Tech Mahindra Ltd, Bangalore v. DCIT, Bangalore

ITA 160/BANG/2011 | 2006-2007
Pronouncement Date: 24-02-2012 | Result: Partly Allowed

Appeal Details

RSA Number 16021114 RSA 2011
Assessee PAN AAACM3484F
Bench Bangalore
Appeal Number ITA 160/BANG/2011
Duration Of Justice 1 year(s) 5 day(s)
Appellant Tech Mahindra Ltd, Bangalore
Respondent DCIT, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 24-02-2012
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 24-02-2012
Date Of Final Hearing 21-02-2012
Next Hearing Date 21-02-2012
Assessment Year 2006-2007
Appeal Filed On 18-02-2011
Judgment Text
PAGE 1 OF 19 ITA NO.201 & 160/BANG /2011 1 INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES B BEFORE SHRI N K SAINI ACCOUNANT MEMBER AND SHRI GEORGE GEORGE K JUDICIAL MEMBER ITA NO.201/BANG/2011 (ASST. YEAR 2006-07) THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-12(4) BANGALORE. VS M/S TECH MAHINDRA LIMITED NO.9/7 HOSUR ROAD BANGALIORE-29. PA NO.AAACM3484F (APPELLANT) (RESPONDENT) ITA NO.160/BANG/2011 (ASST. YEAR 2006-07) M/S TECH MAHINDRA LIMITED NO.9/7 HOSUR ROAD BANGALIORE-29. PA NO.AAACM3484F VS THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-12(4) BANGALORE. (APPELLANT) (RESPONDENT) DATE OF HEARING 21.02.2012 DATE OF PRONOUNCEMENT 24.02.2012 REVENUE BY : SHRI FARAHAT HUSSAIN QUERSHI C IT-II ASSESSEE BY : SHRI PADAM CHAND KHINCHA C.A. O R D E R PER BENCH : THESE APPEALS INSTITUTED BY THE REVENUE AND THE AS SESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-III B ANGALORE DATED 02.11.2010. THE RELEVANT ASSESSMENT YEAR IS 2006-07 . PAGE 2 OF 19 ITA NO.201 & 160/BANG /2011 2 2. SINCE SOME ISSUES ARE COMMON IN BOTH THE APPEAL S AND THEY PERTAIN TO THE SAME ASSESSEE THESE APPEALS ARE HEA RD TOGETHER AND DISPOSE OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVE NIENCE AND BREVITY. FIRST WE SHALL CONSIDER THE REVENUES APPEAL. ITA NO.201/BANG/2011 (REVENUES APPEAL) 3. THE EFFECTIVE GROUNDS RAISED BY THE REVENUE READ S AS FOLLOWS:- II) THE CIT(A) ERRED IN LAW IN DIRECTING THE ASSESSING OFFICER TO EXCLUDE TELECOMMUNICATION EXPENSES AND INSURANCE EXPENSES AMOUNTING TO RS.86 18 618/- AND EXPENSES INCURRED IN FOREIGN EXCHANGE OF RS.22 03 62 997/- TOWARDS PROVIDING MARKETING SERVI CES TO ITS SUBSIDIARY AT USA AND OTHER EXPENSES RELATING TO ONSITE DEVELOPMENT FROM TOTAL TURNOVER FOR THE PURP OSE OF COMPUTING DEDUCTION UNDER SECTION 10A OF THE ACT . III) THE CIT(A) ERRED IN HOLDING THAT THE PROFESSIONAL F ESS OF RS.1 55 890/- PAID BY THE ASSESSEE FOR THE CONSULTAN CY SERVICES AVAILED BY THE ASSESSEE IS ALLOWABLE UNDER SECTION 37 OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE INCURRED THE SAID EXPENDITURE FOR THE VALUATION OF CERTAIN PROPERTIES AT BANGALORE AND CH ENNAI AND TO ASCERTAIN THE TAX IMPLICATIONS ON SALE THERE OF AND THEREFORE THE SAID EXPENDITURE HAD NOTHING TO DO W ITH THE EARNING OF BUSINESS INCOME. 3.1 THE FACTS IN RELATION TO GROUND NO.2 REFERRED ABOVE ARE AS FOLLOWS:- THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE B USINESS OF DEVELOPMENT AND EXPORT OF COMPUTER SOFTWARE. THE A SSESSING OFFICER WHILE COMPUTING DEDUCTION UNDER SECTION 10A OF THE ACT E XCLUDED FROM THE PAGE 3 OF 19 ITA NO.201 & 160/BANG /2011 3 EXPORT TURNOVER THE TELECOMMUNICATION EXPENSES AND INSURANCE EXPENSES AMOUNTING TO RS.86 18 618/- AND ALSO EXPENSES INCUR RED IN FOREIGN CURRENCY IN TOTAL AMOUNTING TO RS.22 03 62 997/-. THE ASSES SING OFFICER HOWEVER DID NOT REDUCE THE ABOVE MENTIONED EXPENSES FROM THE TO TAL TURNOVER IN THE PROCESS OF COMPUTING DEDUCTION UNDER SECTION 10A OF THE ACT. 3.2 AGGRIEVED BY THE RE-COMPUTATION OF DEDUCTION UN DER SECTION 10A OF THE ACT THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 3.3 IT WAS CONTENDED BEFORE THE FIRST APPELLATE AU THORITY THAT THE EXPENSES MENTIONED ABOVE OUGHT NOT TO BE REDUCED FR OM THE EXPORT TURNOVER. ALTERNATIVELY IT WAS ARGUED THAT IF THE E XPENSES ARE REDUCED FROM THE EXPORT TURNOVER THE SAME OUGHT TO BE REDUCED A LSO FROM THE TOTAL TURNOVER WHILE COMPUTING DEDUCTION UNDER SECTION 10 A OF THE ACT. IN SUPPORT OF THE ALTERNATIVE CONTENTION THE ASSESSEE RELIED ON THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S WEBTEK SOFTWARE P. LTD. (2009-TIOL-96- ITAT-BANG). 