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2015 (11) TMI 430 - ITAT KOLKATA

2015 (11) TMI 430 - ITAT KOLKATA - TMI - Deduction u/s.10AA - CIT(A) allowed the claim - Held that:- 10AA was brought in along with the consolidation and quick development of export initiatives in all the units, past, present and future, located in SEZ’s or which were in existence in all parts of India even prior to the promulgation of the SEZ Act, 2005. It is important to note that, for the first time, this section extended the exemption coverage to “Computer IT ES” besides computer software. T .....

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ing assessment year after 2006-07.

The unit to claim benefits of SEZ Act, 2005 need not be physically located within an SEZ, especially an “existing unit” such as the Assessee. As already discussed under the scheme of coverage, the existing EPZ’s are included as SEZ’s and the definitions of the term “Entrepreneur” includes the unit recognized as such by the STP Director who has been equated with the “Development Commissioner” for this purpose. The Assessee’s license sets out three poi .....

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BR> we have already seen, Sec.10AA was telescoped with the earlier Sec.10A, as that section was excluded for application from AY 2006-07 for the reason that Sec.10AA was made to continue to apply to the remaining span of the “left over” years of relief under Sec.10A and which would spill over to the remaining assessment year after 2006-07. Moreover, section 4(1) of SEZ Act provides that an existing SEZ unit shall be deemed to have been notified and established in accordance with provisions of S .....

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ommencing on or after the 1st day of April, 2006 (i.e., financial year 2005-06 or any subsequent year) in any Specialized Economic Zone and that the Assessee had begun production of article or thing prior to 1.4.2006 and has been claiming exemption u/s.10A of the Act, the deduction u/s.10AA of the Act cannot be allowed to the Assessee will not apply to the Assessee as in view of our conclusion that the Assessee was an “existing unit”.

The Assessee is already an existing unit. The dedu .....

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R> The fifth objection of the AO that the Assessee did not operate from SEZ and therefore did not export goods from SEZ and derive income therefrom and therefore not entitled to deduction u/s.10AA of the Act, is not sustainable in view of our conclusion that the Assesssee was an “existing unit”.

The sixth objection with regard to non-filing of Form No.56F is a valid objection. But on this ground the Assessee cannot be denied the benefit of deduction u/s.10AA of the Act. The non-furni .....

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ot allowing deduction to the Assessee u/s.10AA of the Act was that the Assessee did not claim deduction u/s.10AA of the Act in the return of income. The CIT(A) has not commented on this issue. The Revenue in ground No.4 of the grounds has not chosen to take objection on this aspect. Nevertheless, the appellate authorities can take note of claim not made in a revised return of income, more so in the present case where a claim had been made in a revised computation of total income before the AO. T .....

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is objection raised by the AO. - Decided in favour of assessee.

MAT computation - deductibility of the amount allowable as deduction u/s.10AA of the Act while computing book profits u/s.115JB(6) - Held that:- The profits of the Sec.10AA unit of the Assessee should be excluded for the purpose of computing book profits u/s.115JB of the Act from the profit as per Profit and Loss account referred to in that section.- Decided in favour of assessee.

Disallowance of expenditure in .....

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the capital employed remains the same. Issuance of bonus shares by capitalization of reserves is merely a reallocation of company’s fund. That being so, it cannot be held that the company acquires a benefit or advantage of enduring nature. Therefore, the expenditure on issuance of bonus shares is revenue expenditure.- Decided in favour of assessee.

Disallowance of depreciation - reworking the WDV of the assets of Last Peak BPO Pvt.Ltd., which got amalgamated with the Assessee during .....

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be just and appropriate to direct the CIT(A) to adjudicate this issue.

Set off of brought forward loss - Held that:- Sec.10AA(6) of the Act provides that Loss referred to in sub-section (1) of section 72 or sub-section (1) or sub-section (3) of section 74, in so far as such loss relates to the business of the undertaking, being the Unit shall be allowed to be carried forward or set off. The loss that is sought to be set off and carried forward in the present case is not that of the 10 .....

