TMI Blog2008 (5) TMI 457X X X X Extracts X X X X X X X X Extracts X X X X ..... ions 70 and 71 of the Act. HELD THAT:- On perusal of Sec.10B clearly reveals that a deduction is allowed to the assessee in respect of the profits derived from the undertaking eligible under this section from the total income of the assessee. That means the total income of the assessee would include the profits or losses derived from such unit and if there is any profit, then the eligible amount shall be deducted in computing the total income. Accordingly, it is held that the CIT(A) was not legally justified in holding that profits and gains of the business eligible u/s 10B of the Act do not form part of the total income. The view taken by us is also fortified by the decision of the Tribunal in the case of Mindtree Consulting (P.) Ltd. v. Asstt. CIT[ 2005 (11) TMI 176 - ITAT BANGALORE-B] . Having held that the income from the eligible business u/s 10B is to be taken into consideration in computing the total income of the assessee, we are of the view that all the provisions of the Act would be applicable for the purpose of computing the total income of the assessee unless expressly excluded by the Legislature. It is pertinent to note that provisions of section 70 or 71 have no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amortised over a period of five years and thus 1/5th of such expenditure was claimed - HELD THAT:- In our view, the alternate contention of the assessee requires fresh adjudication as the AO had disallowed the same without ascertaining the nature of the expenditure. AO in a summarily manner held that the expenditure was capital in nature without giving any reasons. Accordingly, we set aside the order of the CIT(A) on this issue and remit the matter to the file of AO for fresh adjudication after ascertaining the real nature of expenditure incurred by the assessee. Book profit u/s 115JB - HELD THAT:- In our opinion, gross injustice has been caused to the assessee by not applying the provisions of section 115JB correctly. AO has conveniently added the expenditure relating to section 10B unit but failed to ignore the provisions of clause ( ii ) of the said Explanation which provides that income relating to such unit credited to the Profit Loss Account should also be reduced. Accordingly, we are of the view that the matter requires fresh adjudication. The order of the CIT(A) is, therefore, set aside on this issue and the matter is remitted to the file of AO for fresh adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r such declaration was filed by the assessee. In reply dated 15-3-2004, the assessee merely stated that provisions of section 10B could not be applied since the percentage of the export turnover to the total turnover was only 18.81 per cent. Therefore, no disallowance of loss could be made under section 10B in view of the provisions of sub-section 2( ia ) of section 10B. The Assessing Officer again requested the assessee to explain as to why Form No. 56G was filed if section 10B was not applicable. In reply, the assessee stated that Form No. 56G was filed only for the sake of technical compliance of the section. However, no exemption was claimed under the said section as is also apparent from the audit report. The Assessing Officer rejected the explanation of the assessee for the reasons - ( i ) that provisions of section 10B(2)( ia ) on which reliance was placed by the assessee was no more applicable since omitted with effect from assessment year 2001-02. The 100 per cent export oriented undertaking is defined as per clause ( iv ) of Explanation 2 to section 10B and this fact was not denied by the assessee; ( ii ) since the assessee had not filed any declaration under section 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et off under the provisions of sections 70 and 71 of the Act. He also endorsed the view of the Assessing Officer that the assessee had not exercised option to non-applicability of the provisions of section 10B by not filing the declaration before the due date of the return as provided in sub-section (8) of section 10B and, therefore, the assessee cannot be permitted to say that provisions of section 10B are not applicable. On the contrary it filed Form No. 56G which shows that the assessee intended the applicability of the provisions of section 10B. He also did not follow the decisions of the Tribunal in the case of Navin Bharat Industries Ltd. ( supra ), delivered by Third Member for the reasons given by him at page 6 of the order. Aggrieved by the same, the assessee has preferred the appeal before the Tribunal on this issue. 5. Both the parties have been heard at length. The learned counsel for the assessee has reiterated the stand of the assessee taken before the lower authorities while the learned DR has relied on the reasons given by the revenue authorities. Therefore, the same need not be repeated. At the outset, it may be mentioned that the CIT(A) had proceeded on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he contention of the learned counsel for the assessee that on the basis of Form No. 56G filed by the assessee, it should be held that provisions of section 10B are not applicable. The obligation to file Form No. 56G arises from sub-section (5) of section 10B for claiming deduction under this section while sub-section (8) permits the assessee to file a declaration in writing to the effect that the provisions of section need not be made applicable to him. Both are different obligations and benefits provided by the statute. Therefore, the filing of Form No. 56G cannot be equated with the declaration to be filed under sub-section (8) of section 10B. The purpose of both the requirements is different. If the assessee intends to avail the benefit of provisions of section 10B then it is required to file Form No. 56G duly certified by a Chartered Accountant. On the other hand, if the assessee wants not to take the benefit of section 10B then it is required to file a declaration as per the provisions of sub-section (8) of section 10B. If such declaration is filed then the concerned year shall be excluded in computing the period of ten consecutive years for which the deduction is allowable. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im. The order of the CIT(A) is, therefore, set aside on this issue and consequently, the Assessing Officer is directed to allow the set off of the business loss incurred by the assessee in the aforesaid unit against the other incomes. 9. The next issue arising in this appeal relates to the treatment of interest income of Rs. 57,31,948, training fees Rs. 30,000 and income from sale and purchase of software. According to the assessee, these incomes form part of the income derived from the industrial unit eligible under section 10B of the Act while according to the revenue these incomes were independent incomes earned by the assessee and, therefore, could not be considered as income derived from such unit. 10. After hearing both the parties, we find that the issue relating to interest income and training income came up before the Tribunal in assessee s own case pertaining to assessment years 1998-99 and 2000-01. The Tribunal vide order dated 26-7-2007 (ITA Nos. 3007 and 3008/Mum./04) held that training income was to be treated as income derived from the industrial unit under section 10B while the interest income could not be said to be derived from the industrial unit under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anner held that the expenditure was capital in nature without giving any reasons. Accordingly, we set aside the order of the CIT(A) on this issue and remit the matter to the file of Assessing Officer for fresh adjudication after ascertaining the real nature of expenditure incurred by the assessee. 13. The last issue relates to working of book profit under section 115JB of the Act. The Assessing Officer has added back the expenditure of Rs. 83,79,303 to the net profit as per Profit Loss Account by applying the provisions of clause ( f ) of the Explanation to section 115JB. However, the working of the same is not clear from the order of the Assessing Officer. According to the assessee, it is only the expenditure relating to earning of income under section 10A or 10B can be added and not the loss. In our opinion, gross injustice has been caused to the assessee by not applying the provisions of section 115JB correctly. The Assessing Officer has conveniently added the expenditure relating to section 10B unit but failed to ignore the provisions of clause ( ii ) of the said Explanation which provides that income relating to such unit credited to the Profit Loss Account should ..... X X X X Extracts X X X X X X X X Extracts X X X X
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