WHEREOF ARE RECEIVED IN FOREIGN EXCHANGE. IT IS NOT AVAILABLE ON OTHER EXPORT TURNO VER THE RECEIPTS WHEREOF ARE IN AN INDIAN CURRENCY OR IN CURRENCY WHICH I S NOT A CONVERTIBLE FOREIGN EXCHANGE. THE OBJECT THEREFORE A PPEARS TO BE TO ENCOURAGE MORE INFLOW OF CONVERTIBLE EXCHANGE AND NOT THE MERE EXPORT OF GOODS. MAKING IT AVAILABLE WITH REFERENCE TO THE REALIZATION IN CONVERTIBLE EXCHANGE IS SUGGESTIVE OF THE FACT THAT IT WA S WITH A VIEW TO ENCOURAGE FOREIGN EXCHANGE INFLOW. UNDER THE PROVISIO NS OF S.10B TO AVAIL THE DEDUCTION UNDER THIS SEC. THE UNDERTAKING HAS TO BRING INTO INDIA THE SALE PROCEEDINGS IN CONVERTIBLE FOREIGN EXCHA NGE WHICH SHALL BE PHYSICALLY BROUGHT TO INDIA. REPATRIATION OF THIS RECEIPTS IS THE MAIN CONTENTION IN AVAILING OF SEC.10B. THE SALE PROCEEDS M UST BE RECEIVABLE IN CONVERTIBLE FOREIGN EXCHANGE. THEREFORE THE AVOWED OBJECT IS TO ENCOURAGE INFLOW OF CONVERTIBLE FOREIGN EXCHANGE. IF THAT OBJECT IS KEPT IN MIND AMOUNT RECEIVED IN THE FORM OF INVESTME NT IN EQUITY SHARES IN FOREIGN EXCHANGE CANNOT BE CONSIDERED RECEIVED IN THE FORM OF CONVERTIBLE FOREIGN EXCHANGE. THE SALE PROCEED RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE MEANS THE ACTUAL RECEIPT NOT DEEMED RECEIPT. THE ASSESSEE TAKEN A PLEA THAT THE RBI HAS GIVEN PERMISSION T O MAKE INVESTMENT IN EQUITY SHARES. THE ROLE OF RBI IS LIMITE D TO THE EXTEION OF THE TIME PERIOD WITHIN WHICH THE MONEY IN FOREIGN E XCHANGE RECEIVED CAN BE BROUGHT INTO INDIA. THE RBI IS THE NODAL AGEN CY FOR ALL FOREX ITA NOS.1591 & 1554/HYD/2008 SHRI BODHTREE CONSULTING LTD. HYDERABAD 9 9 MATTERS AND GIVE GUIDE LINES AND PERMISSION TO DEAL WIT H THE FOREIGN EXCHANGE. GIVING THE PERMISSION TO THE ASSESSEE TO RECEIVE FOREIGN EXCHANGE IN THE FORM OF EQUITY INVESTMENT DOES NOT LEA DS TO THE CONCLUSION THAT THE ASSESSEE RECEIVED EXPORT PROCEEDS IN CONVE RTIBLE FOREIGN EXCHANGE. THE RBI HAS NO ROLE TO PLAY OR TO SUGGEST WHETHER ANY INVESTMENT/INCOME FOR CAPITALIZATION OF EXPENDITU RE IS GENUINE OR OTHERWISE IN TERMS OF SEC.10B OF THE IT ACT. THE INVESTM ENT IN EQUITY SHARES BY ASSESSEE IS NOTHING BUT A APPLICATION OF ITS SALES PROCEEDS WITHOUT BRINGING INTO INDIA IN THE FORM OF CONVERTI BLE FOREIGN EXCHANGE. IN OUR HUMBLE OPINION ASSESSEE IS NOT ENTITLED FOR BENE FIT OF SEC.10B ON THIS INVESTMENT OF RS.2 26 30 000/-. FURTHER VARIOU S CASE LAWS CITED BY THE ASSESSEE HAVE BEEN CAREFULLY GONE THROUGH BY US. TH ESE CASE LAWS ARE OF NO ASSISTANCE TO THE ASSESSEE. SINCE THESE ARE DELIVER ED ON DIFFERENT CONTEXT THE JUDGEMENT TO BE READ IN ITS T OTALITY OF ITS CONTEXT IN WHICH THE QUESTIONS AROSE FOR DECISION IN THAT CASE. I T NEITHER DESIRABLE NOR PERMISSIBLE TO PICK