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nst the income of the Assessee under any other source.The CBDT in File No.279/Misc./M-116/2012-ITJ dated 16.7.2013 circulated to the Assessing officers has after referring to conflicting views on whether section 10A and 10B provisions are deduction provisions or exemption provisions, has expressed its view that section 10A/10B provisions are deduction provisions. The said circular becomes a benevolent circular when there is loss in the 10A/10B unit against taxable income of non- 10A/10B unit. Ev .....

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ion open without adjudication and uphold the conclusions of the CIT(A). - Decided against revenue - ITA Nos.154&155/Kol/2013 - Dated:- 30-10-2015 - Hon ble Shri N.V.Vasudevan, JM & Shri Waseem Ahmed, AM For The Appellant : Shri Vasant Subramanyan, For The Respondent : Shri Niraj Kumar, CIT(DR) ORDER Per Shri N.V.Vasudevan, JM : ITA No. 154/Kol/2013 is an appeal by the Revenue against the order dated 8.10.2012 of CIT(A)-I, Kolkata, relating to AY 2009-10. 2. The grounds of appeal raised by th .....

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issue with regard to deduction u/s.10AA of the Act. 3. The facts and circumstances under which the issue with regard to claim of the Assessee for deduction u/s.10AA of the Act arises for consideration are as follows: The Assessee is a company. It was incorporated on 1.12.2004. It is engaged in the business of Data Processing, Software Development and business processing outsource. The Assessee has a unit at Salt Lake City, Kolkata which is registered with Software Technology Park, Kolkata as 100 .....

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ndertaking begins to manufacture or produce articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee. Hundred per cent exportoriented undertaking for the purpose of Sec.10B means, an undertaking which has been approved as a hundred per cent export oriented undertaking by the Board appointed in this behalf by the Central Government in exercise of the powers conferred by section 14 of the Industries (Development and Regulation) Act, 1951 ( .....

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option of the assessee for five consecutive assessment years falling within the block of eight years beginning with the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or things. The term manufacture includes processing or assembling or recording of programmes on any disc, tape, perforated media or other information storage device. The above tax holiday was not available to a hundred per cent. export-oriented undertakin .....

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one provided to industrial undertakings operating in free trade zones. The exemption under the new provisions will be subject to the following conditions :- (i) That the unit manufacturers or produces any articles or things. The term manufacture will include any processing or assembling or recording of programmes on disc, tape, perforated media or other information storage device; (ii) That the unit has not been formed by the splitting up or reconstruction of an existing business; (iii) That it .....

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the deduction claimed u/s. 10B. The AO required the assessee to show cause as to why the said claim should not be disallowed as the provisions of section 115JB, amended w.e.f. 1.4.2008, do not permit the deduction u/s. 10A. In this respect the assessee submitted that the provisions of section 115JB(6) exempted the assessee from taxability u/s. 115JB. The assessee further took the plea that the provisions of section 115JB(6) exempted all units situated in Special Economic Zones from its rigors. T .....

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, the book profit of the SEZ unit could not be included while computing book profit under section 115JB for A.Y. 2008-09, despite the fact that clause (f) of Explanation 1 to section 115JB(2) has been amended to apply the provisions of MAT to units which are entitled to deduction under section 10B. In that year the Assessee claimed deduction u/s.10B of the Act which was allowed by the AO and the dispute was only in the matter of computation of book profits u/s.115JB of the Act as stated above. 5 .....

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mation. M/S.Last Peak BPO Pvt. Ltd., had accumulated loss of ₹ 31,75,212 which was taken into account in computing the total income of the Assessee for AY 09-10. There is no dispute that M/S.Last Peak BPO Pvt.Ltd., was also a company registered with the STPI and was having its production unit at Salt Lake City, Kolkata and rendering Information Technology Enabled Services (ITES). ITES are also covered under the provisions of Sec.10AA of the Act. 6. The AO examined the claim of the Assessee .....

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, who begins to manufacture or produce articles or things or provide any services during the previous year relevant to any assessment year commencing on or after the 1st day of April, 2006, a deduction of- (i) hundred per cent of profits and gains derived from the export, of such articles or things or from services for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which the Unit begins to manufacture or produce such articles or .....

