TMI Blog2012 (12) TMI 592X X X X Extracts X X X X X X X X Extracts X X X X ..... antum of disallowance estimated at 5% is on the higher side. An estimate of 2.5% of the dividend income in our view would be just, fair and reasonable. Issue partly allowed Set Off of losses – STP units claim deduction u/s 10A – Whether loss incurred by STP/SEZ unit is set off against income from Non STP/SEZ unit for same assessment year – Held that:- Following the decision of Tribunal in assessee’s own case in favour of the assessee. Set-off of loss allowed. In favour of assessee Contribution to Trust - Payment of such contributions as deferred compensation to the employee-director who separated from the Company is a payment by the trust on behalf of the assessee and hence eligible for deduction u/s 37(1) – Held that:- As the specific prohibition in Sec.40A(9) and keeping in mind the principle that when there are specific provisions governing a deduction then the general deduction allowable u/s.37(1), cannot be invoked, the disallowance made by the Revenue authorities had to be sustained. In favour of revenue Alternative claim of the Assessee that in the event of the disallowance being sustained, the action of the AO in allocating the aforesaid expenses to the profits of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T) from the total turnover while computing deduction u/s.10A – Held that:- Following the decision in assessee’s own case for earlier years that once this sum is not included in export turnover, then the same cannot be included in the total turnover. In favour of revenue - ITA No.1349/Bang/2010 - - - Dated:- 18-7-2012 - SHRI N. BARATHVAJA SANKAR AND SHRI N.V. VASUDEVAN, JJ. Appellant by : Shri K.R. Pradeep, C.A. Respondent by : Shri S.K. Ambastha, CIT-I(DR) ORDER Per N.V. Vasudevan, Judicial Member This appeal by the Assessee is directed against the order of assessment dt.28.10.2010 passed u/s.143(3) r.w.s. 144C of the Income Tax Act, 1961 (hereinafter referred as 'the Act') by the Additional Commissioner of Income Tax, Circle 12, Bangalore in accordance with the direction of the Dispute Resolution Panel (DRP) u/s. 144(5) r.w.s. 144C(8) of the Act dt.26.9.2011. The Assessment Year involved is 2006-07. 2. The Assessee is a company. It is engaged in the business of developing software. In view of international transactions the assessee had with Associated Enterprises (AE), the case was referred to the Transfer Pricing Officer (TPO) under section 92 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vances to AE. 4. It is not in dispute before us that identical issue had come up for consideration in AY 07-08 in ITA No.972/Bang/2011 order dated 15.6.2012 and this tribunal held as follows: 5.3 In respect of the grounds at S.Nos.5 to 9, the learned counsel for the assessee submitted that the Assessing Officer erred in making a transfer pricing adjustment of Rs. 9,67,89,370 based on the TPO s order and the confirmation of this by the DRP on the issue of interest on advances given by the assessee to its associated enterprises which were its wholly owned subsidiaries. It was submitted that the authorities below overlooked the fact that these interest free advances were given to its overseas subsidiaries out of commercial expediency from out of surplus funds available with it and in accordance with the principles and ratio laid out by the Hon'ble Apex Court in the case of S.A. Builders reported in 288 ITR 1. The learned counsel for the assessee contends that the transfer pricing adjustment made by the TPO at 14% rate of interest based on LIBOR, as the reasonable rate of interest under the CUP method, was based on surmises and was not based on the transfer pricing requirement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s given by the assessee to its wholly owned foreign subsidiaries is identical to that of the earlier years, the Assessing Officer is directed to follow the directions given in the orders for earlier years in the assessee s own case for Assessment Year 2004-05 following the decision in ITA Nos.624 1178/Bang/2007 dt.31.10.2008 in the assessee s own case for Assessment Year 2003-04. We direct the AO to follow the directions as given in the earlier years referred to above. Thus Ground Nos.5 to 8 are decided accordingly. 5. Grounds of appeal 10 11 projects the grievance of the Assessee with regard to the action of revenue authorities in disallowing a sum of Rs.4,33,78,765 (being 5% of the dividend) under Section 14A of the Act as against the claim of the Assessee that only a sum of Rs.82,80,707/- was expenditure incurred in earning exempt income that ought to have been disallowed u/s.14A of the Act. The Assessee earned income in the form of dividend of Rs.3,24,07,833/- on shares and Rs.83,51,57,478/- on mutual fund units held as investments. The aforesaid income did not form part of the total income under the Act, in view of the provisions of Sec.10(34) and 10(35) of the Act. