TMI Blog2015 (10) TMI 826X X X X Extracts X X X X X X X X Extracts X X X X ..... ountry outside India for the granting of relief in respect of income tax chargeable under the Income-tax Act and under the corresponding law in force in that country. India-USA DTAA - India-USA DTAA does not speak about any tax being paid in India as a condition precedent for granting FTC credit - A perusal of Article 25 of India-USA DTAA makes it clear that if an Indian resident derives any income on which tax is paid USA, then credit of such tax shall be granted in India. The said provision does not speak of any income tax being paid by the Indian resident under the Indian Income-tax Act as a condition precedent for claiming the said benefit. Therefore, it is not the requirement of law that the assessee, before he claims credit under the Indo - US convention or under section 90 of the Act, should pay tax in India on such income. India-Canada DTAA - For FTC benefit income must be subjected to tax both in India and Canada - A reading of Article 23 of India-Canada DTAA makes it clear that for an Indian resident to avail FTC benefit in respect of income from sources within Canada, income must be subjected to tax both in India and Canada, i.e., assessee has paid tax both in Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed in the return filed under Section 139(1) of the Act. Once the assessee files the necessary particulars and claims relief under the provisions of the Double Taxation Avoidance Agreement, the limitation placed by domestic law would yield to the tax relief provided for under the Double Taxation Avoidance Agreement. Therefore, the assessing authority was not justified in rejecting the said claim on the ground that no revised return is filed under Section 139(5) of the Act. In fact, probably the assessing authority was conscious that it is not a valid ground to reject the claim, he proceeded to consider the claim of the assessee on merits and has rejected the claim on merits also. In view of the aforesaid discussions, the said substantial question of law is answered in favour of the assessee and against the revenue and the assessee is entitled to the tax benefit to the extent set out above. Unavailed MODVAT credit - whether constitutes income under Section 2(24) of the Income-tax Act and liable to tax? - Held that:- whatever may be the accounting practice adopted by the assessee, the cost price of the raw-material should include tax, duty, cess or fee and correspondingly, the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss account, but in law it is the consolidation of four accounts which would be the account of the assessee. It is from the profits derived by the assessee that the salary is paid. The payment of the salary as it is not dependent on the profit earned by any unit, the basis of commission payable by the assessee to its directors also cannot be made subject to the profit making ability of a unit. Merely because by such allocation the profit margin of 10A unit is going to increase cannot be the basis to allocate the commission paid to the directors proportionately to the profit making unit. In that view of the matter we do not see any justification to deny the benefit which the assessee is entitled to. The impugned orders passed by the authorities has no legal basis. On the contrary it runs counter to the statutory provisions. - Decided in favour of the assessee and against the revenue. Exclusion of AMC profits for the purpose of computing deduction under Section 80IB of the Act, when AMC income is derived from the manufacturing units - Held that:- Customers would get attracted to a product, because of the warranty and the after sales maintenance and hence warranty/after sales mai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is made clear the assessee is not entitled to the benefit of Section 80IB in respect of monitors which are purchased and sold separately as a traded commodity. In fact, the assessee has not claimed any benefit in respect of those monitors. Therefore, the finding recorded by the authorities that the assessee is not entitled to the benefit of deduction under Section 80IB in respect of the monitors which form part of the computer is hereby set aside. Decided in favour of the assessee Exclusion of VAT/GST from export turnover and total turnover for the purpose of computing deduction under Sec. 10A - Held that:- In the instant case, VAT and GST is payable by the purchaser. It is a part of the sale price. The assessee collects the tax and remits it to the Government. It is an indirect tax. The definition of export turnover expressly says what is excluded from export turnover i.e., freight, telecommunication charges or insurance. It has not excluded the VAT and GST payable by the assessee in the foreign jurisdiction. The test to be applied in the light of the aforesaid definitions is excluding the aforesaid three charges from the sale consideration received, sale proceeds received in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in fav0ur of assessee. Entitlment to claim deduction u/s 10A - foreign exchange which is yet to be received during the current assessment year for sale of software - application for extension had been filed and Section 155(11A) of the Foreign Exchange Management Act 1999 and RBI Rules were applicable - Held that:- The assessee is a status holder exporter. The export has been done strictly in accordance with law. Foreign exchange remittances should have been received within six months from and of the financial year. It has not been received. Therefore, an application is filed seeking for extension of time to the Reserve Bank of India. Even to this day the Reserve Bank of India has not rejected the said request. On the contrary, after the period of 6 months, foreign exchange remittances are received and credited to the assessee's account through the Reserve Bank of India. It is in this context merely because the written approval of extension is not passed by the Reserve Bank of India, whether the assessee could be denied the benefit of Section 10A. The Tribunal on consideration of the entire material on record, taking note of the statutory provisions and the object underlying thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the First Appellate Authority were not justified in allocating the substantial portion of the amount as the expenses incurred in respect of Section 10A and disallowing the deduction. That is precisely what the Tribunal has held on proper appreciation of the material on record. In that view of the matter we do not find any justification to interfere with the well considered order of the Tribunal. - Decided in favour of assessee. Difference in the price of shares of Wipro Finance Limited, purchased at market value and sold to assessee's advocate and ex-employee at a subsidized price being a colorable devise to avoid tax should be allowable as a capital loss? - Held that:- It is only when we held that the purchase of shares at a premium is a genuine transaction and infusion of capital of ₹ 95 crores is a genuine transaction, the sale made by the assessee for a throwaway price to its ex-employees was held to be sham. Now whether those transactions were for the market price or the shares had no value but purchased on account of the previous contract and thereby the assessee incurred any loss in the business, is a matter to be gone into by the Tribunal. The Tribunal had not go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TA Nos. 879/2008, 880/2008, 881/2008, 882/2008, 108/2009, 109/2009, 333/2009 and 334/2009. The revenue is the appellant in ITA Nos. 907/2008, 909/2008, 904/2008, 905/2008, 209/2009,210/2009,211/2009 and 363/2009. 2. The assessee-company is a public limited company, listed in India and US engaged in the business of software exports, computer peripherals, IT enabled services, manufacture and sale of vegetable oils, soaps, leather products, hydraulic cylinders and tippers, and manufacture of reagents as well as marketing and support of medical equipment and other related businesses. The business of the company is carried on through the various business units or divisions of the company. It is the case of the assessee that it runs each business unit as an independent profit center. Accordingly separate accounts are maintained for each business unit. The accounts of the assessee are compiled on the basis of consolidation of all accounts maintained at the business unit levels. 3. The facts of the case for each assessment year are set out in brief as under: Assessment Year 2001-02 - ITA Nos. 879 882/2008; 907 909/2008 The appellant filed its return of income for the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The total income of the assessee-company was determined at ₹ 717,81,57,770/- for assessment year 2002-03. The demand, after making certain adjustments for interest, advance tax and tax refunded, was quantified at ₹ 261,66,03,694/- for AY 2002-03. 