3.4 THE CIT(A) ALLOWED THE ALTERNATIVE CONTENTION OF THE ASSESSEE AND DIRECTED THE ASSESSING OFFICER TO EXCLUDE THE E XPENDITURE INCURRED TOWARDS TELECOMMUNICATION AND INSURANCE EXPENSES AM OUNTING TO RS.86 18 618/- AND FOREIGN CURRENCY EXPENSES AMOUNTI NG TO RS.22 03 62 997/- BOTH FROM THE EXPORT TURNOVER AS WELL AS FROM THE TOTAL TURNOVER WHILE COMPUTING DEDUCTION UNDER SECTION 10 A OF THE ACT. THE CIT(A) FOLLOWED THE JUDGEMENT OF THE HONBLE MUMBAI HIGH COURT IN THE PAGE 4 OF 19 ITA NO.201 & 160/BANG /2011 4 CASE OF CIT V GEM PLUS JEWELLERY INDIA LTD. (330 ITR 175) AND THE ORDER OF THE SPECIAL BENCH IN THE CASE OF ITO V SAK SOFT LTD . (313 ITR (AT) 353). 3.5 THE REVENUE BEING AGGRIEVED IS IN APPEAL BEFOR E US. 3.6. THE LEARNED DR SUPPORTED THE ORDER OF THE ASS ESSING OFFICER. 3.7 THE LEARNED AR SUBMITTED THAT THE ISSUE IN QUE STION IS DECIDED IN FAVOUR OF THE ASSESSEE BY THE JUDGEMENT OF THE HO NBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE IN ITA NOS.203 & 204/2011 DATED 18/10/2011. 3.8. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUS ED THE MATERIAL ON RECORD. THE HONBLE KARNATAKA HIGH COURT IN ASSES SEES OWN CASE IN ITA NOS.203 & 204/2011 DATED 18 TH OCTOBER 2011 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND DISMISSED THE APPEAL OF THE REVENUE. THE HONBLE HIGH COURT HAD FOLLOWED ITS EARLIER JUDGEME NT IN THE CASE OF CIT V M/S TATA ELXSI LTD. & OTHERS (2011-TIOL-684-HC-KAR- II). THE HONBLE HIGH COURT IN THE CASE OF TATA ELXSI LTD. & OTHERS HAD HELD THAT WHILE COMPUTING THE EXEMPTION U/S 10A IF THE EXPORT TURN OVER IN THE NUMERATOR IS TO BE ARRIVED AT AFTER EXCLUDING CERTAIN EXPENSES THE SAME SHOULD ALSO BE EXCLUDED FROM THE TOTAL TURNOVER IN THE DENOMINATOR . THE RELEVANT FINDING OF THE HONBLE JURISDICTIONAL HIGH COURT READS AS FOLL OWS:- ..SECTION 10A IS ENACTED AS AN INCENTIVE TO EXP ORTERS TO ENABLE THEIR PRODUCTS TO BE COMPETITIVE IN THE G LOBAL MARKET AND CONSEQUENTLY EARN PRECIOUS FOREIGN EXCHAN GE FOR THE COUNTRY. THIS ASPECT HAS TO BE BORNE IN MIN D. WHILE COMPUTING THE CONSIDERATION RECEIVED FROM SUC H EXPORT TURNOVER THE EXPENSES INCURRED TOWARDS FREI GHT PAGE 5 OF 19 ITA NO.201 & 160/BANG /2011 5 TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABL E TO THE DELIVERY OF THE ARTICLES OR THINGS OR COMPUTER SOFTWARE OUTSIDE INDIA OR EXPENSES IF ANY INCURRED IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVIC ES OUTSIDE INDIA SHOULD NOT BE INCLUDED. HOWEVER THE WORD TOTAL TURNOVER IS NOT DEFINED FOR THE PURPOSE OF TH IS SECTION. IT IS BECAUSE OF THIS OMISSION TO DEFINE TOTAL TURNOVER THE WORD TOTAL TURNOVER FALLS FOR INTERPRETATION BY THIS COURT; ..IN SECTION 10A NOT ONLY THE WORD TOTAL TURNOVE R IS NOT DEFINED THERE IS NO CLUE REGARDING WHAT IS TO BE EXCLUDED WHILE ARRIVING AT THE TOTAL TURNOVER. HOW EVER WHILE INTERPRETING THE PROVISIONS OF SECTION 80HHC THE COURTS HAVE LAID DOWN VARIOUS PRINCIPLES WHICH ARE INDEPENDENT OF THE STATUTORY PROVISIONS. THERE SHOU LD BE UNIFORMITY IN THE INGREDIENTS OF BOTH THE NUMERATOR AND THE DENOMINATOR OF THE FORMULA SINCE OTHERWISE IT WOULD PRODUCE ANOMALIES OR ABSURD RESULTS. SECTION 10A I S A BENEFICIAL SECTION WHICH INTENDS TO PROVIDE INCENTI VES TO PROMOTE EXPORTS. IN THE CASE OF COMBINED BUSINESS OF AN ASSESSEE HAVING EXPORT BUSINESS AND DOMESTIC BUSIN ESS THE LEGISLATURE INTENDED TO HAVE A FORMULA TO ASCER TAIN THE PROFITS FROM EXPORT BUSINESS BY APPORTIONING THE TOTAL PROFITS OF THE BUSINESS ON THE BASIS OF TURNO VERS. APPORTIONMENT OF PROFITS ON THE BASIS OF TURNOVER W AS ACCEPTED AS A METHOD OF ARRIVING AT EXPORT PROFITS. IN THE CASE OF SECTION 80HHC THE EXPORT PROFIT IS TO BE DERIVED FROM THE