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Vs. CIT 286 ITR 585 (Kar) in the context of Sec.80-M of the Act which allows deduction on account of net dividend (gross dividend expenses incurred to earn dividend). 7. The learned DR relied on the decision of the Hon ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Vs. DYCT 328 ITR 81 (Bom), wherein the Hon ble Bombay High Court in the context of Sec.14A of the Act has held that for the assessment year prior to AY 08-09, disallowance has to be made on a reasonable basis considering all circumstances. In other respects he relied on the order of the AO. 8. We have considered the rival submissions. The disallowance u/s.14A of the Act in the present case is restricted only to indirect expenses. The Assessee s calculation is based on the time spent by the functionaries responsible for making investment of cash surpluses. The revenue s objection is that other expenses on corporate establishment should also be considered as they also help the functionaries in some manner in carrying out investment functions. We find force in the submissions of the ld. DR. We are, however, of the view that the quantum of disallowance estimated at 5% is on the higher side. An estimate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year, the losses of these STP and SEZ undertakings were set off against other taxable business . of the assessee company. It was contended by the learned counsel for the assessee that the set off business losses have to be mandatorily considered as per the provisions of section 70 and 71 of the Act for which there was no prohibition. It was submitted that the Assessing Officer disallowed the set off claim made by the assessee on the ground that it was not in the spirit and meaning of section 10A for if the losses incurred by a particular unit in the first few years are allowed for set off with other profits and the profits earned by that unit in the subsequent years are allowed as a deduction, in continuance of ten years, then the deduction allowed under section 10A would exceed the net profit earned by such unit in this period. It was submitted that the Assessing Officer referring to section 10A(6) of the Act, allowed carry forward of the losses of the undertakings for set off in accordance with section 72 of the Act with the caution that the total income in the year of set off shall reduce to that extent and section 10A deduction also would reduce equally. The learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endently as per the provisions of the Act. An assessee cannot be compelled to seek deduction u/s 10A in respect of an undertaking in which there is a loss. This is the basis of not setting off of losses of 10A units against the profit of 10A units for computing deduction u/s 10A. This is in view of the decision of the Third Member in the case of Navin Bharat Industries Ltd. v. DCIT 90 ITD 1. In view of the judgment of the jurisdictional High Court in the case of Himmatsingh (supra), the assessing officer will set off brought forward losses of the units for which the assessee has disclosed positive income for the purpose of claiming deduction u/s 10A . 16.5. Respectfully following the decisions of the Hon ble Tribunal referred supra, we direct the assessing officer to set off brought forward losses of the units for which the assessee has disclosed positive income for the purpose of claiming deduction u/s 10A. Respectfully following the decision of the co-ordinate bench of the Tribunal in the assessee s own case for Assessment Year 2004-05 (supra) on this issue, we direct the Assessing Officer to set off brought forward losses of the units for which the assessee has disclosed po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parated from the Company is a payment by the trust on behalf of the assessee and hence eligible for deduction u/s 37(1) of the Act. 17. The AO rejected the claim of the Assessee holding that the Trust formed under Deferred Compensation Plan cannot be such fund as referred to in Section 36(1)(iv) or (v). The AO also held that the assessee rightly disallowed such contributions u/s 40A(9) in the earlier assessment years. When such contributions become expenditure allowable in the hands of the assessee, it is governed by the provisions of sub-sections 10 11 of section 40A, but these provisions are applicable to the pen prior to 01.03.1984. Therefore, the assessee cannot take benefit of these provisions. Secondly, the AO held that it is not known whether and in what manner the sole beneficiary of the irrevocable trust declared the payout and whether tax was paid thereon. In any case, since these contributions were made to a Fund mentioned in Section 40A(9) of the Act and there is prohibition for their allowance, general provisions sec.37 cannot be applied. Therefore, the deduction of Rs. 12,15,86,375/- claimed was disallowed. 