TMI Blog2009 (1) TMI 884X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) Blr/CIT(A)-VI/2006-07/BLR dt: 09.7.2007 and another by the assessee company by way of Memorandum of cross objections for the assessment year [AY] 2004-05. 2. Aggrieved by the order of the Ld. CIT(A), the Revenue has raised seventy four grounds. On a perusal of grounds of appeal, it is seen that ground Nos:1 and 74 being general in nature which do not survive for adjudication. The remaining 72 grounds, most of which are inter-linked, for the sake of convenience and clarity, they were segregated, inter-linked wherever necessary and finally fourteen effective grounds have been culled out among them which are listed out, as under: 1) The CIT(A) erred in directing the AO/TPO to rework the additions on account of ALP adjustment. He ought to have appreciated that the rate adopted in the TPO's order is arm's length rate as it represents uncontrolled transactions; 2) The CIT(A) erred in directing the AO to delete the disallowance of depreciation on imported software. He ought to have appreciated that:- i. the payments made on account of software import for in house utilization are in the nature of royalty within the meaning of Explanation 2 under section ii. the assessee has fail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome final and an appeal before High Court is pending. 6) The CIT(A) erred in directing the AO not to exclude scrap sale amounting to ₹ 30,45,077/- from the profits eligible for deduction u/s 10A. He ought to have appreciated that as per the ratio of decision of Apex Court in 237 ITR 579 in the case of CIT v. Sterling Foods and Pandian Chemicals v. CIT 262 ITR 278 the source of a particular income on which exemption is sought must directly emerge from the running of that undertaking yielding profits. The CIT(A) erred in directing the AO not to exclude gain on exchange rate fluctuation amounting to ₹ 15,52,56,290/- from the profits eligible for deduction u/s.10A. He ought to have appreciated that as per the ratio of decision of apex Court in 237 ITR 579 in the case of CIT v. Sterling Foods and Pandian Chemicals v. CIT 262 ITR 278 the source of a particular income on which exemption is sought must directly emerge from the running of that undertaking yielding profits. The CIT(A) erred in directing the AO not to exclude interest income received amounting to ₹ 69,61,059/- from the profits eligible for deduction u/s.10A. He ought to have appreciated that as per the ratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lusion of telecommunication charges attributable to delivery of computer software. 9) The CIT(A) erred in directing the AO not to exclude expenditure incurred in foreign currency amounting to ₹ 76,48,71,792/- from the export turnover following the decision of the ITAT in the case of Infosys Technologies Limited. He ought to have appreciated that the decision of the ITAT relied on by him is rendered with regard to deduction u/s 80HHE whereas the deduction claimed by the assessee was u/s 10A of the Act and is not applicable to the facts of the assessee's case and the decision has not been accepted by the Department and has not become final. The CIT(A) has failed to appreciate that:- i. As per section 80HHE there are two aspects to the software development business. The first limb of the business will be export of computer software which was produced by the assessee itself and exported. The second aspect is that of providing technical services in developing the computer software as per the specification of the client. ii. unlike section 80HHE section 10A applies only to profits derived by an under-taking from the export of articles or things or computer software and not for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the deduction u/s 10A. He has further erred in directing the AO to compute and allow the deduction u/s 10A for all the eligible units at Bangalore in software technology parks. The CIT (A) erred in holding that the undertakings at Bangalore satisfy various conditions set by section 10A(2) on the ground that the units have been formed without splitting up or reconstruction of business already in existence and without transfer of old plant and machinery. He further erred in holding that the AO has overlooked specific requirement of section 10A(2) but has evaluated the claim u/s 10A by imposing conditions not found in section 10A(2). The CIT (A) was wrong in holding that the decision os the Hon'ble Apex Court reported in 107 ITR 195 is clearly applicable. The CIT(A) erred in holding that the issue before the ITAT in 85 ITD 325 was not whether the expansion resulted in a new unit as no claim to that effect was made by the assessee in that case. He has erred in observing that the Tribunal for the AYs 98-99 and 99-00 in ITA Nos:895 and 896/B/2005 has given a finding on the eligibility of deduction u/s 10A by extensively bringing the details of eligible units, year of commencement, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for foreign taxes paid and to follow the directions of the ITAT in ITA No:881, 882, 895 and 896/B/2003. The CIT(A) ought to have appreciated that the said decision has not become final and appeal is pending before the High Court. 