TOTAL BUSINESS INCOME OF THE ASSXCESSEE WHEREAS IN SECTION 10-A THE EXPORT PRO FIT IS TO BE DERIVED FROM THE TOTAL BUSINESS OF THE UNDERT AKING. EVEN IN THE CASE OF BUSINESS OF AN UNDERTAKING IT MAY INCLUDE EXPORT BUSINESS AND DOMESTIC BUSINESS IN O THER WORDS EXPORT TURNOVER AND DOMESTIC TURNOVER. TO T HE EXTENT OF EXPORT TURNOVER THERE WOULD BE A COMMONA LITY BETWEEN THE NUMERATOR AND THE DENOMINATOR OF THE FORMULA. IF THE EXPORT TURNOVER IN THE NUMERATOR I S TO BE ARRIVED AT AFTER EXCLUDING CERTAIN EXPENSES THE SAME PAGE 6 OF 19 ITA NO.201 & 160/BANG /2011 6 SHOULD ALSO BE EXCLUDED IN COMPUTING THE EXPORT TUR NOVER AS A COMPONENT OF TOTAL TURNOVER IN THE DENOMINATOR . THE REASON BEING THE TOTAL TURNOVER INCLUDES EXPORT TUR NOVER. THE COMPONENTS OF THE EXPORT TURNOVER IN THE NUMERA TOR AND THE DENOMINATOR CANNOT BE DIFFERENT. THEREFORE THOUGH THERE IS NO DEFINITION OF THE TERM TOTAL TU RNOVER IN SECTION 10A THERE IS NOTHING IN THE SAID SECTIO N TO MANDATE THAT WHAT IS EXCLUDED FROM THE NUMERATOR T HAT IS EXPORT TURNOVER WOULD NEVERTHELESS FORM PART OF THE DENOMINATOR. WHEN THE STATUTE PRESCRIBED A FORMULA AND IN THE SAID FORMULA EXPORT TURNOVER IS DEFINED AND WHEN THE TOTAL TURNOVER INCLUDES EXPORT TURNOVER THE VERY SAME MEANING GIVEN TO THE EXPORT TURNOVER BY THE LEGISLATURE IS TO BE ADOPTED WHILE UNDERSTANDING TH E MEANING OF THE TOTAL TURNOVER WHEN THE TOTAL TURNO VER INCLUDES EXPORT TURNOVER. IF WHAT IS EXCLUDED IN COMPUTING THE EXPORT TURNOVER IS INCLUDED WHILE ARR IVING AT THE TOTAL TURNOVER WHEN THE EXPORT TURNOVER IS A COMPONENT OF TOTAL TURNOVER SUCH AN INTERPRETATION WOULD RUN COUNTER TO THE LEGISLATIVE INTENT AND IMPERMISSIBLE. THUS THERE IS NO ERROR COMMITTED B Y THE TRIBUNAL IN FOLLOWING THE JUDGEMENTS RENDERED IN TH E CONTEXT OF SECTION 80HHC IN INTERPRETING SECTION 10 A WHEN THE PRINCIPLE UNDERLYING BOTH THESE PROVISIONS IS ONE AND THE SAME. 3.9 THE HONBLE MUMBAI HIGH COURT IN THE CASE OF G EM PLUS JEWELLERY INDIA LTD. (SUPRA) IN IDENTICAL CIRCUMSTA NCES HELD THAT SINCE THE EXPORT TURNOVER FORMS PART OF THE TOTAL TURNOVER I F AN ITEM IS EXCLUDED FROM THE EXPORT TURNOVER THE SAME SHOULD ALSO BE R EDUCED FROM THE TOTAL TURNOVER TO MAINTAIN PARITY BETWEEN NUMERATOR AND DE NOMINATOR WHILE CALCULATING DEDUCTION U/S 10A OF THE ACT. THE RELE VANT FINDING OF THE HONBLE MUMBAI HIGH COURT READS AS FOLLOWS:- PAGE 7 OF 19 ITA NO.201 & 160/BANG /2011 7 THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY TH E UNDERTAKING WOULD CONSIST OF THE TURNOVER FROM EXPO RT AND THE TURNOVER FROM LOCAL SALES. THE EXPORT TURNOVER CONSTITUTES THE NUMERATOR IN THE FORMULA PRESCRIBED BY SUB-SECTION (4). EXPORT TURNOVER ALSO FORMS A CONS TITUENT ELEMENT OF THE DENOMINATOR IN AS MUCH AS THE EXPORT TURNOVER IS A PART OF THE TOTAL TURNOVER. THE EXPO RT TURNOVER IN THE NUMERATOR MUST HAVE THE SAME MEANI NG AS THE EXPORT TURNOVER WHICH IS CONSTITUENT ELEMENT OF THE TOTAL TURNOVER IN THE DENOMINATOR. THE LEGISLATURE HAS PROVIDED A DEFINITION OF THE EXPRESSION EXPORT TUR NOVER IN EXPLN.2 TO S.10A WHICH THE EXPRESSION IS DEFINED TO MEAN THE CONSIDERATION IN RESPECT OF EXPORT BY THE UNDERT AKING OF ARTICLES THINGS OR COMPUTER SOFTWARE RECEIVED I N OR BROUGHT INTO INDIA BY THE ASSESSEE IN CONVERTIBLE FO REIGN EXCHANGE BUT SO AS NOT TO INCLUDE INTER ALIA FREIGH T TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES THINGS OR SOFTWARE OUTSIDE INDIA. THEREFORE IN COMPUTING THE EXPORT TURNOVER THE LEGI SLATURE HAS MADE A SPECIFIC EXCLUSION OF FREIGHT AND INSURA NCE CHARGES. THE SUBMISSION WHICH HAS BEEN URGED ON BE HALF OF THE REVENUE IS THAT WHILE FREIGHT AND INSURANCE CHA RGES ARE LIABLE TO BE EXCLUDED IN COMPUTING EXPORT TURNOVER A SIMILAR EXCLUSION HAS NOT BEEN PROVIDED IN REGARD TO TOTAL TURNOVER. THE SUBMISSION OF THE REVENUE HOWEVER MISSES THE POINT THAT THE EXPRESSION TOTAL TURNOVER HAS NOT BEEN D EFINED AT ALL BY PARLIAMENT FOR THE PURPOSES OF S.10A. HOW EVER THE EXPRESSION EXPORT