TMI Blog2015 (1) TMI 773X X X X Extracts X X X X X X X X Extracts X X X X ..... or statistical purposes. Disallowances in computation of deduction u/s 10A - Held that:- When two reasonable constructions are possible, then the construction in favour of the assessee must be adopted. Thus the decision of the Hon’ble Karnataka High Court in the case of Yokogawa India Ltd.(2011 (8) TMI 845 - Karnataka High Court ) holds the field stating that the income of the section 10A unit has to be excluded before arriving at the gross total income of the assessee - The issue of reducing expenditure incurred on telecommunication, insurance and in foreign currency both from the export turnover as well as total turnover is covered by the decision of the jurisdictional High Court in the case of Tata Elexsi (2011 (8) TMI 782 - KARNATAKA HIGH COURT ). - Decided in favour of assessee. Addition of various amounts as ‘income from other sources’ - Held that:- Interest on deposits which are deposited to obtain bank guarantee issued to the customs authorities, reimbursement of expenses by the customers on account of certain bills produced by the company on their behalf and recovery from the employees leaving the company without the giving notice period are part of the business inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re development and had claimed ₹ 4,60,96,559/- as deduction u/s 10A of the Act. In computing the said deduction, the AO observed that the assessee had brought forward loss from the earlier assessment year 2002-03 onwards and both brought business and depreciation loss put together stand at ₹ 8,95,30,264/-(business loss of ₹ 2,00,74,914 + depreciation loss of ₹ 6,94,55,350/-) which has not been adjusted before claiming deduction. Considering the fact that the issue had been elaborately dealt with, in the assessment order for assessment year 2005-06, the AO held that the assessee should have set off the brought forward loss as well as depreciation loss of the earlier years before claiming deduction u/s 10A of the Act. He, accordingly, computed the deduction u/s 10A after set off of earlier year s brought forward business loss and depreciation and accordingly arrived at the profit for computation of deduction u/s 10A at ₹ 2,55,40,802/-. Against the said disallowance and the consequential addition, the assessee is in appeal before us by way of ground of appeal No.2. 4.2 The learned counsel for the assessee submitted that for computing deduction u/s 10A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the AO was erroneous and prejudicial to the interests of the Revenue as exemption u/s 10B was allowed on an inflated amount without deducting unabsorbed depreciation. The CIT directed that unabsorbed depreciation should be adjusted against the income of the export oriented business undertaking and the total income of the assessee should accordingly be recomputed afresh. The assessee therein had appealed to the Tribunal which allowed the same against which the Revenue preferred an appeal before the Hon ble High Court. The Hon ble High Court held that sec.10B cannot be read in isolation of other provisions as it is only an exemption provision and exemption provision cannot be fanciful and it has some rationale with other provisions of the Act and therefore after a combined reading of the definition of exemption, total income-tax liability, deductibility etc., one has to come to a conclusion that calculation as far as possible is to be in terms of the Act. To arrive at a profit and gain, one has to necessarily take into consideration total income in terms of the Act and to arrive at the income, one has to take into consideration various additions and deletions in terms of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry to each other. When there are two judgments of the very same High Court by benches of equal strength, then the later judgment of the High Court has to be followed as held by the Hon ble Apex Court in the case of Bhika Ram and others vs. UOI reported in 238 ITR 113. The decision of the High Court in the case of Himatsingike Siede (supra) is dated 4th August 2006 whereas the decision of the Hon ble High Court in the case of Yokogawa India Ltd.(supra) is dated 9th August, 2011. As regards the dismissal of the SLP by the Hon ble Supreme Court against the decision of the Hon ble Karnataka High Court in the case of Himatsingike Siede (supra) is concerned, we find that the Hon ble Supreme Court has dismissed the appeal in limine without laying down any ratio decidendi therein and, therefore, as held by the Hon ble Apex Court in the case of Indian Oil Corporation Ltd. vs. State of Bihar others, reported in 167 ITR 897, the decision of the Hon ble Karnataka High Court in the case of Yokogawa India Ltd.(supra) holds the field. Further, the Hon ble Apex Court in the case of Vegetable Products Ltd., reported in 88 ITR 192 (SC) has held that where two reasonable constructions are possible, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see submitted that these are : (i) interest on deposits which are deposited to obtain bank guarantee issued to the customs authorities, (ii) reimbursement of expenses by the customers on account of certain bills produced by the company on their behalf (iii) recovery from the employees leaving the company without the giving notice period. Learned counsel for the assessee submitted that all these are part of business income and therefore are eligible to be considered as income from business and deduction u/s 10A has to be allowed on the same. In support of this contention, the learned counsel for the assessee has placed reliance upon the following decisions: (i) Livingstone Jewellery (P) Ltd. vs. DCIT (31 SOT 323)and (ii) CIT vs. Motorola India Electronics (P) Ltd.(265 CTR 94). 7.2 Learned Departmental Representative, on the other hand, supported the orders of the authorities below. 7.3 Having regard to the rival contentions and the material on record, we find that the Tribunal at Mumbai in the case of Livingstone Jewellery (P) Ltd (supra) has considered as to whether all profits which have nexus with the business of an undertaking is qualified 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 ..... il payment made during the earlier assessment year. He, therefore, held that payment of management fee is nothing but siphoning off of profits from India with minimum incidence of tax. He, accordingly, treated the entire sum of ₹ 1.55 crore as unjustified payment and made arms length adjustment accordingly. The AO, in the draft assessment order proposed to make an addition to the returned income of the assessee against which the assessee preferred objections before the DRP who confirmed the order of the AO and consequently, the final assessment order was passed making addition of the adjusted arms length price. 8.1 In appeal before us, the assessee has placed various decisions of Hon ble High Court as well as the Tribunal in support of its contention that the AO is not authorized to disallow the entire expenditure or a part thereof on the ground that the assessee has suffered continuous loss but can only examine the quantum of expenditure and the allowability thereof as a business expenditure. In support of the said contentions, the learned counsel for the assessee placed reliance upon the following decisions: i) M/s.EKL Appliances vs. DCIT (ITA Nos.1068 1070/ 2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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