OUT A WORD OR A SENTEN CE FROM THE JUDGEMENT DIVORCED FROM THE CONTEXT OF THE QUESTION UNDER CONSIDERATION AND TREAT IT TO BE THE COMPLETE LAW DE CLARED BY THE COURT. THE JUDGMENT MUST BE READ AS A WHOLE AND THE OBSERVAT ION FROM THE JUDGEMENT HAVE TO BE CONSIDERED IN THE LIGHT OF THE Q UESTIONS WHICH WERE BEFORE THE COURT. A DECISION TAKES ITS COLOUR FRO M THE QUESTIONS INVOLVED IN THE CASE IN WHICH IT IS RENDERED AND WHIL E APPLYING THE ITA NOS.1591 & 1554/HYD/2008 SHRI BODHTREE CONSULTING LTD. HYDERABAD 10 10 DECISION TO A LATER CASE IT MUST BE CAREFULLY TRY TO ASCE RTAIN THE TRUE PRINCIPLES LAID DOWN BY THE DECISION. ACCORDINGLY THIS GROUND OF THE ASSESSEE IS DISMISSED. 9. THE NEXT GROUND IN ASSESSEES APPEAL IS W.R.T. EXCLUD ING RS.4 25 505/- BEING COMMUNICATION EXPENSES FROM THE EXPO RT TURNOVER AND THE REVENUE IS IN APPEAL BEFORE US EXCLUDING THE SA ME FROM THE TOTAL TURNOVER. 10. WE HAVE BOTH THE PARTIES AND PERUSED THE MATERI AL AVAILABLE ON RECORD. THIS ISSUE HAS BEEN DECIDED BY TRIBUNAL IN THE CASE OF ITO VS. SAKS SOFT INDIA LTD. (121 TTJ 865) (30 SOT 55) (CHENNAI SPECIAL BENCH) WHERE IN IT WAS HELD THAT FOR THE PURPOSE OF A PPLYING THE FORM UNDER SUB SEC.4 OF SEC.10B THE FREIGHT TELEGRAPH CHARGE S OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF ARTICLES OR THINGS OR COMPUTER SOFTWARE OUTSIDE INDIA OF THE EXPENSES IF ANY INCURRED IN FOREI GN EXCHANGE IN PROVIDING THE TECHNICAL SERVICES OUTSIDE INDIA ARE TO BE EXCLUDED BOTH FROM THE EXPORT TURNOVER AND TOTAL TURNOVER WHICH AR E ENUMERATED OR THE DENOMINATOR RESPECTIVELY IN THE FORMULA. 11. IN VIEW OF THE ORDER OF THE TRIBUNAL WE ARE OF THE OPINION THAT COMMUNICATION EXPENSES TO BE REDUCED BOTH FROM EXPO RT TURNOVER ITA NOS.1591 & 1554/HYD/2008 SHRI BODHTREE CONSULTING LTD. HYDERABAD 11 11 AS WELL AS FROM TOTAL TURNOVER AND AS SUCH WE DO NOT FIN D ANY INFIRMITY IN THE ORDER OF THE CIT(A) APPEAL ON THIS ISSUE AND THE SAME IS CONFIRMED. ACCORDINGLY THIS GROUND IN ASSESSEE APPEAL AS WELL AS RE VENUE APPEAL IS DISMISSED. 12. THE NEXT GROUND IN REVENUE APPEAL WITH REFER ENCE TO SET OFF OF BROUGHT FORWARD BUSINESS LOSS FROM PROFITS AND GAINS OF UNDERTAKING WHILE DETERMINING THE DEDUCTION U/S 10B.. 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. SIMILAR ISSUE CAME UP FOR CONSIDERA TION BEFORE THIS TRIBUNAL VIDE ITS ORDER DATED 11.9.2009 IN THE CASE O F M/S CCL PRODUCTS (I) LTD. IN ITA NOS.150/HYD/2009 & 949/HYD/2009 FOR THE ASSESSMENT YEARS 2000-01 AND 2004-05 AND THE TRIBUNAL AFTER CON SIDERING THE ENTIRE FACTS OF THE CASE HELD AS FOLLOWS: 9. WE HAVE DULY CONSIDERED THE RIVAL CONTENTI ONS AND THE MATERIAL ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT. UNDOUBTEDLY