7. Assessee preferred an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)] which was disposed-off by the CIT(A) vide order dated 20.03.2006. Aggrieved by the said order, both the assessee and the Department preferred separate appeals before the ITAT. The ITAT, vide common order dated 30.05.2008 disposed of the appeals. Assessment Year 2003 04 - ITA Nos. 108 109/2009; 210 211/2009 8. The assessee-company filed its return of income for the assessment year 2003-04 on 27.11.2003 disclosing a total income of ₹ 164,86,92,630/- after claiming deduction u/s 10A of the Act to the extent of ₹ 763,34,75,604/-. The assessee had claimed relief under Double Taxation Avoidance Agreement u/s 90 in the return amounting to ₹ 20,99,63,631/-. The assessee also claimed TDS of ₹ 9,55,12,095/- and advance tax payment of ₹ 69,40,50,000/-. The assessee claimed refund of ₹ 39,36,31,184/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)] which was disposed-off by the CIT(A) vide order dated 09 07.2007. Aggrieved by the said order, the Department preferred an appeal before the ITAT. The assessee filed a Memorandum of Cross Objections. The ITAT, vide order dated 30.01.2009 disposed of the appeal and the Cross objections. Assessment Year 2003-04 - ITA No. 209/2009; 12. There are two more substantial questions of law arising out of the order dated 26.09.2007 passed by the Commissioner u/s 263 of the Act. Assessee filed an appeal to the ITAT in ITA No. 1178/2007 and ITAT disposed-off the appeal vide order dated 31.10.2008. Against the order of the ITAT, department has filed an appeal in this Hon'ble Court u/s 260A of the Act. Substantial questions raised therein are connected with this batch of appeals. 13. Several substantial questions of law do arise for consideration in these batch of appeals. Some of the substantial questions of law are already answered either in favour of the revenue or in favour of the assessee in the very assessee's case. Some of the substantial questions of law are already answered by the Apex Court. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year 1990-91 in the case of Wipro Infotech Limited (the assessee's erstwhile wholly owned subsidiary which since merged with the assessee company with effect from 01.04.1994) full credit for foreign taxes was granted by applying Article 25 of the India-US DTAA even though 50% deduction of the eligible income under Section 80-O of the Act was allowed. The said relief was granted by the CIT(A) which the Department has accepted. Since the claim for foreign tax credit is an entitlement like any other pre-paid tax, no revised return as contemplated under Section 139(5) was required. The limitations of the domestic tax law, if any, would also not apply where relief is to be allowed as per the provisions of DTAA. 16. By a letter dated 10.02.2004, request was made to allow tax credit of ₹ 24,94,67,448/- at the fag end of the assessment proceedings which was erroneously not claimed earlier. . Therefore, the assessee raised a claim for tax credit for the tax paid in foreign countries. The assessing authority relying on Section 139(5) of the Act held that the claim is not admissible at this juncture. Section 139(5) of the Act defines the mandatory requirements and the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is being considered. 18. Against the said order, the assessee preferred an appeal to the Commissioner of Income Tax (Appeals). The CIT(A) relying on the Judgment in the assessee's case itself for the assessment year 1990-91 as well as 2000-01 where foreign tax credit was allowed, allowed the claim of the assessee for all the years, setting aside the order passed by the assessing authority. 19. Aggrieved by the said order, the revenue preferred an appeal to the Tribunal. The Tribunal taking note of Section 90(1)(a) prior to its amendment held the word paid has been defined under Section 43(2) of the Act. The said definition is for the purpose of Section 28 to 41. But the said meaning of the word can be imported for Section 90(1)(a). As per Section 43(2) paid means actually paid or incurred according to the method of computing upon the basis on which the profit or gains are computed under the head profit and gains of business or profession. In respect of the income of the unit qualifying for deduction under Section 10-A, income tax is neither paid nor incurred. The Apex Court in the case of CIT v. Williamson Financial Services Ors. (297 ITR 17) dealing with computati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia and in the foreign country, the foreign income taxes paid attributable to such income is allowed as credit in India. However, Section 90(1)(a)(ii) is in respect of DTAA for granting of relief in respect of income tax chargeable under the Act and under the corresponding law in force in that country to promote mutual economic relations, trade and investment. Section 10A income is chargeable to tax in view of Section 4 of the Act. However, subject to the assessee satisfying the conditions prescribed income under Section 10-A is exempted from making such payment. Once the assessee is made to pay tax on such exempted income in the other contracting State then Section 90(1)(a) (ii) enables him to claim credit of the tax paid in the contracting country. Though this provision 90(1)(a)(ii) came on the statute book from 01.04.2004, it is clarificatory in nature. As per Section 90(2) of the Act, the assessee-company was always entitled to the said benefit as the provisions of the agreement was more beneficial than the statutory provisions. India has entered into DTAA with various countries. The expression used in some of the agreements is subjected to tax . The other expression used is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge, he has put forth his claim. If the assessee is not liable to pay tax under the Act merely because he did not put forth the claim in the return he cannot be denied this benefit. Decision pertaining to mandatory filing of a revised returns is with reference to claim for deductions and not with reference to tax relief/credit for prepaid taxes. 24. Per contra, Sri Indra Kumar, the learned Senior Counsel appearing for the revenue supported the impugned order. He contended that, admittedly the assessee is not liable to pay any tax in respect of the income which falls under Section 10A. Therefore, it is not a case of assessee having paid tax or assessee is liable to pay tax under the Act. When that being so, he is not entitled to credit of any tax paid in the contracting country. He submits that the idea behind the foreign tax credit is that the same income should not suffer taxation twice. When an income suffers taxation in both source and resident jurisdiction, tax paid in first jurisdiction needs to be allowed as tax credit in other jurisdiction. Consequently, if a source of income is taxed only in one jurisdiction, no tax credit or relief is required for other jurisdiction. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Finance Bill, 2003 which explains Clause 43 seeking amendment to the Act reads as follows: Clause 43 seeks to amend section 90 of the Income-tax Act relating to agreement with foreign countries. The existing provisions of the said section, inter alia, provide that the Central Government may enter into agreement with the Government of any country outside India for granting of relief in respect of income on which have been paid both income-tax under the Income Tax Act and income-tax in that country, or for the avoidance of double taxation of income under that Act and under the corresponding law in force in that country, etc. It is proposed to substitute clause (a) of sub-section (1) of the said section to provide that the Central Government may enter into an agreement with the Government of any country outside India for the granting of relief inter alia, in respect of income-tax chargeable under the Income-tax Act or under the corresponding law in force in that country to promote mutual economic relations, trade and investment. 29. The memorandum explaining provisions in the Finance Bill 2003 reads as follows: Double Taxation Avoidance Agreements-extendin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Government of any country outside India or specified territory outside India, as the case may be, under sub-section (1) for granting relief of tax, or as the case may be, avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assessee. (2A) Notwithstanding anything contained in subsection (2), the provisions of Chapter X-A of the Act shall apply to the assessee even if such provisions are not beneficial to him. (3) Any term used but not defined in this Act or in the agreement referred to in sub-section (1) shall, unless the context otherwise requires, and is not inconsistent -with the provisions of this Act or the agreement, have the same meaning as assigned to it in the notification issued by the Central Government in the Official Gazette in this behalf 30. Sub-section (1) lays down that the Central Government may enter into an agreement with the Government of another country. Clause (a) (i) contemplates situation when tax is already paid on the same income in both the countries and it empowers the Central Government to grant relief in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me income. Section 91 makes it clear that if a person who is residing in India has paid tax in any country with which, there is no agreement under Section 90 for the relief or avoidance of double taxation, income tax if deducted or otherwise paid as per law in force in that Country, then he shall be entitled to the deduction from the Indian Income Tax payable by him in a sum computed on such doubly taxed income, at the Indian rate of tax or the rate of tax of the said country, whichever is lower or the Indian rate of tax, if both the rates are equal. 