13) The CIT(A)erred in directing the AO to exclude Excise duty and sales tax from the total turnover for the purpose of computing deduction u/s 80HHC following the decision of the ITAT in ITA No:881, 882, 895 and 896/B/2003 which has been challenged before the High Court. The CIT(A)erred in directing the AO to consider only the total turnover and profit of the assessee which are eligible for deduction u/s 80HHC for the purpose of computing deduction u/s 80HHC following the decision of the ITAT in ITA No:881, 882, 895 and 896/B/2003 which has been challenged and pending before the High Court. He ought to have appreciated that while computing the deduction u/s 80HHC total profit of the assessee's business has to be considered and not the profit of the eligible business. The CIT(A) erred in directing the AO not to consider the difference in exchange of ₹ 22.90 crores for exclusion while computing the deduction u/s 80HHC on the ground that the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the limitation date for filing this appeal which caused a delay of nine days and requested for condoning the same. 3.1. Considering the facts and circumstances under which the Revenue was prevented by a reasonable cause in preferring the appeal within the stipulated time limit, the delay of nine days is condoned and the appeal is admitted for adjudication. 4. Similarly, the assessee company, through its Chairman, vide letter dated 8-7-2008 has filed Form of Memorandum of cross objections along with enclosures. The Chairman's letter is reproduced as under: This is with reference to the above referred appeals filed by the Department against the order dated 9.7.07 of the learned Commissioner of Income-tax (Appeals)-VI, Bangalore [CIT(A)] in our case for assessment year 2004-05. In the said appellate order of the CIT(A) which was received by us on 16.7.2007, relief was granted in respect of many issues and the additions/disallowances made in the order of the assessing officer were sustained only in respect of three principle issues. The grounds of appeal in respect of these issues confirmed by the CIT(A) were finalized by us in consultation with our counsels but it appears tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness of the under-takings located in software technology parks and qualified for deduction under section 10A of the Act. The Ld. CIT(A) having held that the deduction under sub-section 1 of section 10A is to be computed as per the mathematical formula defined in sub-section 4 of section 10A, erred in remitting the issue back to the AO. (2) Deemed exports not eligible for deduction under section 10A: a) the Ld. CIT(A) having appreciated that the amount reckoned as deemed exports are exports as per the EXIM policy erred in excluding the same from the purview of export turnover and thereby concluding that the same is not entitled to deduction under section 10A. (3) Issue of exclusion of foreign taxes (VAT/GST) from export and total turnover: The learned authorities below erred in excluding the foreign tax (VAT/GST) from the export turnover and total turnover and thereby granting a lower deduction under section 10A for the undertaking in software technology parks. Without prejudice, similar amount should have been reduced not only from the total turnover but also from the expenditure incurred by the units under section 10A. (4) Software development centre outside India: a) The learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration was realized for monitors so sold. (6) Interest under section 234B: (a) the appellant denies the liabilities for interest u/s 234B/234D. Further prays that the interest u/s 234B if any, should be levied only on the returned income and the levy should be limited to the date of regular assessment. (b) Without prejudice to the appellant's right of seeking waiver before the appropriate authority, the appellant begs for consequential relief in the levy of interest under section 234B. 5. Since most of the issues raised by the Revenue as well as the assessee company are common, for the sake of convenience, these appeals are disposed off in a common order. 6. Most of the issues agitated by the either parties in these appeals have since been considered by the Hon'ble Tribunal in the earlier assessment years. Let us first take up the Revenue's appeal for consideration. 7. In the first effective ground, the grievance of the revenue was that the CIT(A) erred in directing the AO/TPO to rework the additions on account of adjustment. He ought to have appreciated that the rate adopted in the TPO's order is arm's length rate as it represents uncontrolled transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue in question has been covered by the decision of the Hon'ble Tribunal referred supra. The Hon'ble Tribunal while disposing of the appeal for the AYs.01-02 and02-03 had followed the earlier orders for the AYs 98-99, 99-00 and 00-01. Thus, this issue is also decided in favour of the assessee company. 