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2008 (6) TMI 592 - AT - Income TaxEligibility of deduction u/s 10A - profits of the business - clubbing of loss from Non-STPI Unit with the profit of the STPI Unit - business of software and information system - Expenditure reduced from the export turnover - Set off against the profit of the STPI Unit. Eligibility of deduction u/s 10A - profits of the business - clubbing of loss from Non-STPI Unit with the profit of the STPI Unit - business of software and information system - Non-STPI Unit with its head office in Bangalore consisting of four foreign branches - HELD THAT:- Tribunal decision in the case of Tata Elxsi Ltd. vs. ACIT [2007 (10) TMI 630 - ITAT BANGLORE] and I-Gate Global Solutions Ltd. vs. ACIT [2007 (11) TMI 444 - ITAT BANGALORE] relied upon by the learned counsel were on similar facts and situation wherein it has been held that when there is no unabsorbed depreciation or unabsorbed loss in respect of STPI Unit and the profits and gains of the same would be exempt u/s 10A were to be without setting off of the loss of the other divisions or the setting off of carry forward losses of other divisions. The Tribunal held that the exemption u/s 10A to STPI unit and consequently to allow carry forward of such losses and depreciation of non-STPI Unit were separate - AO had taken recourse to consider this clubbing on the basis of finding relating to the separate units interlinked by way of receipts, coupling and deriving costs. The learned CIT(A) thereafter did not take cognizance of the said finding but considered the assessee's agitation by relying on the intention of the legislation for granting deduction u/s 10A only to export income and not other income. These facts have not been controverted. We are inclined to hold that the law is very clear regarding incomes not taxable under Chapter III in the Income Tax Act which only relates to incomes forming part of total income for consideration in the spirit of the legislation has to be considered when the assessee has been able to establish the income of the STPI Unit as was available to the AO remains undisputed. This ground by the assessee, therefore, stands allowed as covered by the decision of the ITAT, Bangalore Bench in Tata Elxsi Ltd. vs. ACIT [2007 (10) TMI 630 - ITAT BANGLORE] on similar facts and circumstances. Expenditure reduced from the export turnover - HELD THAT:- The learned counsel did not argue the amount of expenditure on account of foreign travel and lease line charges as not pertaining to export of software as considered and definite in sub-clause (iv) to Expln. 2 to sub-section 8 of Section 10A. Therefore, this ground stands partly allowed to the extent that the expenditure that has been reduced from the export turnover has to be reduced from the total turnover as well for the purpose of quantifying the profits of the STPI Unit available under section 10A. In other words ground No. 2 stands dismissed and ground No. 3 stands allowed as covered by the decision of the ITAT, Bangalore Bench in cases mentioned above. Set off against the profit of the STPI Unit - HELD THAT:- As section 10A falls under Chapter III being income exempt from tax to be excluded in determining the total income and procedural computation of taxable income as provided in the I.T. Return Format requires income or loss from eligible business u/s 10A be excluded while computing the income from business. This method of computation should be followed consistently in accordance with the provisions of the I.T. Act and profits of the non-STPI Unit cannot be clubbed to the STPI Unit profit going by the same principle, the loss for the non-STPI Unit cannot be set off against the profit of the STPI Unit. Therefore, we direct the AO to consider the carry forward business loss and unabsorbed depreciation of the Non-STPI unit in accordance with the provisions of the Income Tax Act, 1961 after computing deduction 10A deduction based on the income of the STPI Unit which is the eligible profit under the said section. In the result the appeal of assessee stands partly allowed.
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