34. In fact, the circular No.333 dated April 2, 1982 clarifies the legal position. The said circular reads as under:- The correct legal position is that where a specific provision is made in the Double Taxation Avoidance Agreement, that provision will prevail over the general provisions contained in the Income Tax Act, 1961. In fact the Double Taxation Avoidance Agreements which have been entered into by the Central Government under Section 90 of the Income Tax Act, 1961, also provide that the laws in force in. either country will continue to govern the assessment and taxation of income in the respective country except where pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Union is vested in the President and is exercisable in accordance with the Constitution. The Executive is qua the State competent to represent the State in all matters international and may by agreement, convention or treaty incur obligations which in international law are binding upon the State. But the obligations arising under the agreement or treaties are not by their own force binding upon Indian nationals. The power to legislate in respect of treaties lies with the Parliament under entries 10 and 14 of List I of the Seventh Schedule. But making of law under that authority is necessary when the treaty or agreement operates to restrict the rights of the citizens or others or modifies the law of the State. If the rights of the citizens or others which are justiciable are not affected, no legislative measure is needed to give effect to the agreement or treaty. When it comes to fiscal treaties dealing with double taxation avoidance, different countries have varying procedures. In the United States such a treaty becomes a part of municipal law upon ratification by the Senate. In the United Kingdom such a treaty would have to be endorsed by an order made by the Queen i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e gets the relief. In another scenario, though the said income is exempt in this country, by virtue of the agreement, the amount of tax paid in the other country could be given credit to the assessee. Thus for the payment of income tax in the foreign jurisdiction, the assessee gets the benefit of its credit in this country. 40. However, if the contracting country is not agreeable to extend the said benefits, then in terms of the agreement and probably in terms of the exemption granted, the assessee would be entitled to benefit only in this country on account of the exemption and the benefit in the other country is not extended. Thus when exemption is granted in respect of the income chargeable to tax. under this Act in respect of which no benefit is granted in the corresponding country the assessee gets no benefit. However, if the benefit is extended to a portion of the income say for example 90% and 10% is subjected to tax then to that extent the assessee would be entitled to benefit of tax credit as he has paid tax in the foreign jurisdiction as per Section 90 (1)(a)(i) of the Act. 41. In this connection, it is contended on behalf of the Revenue that if the income is charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or computer software, as the case may be, shall be allowed from the total income of the assessee. 44. This provision provides for a deduction of profits or gains derived from export by an undertaking for a period of ten years. The profits and gains derived by such undertaking would form part of the income chargeable to income tax under Sections 4 and 5 of the Act. Therefore, when an assessee is having several undertakings, one of which falls under Section 10A, the assessee's entire income from all the undertakings is computed to arrive at the total income. However, the income from such undertaking falling under Section 10A has to be deducted from the total income. 45. Chapter IV deals with the computation of total income under various heads of income. Section 14 provides for classification of income under various heads of income for the purposes of charge of income-tax and computation of total income. It reads as under :- Save as otherwise provided by this Act, all income shall, for the purposes of charge of income-tax and computation of total income, be classified under the heads of income . 46. The Apex Court in the case of AZADI BACHAO ANDOLAN's case at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r laid down in the IT Act. Section 5 defines the scope of total income and it is subject to the provisions of IT Act. Section 14 provides that save as otherwise provided by the IT Act, all income shall, for the purpose of charge of income-tax and the computation of total income, be classified under the following heads of income. Therefore, the total income in its strict sense requires computation for the purpose of levy of tax. The computation of total income begins only with Chapter IV and as Section 10A is covered in Chapter III, the phrase total income used in S.10A cannot be understood in the same sense as in S.2(45). 14. The phrase Total income has been used in the IT Act in several places with different connotations and shades. The phrase total income used in S.10A is one such variant. The phrase need not necessarily mean the total income as computed in accordance with the provisions of the Act. The relief under this section is with reference to the STP undertakings and not to the assessee. In other words, the relief travels with the undertaking irrespective of who owns the same. The computation of relief as provided in S.10A(4) is also with reference to the unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, the position has been made very clear. The phrase 'total income' has been used in the Income-tax Act in several places with different connotations and shades. The phrase total income used in Section 10A is one such variant. The phrase need not necessarily mean the total income as computed in accordance with the provisions of the Act... The relief under this section is with reference to the STP undertakings and not to the assessee. In other words, the relief travels with the undertaking irrespective of who owns the same. The computation of relief as provided in section 10A(4) is also with reference to the undertaking. A business might have several undertakings and section 28 does not envisage computation of income of each such undertaking. In other words, the profits of the business of the undertaking cannot be computed in isolation. The profits are computed under the head Profits and gains of business or profession . Under the above head, the income from business as a whole has to be computed. The phrase total income used in section 10A(1) is, therefore, to be understood as the total income of the STP unit. This is clear from the first proviso to section 10A(1) w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of gross total income, the other provisions of the Act will have to be first given effect to. There is no reason why reference to the provisions of the Act should not include Section 10A. In other words, the gross total income would be arrived at after considering section 10A deduction also. Therefore, it would be inappropriate to conclude that section 10A deduction is to be given effect to after Chapter VI-A deductions are exhausted. 