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Infosys BPO Ltd. Versus The Assistant Commissioner of Income Tax, Circle 11 (4) , Bangalore.

2015 (8) TMI 163 - ITAT BANGALORE

Computation of deduction u/s. 10A - excluding the telecommunication charges and expenses incurred in foreign currency from the export turnover and total turnover - According to the Revenue, the aforesaid expenses should be excluded only from the export turnover and not from the total turnover - Held that:- As of today, law declared in Tata Elxsi Ltd., [2011 (8) TMI 782 - KARNATAKA HIGH COURT] in which it was held that whatever is excluded from the export turnover, should also be excluded from th .....

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Karnataka High Court ) was concerned with similar situation as set out above. In view of the aforesaid decision of the Hon’ble Karnataka High Court, we are of the view that the claim as made by the Assessee for carry forward of loss of the non-eligible unit had to be allowed without set off of profits of the 10A/10B unit. - Decided against revenue. - ITA No.1265/Bang/2014, ITA No.1320/Bang/2014 - Dated:- 30-7-2015 - SHRI N.V. VASUDEVAN AND SHRI ABRAHAM P. GEORGE, JJ. For The Assessee : Shri Pad .....

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s in excluding the telecommunication charges and expenses incurred in foreign currency from the export turnover and total turnover while computing deduction u/s. 10A of the Act. According to the Revenue, the aforesaid expenses should be excluded only from the export turnover and not from the total turnover. According to the Revenue, the decision of the Hon ble High Court of Karnataka in Tata Elxsi Ltd., 349 ITR 98 in which it was held that whatever is excluded from the export turnover, should al .....

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a which is the jurisdictional High Court is binding on us. We therefore hold that the order of CIT(A) does not call for any interference and accordingly the same is confirmed. 5. Ground Nos. 4 & 5 is with regard to grievance of the Revenue that the brought forward unabsorbed losses of earlier years should be set off against the profits of the 10A unit and deduction u/s. 10A should be allowed only after such set off. This issue has also been settled by the judgment of the Hon ble High Court o .....

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urt in the decision rendered in Yokogawa India Ltd. (supra). On this issue, we find that the effect of the CBDT Circular vis-à-vis the decision of the Hon ble High Court of Karnataka in Yokogawa India Ltd. (supra) was considered by this Tribunal in the case of DCIT v. Biocon in ITA.248, 368 to 371 & 1206/Bang/2010, order dt 30.04.2014. In the aforesaid decision, the Tribunal observed as follows:- 57. ………. The assessee during the previous year had four units which .....

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ere was a loss of ₹ 105,92,19,172. In the return of income filed by the assessee, the assessee sought to carry forward the loss of non-10B units for set off against the profits of non-10B units in the subsequent assessment years. The AO firstly noticed that there was income from other sources to the extent of ₹ 4,71,15,896 and such had to be set off against the loss of the non-10B units. Accordingly, the AO held that the loss of the non-10B units that had to be considered for carry f .....

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ccordingly, the claim of the assessee for carry forward of loss of non-10B unit was not allowed by the AO. 60. On appeal by the assessee, it was contended that the provisions of section 10A and section 10B are exemption provisions and therefore the profit of 10A and 10B units will not enter the computation of total income at all and therefore the profits of these units need not be set off against the loss of non-10B unit by invoking the provisions of section 72 of the Act. 61. The CIT(Appeals) d .....

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s) noticed that the aforesaid decision was followed by the ITAT Bangalore Bench in the case of Intelnet Technologies India Pvt. Ltd. v. ITO, ITA No.1021/Bang/2009 dated 12.3.2010. Similar view expressed by the Delhi Bench of the Tribunal in the case of Global Vantage Pvt. Ltd. v. DCIT, 2010 TIOL 24 ITAT (DEL) was also referred to by the CIT(A). A contrary view was expressed by the Bangalore Bench of the Tribunal in the case of KPIT Cummins Info Systems (Bangalore) Pvt. Ltd. v. ACIT, 120 TTJ 956. .....

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ption provisions. 6. For all the above reasons, the CIT(Appeals) confirmed the order of the Assessing Officer. Against the order of the CIT(A), the Assessee was in appeal before the Tribunal. This Tribunal dealt with the issue in the following words : 63. We have given a careful consideration to the rival submissions. The issue as to whether the provisions of Sec.10B of the Act are deduction provisions or exemption provisions will assume great importance. The reason is that if the provisions are .....

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loss of non-eligible unit against the profit of the eligible unit on which deduction u/s.10B was to be allowed. The Hon ble Court in para 10 to 20 of its judgment dealt with the issue. The Hon ble Court noticed that Sec.10-A(1) of the Act (which is in pari materia with Sec.10-B of the Act) read as follows: 10B. Special provisions in respect of newly established undertaking in free trade zone etc.,-(1) Subject to the provisions of this section, a deduction of such profits and gains as are derive .....

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isions was considered by the Hon ble High Court and it held in para 13 to 15 of its judgment that the expression shall be allowed from the total income of the Assessee does not mean total income as defined u/s.2(45) of the Act but that expression means profits and gains of the STP undertaking as understood in its commercial sense or the total income of the STP unit. Thus the view expressed is that income of the STP undertaking gets quarantined and will not be allowed to be set off against loss o .....

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of non-eligible unit. The Hon ble Karnataka High Court in the case of Yokogawa (supra) was concerned with similar situation as set out above. In view of the aforesaid decision of the Hon ble Karnataka High Court, we are of the view that the claim as made by the Assessee for carry forward of loss of the non-eligible unit had to be allowed without set off of profits of the 10A/10B unit. We hold accordingly and allow the relevant grounds of appeal of the Assessee. 66. We may also observe that the H .....

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1994-95, the assessee computed the profits of the EOU without adjusting the brought forward unabsorbed depreciation of AY 1988-89. It claimed that as s. 10B conferred exemption for the profits of the EOU, the said brought forward depreciation could not be set-off from the profits of the EOU but was available to be setoff against income from other sources. It was also claimed that the profits had to be computed on a commercial basis. The AO accepted the claim though the CIT revised his order u/s .....

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Hon ble Karnataka High Court, the Hon ble Supreme Court observed as follows while dismissing the appeal:- Having perused the records and in view of the facts and circumstances of the case, we are of opinion that the civil appeal being devoid of any merit deserves to be dismissed and is dismissed accordingly. 67. Thus the ratio has to be confined to the facts and circumstances of the case. The aforesaid observations have to be confined to the facts of that case and as applicable to a case where b .....

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off against income post tax holiday which means that they need not be so set off as mandated in the decision of the Hon ble Karnataka High Court in the case of Himatasingike Seide Ltd. (supra). As we have already seen, in Yokogawa India Ltd. 341 ITR 385 (Kar), it was held that even after s. 10A/10B were converted into a deduction provision w.e.f 1.4.2001, the benefit of relief u/s 10A/10B is in the nature of exemption with reference to commercial profits and that as the income of the s. 10A unit .....

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ised by the Revenue also. Accordingly, the same are dismissed. 8. In the result, the appeal by the Revenue is dismissed. ITA 1265/B/2014 (Assessee s appeal) 9. The effective grounds raised by the assessee read as follows:- 1. The order passed by the learned Commissioner of Income tax (Appeals) to the extent prejudicial to the appellant is bad in law is liable to be quashed. 2. The learned CIT(A) at para 3.6 to 3.10 of his order has erred in concluding that losses of STPI unit cannot be set off a .....

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