TMI Blog2010 (5) TMI 671X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the assessee was asked to substantiate why the exemption under section 10B should not be allowed after set off of brought forward losses. In reply, the assessee stated that the exemption which the assessee is entitled to for its current year income are to be deducted from its current year s business profit and only the balance income has to be considered for set off of b/f losses. It was also stated that the question of setting off of b/f losses arises only when the assessee has a positive taxable income. And the positive income figure has to be arrived only after deducting income which is exempt from tax. Hence, section 10B income has to be reduced from the current year profit before positive figure is arrived and from this positive figure b/f losses are to be set off. The assessee also referred to the provision of section 72(1) relating to carry forward and set off of losses and also distinguished the provision of section 10B which is included in Chapter III from the deduction under sections 80HHC and 80-I which form part of Chapter VI of the IT Act. The explanation offered by the assessee was not accepted by the Assessing Officer. The Assessing Officer held that section 10B h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this direction of CIT(A) for exclusion of communication expenses from the total turnover, the revenue is in appeal before us. The assessee is in appeal before us on the direction of the CIT(A) to exclude communication expenses and Rs. 2,26,30,000 being export earnings received in the form of equity investment in an American Company from the export turnover. 4. First we will take up assessee s appeal. The authorized representative submitted that the amount has been received at Rs. 2,26,30,000 on account of export turnover in the form of equity investment in an American company for which the Reserve Bank of India has given permission to receive in that form and as such, it cannot be reduced from the export turnover of the assessee and that amount has to be considered for the purpose of determining the deduction under section 10B. 5. The authorised representative drew our attention to the Hand Book of Rules and Procedures under STP Scheme by Y. Rangaiah and Subba Rao P.V. relating to utilization of export value for investment abroad/Exports of goods towards equity specifically Para 9.17 : 1.An Indian party exporting goods/software/plant and machinery from India towards equ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red outside India is to be included for determining the export turnover for the purpose of section 10B. 7. On the other hand, the DR submitted that assessee stated that since the sales proceed is received and reinvested in equity, it is deemed to have received and can claim deduction of such amount under section 10B. She submitted that since the sales proceeds not brought into India, it cannot claim deduction under section 10B. The departmental representative further submitted that it is not disputed that sales proceedings have not been repatriated in foreign convertible exchange into India. The assessee has not brought the amount of Rs. 2,26,30,000 sales turnover into India since it was invested into purchase of equity shares in a foreign company. The hand book of rules and procedure under ST scheme, of September 2004 at para 9.17 page 28 referred by the authorised representative tells about the procedure for FDI in equity of a foreign company. It does not spell out any IT benefit for such FDI investment. Hence as per the section specified specifically mentioned the concept of repatriation of profits/sales proceeds into India. Only then the software companies can avail the ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee received export proceeds in convertible foreign exchange. The RBI has no role to play or to suggest whether any investment/income for capitalization of expenditure is genuine or otherwise in terms of section 10B of the IT Act. The investment in equity shares by assessee is nothing but a application of its sales proceeds without bringing into India in the form of convertible foreign exchange. In our humble opinion, assessee is not entitled for benefit of section 10B on this investment of Rs. 2,26,30,000. Further, various case laws cited by the assessee have been carefully gone through by us. These case laws are of no assistance to the assessee. Since these are delivered on different context, the judgment to be read in its totality of its context in which the questions arose for decision in that case. It neither desirable nor permissible to pick out a word or a sentence from the judgment, divorced from the context of the question under consideration and treat it to be the complete law declared by the court. The judgment must be read as a whole and the observation from the judgment have to be considered in the light of the questions which were before the Court. A decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m part of total income up to the assessment year 2001-02 i.e., before amendment of section 10B by Finance Act, 2000 with effect from 1-4-2001. However, this caption of Chapter III cannot be conclusive about the exact purport of any provision contained in the said chapter. Earlier, this chapter contained only section 10 which provided for the exclusion of several incomes from the total income. The opening sentence of section 10 itself reads as "In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included". The language of this sentence clearly indicates that the incomes of the type falling within the clauses in section 10 will not be included in the total income of a person. In other words, these incomes do not enter the computation part at all. Subsequently also section 10A was first introduced by the Finance Act, 1981 with effect from 1st April, 1981, the said provision provided for total exemption of the income described in section 10A. Similarly, when section 10B was introduced for the first time by the Finance Act, 1988 with effect from 1st April, 1989, sub-section (1) thereof provided for a clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year under consideration before computing section 10B deduction. 10.1 Further the judgment relied by the learned Departmental Representative in the case of Sword Global (I.) (P.) Ltd. v. ITO cited supra will also support our view. 10.2 Accordingly, the ground No. 2 in the revenue appeal in ITA No. 949/Hyd./2008 allowed. However, for the assessment year 2000-01 the unamended provisions of section 10B is applicable and income of E.O.U is totally exempted from the tax and it is not become part of the total income of the assessee for the assessment year 2000-01, as such, there is no question of set off of brought forward losses of earlier years with the income of the assessee in the current year. Accordingly, ground No. 3 in ITA No. 150/Hyd./2009 is dismissed. The ground No. 4 in this appeal related to Ground No. 3, consequently this ground also dismissed." 14. Respectfully following the above ratio laid down by the Tribunal in its order cited supra, we reverse the order of the CIT(A). Before us the AR relied on Dy. CIT v. Glenmark Laboratories Ltd. [2010] 127 TTJ (Mum.) 719. The facts of the above case is entirely different from the facts of the present case. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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