52. Section 10A (1) speaks of deduction . The deduction is of profits and gains for a period of ten consecutive assessment years. The said deduction is from the total income of the assessee. Therefore, the total income before allowing the said deduction includes the profits and gains from the business referred to in Section 10A(1). Section 5 of the Act explains the scope of total income to mean all income from whatsoever source derived. Section 4 of the Act charges this total income. However, Section 10A (1) provides that, subject to the provisions of the said Section, profits and gains derived by an undertaking referred to in that Section shall be allowed as deduction from the total income of the assessee. Therefore, by virtue of the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity to pay customs duty or additional duty under the Act arises when the taxable event occurs. They are then subject to the payment of duty as prevalent on the date of the entry of the goods. An exemption notification issued under Section 25 of the Act had the effect of suspending the collection of customs duty. It does not make items which are subject to levy of customs duty etc. as items not leviable to such duty. It only suspends the levy and collection of customs duty, etc. wholly or partially and subject to such conditions as may be laid down in the notification by the Government in public interest . Such an exemption by its very ;nature is susceptible of being revoked or modified or subjected to other conditions. The supersession or revocation of an exemption notification in the public interest is an exercise of the statutory power of the State under the law itself as is obvious from the language of Section 25 of the Act. 55. Similarly, the Apex Court in the case of Wallace Flour Mills Co. Ltd., v. Collector of Central Excise, Bombai, Division III reported in 44 ELT 598 at para 4 has held as under: Excise is a duty on manufacture or production. But the realizatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the deduction is given) which is attributable to the income which may be taxed in the United States. 59. A perusal of the aforesaid provision makes it clear that if a resident Indian derives income, which may be taxed in United States, India shall allow as a deduction from the tax on the income of the resident, amount equal to the income tax paid in United States of America, whether directly or by deduction. The conditions mandated in the treaty is that if any income derived and tax paid in United States of America on such income , then tax relief/credit shall be granted in India on such tax paid in United States of America. The said provision does not speak of any income tax being paid by the resident Indian under the Income-tax Act as a condition precedent for claiming the said benefit. Where the Indian resident pays no tax on such income derived, whereas the said income is taxed in the United States, India shall allow as a deduction from the tax on the income of that resident an amount equal to the income-tax paid in the United States. Therefore, this provision is in conformity with Section 90(1) (a) (ii) of the Act i.e., the income tax chargeable under the income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jected to tax both in India and Canada shall be allowed as a credit against the Indian Tax payable in respect of such income but in an amount not exceeding that proportion of Indian Tax, which such income bears to the entire income chargeable to Indian tax. 61. A reading of the aforesaid provision makes it clear that the benefit of Article 23 would be available to an assessee in India only in respect of the income from sources within Canada, which has been subjected to tax both in India and Canada, which forms part of the total income of the assessee and has suffered tax in India under the Income tax Act and has suffered tax in Canada also i.e., assessee has paid tax both in India as well as in Canada on the same income. Then the agreement provides the tax paid in Canada shall be allowed as a credit against the Indian tax payable in respect of such income. However, the said benefit is confined only to the extent of an amount not exceeding that proportion of Indian tax, which such income bears to the entire income chargeable to Indian tax. In other words if the income tax paid in India is less than the income tax paid in Canada, the assessee would be entitled to relief only to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elief or avoidance of double taxation, income-tax, by deduction or otherwise, under the law in force in that country, he shall be entitled to the deduction from the Indian income-tax payable by him of a sum calculated on such doubly taxed income at the Indian rate of tax or the rate of tax of the said country whichever is the lower, or at the Indian rate of tax if both the rates are equal. (2) .. (3) .. Explanation (i) . . (ii) . . (iii) . . (iv) the expression 'income tax' in relation to any country includes any excess profits tax or business profits tax charged on the profits by the Government of any part of that country or a local authority in that country. 66. The said provision provides for deduction of the tax paid in any country from the Indian Income tax payable by him of a sum calculated on such doubly taxed income even though there is no agreement under Section 90 for the relief or avoidance of double taxation. Explanation (iv) defines the expression income tax in relation to any country includes any excess profit tax or business profits tax charged on the profits by the Government of any part of that country or a local authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion (1) for granting relief of tax, or as the case may be, avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assessee 68. What follows is, if the provisions contained in Section 90 is more beneficial to the assessee as compared to the terms in the agreement by India with the Government of any country outside India then, notwithstanding such agreement, the provisions of the Act to the extent they are beneficial to that assessee apply. The benefit claimed by the assessee is by virtue of the terms of the agreement. The agreement came into existence in 1990. The amended provision came into existence from 1.4.2004. In fact, the amendment is giving effect to the terms of agreement of 1990. In other words, the terms of agreement was more beneficial than the provision of the Act prior to amendment. After amendment, the amended provision is in conformity with the benefit agreed to be given under the agreement. In fact, the Apex Court (in Azadi Bachao Andolan) dealing with the aforesaid amended provisions has held as under: ........... said clause is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 139(5) of the Act. The income contemplated by Section 139(1) of the Act can only be the income which the assessee bona fide believes to be his income and not the income as finally -assessed by the assessing officer. On the discovery of omission or wrong statement in the earlier return filed by the assessee he can safely file a revised return without recourse to the assessing officer in any way. Once such a revised return is filed under Section 139(5), the effective return for the purpose of the assessment is thus the return which is ultimately filed by the assessee on the basis of which he wants his income to be assessed. In this context one should notice the issue on hand is not with regard to a claim that would vary the income of the assessee. The issue is with regard to allowing a credit on account of tax paid outside India in respect of which particulars were furnished to the assessing authority during the course of assessment proceedings before the assessment is passed. It is bound to be entertained and dealt with on merits. Once the return is filed and the income tax officer commences the assessment proceedings, the assessing authority is not the tax payer's opponent, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim tax benefit, as the said benefit of tax was not claimed in the return filed under Section 139(1) of the Act. Once the assessee files the necessary particulars and claims relief under the provisions of the Double Taxation Avoidance Agreement, the limitation placed by domestic law would yield to the tax relief provided for under the Double Taxation Avoidance Agreement. Therefore, the assessing authority was not justified in rejecting the said claim on the ground that no revised return is filed under Section 139(5) of the Act. In fact, probably the assessing authority was conscious that it is not a valid ground to reject the claim, he proceeded to consider the claim of the assessee on merits and has rejected the claim on merits also. 74. In view of the aforesaid discussions, the said substantial question of law is answered in favour of the assessee and against the revenue and the assessee is entitled to the tax benefit to the extent set out above. Substantial question No.2 Whether the Tribunal was right in directing that only that part of the MODVAT credit that is availed of prior to the due date for filing the return of income is deductible under Section 43B whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e total income which was challenged by the assessee by preferring an appeal. The Commissioner of Income-tax (Appeals), following the earlier orders passed in the assessee's case and also following the decision of the Tribunal for earlier years reversed the said order of the assessing authority. Aggrieved by the same, the Revenue preferred an appeal. The Tribunal, relying on the judgment of the Special Bench in DCIT v. Glaxo Simthkline Consumer Healthcare Limited reported in 299 ITR(1) ITAT (CHA) held that the unavailed MODVAT credit cannot be allowed as deduction under Section 43B. It further held that if the excise duty paid by the assessee is to be included in the closing stock, then the same is to be considered