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2008 (5) TMI 372 - AT - Income TaxValidity of re-assessment proceedings under section 147 - condition precedent for reopening is absent - Computation deduction u/s 10A - set off business loss or unabsorbed depreciation of non-STPI unit from the income of the STPI unit for computing deduction u/s 10A - Computation of Export Turnover - Export (sic-expenses) incurred in foreign exchange. HELD THAT - In the case of Yokogawa India Ltd. It has been held that s. 10A allows deduction from total income and does not allow exemption from total income as s. 10A has been amended w.e.f. 1st April 2001. Deduction is undertaking specific as the word an undertaking is used. Income of that undertaking is to be computed as per provisions of the Act as if it was the only undertaking. The jurisdictional High Court in the case of CIT vs. Siddaganga Oil Extractions (P) Ltd 1992 (11) TMI 65 - KARNATAKA HIGH COURT held that loss in respect of hydrogenation plant cannot be set off from the profits of the solvent plant for computing deduction under s. 80HH in respect of solvent plant. Hence if there are brought forward losses (including unabsorbed depreciation) of STPI unit then the same is to be considered for the purpose of computing deduction under s. 10A. Following the orders of Tribunal in the case of Huawei Technologies (India) (P) Ltd. held that for computing deduction u/s 10A one has to ascertain the total income as per provision of the Act in respect of that undertaking and the amount so determined to be reduced from the total income meaning thereby the s. 10A deduction is to be allowed from the total income without setting off of brought forward and current year s loss of non-s. 10A unit. Therefore AO is directed not to set off business loss or unabsorbed depreciation of non-STPI unit from the income of the STPI unit for computing deduction u/s 10A. Export (sic-expenses) incurred in foreign exchange - CIT(A) confirmed that on site payments should be reduced for the purposes of arriving at the export turnover - HELD THAT - The CBDT Circular No. 694 stated that computer programmes are not physical goods but are developed as a result of an intellectual analysis of the system and method followed by the purchaser of the programme. It is often prepared on site with the software personnel going to the clients premises. Hence when the expenditure is in respect of payments on site development. the same cannot be excluded from the export turnover by holding it as technical services. When export of services only is not entitled to deduction under s. 10A then the legislature made clear that foreign exchange relating to technical services will be excluded. If there is export of goods as well as services then only that portion will be eligible for deduction which relates to goods. Hence. the AO is not justified in excluding from export turnover. Technical service charges - Words mentioned in respect of debit of expenditure are to be considered unless it is established by the assessee that the expenditure does not relate to that issue. Hence the AO was justified in excluding a sum from the export turnover. Disallowance on Communication charges - This Bench while deciding the appeal in the case of I Gate Global Solutions Ltd. 2007 (11) TMI 444 - ITAT BANGALORE upheld the finding of the learned CIT(A) that 80 per cent of the uplinking charges be reduced from the export turnover. Hence the AO will ascertain the telecommunication charges attributable to the delivery of the software. To that extent the amount will be reduced from the export turnover. In the result the appeal filed by the assessee is partly allowed.
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