TURNOVER HAS BEEN DEFINED. THE DEFINITION OF EXPORT TURNOVER EXCLUDES FREIGHT AN D INSURANCE. SINCE EXPORT TURNOVER HAS BEEN DEFINED BY PARLIAMENT AND THERE IS A SPECIFIC EXCLUSION OF FRE IGHT AND INSURANCE THE EXPRESSION EXPORT TURNOVER CANNOT HAVE A DIFFERENT MEANING WHEN IT FORMS A CONSTITUENT PART OF THE TOTAL TURNOVER FOR THE PURPOSES OF THE APPLICATION OF THE FORMULA. UNDOUBTEDLY IT WAS OPEN TO PARLIAMENT TO MAKE A PROVISION WHICH HAS BEEN ENUNCIATED EARLIER MUST PR EVAIL AS A MATTER OF CORRECT STATUTORY INTERPRETATION. ANY OT HER INTERPRETATION WOULD LEAD TO AN ABSURDITY. IF THE C ONTENTION PAGE 8 OF 19 ITA NO.201 & 160/BANG /2011 8 OF THE REVENUE WERE TO BE ACCEPTED THE SAME EXPRES SION VIZ. EXPORT TURNOVER WOULD HAVE A DIFFERENT CONNO TATION IN THE APPLICATION OF THE SAME FORMULA. THE SUBMISSIO N OF THE REVENUE WOULD LEAD TO A SITUATION WHERE FREIGHT AND INSURANCE THOUGH THESE HAVE BEEN SPECIFICALLY EXCLU DED FROM EXPORT TURNOVER FOR THE PURPOSES OF THE NUME RATOR WOULD BE BROUGHT IN AS PART OF THE EXPORT TURNOVER WHEN IT FORMS AN ELEMENT OF THE TOTAL TURNOVER AS A DENOMIN ATOR IN THE FORMULA. A CONSTRUCTION OF A STATUTORY PROVISIO N WHICH WOULD LEAD TO AN ABSURDITY MUST BE AVOIDED. MOREOVE R A RECEIPT SUCH AS FREIGHT AND INSURANCE WHICH DOES NO T HAVE ANY ELEMENT OF PROFIT CANNOT BE INCLUDED IN THE TOTA L TURNOVER. FREIGHT AND INSURANCE CHARGES DO NOT HAV E ANY ELEMENT OF TURNOVER. FOR THIS REASON IN ADDITION THESE TWO ITEMS WOULD HAVE TO BE EXCLUDED FROM THE TOTAL TURN OVER PARTICULARLY IN THE ABSENCE OF A LEGISLATIVE PRESCRI PTION TO THE CONTRARY CIT V SUDARSHAN CHEMICALS INDUSTRIES LTD. (2000) 163 CTR (BOM) 596: (2000) 245 ITR 769 (BOM) APPLIED; CIT V LAKSHMI MACHINE WORKS (2007) 210 CTR (SC) 1: (2007) 290 ITR 667 (SC) AND CIT V CATAPHARMA (IN DIA) (P) LTD. (2007) 211 CTR (SC) 83: (2007) 292 ITR 641 (SC) RELIED ON 3.10 IN THE CASE OF SAK SOFT LTD. (SUPRA) THE ASS ESSEE WAS ENGAGED IN THE BUSINESS OF EXPORTING COMPUTER SOFTWARE AND CLAIMED DEDUCTION U/S 10B OF THE ACT. IN COMPLETING THE ASSESSMENT U/S 1 43(3) OF THE ACT THE AO REDUCED THE EXPENDITURE INCURRED IN FOREIGN EXCH ANGE IN PROVIDING THE TECHNICAL SERVICES OUTSIDE INDIA FROM THE EXPORT T URNOVER WITHOUT CORRESPONDING REDUCTION FROM TOTAL TURNOVER THEREB Y REDUCING THE DEDUCTION CLAIMED BY THE ASSESSMENT U/S 10B OF THE A CT. 3.11 IN LIGHT OF THE ABOVE FACTS THE SPECIAL BENC H HELD AS UNDER:- PAGE 9 OF 19 ITA NO.201 & 160/BANG /2011 9 FOR THE ABOVE REASONS WE HOLD THAT FOR THE PURPOS E OF APPLYING THE FORMULA UNDER SUB-SECTION (4) OF SECTIO N 10B THE FREIGHT TELECOM CHARGES OR INSURANCE ATTRIBUTA BLE TO THE DELIVERY OF ARTICLES OR THINGS OR COMPUTER SOFTW ARE OUTSIDE INDIA OR THE EXPENSES IF ANY INCURRED IN F OREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICES OUTSID E INDIA ARE TO BE EXCLUDED BOTH FROM THE EXPORT TURNOVER AN D FROM THE TOTAL TURNOVER WHICH ARE THE NUMERATOR AND THE DENOMINATOR RESPECTIVELY IN THE FORMULA. THE APPEAL S FILED BY THE DEPARTMENT ARE THUS DISMISSED. 3.12 IN THE LIGHT OF THE ABOVE JUDGEMENTS OF THE H ONBLE HIGH COURTS AND THE ORDER OF THE SPECIAL BENCH WE ARE O F THE VIEW THAT THE CIT(A) IS JUSTIFIED IN DIRECTING THE ASSESSING OFFI CER TO EXCLUDE THE ABOVE MENTIONED EXPENDITURE BOTH FROM THE EXPORT TURNOVER AS WELL AS FROM THE TOTAL TURNOVER WHILE CALCULATING DEDUCTION UNDER SE CTION 10A OF THE ACT. THEREFORE THE ORDER OF THE CIT(A) IS CORRECT AND I N ACCORDANCE WITH LAW AND NO INTERFERENCE IS CALLED FOR. 3.13 IN THE RESULT GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED. 4. THE FACTS IN RELATION TO GROUND NO.3 IN REVENUE S APPEAL ARE AS FOLLOWS:- THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.1 55 890 /- TOWARDS CONSULTANCY FEES PAID TO THE FOLLOWING PARTIES :- M/S C B RICHARD ELLIS SOUTH ASIA PVT. LTD. RS.1 30 890/- M/S CHANAK IQ CONSULTANCY PVT. LTD. RS. 25 000/- RS.1 55 890/- THE ASSESSING OFFICER OBSERVED THAT THE ABOVE EXPEN DITURE WAS INCURRED FOR OBTAINING LEGAL OPINION IN RESPECT OF SALE OF P ROPERTY AND FOR ASSESSING PAGE 10 OF 19 ITA NO.201 & 160/BAN G/2011 10 THE VALUE OF THE PROPERTY SITUATED IN CHENNAI AND BA NGALORE. THE ASSESSING OFFICER HELD THAT THE SAID EXPENDITURE WAS NOT A RE VENUE EXPENDITURE AND ADDED BACK AN AMOUNT OF RS.1 55 890/- TO THE TOTAL INCOME OF THE ASSESSEE COMPANY. 