in purchase as the closing stock is a figure to balance the item of purchase left at the end of the year. If MODVAT credit available on closing stock is set-off before the due date of filing of return, then such amount is available for deduction and not restricted under Section 43B of the Act. It means the unavailed MODVAT credit of ₹ 1,32,50,765/- is availed before the due date of filing of returns, then there will be no addition. Therefore for re-computation, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: We are unable to accept the view of the assessing officer that merely because the MODVAT credit is an irreversible credit available to the manufacturers upon purchase of duty paid on raw-materials, it would amount to income which is liable to be taxed under the Act. 79. Therefore, it is clear that by virtue of Section 145A of the Act, the valuation of purchase and sale of goods and inventory for the purpose of determining the income chargeable under head profit and loss account from business or profession should be in accordance with the method of accounting regularly adopted by the assessee. In such accounting, the assessee should include the amount of any tax duty, cess or fee incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation. Therefore, prior to this introduction of the provision, if the assessee has followed a particular accounting practice where the cost of raw-material is taken into consideration as net value, even while determining the value of the finished products that net value could have been adopted. There was no obligation to include any tax, duty, cess or fee in the cost of raw-mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee company are consolidation of unit's accounts. These units have separate profit and loss account and balance sheet. The assessee filed returns for assessment year 2001-2002 on 30.10.2001. One of the points of controversy is that the assessee has made commission payments of ₹ 6,86,28,000/- to its directors. The directors of the company were entitled for commission on the services rendered on the basis of percentage of profit earned. The commission paid to its directors was allocated by the assessee to the units which these directors, are heading as whole time directors. The assessing authority was of the view that allocation of this commission should be on the basis of the profits earned by each unit. Therefore the assessing authority re-allocated the said commission on the basis of profits earned by each unit. The following table shows the allocation made by the assessee and re-allocation made by the assessing authority. Name Commission Payment (Rs.) Unit allocated to Allocation to Wipro Technologies (Rs.) Remark/Bas is Azim H. Premji 3,16,74,625 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he extent of profit made has no legal basis. 85. Per contra, learned Senior Counsel appearing for the revenue submitted when Section 10A unit is the source of making payment of commission, the commission paid to the extent of percentage of profit made should necessarily be allocated to the said unit, otherwise the profit margin of the unit which is exempted from payment of tax would be huge and such determination is improper and therefore he submits the allocation of commission to 10A unit made by the authorities is legal and valid and did not call for any interference. 86. It is not in dispute that the assessee is carrying on various business activities through its business units. These units have separate account and function as independent profit centres. The accounts of the assessee are consolidation of units accounts. Each unit has separate profit and loss account and balance-sheet. There are four directors in the assessee company. Each one of the directors are full time directors who are managing these units. The salary is paid by the assessee and the salary so paid admittedly is allocated to each unit which they are heading. Section 198 of the Companies Act 1956 deals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been incurred by any of the persons aforesaid; and (d) any expenditure incurred by the company to effect any insurance on the 'life of or to provide any pension, annuity or gratuity for, any of the persons aforesaid or his spouse or child.] 87. The aforesaid provisions make it clear that the total managerial remuneration payable to a director shall not exceed 11% of the net profits of that company for that financial year computed in the manner laid down in the Companies Act within the limits of maximum remuneration specified in Sub Section 1. The company may pay managerial remuneration to its directors. After reducing such monthly remuneration paid, if the company earns profits more than what is paid as remuneration, then the directors should be eligible for payment of commission to the extent of 11% of the net profits of the company. 88. Section 17(1) of the Income-tax Act, 1961 defines what is salary for the purposes of Sections 15 and 16 of the Act, which reads as under: 17(1) Salary includes (i) wages; (ii) any annuity or pension; (iii) any gratuity; (iv) any fees, commissions, perquisites or profits in lieu of or in addition to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitled to. The impugned orders passed by the authorities has no legal basis. On the contrary it runs counter to the statutory provisions. 90. In that view of the matter the substantial question of law is answered in favour of the assessee and against the revenue. Substantial question of law No.4: 91. As the question of law involved is the same, these two substantial questions of law are taken up for consideration. They are : - Whether the Tribunal was right in excluding AMC profits for the purpose of computing deduction under Section 80IB of the Act, when AMC income is derived from the manufacturing units? [Question of law No. 'a' in ITA Nos.881 882/2008, 109/2009 333/2009 - (assesse's appeal)] Whether the Tribunal was right in concluding that purchase and sales of monitors constituted a trading activity and thus excludable from the profits of the Pondicherry units for the purposes of computing deduction under Section 80-IB of the Act, when such monitors were part of the computers manufactured and sold by the units? [Question of law No. 'b' in ITA Nos.881 882/2008, 109/2009 333/2009 - (assessee's appeal)] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has accepted this position and has given the benefit of Section 80IB to the total consideration in both the cases. Now, the dispute is regarding the profit arising out of AMC contract of two years in the second scheme where only one year warranty is agreed and two years AMC is provided. In this context, it is necessary to look at Section 80IB. Section 80IB deals with deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. Section 80IB (1) reads as under: 80-IB Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. (1) Where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections (3) to(11), (11A) and (11B) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nefit was extended. 101. However, the learned Counsel for the revenue relied on the judgment of the Delhi High Court in the case of Commissioner of Income tax v. Gitwako Farma (I) (P) Limited [(2011) 332 ITR 471] where it was held that, converting raw fish into tinned fish did not amount to manufacturing and, therefore, the assessee is not entitled to deduction under Section 80-IB. There the question was, whether conversion of raw fish into tinned fish constitutes a manufacturing activity and not whether the income derived there from is an income from the business. 102. The learned Counsel also relied on the judgment of the Rajasthan High Court in the case of D.D.Shah And Brothers v. Union Of India And Another [(2006)283 ITR 486 (RAJ)] where the question which fell for consideration is, whether blending of different qualities of tea constitute manufacture and production. It was held that, it does not constitute manufacture and production and Section 80-IB is not attracted. 103. In the instant case, the business which is carried on by the assessee consists of manufacturing of computers and servicing those computers either under a warranty arrangement or by virtue of AMC In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible for benefit under Section 80IB. MONITORS 104. The assessee sells computers manufactured at Pondicherry unit. The monitor attached to the computer is a part of the system and the system cannot be used without the monitor. Although some monitors were bought and sold, the majority of the monitors purchased have been sold as part of the computers. The assessing officer took a similar stand as in the case of AMC income and directed that sale of monitors cannot be said to have an integral link with manufacturing activities of the appellant and is, therefore, not includable for computation under Section 80IB of the Act. Both the Commissioner of Income Tax (Appeals) and the Tribunal upheld the said contention. Aggrieved by the said order, the assessee is before this Court. 