18. The learned counsel for the Assessee submitted befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture of capital expenditure) wholly and exclusively for the welfare of the employees of the assessee referred to in sub-section (9) out of the sum referred to in that sub-section, the amount of such expenditure shall, in case no deduction has been allowed to the assessee in respect of such sum and subject to the other provisions of this Act, be deducted in computing the income referred to in section 28 of the assessee of the previous year in which such expenditure is so laid out or expended, as if such expenditure had been laid out or expended by the assessee. (11) Where the assessee has, before the 1st day of March, 1984, paid any sum to any fund, trust, company, association of persons, body of individuals, society or other institution referred to in sub-section (9), then, notwithstanding contained in any other law or in any instrument, he shall be entitled (i) to claim that so much of the amount paid by him as has not been laid out or expended by such fund, trust, company, association of persons, body of individuals, society or other institution (such amount being hereinafter referred to as the unutilised amount) be repaid to him, and where any claim is so made, the unutilis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity of the trust being used as a medium of tax avoidance by which the contribution is claimed as deduction and the same contribution flowing back to the employer in the form of deposits, investments in shares etc. The entire object of Sec.40A(9) of the Act is to prevent the employer having the benefit of deduction in the name of staff welfare, while having the use of the funds indirectly by controlling it. We are of the view that in the light of the specific prohibition in Sec.40A(9) of the Act and keeping in mind the principle that when there are specific provisions governing a deduction then the general deduction allowable u/s.37(1) of the Act, cannot be invoked, the disallowance made by the Revenue authorities had to be sustained. It is not the case of the Assessee that the deduction claimed by the Assessee does not fall within the parameters of Sec.36(1)(iv) (v) of the Act. We therefore sustain the disallowance made by the Revenue authorities. We however accept the alternative claim of the Assessee that in the event of the disallowance being sustained, the action of the AO in allocating the aforesaid expenses to the profits of the units eligible for deduction u/s.10A of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter had not attained finality. The learned Departmental Representative placed reliance on the findings of the Assessing Officer and the DRP on this issue and reiterated the arguments in the orders of the authorities below. 25. We have heard both parties and carefully perused and considered the material on record. We find from a perusal of the order of the co-ordinate bench of the Tribunal in the assessee s own case for Assessment Year 2004-05 in ITA No.1072/Bang/2007 (supra) at para 8.2 thereof that this issue has been held in favour of the assessee following the earlier decision of the Tribunal in the assessee s own case in ITA Nos.426, 427, 468 and 469/Bang/2006 for Assessment Years 2001- 02 and 2002-03. It is seen from this order that this issue has been decided in favour of the assessee company by the Tribunal from Assessment Year 1998-99 onwards. We, therefore, respectfully following the decision of the co-ordinate bench of the Tribunal for Assessment Year 2004-05 (supra), decide this issue in favour of the assessee. Grounds No.20 to 23 are allowed to the above extent. 26. In Grounds No.24 to 27, the Assessee has projected its grievance against the action of the AO in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties below. 