4.1 THE ASSESSEE BEING AGGRIEVED CARRIED THE MATTE R IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4.2 THE FIRST APPELLATE AUTHORITY ALLOWED THE APPE AL OF THE ASSESSEE BY OBSERVING THUS:- BASED ON THE DOCUMENTS PRODUCED BEFORE ME IN MY V IEW IT IS EVIDENT THAT PROFESSIONAL FEES ON ISSUES RELA TING TO ADVICE RECEIVED BY THE COMPANY ARE FOR THE BUSINESS O F THE APPELLANT AND HENCE THE SAME IS ALLOWABLE UNDE R SECTION 37 OF THE ACT. 4.3 AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. 4.4 THE LEARNED DR RELIED ON THE FINDING OF THE AS SESSING OFFICER AND SUBMITTED THAT THE ABOVE SAID EXPENSES ARE FOR THE PURPOSE OF VALUATION OF CERTAIN PROPERTIES AND TO ASCERTAIN THE TAX IMPL ICATIONS ON SALE THEREOF. THEREFORE IT WAS SUBMITTED THAT THE SAID EXPENSES HAVE NOTHING TO DO WITH THE EARNING OF BUSINESS INCOME AND THE EXPENDITURE WAS ON ACCOUNT OF CAPITAL FRONT. 4.5 THE LEARNED AR ARGUED THAT THE ABOVE SAID EXPE NSES ARE INCURRED IN THE NORMAL COURSE OF BUSINESS AND THE S AME IS AN ALLOWABLE EXPENDITURE UNDER SECTION 37 OF THE ACT. PAGE 11 OF 19 ITA NO.201 & 160/BAN G/2011 11 4.6 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS ON RECORD. THE DETAILS OF THE EXPENSES AND THE PUR POSE FOR INCURRING THE EXPENSES ARE NOT DISCUSSED IN DETAIL. WE FEEL THAT THE FACTS ARE NOT VERY FORTHCOMING ON THIS ISSUE. THEREFORE THIS MATTER NEEDS RE-CONSIDERATION AND ACCORDINGLY WE RESTORE THE MATTER TO THE FILE O F THE ASSESSING OFFICER FOR FRESH CONSIDERATION. THE ASSESSEE SHALL PLACE ALL THE DETAILS WITH REFERENCE TO THE EXPENSES BEFORE THE ASSESSING OFFI CER AND HE SHALL DISPOSE OFF THE MATTER AS EXPEDITIOUSLY AS POSSIBLE AFTER AFFORDING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. HENCE GROUND NO.3 IN REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE S. 4.7 IN THE RESULT THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AS INDICATED ABOVE. ITA NO.160/BANG/2011 (ASSESSEES APPEAL) 5. THE ASSESSEE HAS FILED CONCISE GROUNDS OF APPEA L. GROUND NOS.1.1 AND 2.1 RELATE TO THE ISSUE WHETHER THE ASS ESSING OFFICER IS JUSTIFIED IN EXCLUDING EXPENSES OF RS.86 18 618/- BEING TELEC OMMUNICATION AND INSURANCE EXPENSES AND A SUM OF RS.22 03 62 997/- I NCURRED IN FOREIGN CURRENCY FROM THE EXPORT TURNOVER WHILE CALCULATING DEDUCTION UNDER SECTION 10A OF THE ACT. 5.1 THE LEARNED AR IN THE COURSE OF HEARING SUBM ITTED THAT THE CIT(A) DID NOT ADJUDICATE THIS ISSUE. IT WAS STATE D THAT THE ALTERNATIVE PLEA OF THE ASSESSEE NAMELY WHEN EXPENSES ARE REDUCED F ROM THE EXPORT TURNOVER THE SAME SHOULD ALSO BE REDUCED FROM THE TOTAL TURNOVER WHILE PAGE 12 OF 19 ITA NO.201 & 160/BAN G/2011 12 COMPUTING DEDUCTION UNDER SECTION 10A OF THE ACT H AS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V M/S TATA ELXSI LTD. & OTHERS (2011-TIOL-68 4-HC-KAR-II). HENCE IT WAS SUBMITTED THAT THE ISSUES RAISED IN A SSESSEES APPEAL IN GROUND NOS.1.1 AND 2.1 NEED NOT BE ADJUDICATED. THEREFORE GROUND NOS.1.1 AND 2.1 ARE REJECTED. 6. GROUND NO.4.1 WAS NOT PRESSED DURING THE COURSE OF HEARING. HENCE THE SAME IS DISMISSED AS NOT PRESSED. GROUN D NO.6.1 RELATE TO THE ISSUE OF LEVY OF INTEREST UNDER SECTION 234D OF THE ACT. THE LEVY OF INTEREST UNDER SECTION 234D IS HELD TO BE VALID FOR AND FROM THE ASSESSMENT YEAR 2004-05 BY VIRTUE OF THE ORDER OF THE SPECIAL BE NCH IN THE CASE OF ITO V EKTA PROMOTERS PVT. LTD. (305 ITR 1 (AT). H ENCE GROUND NO.6.1 IS REJECTED. 7. GROUND NO.7.1 IS GENERAL IN NATURE AND NO SPECI FIC ADJUDICATION IS CALLED FOR. HENCE THIS GROUND IS REJECTED. 