105. Learned senior Counsel assailing the said finding contended that, the sales of only monitors are not allowable for deduction under Section 80IB. However, when a monitor is sold as part of a computer and is liable to excise duty, the assessee is eligible for the benefit under Section 80IB. In fact, when the assessee was asked to furnish details of monitors sold and to show cause why the claim under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the total consideration. As set out earlier the assessee is carrying on the manufacturing of computers and sale of computers. He has satisfied all the requirements stipulated in sub-section (2) of Section 80IB and he is eligible for the said exemption. The monitors which he has purchased from outside is used as a spare part in the manufacture of computer and it is sold to the customers as such. In other words, those monitors which are used in the computers are not the traded commodities. Therefore, it is a part of the computer and the total consideration of the computer includes the value of this monitor. The profit derived from the said computer includes the sale of the monitor which is a part of the said computer which falls within the first degree. In view of the aforesaid judgments the profit derived from the said sale of monitor as a part of the computer is also eligible for benefit under Section 80IB. However, it is made clear the assessee is not entitled to the benefit of Section 80IB in respect of monitors which are purchased and sold separately as a traded commodity. In fact, the assessee has not claimed any benefit in respect of those monitors. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue contended that the VAT and GST collected by the assessee in foreign jurisdiction is paid to the authority there itself. The said amount is not received in or brought into India by the assessee in convertible foreign exchange. Therefore, the authorities rightly excluded the said amount from export turnover and therefore he submits that no case for interference is made out. 110. In order to appreciate this contention it is necessary to look into the definition of export turnover as contained in explanation 2(iv). It reads as under : (iv) export turnover means the consideration in respect of export [by the undertaking] of articles or things or computer 'software received in, or brought into, India by the assessee in convertible foreign exchange in accordance with sub-section (3), but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India, 111. Explanation 2 makes it very clear, the definition of ' export turnover is only for the purpose of Sec. 10A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk outside India with the approval of the Reserve Bank of India. 114. Therefore the sale proceeds referred to in sub-sec. (3) is defined under this explanation. With the approval of the Reserve Bank of India, if the assessee has maintained a separate account with any Bank outside India and the sale proceeds received for export of articles, things or computer software is credited to such separate account, the said sale proceeds is deemed to have been received in India. Though the said sale proceeds are not received in or brought into India, by a legal fiction, explanation 2 declares that the said sale proceeds are deemed to have been received in India. Once that sale proceeds is deemed to have been received in India, it falls within the definition of export turnover under clause (iv) of explanation 2 and satisfies the first condition of the consideration in respect of export being received in India. Similarly, it also satisfies sub-sec. (3) of Sec.10A where the word used is 'received in India'. Once the sale proceeds are received in India by the assessee by virtue of the said legal fiction, then it falls within the definition of export turnover, unless expressly exclude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is the position even in the case of rent, commission, interest, etc. It is important to bear in mind that excise duty and sales tax are indirect taxes . 116. From the aforesaid judgment, the Apex Court has categorically held that, we cannot interpret the words 'total turnover' in the above formula with reference to the definition of the word turnover in other laws like Central Sales Tax or as defined in the Accounting Principles. Therefore, the definition of export turnover has to be interpreted in the context in which it is used. Moreover in the aforesaid case, the assessee was not liable to pay either excise duty or sales tax on its exports. When the said amount was not included in the sale price, it could not have been included in the turn over or export turnover or total turnover. 117. In fact the Revenue relied on yet another judgment of the Apex Court in the case of Anand Swarup Mahesh Kumar v. The Commissioner of Sales Tax reported in 1980 STC Vol.46 pg. 477, where it was held, Where a dealer is authorized by law to pass on any tax payable by him on a transaction of sale to the purchaser, such tax does not form part of the consideration for purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n element of market fee is, therefore, not proper. Here again, the question was whether tax is leviable on the market fee. As such, it has no application to the facts of the case. 122. In fact the assessee also relied on a judgment in the case of Paprika Ltd. v. Board of Tade [1944] 1 All E.R. 372, 374 ( KB ), where it has been held as under : Wherever a sale attracts purchase tax, that tax presumably affects the price which the seller who is liable to pay the tax demands, but it does not cease to be the price which the buyer has to pay even if the price is expressed as X plus purchase tax. 123. Again in the case of Love v. Norman Wright (Builders) Ltd. [1944] 1 All E.R. 618, 620 ( CA ), it is held as under : Where an article is taxed, whether by purchase tax, customs duty, or excise duty, the tax becomes part of the price which ordinarily the buyer will have to pay. The price of an ounce of tobacco is what it is because of the rate of tax, but on a sale there is only one consideration, though made up of cost plus profit plus tax. So, if a seller offers goods for sale, it is for him to quote a price which includes the tax if he desires to pass it on to the buyer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale consideration or not has to be decided in the light of the definition used in the statute and also in the context for which it is used. 127. In the context of Sec. 10A when the statute provides a particular definition for the purpose of the said section only, then we have to interpret that definition in the light of the words used in the said provision. We cannot take assistance from the definition in the other statutes and not even the said definition in the very same Act if it is derived in the context of other sections. Similarly the object behind the said provision also has to be kept in mind. 128. In the instant case, VAT and GST is payable by the purchaser. It is a part of the sale price. The assessee collects the tax and remits it to the Government. It is an indirect tax. The definition of export turnover expressly says what is excluded from export turnover i.e., freight, telecommunication charges or insurance. It has not excluded the VAT and GST payable by the assessee in the foreign jurisdiction. The test to be applied in the light of the aforesaid definitions is excluding the aforesaid three charges from the sale consideration received, sale proceeds received in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . A. sum of ₹ 2 crores was received along with the agreement and the schedule for payment of the balance of ₹ 10.50 crores was contracted. The closing stock-in-trade as at 31st March 2000 was valued at ₹ 12.50 crores. A further sum of ₹ 5.20 crores was drawn down from the capital reserve consequent to valuing the closing stock in trade at 12.50 crores against the opening stock in trade at 17.70 crores. On 22.01.2001, a general power of attorney was issued to the promoters of M/s.Prestige Estates Projects Private Limited. The power of attorney authorized the said attornies to sell or otherwise dispose of the immovable property by way of sale or otherwise in whole or in the form of undivided shares or in any other manner and on such terms and conditions as the attornies deem it fit in favour of any predecessors or in favour of his/her nominee (assesses). In the accounts, stock in trade was recorded as sold. They released the capital of ₹ 10.07 crores drawn down from the capital reserve to the profit and loss account. A deed of transfer came to be executed for the assessment year 2004-05 conferring an area to the extent of 8,344 square feet of land in fav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l asset into stock in trade of business or it is the treatment by him as a stock in trade in business and the same is chargeable to income tax as his income of the previous year in which such stock in trade is sold. By execution of the power of attorney, the assessee received the consideration due to him for sale of the land. As in law there was no transfer, the said amount is liable to tax only when the said stock in trade is sold and therefore, the order passed, by the lower appellate Court was in accordance with law and the Order passed by the Tribunal is erroneous and as such, the same is liable to be set aside. 