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utilized for the purposes of the business of the assessee in the manner laid down in sub-section (2). (2) The deduction under clause (ii) of sub-section (1) shall be allowed only if the following conditions are fulfilled, namely :- (a) the amount credited to the Special Economic Zone Re-investment Reserve Account is to be utilised- (i) for the purposes of acquiring machinery or plant which is first put to use before the expiry of a period of three years following the previous year in which the .....

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or plant along with the return of income81 for the assessment year relevant to the previous year in which such plant or machinery was first put to use. (3) Where any amount credited to the Special Economic Zone Re-investment Reserve Account under clause (ii) of sub-section (1),- (a) has been utilised for any purpose other than those referred to in sub-section (2), the amount so utilised; or (b) has not been utilised before the expiry of the period specified in sub-clause (i) of clause (a) of sub .....

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ncluded by application of the provisions of sub-section (7B) of section 10A, the undertaking, being the Unit shall be entitled to deduction referred to in this sub-section only for the unexpired period of ten consecutive assessment years and thereafter it shall be eligible for deduction from income as provided in clause (ii) of sub-section (1). Explanation.-For the removal of doubts, it is hereby declared that an undertaking, being the Unit, which had already availed, before the commencement of .....

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referred to above shall be reckoned from the assessment year relevant to the previous year in which the Unit began to manufacture, or produce or process such articles or things or services in such free trade zone or export processing zone : Provided also that where a Unit initially located in any free trade zone or export processing zone is subsequently located in a Special Economic Zone by reason of conversion of such free trade zone or export processing zone into a Special Economic Zone and h .....

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after the 1st day of April, 2006 in any Special Economic Zone; (ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence: Provided that this condition shall not apply in respect of any undertaking, being the Unit, which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section; (ii .....

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to another undertaking, being the Unit in a scheme of amalgamation or demerger,- (a) no deduction shall be admissible under this section to the amalgamating or the demerged Unit, being the company for the previous year in which the amalgamation or the demerger takes place; and (b) the provisions of this section shall, as they would have applied to the amalgamating or the demerged Unit being the company as if the amalgamation or demerger had not taken place. (6) Loss referred to in sub-section (1 .....

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uch articles or things or services bears to the total turnover of the business carried on by the undertaking: Provided that the provisions of this sub-section [as amended by section 6 of the Finance (No. 2) Act, 2009 (33 of 2009)] shall have effect for the assessment year beginning on the 1st day of April, 2006 and subsequent assessment years. (8) The provisions of sub-sections (5)82 and (6) of section 10A shall apply to the articles or things or services referred to in sub-section (1) as if- (a .....

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ion is claimed and allowed in respect of profits of any of the specified business, referred to in clause © of sub-section (8) of section 35AD, for any assessment year, no deduction shall be allowed under the provisions of section 35AD in relation to such specified business for the same or any other assessment year.] Explanation 1.-For the purposes of this section,- (i) export turnover means the consideration in respect of export by the undertaking, being the Unit of articles or things or se .....

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er physical or otherwise; (iii) manufacture shall have the same meaning as assigned to it in clause ® of section 2 of the Special Economic Zones Act, 2005; (iv) relevant assessment year means any assessment year falling within a period of fifteen consecutive assessment years referred to in this section; (v) Special Economic Zone and Unit shall have the same meanings as assigned to them under clauses (za) and (zc) of section 2 of the Special Economic Zones Act, 2005. Explanation 2.-For the re .....

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ssessment year beginning on or after the 1st day of April, 2001, unless the assessee furnishes in the prescribed form, along with the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this section. Sec.10(7B) The provisions of this section shall not apply to any undertaking, being a Unit referred to in clause (zc) of section 2 of the Speci .....

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al with each of the objections of the AO for not allowing deduction u/s.10AA of the Act and the order of the CIT(A) on those objections and the submissions made by the parties before us. The grounds of appeal raised by the Revenue are based on the objections of the AO for not allowing deduction u/s.10AA of the Act. 10. The first objection of the AO was that the Assessee s unit was not located in a Special Economic Zone. In this regard the AO has pointed out that deduction u/s.10AA(1) of the Act .....