8. THE REMAINING SURVIVING GROUNDS NAMELY GROUND N OS.3.1 5.1 AND 5.2 READS AS FOLLOWS:- 3.1) THE LEARNED DCIT HAS ERRED IN DISALLOWING SOFT WARE EXPENSES OF RS.7 71 400/- AND RS.70 400/- AND THE LEARNED CIT(A)-III HAS ERRED IN CONFIRMING THE ACTI ON OF THE LEARNED DCIT BANGALORE. 5.1 THE LEARNED DCIT HAS ERRED IN SETTING OFF LOSSE S OF NON 10A UNIT AGAINST PROFITS OF 10A UNITS BEFORE COMPUT ING AND ALLOWING DEDUCTION UNDER SECTION 10A AND THE LE ARNED CIT(A)-III HAS ERRED IN CONFIRMING THE ACTION OF TH E LEARNED DCIT BANGALORE. PAGE 13 OF 19 ITA NO.201 & 160/BAN G/2011 13 5.2 THE LOWER AUTHORITIES HAVE ERRED IN NOT ALLOWIN G THE LOSSES OF NON 10A UNITS TO BE SET OFF AND CARRIED F ORWARD IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER VI OF THE ACT. 8.1 THE FACTS IN RELATION TO GROUND NO.3.1 ARE AS FOLLOWS:- THE ASSESSEE IN RESPECT OF ITS BANGALORE UNIT AND CHENNAI UNIT HAD DEBITED A SUM OF RS.7 71 400/- & RS.70 400/- R ESPECTIVELY TOWARDS COMPUTER SOFTWARE EXPENSES. THE ABOVE SAID EXPENSE S WAS TREATED AS CAPITAL IN NATURE AND WAS NOT ALLOWED AS A DEDUCTIO N UNDER SECTION 37 OF THE ACT BY THE ASSESSING OFFICER. ON APPEAL IT WAS ARG UED THAT THE EXPENSES INCURRED FOR COMPUTER SOFTWARE RELATES TOWARDS THE PAYMENT OF ANNUAL LICENCE FEES FOR UTILIZATION OF SOFTWARE FOR BACK O FFICE SUPPORT FUNCTIONS AND ARE BONAFIDE REVENUE EXPENSES ALLOWABLE UNDER S ECTION 37 OF THE ACT. THE CIT(A) HOWEVER REJECTED THE CLAIM OF THE ASSESS EE BY APPLYING THE RATIO OF JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V ASHOK LEYLAND LIMITED (86 ITR 549) AND THE ORDER OF THE SP ECIAL BENCH IN THE CASE OF AMWAY INDIA ENTERPRISES V DCIT (301 ITR (AT) 1). THE CIT(A) CONCLUDED THAT THE SOFTWARE EXPENSES INCURRED BY THE ASSESSEE COMPANY HAVE AN ENDURING BENEFIT AND ARE CAPITAL IN NATURE. THUS THE ASSESSEES CONTENTION ON THIS ISSUE WAS REJECTED. 8.2 THE LEARNED AR SUBMITTED THAT THE ISSUE OF ALL OWANCE OF EXPENDITURE WITH REFERENCE TO PURCHASE OF SOFTWARE HAS BEEN CONSIDERED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT V M/S TOYOTA KRILOSKAR MOTORS PVT. LTD. (ITA NO.174/2009 DATED 2 3 RD MARCH 2011). PAGE 14 OF 19 ITA NO.201 & 160/BAN G/2011 14 8.3 THE LEARNED DR ON THE OTHER HAND SUPPORTED THE ORDERS OF THE INCOME TAX AUTHORITIES. 8.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIALS ON RECORD. THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT V M/S TOYOTA KRILOSKAR MOTORS PVT. LTD. (ITA NO.174/2009 DATED 23 RD MARCH 2011) HAS CONSIDERED WHETHER THE EXPENDITURE IN RES PECT OF PURCHASE OF SOFTWARE IS CAPITAL OR REVENUE. THE HONBLE HIGH C OURT AT PARA 3 OF ITS JUDGEMENT HELD AS FOLLOWS :- AS RIGHTLY POINTED OUT BY THE AUTHORITIES WHEN THE LIFE OF A COMPUTER OR SOFTWARE IS LESS THAN TWO YEARS AND AS SUCH THE RIGHT TO USE IT IS FOR A LIMITED PERIOD THE FEE PAID FOR ACQUISITION OF THE SAID RIGHT IS ALLOWABLE AS REVENUE EXPENDITURE AND THESE SOFTWARE IF THEY ARE LICENCED FOR A PARTICULAR PERIOD FOR UTILISING THE SAME FOR THE SUBSEQUENT YEARS FRESH LICENCE FEE IS TO BE PAID . THEREFORE WITHOUT RENEWING THE LICENCE OR WITHOUT PAYING THE FEE ON SUCH RENEWAL IT IS NOT POSSIBLE T O USE THOSE SOFTWARE. IN THOSE CIRCUMSTANCES THE FINDIN GS RECORDED BY THE AUTHORITIES THAT THE FEE PAID FOR OBTAINING THE SOFTWARE AND THE LICENCE AND FOR RENE WING THE SAME IS TO BE CONSTRUED AS ONLY REVENUE EXPENDIT URE DO NOT CALL FOR INTERFERENCE BY THIS COURT. 8.5 THE SPECIAL BENCH IN THE CASE OF AMWAY INDIA EN TERPRISES V DCIT (301 ITR (AT) 1) HAD LAID DOWN VARIOUS TESTS T O EXAMINE WHETHER THE EXPENDITURE INCURRED FOR PURCHASE OF COMPUTER SOFTW ARE IS CAPITAL OR REVENUE. IN THE INSTANT CASE THERE HAS BEEN NO DI SCUSSION WITH REFERENCE TO THE NATURE OF EXPENDITURE INCURRED BY THE ASSESSEE C ONCERNED AND ALSO THE TESTS LAID DOWN BY THE SPECIAL BENCH IN THE CASE OF AMWAY INDIA PAGE 15 OF 19 ITA NO.201 & 160/BAN G/2011 15 ENTERPRISES. THEREFORE IN THE LIGHT OF THE JUDGEME NT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V M/S TOYOTA KRILOSKAR MOTORS PVT. LTD. (SUPRA) AND THE ORDER OF THE SPECIAL BENC H IN THE CASE OF AMWAY INDIA ENTERPRISES (SUPRA) THIS ISSUE IS RESTORED T O THE FILE OF THE ASSESSING OFFICER TO GIVE AN ELABORATE DISCUSSION ON THE SAME . THE ASSESSEE SHALL PRODUCE THE DETAILS WITH REFERENCE TO THE EXPENDITU RE INCURRED AND SHALL COOPERATE WITH THE ASSESSING OFFICER FOR EXPEDITIOU S DISPOSAL OF THE MATTER. IT IS ORDERED ACCORDINGLY. THEREFORE GROU ND NO.3.1 IS ALLOWED FOR STATISTICAL PURPOSES. 