Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2007 (6) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2007 (6) TMI 273 - ITAT MADRAS-CDenial for exemption u/s 10A - STPI Unit engaged in the business of software development and export - Free Trade Zone - newly established undertakings - provisions of section 10A are same as section 80HHE - HELD THAT:- We find that in this case there is a clear establishment of new unit by substantial investment in Plant and Machinery. The STPI Unit is an integrated unit by itself. The assessee is engaged in export of computer software which duly qualifies for exemption u/s 10A. The assessee commenced export of computer software from the current assessment year. The assessee's activities include development and export of software. This, inter alia, includes onsite integration of software. The Assessing Officer's contention that earlier developed software is only being sold is unfounded and devoid of cogency. The fact that new unit also deals in the same products as that of old unit or that there are some old unit's employees or customers cannot be taken as a ground for denying the benefit u/s 10A as evident from the case laws cited above. The old unit's incurring of losses etc. has also been explained by giving data that the domestic turnover has resulted in a very small profit or loss in earlier years and it is only the exports, which are profitable. Therefore, it is clear that it cannot be said that the STPI Unit of the assessee was established as a result of splitting or reconstruction of the old unit. Hence, we uphold the order of the ld CIT (A) in this regard and decide the issue in favour of the assessee. It will not be out of place here to mention that it is a settled proposition often reiterated by the Hon'ble Apex Court that in cases where two views are possible, the one favourable to the assessee should be adopted. CIT v. Podar Cements (P.) Ltd.[1997 (5) TMI 2 - SUPREME COURT] and Mysore Minerals Ltd. v. CIT [1999 (9) TMI 1 - SUPREME COURT]. Deduction u/s 80HHE - consultancy charges, subscription charges, exhibition expenses, advertisement, travelling expenses and software-expenses - expenditures incurred in foreign currency - HELD THAT:- It is seen that what is excluded from export turnover is also excluded from total turnover. Now in this case, the ld CIT (A) has held that section 10A is akin to section 80HHE, hence the deduction can be properly computed only by deducting expenditure incurred in foreign exchange, both from the total turnover and also from the export turnover. We find that Hon'ble Apex Court in the case of CIT v. Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME COURT] had the occasion to consider the meaning of 'total turnover' with respect to section 80HHC.' We find that section 10A also is a beneficial section. It is intended to provide incentive to promote exports. In fact section 10A is meant to provide a larger benefit than that provided by section 80HHE by providing the tax holiday to the assessee. If the expenditure incurred in foreign currency are excluded from export turnover but not from total turnover, the benefit granted by section 10A would be considerably reduced. This, in our opinion, cannot be the scheme of the Act. In this regard, Hon'ble Apex Court in the case of K.P. Varghese v. ITO [1981 (9) TMI 1 - SUPREME COURT] had held that a literal construction that leads to absurdity, unjust result or mischief should be avoided. Similarly Hon'ble Apex Court in the case of Bajaj Tempo Ltd. [1992 (4) TMI 4 - SUPREME COURT] with respect to relief for new industrial undertaking u/s 15C of the Income-tax Act, 1922 has held that such provisions should be construed liberally. Very literal Construction which defeats the very purpose of enacting the provision should be avoided. Thus, these expenditures incurred in foreign currency are to be excluded from export turnover and they should also be excluded from total turnover in order to properly work out and grant relief that is intended by this section. Hence, in our opinion, these items which are to be excluded from export turnover cannot be included in total turnover while calculating the relief u/s 10A. In the result, this appeal by the revenue is partly allowed.
|