29. We have heard both parties, carefully perused and considered the material on record. We find that the decision of the co-ordinate bench of the Tribunal has in the assessee s own case in ITA No.1072/Bang/2007 (supra) has followed its earlier order in ITA No.651/Bang/94 for Assessment Year 1997-98 and in ITA Nos.426, 427, 468 469/Bang/2006 dt.3.5.2008. The relevant findings are extracted hereunder : 11.4. We have carefully considered the submissions of both the parties. We have also perused the decisions of the Hon ble Tribunal on which the assessee company has placed strong reliance. The order of the Hon ble Tribunal for the AY 97-98 in assessee s own case in ITA No:651/B/94 has decided the issue in favour of the assessee and relevant findings of the Tribunal is reproduced as under: 27.14. In view of these entire facts of the case and, in the absence of any specific finds by the authorities below that the expenditure is incurred for the various units claiming exemption/deduction in an artificial way of allocating the expenses and that too on surmises is not justifiable. We are, therefore of the opinion that the profits of the undertaking eligible for exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the on-site development of software to specific customers. These, it was submitted, are the cost centres of Wipro Technologies Divisions and its sub-units, viz., the undertakings in Software Technology Parks (STPs) and Special Economic Zones (SEZs). It was submitted that the assessee s submissions that the SDCs are extensions of STP / SEZ units was rejected by the Assessing Officer, who was of the view that they are independent of STP units. The Assessing Officer was of the view that the revenue generated by the above SDCs abroad are included in the revenues shown by the STP / SEZ units. The Assessing Officer concluded that on site as envisaged in Explanation 3 to section 10A is development at the clients location but that, SDCs are not so as they are offices operating as Permanent Establishments (PEs) of the assessee company in foreign countries and also paying foreign taxes. In computing the deduction under section 10A, the Assessing Officer following the method established in earlier years assessments, arrived at the reserves and profits derived from these SDCs and excluded them from the profits of individual STP units. The DRP concurred with the view of the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 37, the Assessee has projected its grievance against the order of the AO whereby the AO excluded interest income, income generated from sale of scrap and exchange fluctuation, while computing eligible income on which deduction u/s.10A of the Act has to be allowed. 37. The learned counsel for the assessee submits that the aforesaid items are derived by the STP/SEZ undertakings and were correctly included for computing the eligible deductions. The assessee had also submitted that the deduction under section 10A is to be computed with reference to working formula in section 10A(4) wherein the expression profit of the business of the undertaking is used and there is no case for excluding any of the aforesaid sources of income for computing the deduction. Alternatively, the learned counsel for the assessee submitted that the AO should be directed to calculate net income i.e., the related expenses incurred in earning the aforesaid income debited to profit and loss account should also be excluded. It was submitted that the Assessing Officer concluded that the interest shown as miscellaneous income in each of the units has to be excluded from the profits since no borrowed funds were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. For the purpose of section 80-HHC, the Mumbai Bench in the case of ACIT v. Muthu Mandir Tardev Road, Mumbai (2006) 10 SOT 148 held that exchange gain itself is to be considered as part of the export turnover. Hence, following the decision of the Bench in the case of the assessee for the earlier years, it is held that exchange fluctuation is to be considered as part of the profit of the undertaking eligible for deduction u/s 10A. (3) With regard to interest income also, the Hon ble Tribunal in its decision referred supra, after deliberating the issue at length has, arrived at a conclusion that - 10.2. .The treatment to be meted out to interest had been under dispute while computing profits of the business u/s 80HHC of the I.T.Act. as per Explanation (baa) to section 80HHC, 90% of the interest is not to be included in the profits of the business. The issue as to whether the interest to be treated as business income or income from other sources has been considered by various High Courts. The Delhi High court in the case of CIT v. Shriram Honda Power Equipment 289 ITR 475 has discussed such an issue at length. However, it was observed by the Delhi High Court that in a gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be allowed only when foreign exchange is received on export of computer software manufactured by the assessee and that the EXIM Policy cannot overrule the Income-tax Act which is a separate code in itself. The DRP noted that the assessee itself had not made this claim for deduction under section 10A in the return of income filed and finally held that since deemed exports do not actually involve export, the assessee is not eligible for deduction under section 10A thereby rejecting the assessee s claim. The learned Departmental Representative supported the orders of the Assessing Officer and pointed out that the ITAT in the assessee s own case for Assessment Year 2004-05 had held the issue in favour of Revenue and against the assessee and sought dismissal of assessee s grounds on this issue. 