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2020 (12) TMI 678 - HC - Income TaxDepreciation claimed on software - treated as royalty u/s 40(a)(ia) - Whether the tribunal is correct in allowing expenditure on imported software when the expenditure per se is capital in nature and is not allowable? - HELD THAT:- Depreciation claimed on software, which was treated as royalty u/s 40(a)(ia) could not have been decided by the tribunal. Remand matter to the tribunal to decide the issue of depreciation claimed on software to the tribunal for decision afresh by taking into account the decision rendered in Wipro Ltd. [2010 (8) TMI 1053 - KARNATAKA HIGH COURT] - Accordingly, the second substantial question of law is answered. From perusal of aforesaid paragraph, it is evident that the issue pertaining to expenditure incurred for purchase of software as royalty has been dealt with and it has been held that the same is not royalty and the provisions of Section 40(a)(ia) are not attracted. The decision of the Supreme Court in the case of Chaudhary Transport Company [2020 (8) TMI 23 - SUPREME COURT] has no application to the fact situation of the case as the Supreme Court has interpreted Section 40(a)(ia) of the Act in the context of Section 194C of the Act. Thus, the second question of law has to be answered in favour of the assessee and against the revenue. Claim of assessee towards set-off of losses of STP/SEZ unit against the other income - Deduction u/s 10A - HELD THAT:- Supreme Court in Yokogawa India Ltd. [2016 (12) TMI 881 - SUPREME COURT] was dealing with the issue whether losses under Section 10A units or non Section 10A units can be set off against the profits of Section 10A units before deductions under Section 10A are effected held that it is only logical and natural that the stage of deduction of the profits and gains of the business of an eligible undertaking has to be made independently and, therefore, immediately after the stage of determination of its profits and gains. At that stage the aggregate of the incomes under other heads and the provisions for set off and carry forward contained in Sections 70, 72 and 74 of the Act would be premature for application. The deductions under Section 10A therefore would be prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving at the total income of the assessee from the gross total income. It is further held that the somewhat discordant use of the expression 'total income of the assessee' in Section 10A has already been dealt with earlier and in the overall scenario unfolded by the provisions of Section 10A the aforesaid discord can be reconciled by understanding the expression 'total income of the assessee' in Section 10A as 'total income of the undertaking'. Thereafter, in para 18 has answered all the substantial questions of law in favour of the assessee including the one whether losses under Section 10A units or non Section 10A units can be set off against the profits of Section 10A units before deductions under Section 10A are effected have answered all the substantial questions of law in favour of the assessee. Therefore, first substantial question of law is answered in favour of assessee and against the revenue.
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