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TMI Blog2012 (7) TMI 582X X X X Extracts X X X X X X X X Extracts X X X X ..... units are not eligible for deduction under Section 1 OA of the Act. 3. The Learned CIT(A) has erred in law and on facts in upholding the order of the AO without appreciating the fact that the unit 2, unit 3, and unit 4 have satisfied all the formation conditions of Section 10A and hence eligible for deduction under Section 10A of the Act. 4. The Learned CIT(A) for A Y 2007-08 has erred law in not allowing the Honourable Tribunal's order for earlier years regarding section 10A eligibility of unit 2, unit 3 and unit 4 in the Appellant's own case, being binding on the lower authorities. 5. The Learned CIT(A) has erred in law and on facts in ignoring and not following the Honourable Tribunal's decisions in the appellant's own case for earlier years without appreciating the fact that the issues and facts covered under the present appeal are identical and similar with that of the earlier years. 6. The Learned CIT(A) has erred in law and on facts in stating that the Honourable Tribunal's decisions in the Appellant's own case for earlier years are not binding on the ground that the orders for the earlier years have been passed by Honourable Tribunal without discussing the basis or con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground No.1 is general in nature and needs no adjudication. 4. As regards grounds No.2 to 7, the brief facts of the case are that the assessee company is engaged in the business of software development services and professional services and it filed its return of income for the assessment year 2007- 08 on 31.10.2007 declaring a total income of Rs.29,30,45,240/-. During the assessment proceedings u/s 143(3), the Assessing Officer observed that the assessee company has five units registered under STPI, of which two are new units, which have commenced operations during the previous year pertaining to the assessment year 2005-06. He also observed that the assessee company has claimed deduction u/s 10A amounting to Rs.124,77,99,091/- in respect of its units situated at different places in Bangalore and Chennai. The assessee company was asked to furnish documents and details pertaining to the two new units, as the details regarding the old units were already considered in the earlier assessment years. After considering the details furnished by the assessee, the AO observed that one of the primary conditions stipulated in sec. 10A was that the undertaking should have been formed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a list of capital goods to be imported for attestation, which is required to obtain the bonded ware house license from Custom's authorities. It is also intimated that separate proforma invoice from the supplier has to be submitted to this office for attestation as and when you intend to import duty free capital goods/~ Along with the approval letter, another letter of the same date has also been issued by STPI. In para 1 of letter No.6200 dated 29th June, 1998, it is mentioned that the Govt. is pleased to extend all the facilities and privileges admissible under the STP scheme for the establishment of a new undertaking unit in the State of Tamil Nadu for the manufacture of computer software. Such facilities and privileges were subject to the conditions stipulated in Annexure as well as mentioned in para 2 of that letter. As per para 2(ix) of the letter under reference, it was mentioned that the unit shall be custom bonded. It therefore means that in order to avail the facilities and privileges admissible under the STP scheme can be availed if the unit is custom bonded. The assessee has obtained clarification from STPI as per letter dated 20th April, 2004 from Director, STP. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to the delivery of software outside India from the export turnover, the assessee in not going to press the same in view of the alternative ground of appeal at ground Nos. 11 and 12, which is covered by the decision of the Hon'ble Karnataka High Court in the case of CIT Vs. Tata Elxsi Ltd. reported in (2011) 5 TaxCorp (DT) 49675. 10. Having heard both the parties and having considered the material available on record, we find that S.No. 11 is covered in favour of the assessee by the decision of the Hon'ble Jurisdictional High Court in the case of Tata Elxsi Ltd. (cited Supra), wherein the Hon'ble Jurisdictional High Court has held that for the purpose of computing deduction u/s 10A of the Income-tax Act, if any income is excluded from the export turnover, then the same has to be excluded from the total turnover also. 11. In view of the same, ground No.10 is rejected and ground nos. 11 and 12 are allowed. 12. As regards grounds No.13 and 14 are concerned, the brief facts of the case are that the AO observed that the assessee company has added an amount of Rs.11,60,328/- and Rs.1,33,52,,629/- for units 5 and 6 respectively as foreign exchange gain for the purpose of compu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) who confirmed the order of the AO and the assessee is in appeal before us. 20. The learned counsel for the assessee submitted that the facts relating to the 'interest income' and 'miscellaneous income' have not been properly appreciated by the AO and the CIT(A). It was submitted that the 'interest income' and 'miscellaneous income' for units 5 and 6 have been excluded from the profits and gains of the undertaking for computation u/s 10A of the Income-tax Act and while making such adjustment in computation, inadvertently foreign exchange gain was also excluded from the profit of the business of the undertaking. He submitted that it is necessary to consider the actual bifurcation of the 'interest income' and 'miscellaneous income' of units 5 and 6 respectively and then decide the issue in accordance with law. 21. The learned DR had no objection to the same thing but he placed reliance upon the orders of the authorities below: 22. Having heard both the parties and having considered the rival contentions, we deem it fit and proper to remit the issue back to the file of the AO for reconsideration of the issue in accordance with law and as per above observation. 23. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication dated 26.9.2000 and in support of its contention, the assessee placed reliance upon the decision of Chennai Tribunal in the case of M/s Accurum India Pvt. Ltd., 2010-TIOL-127, ITAT, Madras. The Assessing Officer was however not convinced with the assessee's submission and held that the income earned by the assessee is mainly due to supply of man power to its clients, which is akin to the work undertaken by a recruitment agency. He accordingly held that recruitment fee/revenue earned by recruiting manpower is not allowable deduction u/s 10A and is to be excluded from export turnover. 25. Aggrieved by this, assessee preferred an appeal before the CIT(A) who confirmed the order of the AO and the assessee is in second appeal before us. 26. The learned counsel for the assessee reiterated the submissions made by the assessee before the authorities below and has placed strong reliance upon the CBDT Notification dated 26.9.2000, wherein the IT enabled services are specified to include human resource services. He submitted that the meaning of the phrase 'human resource services' mentioned in the notification had come up for consideration before various Benches of the Tribunal and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed issue. 30. Having heard both the parties and having considered the material available on records, we find that the alternative contention, of the assessee is already covered by the decision of the Hon'ble Jurisdictional High Court in the case of CIT Tata Elxsi Ltd. reported in (2011) 5 TaxCorp (DT) 49675 and we have followed the said decision while dealing with ground Nos. 11 and 12 of the assessee's appeal. As both the parties have agreed on the outcome of the grounds No. 8 and 9 for accepting the alternate plea, we do not see any reason to adjudicate on the issue as to whether the recruitment fee would form part of export turnover. Therefore, the issue is left open to the assessee to agitate in appropriate cases. 31. In view of the same, we direct the Assessing Officer to consider only the net income from 'manpower supply' as 'income from other sources'. Needless to mention that the assessee shall be given fair opportunity of hearing and also for filing necessary details regarding expenditure related to the recruitment process. 32. In the result, grounds No. 8 and 9 are rejected and the alternate plea is accepted. 33. In the result, assessee's appeal is allowed for statis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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