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2020 (1) TMI 920 - AT - Income TaxDeduction u/s.10A - Deduction granted to unit II treating it as a separate eligible unit by the Ld. CIT(Appeals). HELD THAT:- It is absolutely clear that there were existence of two units i.e. Unit 1 is for creating products for higher education industry and Unit 2 is for creating products for banking and finance industry. Unit 1 and Unit 2 are basically two different and distinct units of the assessee. There is neither expansion nor splitting one unit into another. The Ld. DR was unable to bring on record any material/document in support of the Revenue substantiating that both units are one and the same. DR relied on the observation of the Assessing Officer that Master Service Agreement was not furnished but how that agreement could have helped the revenue additionally was not substantiated by the Ld. DR because of the fact that as on record in the order of the Ld. CIT(Appeals) at Para 5.3.2 and Para 5.3.3, it is mentioned by the First Appellate Authority that various documents/returns such as separate custom bonded warehouse licenses, separate annual reports filed with STPI, separate monthly reports submitted to Superintendent of Customs for Unit I and Unit II further confirm that Unit II is separate and independent from Unit I. These facts were not disputed by the Ld. DR before us. Thus we are of the considered view that Unit II of the assessee company is absolutely a new and separate unit and independent from Unit I. Therefore, the Ld. CIT(Appeals) was justified in holding that the assessee is eligible to claim of deduction u/s.10A of the Act on the profits of Unit II separate from deduction u/s.10A of the Act on profits of Unit I. Thus, we do not find any infirmity with the findings of the Ld. CIT(Appeals) and relief provided to the assessee by the Ld. CIT(Appeals) is hereby sustained. Computation of deduction u/s 10A - as per CIT-A exemption u/s.10A of the Act should be computed after excluding communication expenses, insurance and travel expenses from the total turnover - HELD THAT:- As relying on HCL TECHNOLOGIES LTD. [2018 (5) TMI 357 - SUPREME COURT] CIT(Appeals) was correct in directing the Assessing Officer to calculate deduction u/s.10A of the Act after reducing the expenses which are reduced from export turnover, from total turnover as well. Thus, relief provided to the assessee by the Ld. CIT(Appeals) is hereby sustained. Thus, ground No.2 raised in appeal by the Revenue is dismissed. Interest income eligible for deduction u/s.10A of the Act when the facts of the case are that interest was earned on bank deposits - HELD THAT:- As decided in M/S MOTOROLA INDIA ELECTRONICS PVT LTD [2014 (1) TMI 1235 - KARNATAKA HIGH COURT] while directing the Assessing Officer to allow deduction u/s.10A of the Act on interest income of ₹ 42,86,469/-. The Ld. DR could not bring any contrary decision of any Higher Forum in support of the Revenue nor could bring any relevant documents/materials opposing the already established facts in favour of the assessee. Therefore, we do not find any infirmity with the findings of the Ld. CIT(Appeals) which is thereby upheld. Thus, ground No.3 raised in appeal by the Revenue is dismissed. Foreign exchange gain as eligible for deduction u/s.10A - HELD THAT:- Hon‟ble Madras High Court in the case of CIT Vs. Pentasoft Technologies Ltd. [2010 (7) TMI 75 - MADRAS HIGH COURT] held that “ the exchange value based on upward or downward of the Rupee value is not in the hands of the assessee. In other words, the assessee does not determine the exchange value of the Indian Rupee. It has to be remembered but for the fact that the assessee is an export house, there was no question of earning any foreign exchange. Therefore, when the fluctuation in foreign exchange rate was solely relatable to the export business of the assessee and the higher Rupee value was earned by virtue of such exports carried out by the assessee, there is no reason why the benefit of section 10(A) should not be allowed to the assessee - Decided against revenue
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