9. The third effective ground is with regard to the provision for warranty. The assessee had provided for the incremental warranty expenses in its books amounting to ₹ 6,98,28,965/-. It was the contention of the assessee that such warranty expenses were allowed by the Hon'ble Tribunal for the AYs.98-99 and 99-00. However, the Ld.AO rejected the assessee's contention on the ground that the order of the Hon'ble Tribunal is being challenged before the Hon'ble High Court. Aggrieved, the assessee has reiterated before the Ld.CIT(A) that since this issue is covered by the appellate orders for earlier years, it should be decided in its favour. The Ld.CIT(A) was of the view that the facts of the current year are similar to the facts of the earlier years and following the decision of the Hon'ble Tribunal, he directed the AO to allow the deduction as claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the AYs.98-99 and 99-00. Considering the issue in depth and also identical to the one in the earlier years, the Ld. CIT (A), following the decisions of the Hon'ble Apex Court referred supra had reversed the order of the Ld.A.O. 10.2. Before us, the Ld.D.R. forcefully argued that the Ld. CIT(A) had grossly erred in deleting the addition made following the decisions of the Hon'ble Tribunal which has been challenged before the Hon'ble High Court. On the other hand, the Ld.A.R has brought to our reference that a similar issue was deliberated by the Hon'ble Tribunal for the AY 2000-01 which was followed for the AYs 2001-02 and 02-03 wherein the issue was restored back on the file of the Ld. A.O for re-computation and, therefore, prayed that the same treatment may be handed out for this AY too. 10.3. Rival submissions were carefully considered. We have also critically perused the earlier years' orders of the Hon'ble Tribunal on which strong reliance was placed by the assessee company. The Hon'ble Tribunal had in fact went to the root of the issue and elaborately analysed the matter with a hypothetical example. The relevant portion of its analysis, for ready ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... included in the closing stock then the same is to be considered in purchases as the closing stock is a figure to balance the item of purchases left at the end of the year. Hence, in the example given above, ₹ 4 will have to be debited in the manufacturing account. As per decision of Apex Court in the case of Berger Paints India Ltd. 266 ITR 99 provisions of section 43B are also applicable in respect of amount included in closing stock. If Modvat credit available on closing stock is set off before the due date of filing of return, then such amount is available for set off u/s 43B of the I.T.Act. It means that if modvat credit of ₹ 1,32,50,765/- is availed before the due date of filing of return, then there will be no addition. For re-computation, the matter is restored back on the file of the assessing officer. 10.4. Considering the facts and circumstances of the issue and respectfully following the decisions of Hon'ble Tribunal referred supra, for the purpose of re-computation the matter is restored back on the file of the Ld.A.O. 11. The fifth effective ground pertains to allocation of corporate expenses. It was the contention of the assessee company that Wipro Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te expenses made by the Ld.AO and also failed to take cognizance of the very fact that the decisions of the Hon'ble Tribunal have been challenged before the Hon'ble High Court. 11.4. We have carefully considered the submissions of both the parties. We have also perused the decisions of the Hon'ble Tribunal on which the assessee company has placed strong reliance. The order of the Hon'ble Tribunal for the AY 97-98 in assessee's own case in ITA No:651/B/94 has decided the issue in favour of the assessee and relevant findings of the Tribunal is reproduced as under: 27.14. In view of these entire facts of the case and, in the absence of any specific finds by the authorities below that the expenditure is incurred for the various units claiming exemption/deduction in an artificial way of allocating the expenses and that too on surmises is not justifiable. We are, therefore of the opinion that the profits of the undertaking eligible for exemption u/s 10A is correctly worked out and no artificial working can be attributed thereto. The ground taken by the assessee is, therefore, allowed and the order of the Commissioner (Appeals) is reversed in this aspect. 11.5. The Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss:Loss on sale of fixed assets (17,63,818) 11,14,452 Sub-total(B) 1,26,41,092 Total (A+B) 16,63,93,950 The sum of ₹ 15,37,52,858 [ sub-total (A) in the above table] was considered by the assessee for computing profit eligible for deduction u/s 10A for the STP units forming part of Wipro Technologies Division. However, the Ld.AO took a stand that only the income which can be held to be directly attributable to the business activity of the units claiming 10A can be treated as part of total turnover. Source of a particular income on which exemption is sought must directly emerge from the running of the undertaking yielding profits. 