133. Per contra, learned senior counsel appearing for the department/revenue contends the stock in trade sold by the assessee earlier was a capital asset by virtue of Section 2(47)(iv). The said capital asset was converted by the owner there of into stock in trade of a business. Though Section 45(1) is not attracted, Section 45(2) contemplates two instances. One, when stock in trade is sold. The second, otherwise transferred by him. The words otherwise transferred by him as incorporated under the Act includes the interest in an immovable property transferred by way o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vious year in which the transfer took place. (1A) Notwithstanding anything contained in subsection (1), where any person receives at any time during any previous year any money or other assets under an insurance from an insurer on account of damage to, or destruction of, any capital asset, as a result of- (i) flood, typhoon, hurricane, cyclone, earthquake or other convulsions of nature; or (ii) riot or civil disturbance; or (iii) accidental fire or explosion; or (iv) action by an enemy or action taken in combating an enemy (whether with or without a declaration of war), then, any profits or gains arising from receipt of such money or other assets shall be chargeable to income-tax under the head ''Capital gains and shall be deemed to be the income of such person of the previous year in which such money or other asset was received and for the purposes of section 48, value of any money or the fair market value of other assets on the date of such receipt shall be deemed to be the full value of the consideration-received or accruing as a result of the transfer of such capital asset. (2) Notwithstanding anything contained in sub-section (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious year in which such stock in trade is sold or otherwise transferred by him. Therefore, in so far as stock in trade is concerned, the relevant year in which the capital gain tax is leviable is the previous year in which such stock in trade is sold. The word used is sold or otherwise transferred by him. In view of the expressed words used in Section 45(2), it is clear that Section 45(1) deals with capital gains on transfer of capital asset, Section 45(2) deals with payment of capital gains in a transaction where stock in trade is sold or otherwise transferred by him. 137. Under Sec. 45(1), the capital gains are chargeable to income tax of the previous year in which the transfer took place. The said transfer may be in any one of the modes prescribed under Sec 2(47). It need not necessarily be by way of sale, exchange or relinquishment of the asset as evidenced by registered documents. It can be in any one of the modes contemplated in clause (i) to (vi) of Sec. 2(47). However, when it comes to levying of capital gains under sub-sec.(2) of Sec. 45, it deals with capital asset converted by the owner thereof into, or is treated by him as stock-in-trade of a business carried on by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her, it stated anything contained herein shall on delivery of possession of the said property or empower the purchasers to claim any prospective rights in the schedule property. In the power of attorney executed, there is no whisper of delivery of possession of the schedule property to the power of attorney holder. Under Sec. 2(47), any transaction involving the allowing of possession of immovable property be taken or retained in part performance of a contract of the nature referred to in Sec. 53A of the Transfer of Property Act is a deemed transfer in relation to a capital asset. Therefore even if the stock-in-trade which was prior to its conversion a capital asset, as treated by the Tribunal as a capital asset, as possession is not delivered, it would not become a transfer and question of payment of capital gains would not arise. 139. The CBDT circular No. 495 dt. 22-09-87 which came into effect from 01-04-1988 explains the purpose of sub-clause (vi) of Sec. 2(47) in these following words : pg. 129 the newly inserted sub-clause (6) of Sec.2(47) has brought into the ambit of transfer, the practice of enjoyment of property rights though words commonly known as power of attor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onor. A power of attorney is as is well known, a document of convenience . 142. A deed of power of attorney is executed by the principal in favour of the agent. The agent derives a right to use his name and all acts, deeds and things done by him and subject to the limitations contained in the said deed, the same shall be read as if done by the principal. A power of attorney is a document of convenience. A power of attorney is not an instrument of transfer in regard to any right, title or interest in an immovable property. It is revocable or terminable at any time unless it is made irrevocable in a manner known to law. 143. Therefore even if Section 2(47) is held to be applicable to a stock-in-trade, unless the transaction in question has the effect of transferring or enabling the enjoyment of any immovable property, it would not amount to a transfer. 144. In the instant case, assessee executed a power of attorney after entering into an agreement of sale for the purposes mentioned therein. It is in pursuance of the power so conferred, coupled with the terms of the agreement of sale, the power of attorney holder has to develop the property, identify the purchasers and sell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly, the said two orders are set aside. The order passed by the Appellate Commissioner is restored. 145. Accordingly, the substantial question of law is answered in favour of the assessee and against the Revenue. REVENUE'S APPEAL - QUESTION No.7: Whether the Appellate Authorities were correct in holding that the assessee will be entitled to claim deduction u/s 10A of the Act in respect of foreign exchange which is yet to be received during the current assessment year for sale of software i.e., within six months contrary to Section 10A(3) of the Act as an application for extension had been filed and Section 155(11A) of the Foreign Exchange Management Act 1999 and RBI Rules were applicable? [Question of law No.28 in ITA Nos.907 909/2008; Question of law No.24 in ITA Nos.904 905/2008; Question of law No.8 in ITA Nos.210 211/2009 and Question of law No. 12 in-ITA No.363/2009 (Department's appeal)] 146. The facts are not in dispute. The assessee is a status holder exporter. The export has been done strictly in accordance with law. Foreign exchange remittances should have been received within six months from and of the financial year. It has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal)] 148. The assessee had allocated the corporate expenses on the basis of the actual expenditure incurred by the units. The assessing authority taking into consideration that in the earlier year 57% expenditure was allocated to the 10A units, was not willing to accept the case of the assessee. Therefore, assessee by a letter dated 04.03.2004 agreed for allocation of only a part of the expenditure related to salary, wages and allowances and directors' fee at 20% to Wipro Technologies which is a 10A unit and which had generated 57% of the revenue of the assessee. Assessing Authority did not agree with assessee's submission and allocated expenses of the corporate division in the ratio of revenue of the 10A units. Aggrieved by the same the assessee preferred an appeal. In the appeal by the assessee, the Commissioner of Income-Tax following the judgments of the ITAT in the assessee's case itself for the earlier year set aside the said allocation made by the assessing authority, accepted the case of the assessee and directed the Assessing Authority to consider only such expenses for allocation as admitted by the assessee during the assessment process. Aggrieved by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very same point accepted actual allocation of expenditure. The relevant observations of this Court is at para Nos.27 and 28. 27. A perusal of the aforesaid statement shows the Corporate Office has spent a sum of ₹ 7,37,98,774/- towards the expenses consisted of salaries etc., excluding interest less revenues. They allocated a sum of ₹ 4,93,49,416/- to the various sub-divisions other than the software export sub-division. Similarly they have recovered a sum of ₹ 3,70,00,000/- from software exports sub-division in the process the excess recoveries is 1,25,50,642/-. Further, a sum of ₹ 20,11,34,657/- is the interest out go to intra business and external agencies. The interest earned from deployment of funds intra-business and with external agencies is ₹ 9,38,24,255/-. The net interest outgo is 10,73,10,402/-. 