42. We have heard both parties and have carefully perused and considered the material on record. We are not convinced with the submission of the assessee and find that the co-ordinate Bench of this Tribunal in ITA No.1072/Bang/2007 in assessee s own case for Assessment Year 2004-05 had considered an identical issue and decided the issue against the assessee. The relevant extract of the findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nover'. The said decision was followed by the Tribunal in the assessee s own case for Assessment Year 2004-05 in ITA No.1072/Bang/2007. Respectfully following these decisions of the Tribunal (supra) on this issue, we are of the considered view that no interference is called for and accordingly dismiss the assessee s ground No.41. 47. In Grounds No.42 to 46, the Assessee has projected its grievance against the action of the AO in excluding communication link and other reimbursements incentives and rewards from the export turnover while computing deduction u/s.10-A of the Act. Alternatively, the Assessee has prayed that if the aforesaid sums are excluded from the export turnover then they should also be excluded from the total turnover. 48. The assessee company had primarily two categories / methods for realizing its price (i) Time and Material Contracts, which means that the price realized is linked to the efforts for the computer software delivered and the tools and equipment used for the same; and (ii) Fixed Price Contracts, wherein the price realized is with reference to milestones for delivery of computer software. The assessee submitted that it realized in convertible forei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toto which holds good for the Assessment Year under dispute also. Accordingly, this issue is remitted back to the file of the Assessing Officer as in last year. 51. We, respectfully following the decisions of the co-ordinate Bench of the Tribunal in the assessee s own case in the earlier years, in ITA No.1072/Bang/2007 (supra), remit this issue back to the file of the Assessing Officer and direct the Assessing Officer to give the assessee adequate opportunity of filing the details on this issue and being heard in the matter. 52. In Ground No.47 to 53 and 54 55 the Assessee has projected its grievance against the action of the AO in excluding expenses incurred in foreign currency abroad and telecommunication expenses, from the export turnover while computing deduction u/s.10-A of the Act. It is the plea of the Assessee that the learned authorities below erred in proceeding with a presumption that expenses are embedded in the export turnover whereas in appellant s case there is no dispute that the items sought to be excluded are business expenditure incurred in foreign currency for on-site development of computer software (including services for development of computer softwar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. The Assessing Officer was of the view that since the sale proceeds were not remitted into India within 6 months from the end of the previous year as provided in section 10A(3) and also since the delayed realization did not have the approval of the competent authority, they were to be excluded from the 'export turnover'. The DRP, it is submitted, concurred with and upheld the Assessing Officer view brushing aside the assessee s reliance placed on the decision of the Hon'ble Apex Court in 204 ITR (St) 9 and of the Hon'ble Punjab Haryana High Court in 193 ITR 71 in support of its claim. 56. The learned Departmental Representative, on his part, supported the orders of the authorities below. 57. We have heard both parties, carefully perused and considered the material on record. We find that a similar issue was considered by a co-ordinate bench of this Tribunal, in the assessee s own case, in ITA No.1072/Bang/2007 (supra) at pages 22 and 23 at paras 13 to 13.5 thereof and find that the issue has been decided in favour of the assessee. We, therefore, respectfully following the decision of the Tribunal in the assessee s own case for Assessment Year 2004-05 (supra), dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat on examination of the details filed in respect of this claim, the Assessing Officer proposed to disallow the deduction claimed u/s. 10A in respect of certain units at Bangalore having regard to the past assessment years wherein the deduction was denied. The Assessing Officer, after making adjustments in the 'export