S.10B IS A PART OF CH APTER III OF THE ACT. IT IS TRUE THAT HEADING OF CHAPTER III IS INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME UP TO THE ASSESSMENT YEAR 2001-02 I.E. BEFO RE AMENDMENT OF S.10B BY FINANCE ACT 2000 W.E.F. 1.4.2001. HOWEVER THIS CAPTION OF CHAPTER III CANNOT BE CONCLUSIVE ABOUT THE EXACT PURPORT OF ANY PROVISION CONTAINED IN THE SAID CHAPTER. EARLIER THIS CHAPTER CONTAINED ONLY S.10 WHICH PROVIDED FOR THE EXCLUSION OF SEVERAL INCOMES FROM THE TOTAL INC OME. THE OPENING SENTENCE OF S.10 ITSELF READS AS IN COMPUTING THE TOTAL INCOME OF A PREVIOUS YEAR OF ANY PERSON ANY INCOME FALLING WITHIN ANY O F THE FOLLOWING CLAUSES SHALL NOT BE INCLUDED. THE LANGUAGE OF THIS SENTE NCE CLEARLY INDICATES THAT THE INCOMES OF THE TYPE FALLING WITHIN THE CLAUSES IN S.10 WILL NOT BE INCLUDED IN THE TOTAL INCOME OF A PERSON. IN OTHER WORDS T HESE INCOMES DO NOT ENTER THE COMPUTATION PART AT ALL. SUBSEQUENTLY ALSO S.1 0A WAS FIRST INTRODUCED BY THE FINANCE ACT 1981 W.E.F. 1 ST APRIL 1981 THE SAID PROVISION PROVIDED FOR ITA NOS.1591 & 1554/HYD/2008 SHRI BODHTREE CONSULTING LTD. HYDERABAD 12 12 TOTAL EXEMPTION OF THE INCOME DESCRIBED IN S.10A. SIMILARLY WHEN S.10B WAS INTRODUCED FOR THE FIRST TIME BY THE FINANCE ACT 1 988 W.E.F. 1 ST APRIL 1989 SUB-S(1) THEREOF PROVIDED FOR A CLEAR EXCLUSION OF THE INCOME REFERRED TO IN THE SAID SECTION FROM THE TOTAL INCOME OF AN ASSESS EE. SINCE THESE PROVISIONS PROVIDED FOR TOTAL EXCLUSION FROM THE TOTAL INCOME THEY WERE GROUPED ALONG WITH S.10 IN CHAPTER III OF THE ACT. HOWEVER LATE R ON THE NATURE OF RELIEF PROVIDED BY THESE SECTIONS UNDERWENT A SEA CHANGE I N SO FAR AS THAT TOTAL EXCLUSION OF THE INCOME WAS REMOVED AND ONLY DEDUCT ION WAS PROVIDED W.E.F. 1.4.2001. THIS IS CLEAR FROM THE LANGUAGE USED I N S.10A S.10AA S.10B AND S.10BA. AGAIN S.10C PROVIDES FOR TOTAL EXCLUSION OF THE INCOME DERIVED BY ASSESSEE FROM AN INDUSTRIAL UNDERTAKING IN ANY INTE GRATED INFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE LOCA TED IN THE NORTH EASTER REGION. THUS WHEREVER THE LEGISLATURE HAS INTENDE D FOR TOTAL EXCLUSION OF INCOME IT HAS SPECIFICALLY PROVIDED SO AND WHEREVER IT IS NOT INTENDED THE WORD DEDUCTION HAS BEEN USED IN THOSE SECTIONS. 10. COMING TO THE FACTS OF THE CASE BEFORE US THE ASSESSEE HAS CLAIMED DEDUCTION U/S 10B OF THE IT ACT. ONCE THE DEDUCTIO N U/S10B HAS TO BE ALLOWED THE TOTAL INCOME OF THE UNDERTAKING WILL E NTER THE COMPUTATION AND THEN ONLY DEDUCTION WILL GIVEN TO THE ASSESSEE. IN THIS EVENT THE FINDINGS OF THE CIT(A) CANNOT BE ACCEPTED THAT S.10B IS A SECLU DED PROVISIONS HAD IT BEEN A CASE WHERE TOTAL EXCLUSION FROM INCOME WAS P ROVIDED