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and includes an existing Unit, an Offshore Banking Unit and Unit in an International Financial Services Centre, whether established before or established after the commencement of this Act; 11. According to the AO the first condition is that the Assessee s unit must be located in an SEZ. This condition, according to him, is not satisfied, as the Assessee is a unit registered under the Software Technology Parks of India, Kolkata unit, as a 100% EOU for rendering IT and ITES with development centr .....

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nted letter of approval by a Development Commissioner u/s.15(9) of the SEZ Act. Therefore the Assessee is not entitled to deduction u/s.10AA of the Act. 12. The CIT(A) however followed his own order in Assessee s own case in AY 2008- 09 dated 26.4.2012 wherein he held that a unit set up in a Software Technology Park for the purpose of rendering ITES was equivalent to a EPZ/SEZ as per the policy of Government of India and therefore all the units which were enjoying export benefits including those .....

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/s.115JB of the Act. The conclusions of the CIT(A) were confirmed by the Hon ble ITAT in ITA No.1057/Kol/2012 for AY 2008-09 by order dated 19.2.2014. The following were the relevant observations of the Tribunal: 6. Now before us, ld. DR strongly assailing the order of ld.CIT(Appeals) submitted that assessee was not a Unit established in a Special Economic Zone. Hence, according to him benefit of sub-section 6 of section 115JB will not be available to it. According to him, ld.CIT(Appeals) fell i .....

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r assessee, functioning from Falta Export Processing Zone, admittedly a Software Technology Park, was eligible for claiming the benefit of sub-section 6 of section 115JB of the Act . Sub-section 6 of section 115JB is reproduced hereunder : - (6). The provisions of this section shall not apply to the income accrued or arising on or after the 1st day of April , 2005 from any business carried on, or services rendered by an entrepreneur or a Developer, in a Unit or Special Economic Zones, as the cas .....

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condition that a unit has to function in an SEZ for claiming the benefit of sub-section (6). Since subsection 6 of section 115JB of the Act was inserted by Special Economic Zone, 2005, the meaning of the term Unit given in the said Act will , in our opinion, be relevant since such word is not defined in the Income Tax Act . Section 2(zc) of Special Economic Zone Act 2005 defines a Unit as under : - UNIT means a Unit set up by Entrepreneur in a Special Economic Zone and includes an existing unit, .....

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ntial for applying the exclusionary clause of sub-section 6 of section 115JB of the Act . One of the grounds taken by Revenue says that assessee has not claimed any exempt ion under section 10AA of the Act for applying Section 6 of Section 115JB of the Act . We do not find any such requirement in sub-section 6 of section 115JB of the Act. Assessee was also governed by the same Rules as applicable to the Special Economic Zone and reported to the same authority mentioned under the Special Economic .....

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was that the decision rendered in the context of Sec.115JB(6) of the Act and with reference to Sec.10A of the Act cannot hold good for allowing deduction u/s.10AA of the Act in the present AY. He reiterated the stand of the AO. 14. On behalf of the Assessee reliance was placed on the written submissions filed before CIT(A) which have been incorporated in the impugned order of the CIT(A). It was emphasised that the Assessee was an existing SEZ and existing unit within the meaning of SEZ Act and w .....

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mings experienced on account of the multiplicity of controls and clearances; absence of world-class infrastructure, and an unstable fiscal regime and with a view to attract larger foreign investments in India, the Special Economic Zones (SEZs) Policy was announced in April 2000. This policy intended to make SEZs an engine for economic growth supported by quality infrastructure complemented by an attractive fiscal package, both at the Centre and the State level, with the minimum possible regulati .....

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e Department of Electronics and Information Technology. The services rendered by STPI for the Software exporting community have been statutory services, data communications servers, incubation facilities, training and value added services. STPI has played a key developmental role in the promotion of software exports with a special focus on SMEs and start up units. The STP Scheme which is a 100% export oriented scheme has been successful in fostering the growth of the software industry. The expor .....

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luding second hand equipment can be imported (except prohibited items). Equipment can also be imported on loan basis/lease. 100% FDI is permitted through automatic route. Sales in the DTA up to 50% of the FOB value of exports permissible. Use of computer imported for training permissible subject to certain conditions. Depreciation on computers at accelerated rates up to 100% over 5 years is permissible.18. In May 2005, the SEZ Act was passed by the Parliament and SEZ Rules came into force from F .....