28. It is this amount which they were claiming as deduction. In the light of the aforesaid facts it does not represent the expenditure incurred by the Corporate Office in respect of its subdivisions. In those circumstances, the Assessing Officer and the First Appellate Authority were not justified in allocating the substantial portion of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion was raised for consideration in assesssee's case itself in ITA 893, 894, 900, 910, 929 and ' 931/08 which was decided on 10.6.2014. In fact, this Court followed the Judgment rendered in assessee's sister concern in the case of Wipro GE Medical Systems Ltd., in ITA Nos.391 and 392/2008 and substantial question of law was answered in favour of the assessee and against the revenue. 154. Following the said Judgment, the above substantial question of law is answered in favor of the assessee and against the revenue. Substantial question No. 12: [Question of law No.33 in ITA Nos.907 909/2008 - (Department's appeal)] Whether the Tribunal was correct in reversing the finding of the Assessing Officer which was confirmed by the Appellate Commissioner who had held that the difference in the price of shares of Wipro Finance Limited, purchased at market value and sold to assessee's advocate and ex-employee at a subsidized price being a colorable devise to avoid tax should be allowable as a capital loss? 155. The said question arose for consideration before this Court in the assessee's case in ITA Nos. 1395/2006 c/w 1394/2006 decided on 5.11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stant case, the facts are slightly different. The balance of 21,62,044 equity shares of Wipro Finance Limited out of 5,04,76,188 acquired over the years from financial year 1991-92 to financial year 1998-99 were sold during assessment year 2001-02. The long term capital loss of ₹ 2,50,07,294 from the sale of these shares was claimed. 157. It was contended that, in the instant case there is no windfall gain transaction during the assessment year 2001-02 as was the finding in assessment year 2000-01 wherein the sale of shares in Wipro Net Limited resulted in short-term capital gain of ₹ 109.54 crores. 158. Though in this case there is no windfall gain, still having regard to the total number of shares of Wipro Finance Limited which is already sold and only a small balance was the subject matter of these proceedings, we do not find any justification to differ from the finding which we have given earlier and, therefore, following the said reasoning, the finding recorded by the Appellate Tribunal is hereby set aside. 159. However, the assessee has incurred capital loss in assessment year 2001-02 of ₹ 102,58,60,379 from the sale of the following shares in WFL w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d answered the same and remanded the matter back to the assessing officer which is wholly erroneous. The said order has to be set aside and this question has to be remanded back to the Tribunal for fresh consideration and in accordance with law. Accordingly, the finding recorded by the Tribunal at paras 220 and 221 is hereby set aside. This question is remanded to the Tribunal for fresh consideration in accordance with law. Substantial Question of law No. 14: Whether the Tribunal was right in directing that losses of a 10A unit, which are already set-off against other business income of the appellant, should be again carried forward and set-off-. against eligible profits of the same unit in a subsequent year? [Question of law No. (b) in ITA Nos.879/2008, 880/2008 and 108/2009 and Question of law No. 'c' in ITA No.334/2009 - (assessee's appeal)] -. Whether the Tribunal was correct in holding that income of each undertaking should be taken independently and losses of Section 10A units cannot be set off against profits of Section 10A units, when computing deduction u/s 10A of the Act? [Question of law No.22 in ITA Nos.907 909/2008 and Question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 907 909/2008 - (Department's Appeal)]. [Question of law No.31 in ITA Nos.907 909/2008 and Question of law No. 13 in ITA Nos.210 211/2009 - (Department's Appeal)]. [Question of law No. 14 in ITA Nos.210 211/2009 - (Department's Appeal)]. 165. In the connected cases similar questions were raised which are treated as substantial questions of law No. 15, 16, 17 and 20. The said substantial question of law arose for consideration in the assessee's case in ITA 3204/2005 which was decided on 28.2 2012. In the said case, the Court was considering Section 80 HHE which is pari materia with 80HHC. It was held that the aforesaid items have to be reduced only from profits of the business of goods or merchandize. Accordingly, the said substantial question of law was answered in favour of the assessee. The aforesaid substantial questions of law are accordingly answered in favour of the assessee and against the revenue. Substantial Question No. 16: Whether the Appellate Authorities were correct in holding that income earned from sale of scrap export incentive, rent received, interest income and gain on exchange rate fluctuation should be treated as profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.3198/2005 which was decided on 28.2.2012 where the substantial questions of law were answered in favour of the assessee and against the revenue. Following the said Judgment, said questions of law are answered in favour of assessee and against the revenue. Substantial Question No. 18: Whether the Appellate Authorities were correct in holding that the payments made by the assessee for import of software cannot be disallowed u/s 40(a)(i) of the Act for failing to deduct tax at source u/s 195 of the Act as such payments did not constitute royalty u/s 9(1)(vi) of the Act? [Question of law No.26 in ITA Nos 907 909/2008, Question of law No.22 in ITA Nos.904 905/2008 and Question of law No.9 in ITA No.363/2009 - (Department's appeal)] Whether the Appellate Authorities were correct in holding depreciation claimed on software imported for in house utilization and treated as part of block-of assets should be allowed, despite the same being in the nature of royalty as per Explanation to section 9(1)(vi) of the Act and no TDS u/s 194 of the Act having been deducted, section-40(a)(i) of the Act? [Question of law No.2 in ITA Nos.210 211/2009 - (Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed by the authorities in the case of the assessee itself. That would meet the ends of justice. Substantial Question No.21: Whether the Tribunal was right in remanding the issue pertaining to prior period items without noting the submissions of the appellant? [Question of law No'.'g' in ITA No.879/2008 -(Assessee's appeal)] 175. Learned Counsel for both the parties submit that this question does not arise for consideration. Accordingly, it is deleted. Question No.22: Whether the Tribunal was right in upholding the levy of interest under Sec. 234D of the Act ? [Question of law No. 'e' in ITA Nos.881 882/2008 and Question of law No.'f in ITA No.333/2009 - (Assessee's appeal)] 176. The assessee contended, interest under Sec. 234D is not leviable if a refund was due unless it was actually granted for use in the business of the assessee. Further, Section 234D is not applicable as it came into force with effect from 1-6-03. However, the assessing officer levied interest under Sec. 234D of the Act. Both the CIT (Appeal) and the Tribunal upheld the levy of interest. It is against the said order, the present appeal is f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should also be allowed? [Question of law No.2 in ITA No.209/2009 -(Department's appeal)] 178. The said questions arose for consideration before this Court in assesssee's case itself in ITA 3202/05 by order dated 28.2.2012, it was held that loss incurred on discontinuance of business does not involve a substantial question of law. Here again, the same questions arise. They do not constitute substantial questions of law. We decline to answer the same. Substantial Question No.24: Whether the Tribunal was right in holding that interest received under Section 244-A would be taxable in the year of receipt of the said interest without considering the fact that the tax granted as a refund on which interest is computed itself is disputed in appeals by the respondent? [Question of law No.(d) in ITA Nos.879 880/2008 - (Assessee's appeal)] 179. The said question arose for consideration in the assessess's case in ITA 3204/2005 and this Court by its order dated 28.2.2012 answered the same as under: 6. It is settled law that interest paid is compensatory in nature under the Income Tax Act. If an amount is due on a particular date and if that am ..... X X X X Extracts X X X X X X X X Extracts X X X X
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