9. GROUND NOS.5.1 AND 5.2 IS REGARDING THE SET OFF OF LOSSES OF TAXABLE UNITS OF THE ASSESSEE AGAINST THE INCOME O F THE EXEMPTED UNITS. 9.1 THE ASSESSING OFFICER WHILE COMPLETING THE ASS ESSMENT HAD SET OFF OF THE BUSINESS LOSSES INCURRED IN THE BANGALO RE TAXABLE UNIT OF THE ASSESSEE AGAINST THE INCOME OF CHENNAI EXEMPT UNIT . IT WAS CONTENDED BEFORE THE FIRST APPELLATE AUTHORITY THAT EACH UNIT IS SEPARATE UNDERTAKING WITHIN THE MEANING OF SECTION 10A AND AS SUCH LOSS ES/PROFITS FROM EACH UNIT WOULD HAVE TO BE DEALT WITH INDEPENDENTLY. 9.2 THE CIT(A) HOWEVER REJECTED THE ASSESSEES CON TENTION. THE CIT(A) FOLLOWED THE ORDER OF THE TRIBUNAL IN THE CA SE OF INTELLINET TECHNOLOGIES INDIA PVT. LTD. V ITO (ITA NO.1021/BAN G/2009) WHICH IN TURN RELIED ON THE JURISDICTIONAL HIGH COURT IN THE CASE OF HIMATSINGKE SEIDE LTD. 286 ITR 255. 9.3 THE ASSESSEE BEING AGGRIEVED IS IN APPEAL BEFO RE US. PAGE 16 OF 19 ITA NO.201 & 160/BAN G/2011 16 9.4 AT THE OUTSET IT WAS POINTED OUT BY THE ASSESS EE THAT THE ISSUE IN QUESTION IS SQUARELY COVERED BY THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V M/S AXA BUSINESS SERVICE S PVT. LTD. & OTHERS (2011-TIOL-711-HC-KAR-II). IT WAS STATED THAT THE H ONBLE JURISDICTIONAL HIGH COURT HAD REVERSED THE ORDER OF THE TRIBUNAL I N THE CASE OF INTELLINET TECHNOLOGIES INDIA (P) LTD. V ITO (SUPRA). IT WAS CONTENDED THAT THE HONBLE JURISDICTIONAL HIGH COURT HAD DISTINGUISHED THE JUDGEMENT OF HONBLE HIGH COURT IN THE CASE OF HIMATASINGIKE SEIDE LTD. (286 ITR 255). 9.5 THE LEARNED DR WAS DULY HEARD. 9.6 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIALS ON RECORD. THE HONBLE JURISDICATIONAL HIGH COURT IN THE CASE OF CIT V M/S AXA BUSINESS SERVICES PVT. LTD. (SUPRA) HAD CATEGOR ICALLY HELD THAT DEDUCTION U/S 10A IS TO BE CALCULATED ON A STAND ALONE BASIS AS INCOME UNDER SECTION 10A UNIT HAS TO BE EXCLUDED AT THE SOURCE ITSELF BE FORE ARRIVING AT THE GROSS TOTAL INCOME. IT WAS FURTHER HELD BY THE HONBLE JU RISDICTIONAL HIGH COURT THAT THE LOSS OF NON 10A UNITS CANNOT BE SET OFF OF AGAINST THE INCOME OF 10A UNIT UNDER SECTION 72 OF THE ACT. THE RELEVANT FINDING OF THE HONBLE JURISDICATIONAL HIGH COURT IN THE CASE OF CIT V M/S AXA BUSINESS SERVICES PVT. LTD. (SUPRA) AT PARAS 19 29 TO 31 READS AS FO LLOWS:- 19. FROM THE AFORESAID DISCUSSION IT IS CLEAR THAT THE INCOME OF 10A UNIT HAS TO BE EXCLUDED BEFORE ARRIVI NG AT THE GROSS TOTAL INCOME OF THE ASSESSEE. THE INCOM E OF 10A UNIT HAS TO BE DEDUCTED AT SOURCE ITSELF AND NO T AFTER COMPUTING THE GROSS TOTAL INCOME. THE TOTAL INCOME USED IN THE PROVISIONS OF SECTION 10A IN THIS CONTE XT MEANS THE GLOBAL INCOME OF THE ASSESSEE AND NOT THE PAGE 17 OF 19 ITA NO.201 & 160/BAN G/2011 17 TOTAL INCOME AS DEFINED IN SECTION 2(45). HENCE T HE INCOME ELIGIBLE FOR EXEMPTION U/S 10A WOULD NOT ENT ER INTO COMPUTATION AS THE SAME HAS TO BE DEDUCTED AT SOURCE LEVEL. 29. AFTER MAKING ALL SUCH COMPUTATION THE ASSESSEE WOULD BE ENTITLED TO THE BENEFIT OF SET OFF OR CARR Y FORWARD OF LOSS AS PROVIDED U/S 72 OF THE ACT. TH AT IS THE BENEFIT WHICH IS GIVEN TO THE ASSESSEE UNDER TH E ACT IRRESPECTIVE OF THE NATURE OF BUSINESS WHICH HE IS CARRYING ON. THE SAID BENEFIT IS AVAILABLE EVEN TO UNDERTAKINGS U/S 10B OF THE ACT. THE EXPRESSION DEDUCTION OF SUCH PROFITS AND GAINS AS DERIVED BY A N UNDERTAKING SHALL BE ALLOWED FROM THE TOTAL INCOME OF THE ASSESSEE HAS TO BE UNDERSTOOD IN THE CONTEXT WITH WHICH THE SAID PROVISION IS INSERTED IN CHAPTER III OF THE ACT. SUB-SECTION (4) OF SECTION 10A CLARIFIES THIS POSITION. IT PROVIDES THAT THE PROFITS DERIVED FRO M EXPORT OF ARTICLES OR THINGS FROM COMPUTER SOFTWARE SHALL BE THE AMOUNT WHICH BEARS TO THE PROFITS OF T HE BUSINESS OF THE UNDERTAKING THE SAME PROPORTION AS THE EXPORT TURNOVER IN RESPECT OF SUCH ARTICLES OR THIN GS OR COMPUTER SOFTWARE BEARS TO THE TOTAL TURNOVER OF TH E BUSINESS CARRIED ON BY THE UNDERTAKING. THEREFORE IT IS CLEAR THAT THOUGH THE ASSESSEE MAY BE HAVING MORE TH AN ONE UNDERTAKING FOR THE PURPOSE OF SECTION 10A IT I S THE PROFIT DERIVED FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE FROM THE BUSINESS OF THE UNDERTAK ING ALONE THAT HAS TO BE TAKEN INTO CONSIDERATION AND S UCH PROFIT IS NOT TO BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE. IT IS ONLY AFTER THE DEDUCTION OF THE SAI D PROFITS AND GAINS THE INCOME OF THE ASSESSEE HAS T O BE COMPUTED. 30. THE PROVISIONS OF THIS SUB-SECTION WILL APPLY E VEN IN THE CASE WHERE AN ASSESSEE HAS OPTED OUT OF SECTION 10A BY EXERCISING HIS OPTION UNDER SUB-SECTION (8). AS DISCUSSED IT IS PERMISSIBLE FOR AN ASSESSEE TO OPT IN AND PAGE 18 OF 19 ITA NO.201 & 160/BAN G/2011 18 OPT OUT OF SECTION 10A. IN THE YEAR WHEN THE ASSESS EE HAS OPTED OUT THE NORMAL PROVISIONS OF THE ACT WOU LD APPLY. THE PROFITS DERIVED BY HIM FROM THE STP UNDERTAKING WOULD SUFFER TAX IN THE NORMAL COURSE SUBJECT TO VARIOUS PROVISIONS OF THE ACT INCLUDING THOSE OF CHAPTER VI-A. IF IN SUCH A YEAR THE ASSESSEE H AS SUFFERED LOSSES SUCH LOSSES WOULD BE SUBJECT TO IN TER SOURCE AND INTER HEAD SET OFF. THE BALANCE IF ANY THEREAFTER CAN BE CARRIED FORWARD FOR BEING SET OF F AGAINST PROFITS OF THE SUBSEQUENT ASSESSMENT YEARS I N THE NORMAL COURSE. UNABSORBED DEPRECIATION ALSO ME RITS A SIMILAR TREATMENT. 31. AS THE INCOME OF 10-A UNIT HAS TO BE EXCLUDED A T SOURCE ITSELF BEFORE ARRIVING AT THE GROSS TOTAL IN COME THE LOSS OF NON 10-A UNIT CANNOT BE SET OFF AGAINST THE INCOME OF 10-A UNIT U/S 72. THE LOSS INCURRED BY TH E ASSESSEE UNDER THE HEAD PROFITS AND GAINS OF BUSINE SS OR PROFESSION HAS TO BE SET OFF AGAINST THE PROFITS AN D GAINS IF ANY OF ANY BUSINESS OR PROFESSION CARRIED ON BY SU CH ASSESSEE. THEREFORE AS THE PROFITS AND GAINS UNDER SECTION 10-A IS NOT BE INCLUDED IN THE INCOME OF TH E ASSESSEE AT ALL THE QUESTION OF SETTING OFF THE LO SS OF THE ASSESSEE OF ANY PROFITS AND GAINS OF BUSINESS AG AINST SUCH PROFITS AND GAINS OF THE UNDERTAKING WOULD NOT ARISE. SIMILARLY AS PER SECTION 72(2) UNABSORBED BUSINESS LOSS IS TO BE FIRST SET OFF AND THEREAFTER UNABSORBED DEPRECIATION TREATED AS CURRENT YEARS DEPRECIATION U /S 32(2) IS TO BE SET OFF. AS DEDUCTION U/S 10A HAS T O BE EXCLUDED FROM THE TOTAL INCOME OF THE ASSESSEE THE QUESTION OF UNABSORBED BUSINESS LOSS BEING SET OFF AGAINST SUCH PROFIT AND GAINS OF THE UNDERTAKING WO ULD NOT ARISE. IN THAT VIEW OF THE MATTER THE APPROAC H OF THE ASSESSING AUTHORITY WAS QUITE CONTRARY TO THE AFORESAID STATUTORY PROVISIONS AND THE APPELLATE COMMISSIONER AS WELL AS THE TRIBUNAL WERE FULLY JUST IFIED IN SETTING ASIDE THE SAID ASSESSMENT ORDER AND GRAN TING THE BENEFIT OF SECTION 10A TO BE ASSESSEE. HENCE THE PAGE 19 OF 19 ITA NO.201 & 160/BAN G/2011 19 MAIN SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAV OUR OF THE ASSESSEES AND AGAINST THE REVENUE. 9.7 THE FACTS BEING IDENTICAL RESPECTFULLY FOLLOW ING THE DICTUM LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT WE DI RECT THE AO TO CALCULATE DEDUCTION U/S 10A OF THE ACT WITHOUT SETTING OFF OF THE LOSS OF NON TAXABLE UNITS AGAINST THE INCOME OF THE EXEMPTED UNITS. IT IS ORDERED ACCORDINGLY. HENCE GROUND NOS.5.1 AND 5.2 ARE ALLOWED. 10. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH DAY OF FEBRUARY 2012 SD/- SD/- (N K SAINI) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COPY TO:- 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONC ERNED 4. THE CIT(A) CONCERNED 5. THE DR 6. GF MSP/- BY ORDER ASST. REGISTRAR ITAT BANGALORE.