12.2. After considering the submissions of the either parties, the Ld. CIT(A) had analysed the term profits derived from export of computer software referred to in sub-section 1 of section 10A of the Act and also following the yardstick laid down by the Hon'ble Tribunal in assessee's own case for the AY 97-98 for the items such as scrap sales and income were in the nature of reduction of expenses incurred under these heads, the Ld.CIT(A) held that these are to be included in the profits of the business for the purpose of computing the deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking and is to be considered as eligible for deduction u/s 10A. The excess amount is received because the sale proceeds when received are more as compared to the price at which the goods were exported on account of exchange rate fluctuation. The exports are made at a price in foreign exchange and the amount is received in India subsequently and, therefore, some gain is there on account of fluctuation. For the purpose of section 80-HHC, the Mumbai Bench in the case of ACIT vs Muthu Mandir Tardev Road, Mumbai (2006) 10 SOT 148 held that exchange gain itself is to be considered as part of the export turnover. Hence, following the decision of the Bench in the case of the assessee for the earlier years, it is held that exchange fluctuation is to be considered as part of the profit of the undertaking eligible for deduction u/s 10A. (3) With regard to interest income also, the Hon'ble Tribunal in its decision referred supra, after deliberating the issue at length has, arrived at a conclusion that - 10.2.................The treatment to be meted out to interest had been under dispute while computing profits of the business u/s 80HHC of the I.T.Act. as per Explanation (baa) to section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 10A(4). Hence, we are of the opinion that the Ld.CIT(A) was justified in directing the assessing officer not to exclude rent from the receipts for the purpose of computing deduction u/s 10A. 12.8. As the issue dealt with by the Hon'ble Tribunal is similar to the issue on hand, respectfully following the said decision, we direct the AO not to exclude the rent receipt for the purpose of computing deduction u/s 10A. 12.9. With regard to commission and other income, the Revenue has vehemently agitated that the Ld.CIT(A) had no power as per the amended provisions of section 251 of the Act to remit back to the AO. We are in total agreement with the Revenue. As per the amended provisions of section 251 of the Act [Finance Act, 2001 w.e.f. 1/6/2001], the power of CIT(A) in remitting back or set-aside certain issues to lower authorities has been dispensed with. However, we find that no tangible evidence has been brought to our reference by the Ld.A.R to substantiate his claim. In view of the above, the issues of commission and other income are restored on the file of Ld.CIT(A) with a direction to decide the issues on merits after affording reasonable opportunities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 155(13) of the Income-tax Act extensively and quoting Rule 15 of RBI Regulations came to a conclusion that the Ld.CIT (A) was justified in directing the AO to include in export turnover the collections made after the expiry of six months. As the issue before hand is similar which was decided by the Hon'ble Tribunal and respecting its view, we have no hesitation in upholding the action of the Ld. CIT(A) in the matter. 14. The next effective eighth ground is with regard to reimbursement of communication links, incentives, rewards, telecommunication expenses etc., In respect of reimbursement of communication links and other sales performance incentives, the Ld. AO had stated that only the consideration in respect of export of article or things is liable to be taken for the purposes of section 10A. Thus, the AO had concluded that the amount received by the assessee as communication link charges or other rewards and incentives were not a consideration for the export of the software. However, the assessee company's contention was that - 15.1...........The reimbursement of certain expenses was also in the nature of export as the same was paid pursuant to the contract of sale o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us. The Ld. A.R forcefully submitted that the issues stand covered by the decision of the Tribunal in the case of the assessee company for the AYs. 01-02 and 02-03. On the other hand, the ld. D.R urged that the action of the Ld. AO is in order which may be upheld. 