turnover' and the profits of the business, computed the deduction u/s. 10A/10AA for each of the undertakings in respect of which the assessee had made a claim. The Assessing Officer, it was submitted allowed deductions under sections 10A, 10AA and 10B as computed by him for STP undertakings located in cities other than Bangalore and also for 100% EOU; and for undertakings located in SEZs. It was submitted that the Assessing Officer allowed deduction under section 10A, computed by him, for undertakings, Electronic City 4 and Madiwala 5 located at Bangalore in the STP commenced on the strength of the new licence. The Assessing Officer also allowed deduction under section 10A/10AA of the Act in respect of STP/SEZ undertakings formed during the year. The Assessing Officer held undertakings located at M.G. Road, Koramangala 1, Laxmi Building, Madhapur and Madiwala 1 are n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No.1072/Bang/2007 and C.O. No.77/Bang/2007 dt.30.1.2009 for Assessment Year 2004-05. At para 17.3 and 17.4 at pages 31 and 32 of the said order, the Tribunal has held as under : 17.3. We have duly considered the rival submissions and also critically analysed the facts and circumstances under which the Ld. CIT(A) had formed an opinion and arrived at a decision that the undertakings at Bangalore are eligible for deduction u/s 10A of the Act. We have also perused the Hon ble Tribunal s decision referred supra. The Hon ble Tribunal had dealt with the issue of applicability of section 10A of the Act comprehensively and also extensively quoted the decisions of Hon ble Bombay Tribunal in the case of JCIT v. Associated Capsules (P) Ltd Mumbai (2008) 21 SOT 420, Hon ble Delhi High court in the case of DI(Exemptions) v. Escorts Cardiac Assistance Hospital society reported in 300 ITR 75 and Hon ble Supreme Court in the case of Radhasoami Satsang v.CIT reported in 193 ITR 321 to substantiate its stand in confirming the finding of the Ld.CIT(A). In its concluding paragraph, it has been thus held that 13.12. Hence, considering the rule of consistency, we also hold that the assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e respectfully perused the decision of Hon ble Tribunal referred supra. The Hon ble Tribunal, after analyzing an identical issue exhaustively with reference to submissions of either party and also considering the reasoning of the Ld.CIT (A) in depth, has concluded, thus 33.7. In respect of allocation of expenditure, we have perused the order of the learned CIT(A). The assessee himself has allocated the overheads and such allocation has been made on the basis of sales turnover. Once such an allocation has been made by the assessee, then it was the duty of the assessing officer to point out that why the allocation is not correct. The assessing officer has simply ignored the details filed by the assessee and made the allocation. Without pointing out any error in the allocation the assessing officer was not justified in disturbing the allocation. Hence, the finding of the leaned CIT(A) on this issue is confirmed. 20.4. Respectfully, following the above ruling, we confirm the Ld.CIT(A) s action. We, therefore, respectfully following the decision of this Tribunal decision for A.Y. 2004-05 (supra), on the issue of allocation of corporate overheads, direct the A.O. not to allocate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax or excise cannot be charged on these amounts. When the assessee is deriving income from the service contract, then it cannot be said that it is deriving income from the industrial undertaking. The deduction u/s 80-IB commences from the year in which the industrial undertaking begins to manufacture or produce articles or things. Hence, the intention of the Legislature is quite clear that the deduction should be allowed to an industrial undertaking which the profit is derived from the manufacturing or production of an article or thing. Therefore, the learned CIT(A) was justified in holding that profit from AMC cannot be included for the purpose of computing deduction u/s 80IB. 33.6. In respect of monitors, it was submitted before the learned CIT(A) that the monitors are sold along with the computer manufacture by the undertaking. It may be an integrated component of the computer. If there is no value addition without any change in name, character or and use, then such an activity cannot constitute manufacture or production. If the monitors have been sold as part of the computer without making any value addition by the industrial undertaking, then the profit derived from sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a direction that if an undertaking eligible for section 8O-lC incurs a loss, that loss cannot be set-off against income from other sources because this unit has to be treated as the only source of income. 