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et Foreign Exchange earnings for India This was aimed at building-up the foreign exchange reserves as quickly as possible, to strengthen India s balance of payment situation. For this purpose, Government of India placed the Export Processing Zone, STP s and Special Economic Zones (SEZ s) at par and gave similar support and entitlements to all these areas for augmenting Net Foreign Exchange earnings. In particular, the STP s were placed on level footing with the EPZ s and SEZ s as regards control .....

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p by the Government of India in the year 1984. This has now come under the purview of the SEZ Act & Rules with effect from 10th February, 2006 in terms of Government of India Notification No. S.O.195(E) dated 10.02.2006. 20. EPZ concept was created and were set up for giving quick administrative support by dedicating the necessary staff etc., for speedy clearances of all units, including the STP units and the other similar units which were grouped under these EPZ s. The sole aim for all thes .....

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g within the scope of the category Income which do not form part of the Total Income in Chapter III of the Income Tax Act, 1961 (Act). 21. Under Sec.10A of the Act, a deduction of such profits and gains as are derived by an undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or comput .....

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mputer software as described in Sec.10A above. 10AA was brought in along with the consolidation and quick development of export initiatives in all the units, past, present and future, located in SEZ s or which were in existence in all parts of India even prior to the promulgation of the SEZ Act, 2005. It is important to note that, for the first time, this section extended the exemption coverage to Computer IT ES besides computer software. The SEZ Act itself was brought into effect from 10th Febt .....

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es required that the earning of Foreign Exchange was to be Net Surpluses and were to be accruing to the Indian Economy. All the regulatory parameters were similar, as was the sole purpose of the Exports promoting effort. In a sweeping move to galvanize the export efforts into higher value and volume terms, all the units set up in the past, and those that were being grouped in a specific location were covered by the Special Economic Zones Act, 2006 and brought into effect from February, 2006 and .....

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the remaining period will be available 23. The unit to claim benefits of SEZ Act, 2005 need not be physically located within an SEZ, especially an existing unit such as the Assessee. As already discussed under the scheme of coverage, the existing EPZ s are included as SEZ s and the definitions of the term Entrepreneur includes the unit recognized as such by the STP Director who has been equated with the Development Commissioner for this purpose. The Assessee s license sets out three points. In a .....

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efinitions under the SEZ Act, need to be looked into in the light of the position that existed prior to the SEZ Act and the express provisions in the SEZ Act in respect of units existing prior to the Act.: 2. Definitions In this Act, unless the context otherwise requires,- a to k… j. entrepreneur means a person who has been granted a letter of approval by the Development Commissioner under sub-section (9) of Section 15; k. existing Special Economic Zone means every Special Economic Zone w .....

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pecial Economic Zone and includes an existing Unit, an Offshore Banking Unit and Unit in an International Financial Services Centre, whether established before or established after the commencement of this Act; 25. The following other provisions of SEZ Act also needs to be looked into: 4. Establishment of Special Economic Zone and approval and authorisation to operate it to, Developer 1. The Developer shall, after the grant of letter of approval under sub-section (10) of Section 3, submit the ex .....

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rovisions of this Act and the provisions of this Act shall, as far as may be, apply to such Zone accordingly : Provided further that the Central Government may, after notifying the Special Economic Zone, if it considers appropriate, notify subsequently any additional area to be included as a part of that Special Economic Zone. 2. After the appointed day, the Board may, authorise the Developer to undertake in a Special Economic Zone, such operations which the Central Government may authorise. 44. .....

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ore the commencement of the SEZ Act. Therefore, in the light of the objectives for creation of SEZ/EPZ/STP, it can be concluded that all STP units enjoyed special economic benefits and were intended to achieve objective of Net Foreign Exchange earnings, and qualify to be called Existing Special Economic Units . They were therefore to be considered as existing Unit within the meaning of the SEZ Act i.e., Unit which has been set up on or before the commencement of this Act in an existing Special E .....