FOR THEN FOR US THE OBSERVATION OF THE CIT(A) THAT SUCH INCOME CANN OT BE TAKEN INTO CONSIDERATION FOR SET OFF U/S 70 71 OR 72 WOULD NO T BE PROPER. IN THE LIGHT OF ABOVE WE ARE INCLINED TO AGREE WITH THE CONSENT WI TH THE LEARNED DEPARTMENTAL REPRESENTATIVE AND ACCORDINGLY WE CONF IRM THE ORDER OF THE ASSESSING OFFICER THAT 10B DEDUCTION TO BE COMPUTED AFTER SET OFF OF THE UNABSORBED BUSINESS LOSSES AND DEPRECIATION CARRIED FORWARD FROM EARLIER YEARS FOR THE ASSESSMENT YEAR 2004-05. THIS VIEW OF OURS FORTIFIED BY THE ORDER OF THE TRIBUNAL IN THE CASE OF EFUNDS INTERNA TIONAL (P) LTD. VS. DCIT (120 TTJ (DEL.) 305) WHEREIN HELD THAT CARRIED FORW ARD UNABSORBED BUSINESS LOSS OF UNIT ENTITLED FOR DEDUCTION U/S10A CAN BE S ET OFF WITH THE INCOME OF THE OTHER BUSINESS OF THE ASSESSEE. APPLYING THE S AME PRINCIPLE CARRIED FORWARD UNABSORBED BUSINESS LOSS OR UNABSORBED DEPR ECIATION TO BE SET OFF WITH THE BUSINESS INCOME OF THE ASSESSMENT YEAR UND ER CONSIDERATION BEFORE COMPUTING THE 10B DEDUCTION. 10.1. FURTHER THE JUDGEMENT RELIED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE IN THE CASE OF SWORD GLOBAL (I) PVT . LTD. VS. ITO CITED SUPRA WILL ALSO SUPPORT OUR VIEW. 10.2. ACCORDINGLY THE GROUND NO.2 IN THE REVENUE APPEAL IN ITA NO.949 /HYD/2008 ALLOWED. HOWEVER FOR THE ASSESSMENT YE AR 2000-01 THE UNAMENDED PROVISIONS OF S.10B IS APPLICABLE AND INC OME OF E.O.U IS TOTALLY EXEMPTED FROM THE TAX AND IT IS NOT BECOME PART OF THE TOTAL INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2000-01 AS SUCH THERE IS NO QUESTION OF SET OFF OF BROUGHT FORWARD LOSSES OF EARLIER YEARS WITH THE INCOME OF THE ASSESSEE IN THE CURRENT YEAR. ACCORDINGLY GROUND N O.3 IN ITA NO.150/HYD./2009 IS DISMISSED. THE GROUND NO.4IN T HIS APPEAL RELATED TO GROUND NO.3 CONSEQUENTLY THIS GROUND ALSO DISMISSE D. ITA NOS.1591 & 1554/HYD/2008 SHRI BODHTREE CONSULTING LTD. HYDERABAD 13 13 14. RESPECTFULLY FOLLOWING THE ABOVE RATIO LAID DOW N BY THE TRIBUNAL IN ITS ORDER CITED SUPRA WE REVERSE THE ORD ER OF THE CIT(A). BEFORE US THE AR RELIED ON DCIT VS. GLEN MARK LABORA TORIES LTD. (127 TTJ 719). THE FACTS OF THE ABOVE CASE IS ENTIRELY DIFFE RENT FROM THE FACTS OF THE PRESENT CASE. HENCE WE DECLINE TO COMMENT ON THI S ISSUE. 15. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DISMISSED AND THE REVENUE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT : 21.5.2010 SD/- SD/- G.C. GUPTA CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 21ST MAY 2010 COPY FORWARDED TO: 1. M/S BODHTREE CONSULTING LTD. 1-8-617 PRAKASH NAGAR BEGUMPET HYDERABAD 2. ACIT CIRCLE 1 (3) HYDERABAD 3. CIT(A)-II HYDERABAD. 4. CIT HYDERABAD 5. THE D.R. ITAT HYDERABAD. NP