71. The ld. AR for the assessee submitted that section 80-IC(7) read with section 80-IA(5) operate for the limited purposes of determining the deduction under section 80-IC(1) and it imposes no other restriction with regard to set-off of the loss of an undertaking against other income. Set-off of losses is governed by Section 70 and 71 and there is no restriction that the loss incurred by an undertaking eligible for an incentive deduction cannot be set-off against the other sources of profits / income. 72. It was further submitted that the Tribunal in the earlier years has dealt the issue of set off of losses of STP units against other business income and has decided the issue in favour of the assessee in ITA.No. 1072/B/07 for AY: 2004-05 in para 16 of page 28. 73. The learned DR relied on the order of the AO. 74. We have considered the rival submissions. Sec.80IA(5) of the Act only prescribes the method by which the quantum of deduction has to be arrived. he words as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee makes surplus profits after claiming eligible allowances and he is entitled to claim deduction under section 80IA, the earlier benefit given under other sections of the Act should be taken into account before granting deduction under section 80IA . The above reasoning of the Hon ble ITAT has since been confirmed by the Hon ble Karnataka High Court. In view of the above and also the decision on similar issue in Assessee s own case referred to earlier, we are of the view that the claim of the Assessee for set off has to be allowed. We direct the AO to allow the set off as claimed by the Assessee. The grounds of appeal are decided accordingly. 75. In Grounds No.80 81, the Assessee has challenged the order of the AO whereby the AO allocated a sum of Rs.57,76,956/- as relatable to toilet shop at Baddi, H.P. The assessee claimed the deduction u/s 80-lC equal to 100% of the profits of Rs. 34,78,67,020/- derived by the industrial undertaking at Baddi, Himachal Pradesh, which manufactures toilet soaps. The undertaking comes under Wipro Consumer Care Division of the assessee. The profit was computed as per the method of accounting regularly followed by the assessee. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of and has deleted the allocation of corporate overheads made by the Assessing Officer. Respectfully following this decision of the Tribunal on the issue of allocation of corporate overheads, we delete the allocation of corporate overheads made by the Assessing Officer to the soap unit at Baddi, Himachal Pradesh and the Glucovita unit while computing the deduction u/s. 80 IC of the Act. Respectfully following the order of the Tribunal, we hold that the allocation of expenses as done by the AO be deleted. Gr.No.80 81 are accordingly allowed as held in the earlier years. 80. In Ground No.82, the Assessee has projected its grievance against the action of the AO in not considering other income of Baddi unit being scrap sales, discounting of cheques and other income totalling in all a sum of Rs.20,17,616/- as part of the income eligible for deduction u/s.80-IC of the Act. It is not in dispute before us that identical issue was considered by the Tribunal in Assessee s own case in AY 07-08 in ITA No.972/Bang/2011 order dated 15.6.2012 and the Tribunal held as follows: 22.2 We have heard both the learned counsel for the assessee and the learned Departmental Representative on the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has made claim for tax relief against the VAT tax paid in USA and Canada. As per the DTAA with USA and Canada, the claim is admissible only for the tax paid under Income-tax Act in India and federal tax in USA and Canada. It is clear that the Ld.CIT(A) has not disposed off this issue on merits 18.4. The Hon ble Tribunal analyzing the issue in depth, was, further, opined that 22.8 credit for income-tax paid in other country in relation to income u/s 10A will not be available u/s 90(1)(a). U/s 90(1)(b), the Central Government may enter into an agreement with a Government of any country outside India for the avoidance of double taxation of income under this Act and under the corresponding law in force in that country. To see the applicability of section 90(1)(b), one is required to go through the DTAA agreements. Though the assessing officer has discussed this issue in detail in his order, but the learned CIT(A) has not considered the arguments advanced by the assessing officer in not allowing the tax credit. Hence, we feel that this issue requires to be reconsidered by the learned CIT(A) in view of the facts and arguments considered by the assessing offic ..... 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