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to agree with the reasoning adopted by the CIT(A) that the Assessee which was an STP unit registered under STPI Scheme was Existing SEZ and Existing Unit under the SEZ Act and therefore can claim benefits available to an SEZ. As a corollary to the above conclusion, the physical presence of existing SEZ or Existing Unit in a SEZ is not a condition for allowing deduction u/s.10AA of the Act. As we have already seen, Sec.10AA was telescoped with the earlier Sec.10A, as that section was excluded fo .....

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nt of the relevant statutory provisions also supports the conclusions which we have arrived at as above. 27. For the reasons given above, we concur with the order of the CIT(A) on this issue. 28. The second reason given by the AO for denying the benefit of deduction u/s.10AA of the Act to the Assessee was that as per Sec.10AA(4)(i) of the Act the unit has to begin manufacture or produce articles or things or provide services during the previous year relevant to AY commencing on or after the 1st .....

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that the Assessee does not fulfil the following conditions laid down in Sec.10AA(4)(ii) & (iii) of the Act which reads thus: (ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence: (iii) it is not formed by the transfer to a new business, of machinery or plant previously used for any purpose. 30. The AO referred to the amalgamation of M/S.Last Peak BPO Pvt.Ltd., with the Assessee during the previous year. M/S.Last Peak BPO Pvt.Ltd., was in all re .....

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ile license for private bonded warehousing cum manufacturing. The endorsement was done by the Asst.Commissioner of Customs on 11.2.2010. According to the AO there was no approval of M/S.Last Peak BPO Pvt.Ltd. as 100% EOU upto 11.2.2010 and therefore deduction u/s.10AA of the Act could not be granted. Further the AO also expressed opinion that the Assessee was formed by transfer to a new business, of machinery or plant previously used by M/S.Last Peak BPO Pvt.Ltd. and therefore there was violatio .....

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tion u/s.10AA of the Act is claimed for the period within 10 years contemplated by Sec.10AA of the Act even after considering the exemption already availed by the Assessee. Even M/S.Last Peak BPO Pvt.Ltd. had not availed Sec.10A deduction for period beyond 10 years before amalgamation with the Assessee. In such circumstances, the very basis of application of Sec.10AA(4)(ii) & (iii) of the Act is flawed. We are of the view that the objection of the AO in this regard is without any merit. 32. .....

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m No.56F along with the return of income is not mandatory. The Assessee is directed to file the report in the prescribed form for AO s consideration. The non-furnishing of Form No.3CEB report in respect of international Transaction which the Assessee had with it s Associated Enterprise in terms of Sec.92 of the Act, has nothing to do with allowing deduction u/s.10AA of the Act. This objection of the AO is therefore held to be unjustified. 34. The last objection of the AO for not allowing deducti .....

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e AO in our view is therefore devoid of any merits. Besides the above reasons, it is also seen that the AO, ought to have considered the claim of the Assessee for deduction u/s.10B of the Act, as made in the original return of income. He has chosen to ignore the same and sought to deny the benefit of Sec.10AA of the Act alone. The order of the AO is silent on the claim of the Assessee u/s.10B of the Act. This approach of the AO in our view is nor proper. We therefore reject this objection raised .....

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t. It lays down where in the case of an assessee, being a company, the income-tax, payable on the total income as computed under the Act in respect of any previous year relevant to the assessment year commencing on or after a particular AY, is less than a particular percentage of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of prescribed percentage. T .....

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the shareholders of a company. To this profit certain additions and deletions have to be made as laid down in the explanation below Sec.115JB(2). One of the items of exclusion from the profit as per profit and loss account referred to above is the amount of income to which any of the provisions of section 10 other than the provisions contained in clause (38) thereof or section 11 or section 12 apply, if any such amount is credited to the profit and loss account . Sec.10A/10B/10AA of the Act is .....

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ase may be. 37. According to the AO, the Assessee was a unit in Special Economic Zone and therefore the provisions of Sec.115JB(6) of the Act were not applicable. We have already held while deciding the earlier grounds that this conclusion of the AO is not correct. Besides the above, the Tribunal in Assessee s own case in AY 08-09 held in favour of the Assessee. The relevant portions of the order of Tribunal have already been extracted in the earlier part of this order. For the reasons stated ab .....

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red was capital expenditure as it has been incurred to increase the capital base of the company. The AO followed the decision of the Hon ble Supreme Court in the case of Punjab State Industrial Development Corpn. Ltd. (1997) 93 Taxman 5 (SC), wherein it was held that fees paid for increase in authorized capital is a capital expenditure and not allowable as a deduction, the AO disallowed the claim of the Assessee for deduction of the aforesaid sum. 39. Before CIT(A) the Assessee pointed out that .....

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nger res integra and has been settled by the Hon ble Supreme Court in the case of CIT Vs. General Insurance Corporation Ltd. 205 CTR 280 (SC) wherein it was held that expenditure incurred in connection with issuance of bonus shares, constitutes revenue expenditure. It was held that issuance of bonus shares does not result in any inflow of fresh funds or increase in the capital employed, the capital employed remains the same. Issuance of bonus shares by capitalization of reserves is merely a real .....

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DV of the assets of Last Peak BPO Pvt.Ltd., which got amalgamated with the Assessee during the previous year by invoking the provisions of Explanation 2 to Sec.43(6) of the Act. Though the Assessee raised a specific ground challenging the action of the AO in this regard, the CIT(A) has not adjudicated the same. The revenue has raised a ground on the presumption that the addition made by the AO in this regard was deleted by the CIT(A). On a careful perusal of the order of the CIT(A), we find that .....

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the total income that was to be brought to tax. Though the Assessee had filed elaborate submission on this issue before CIT(A), the CIT(A) has decided the issue but has not given any reasons for his decision. 43. The Assessee, as we have already seen, filed return of income for AY 09-10 declaring total income of nil. The Assessee s income from the STP unit was ₹ 7,29,47,045 including interest received on deposit of call money received of ₹ 13,73,888. The Assessee in the return of inc .....

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in the succeeding AYs. 44. The AO did not allow the claim of the Assessee for deduction u/s.10AA of the Act. The AO also excluded the sum of ₹ 13,73,888 which was interest on call money from the business income and was of the view that the same has to be considered not as business income but income from other sources. He set off the entire loss of ₹ 49,33,807 against the business income computed by disallowing depreciation, fee paid for increase in share capital of ₹ 7,21,02,9 .....

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ssions. Sec.10AA(6) of the Act provides that Loss referred to in sub-section (1) of section 72 or sub-section (1) or sub-section (3) of section 74, in so far as such loss relates to the business of the undertaking, being the Unit shall be allowed to be carried forward or set off. The loss that is sought to be set off and carried forward in the present case is not that of the 10AA unit on which the Assessee has claimed deduction u/s.10AA of the Act. The loss in question is that of Last Peak BPO P .....

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Scientific Atlanta India Technology Pvt.Ltd. Vs. ACIT (2010) 38 SOT 0252 (SB)(Chennai) supports the above conclusion. The CBDT in File No.279/Misc./M-116/2012-ITJ dated 16.7.2013 circulated to the Assessing officers has after referring to conflicting views on whether section 10A and 10B provisions are deduction provisions or exemption provisions, has expressed its view that section 10A/10B provisions are deduction provisions. The said circular becomes a benevolent circular when there is loss in .....

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evenue against the order dated 8.10.2012 of CIT(A)-I, Kolkata relating to AY 2009-10. This appeal arises out of an order passed by the AO treating the interest income on call money as Income from other sources . The Assessee, as we have already seen, filed return of income for AY 09-10 declaring total income of nil. The Assessee s income from the STP unit was ₹ 7,29,47,045 including interest received on deposit of call money received of ₹ 13,73,888. The Assessee in the return of inco .....

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in the succeeding AYs. 49. The AO did not allow the claim of the Assessee for deduction u/s.10AA of the Act. The AO also excluded the sum of ₹ 13,73,888 which was interest on call money from the business income and was of the view that the same has to be considered not as business income but income from other sources. He however omitted to add the said sum to the total income of the Assessee. By an order dated 21.2.2012 he brought the said sum to tax and also treated the said sum as Income .....

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