14.6. We have carefully considered the submissions of the either parties. We find that the Hon'ble Tribunal has dealt with these issues comprehensively. After considering the pros and cons of the issues, the Hon'ble Tribunal has decided thus - 24.5...........In respect of expenditure incurred on on-site development, the issue stands covered by the order of this Tribunal in the case of lnfosys Technologies Limited. This Bench in the case of Insosys Technologies vide order dated 31st March, 2005 in ITA NO.50/Bang/2001 held in that case that the assessee is involved in developing software. The assessee was not involved in rendering of technical services. Such software are provided through the computer programmes developed by them. Hence, expenses in foreign currency were not to be reduced for ascertaining the export turnover. This bench in the case of M/s.Relq software Pvt. Ltd. in ITA No:767/Bang/2007 vide order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de order dated 11th January, 2008 in ITA NO.5/Hyd/2005 and 354/Hyd/2006 held that expenditure incurred on travel and allowances for the purpose of development of software at clients site outside India cannot be excluded from the export turn-over. Similar finding has been given by Chennai Bench vide order dated 15th February 2008 in ITA NO.731/Mad in the case of Changepond Technologies P.Ltd vs ACIT wherein it has been held that expenses on salaries, traveling and other perquisites are to be included in the export turnover. Hence, following the decision of this Bench and considering the decisions of other Benches on this issue, the expenses on traveling etc. cannot be excluded from the export turnover. Income-tax Act does not provide any bifurcation of the expenses incurred outside India. The assessing officer has not brought on record any expenditure which may not be relevant for the purpose of export. Hence, the apportionment is not desirable. We confirm the finds of the learned CIT(A) that such apportionment cannot be done. 24.7. In respect of telecommunication expenses, only those expenses which are relevant for the delivery of software are to be excluded. No effort has been mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e action of the Ld. CIT(A), the Revenue has brought up this issue before us for redressal. It was the case of the Revenue that the Ld.CIT(A) has grossly erred in deciding the issue in favour of the assessee by following the decision of Hon'ble Tribunal in the case of Infosys Technologies Limited which has been challenged before the Hon'ble High Court. Another point on which the Revenue found fault with the CIT(A) was that the decision relied on by him was rendered with regard to deduction u/s 80HHC whereas the issue before him was the claim u/s 10A of the Act. It was, further, submitted that the assessee had filed annual returns before the STPI authorities showing the assessee had earned export income through data communication as well as onsite consultancy which shows that it had rendered technical services. The agreements entered into by the assessee with the clients for exporting computer software clearly provides software application development, deployment and support services. To strengthen its stand, the Revenue, further, submitted that the assessee provides technical services in developing software as per the specifications of the client(s) and, hence, it is clear t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue has come up with the present appeal. The Ld. D.R. had opposed the finding of the Ld.CIT(A) who solely relied on his decision for the AYs.2001-02 and 02-03 in the assessee's own case and merely followed the decision of the Hon'ble Tribunal which has been challenged before the Hon'ble High Court and, therefore, pleaded that the order of the Ld. AO may be upheld on this count. On the other hand, the learned AR submitted that the issue stands covered in favour of the assessee by the decision of the Hon'ble Tribunal referred supra and, as such, the Revenue has no valid point which should be addressed to. 16.4. We have carefully considered the contentions of the either parties and also carefully perused the order of the Hon'ble Tribunal. While deciding an identical issue, the Hon'ble Tribunal cited the following decisions - (1) [12.5.] ITA No: 669 and 804/Ban/05 dated: 22.3.2006 for the AY 2000-01 in the case of assessee company wherein it was concluded that 'we direct the AO to allow set off of loss from 10A units against the other business income of the assessee or income from other sources. (2) ITA NO.248 and 249/Bang/07 dated 27.11.2007 in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed the earlier years order's versions. 17.1. After considering the submissions of either parties exhaustively, critically analyzing the applicability of the provisions of relevant sections of the Act, legal implications and also perusing the various decisions of the Hon'ble Courts on which strong reliance was placed, the Ld.CIT(A) came to the conclusion that the under-takings at Bangalore are eligible for deduction u/s 10A and, accordingly, directed the AO to allow deduction u/s 10A . In respect of the undertakings outside Bangalore, the AO was directed to consider the deduction u/s 10A for each of the undertakings individually as claimed by the assessee and not to treat them as one in each city. 17.2. Aggrieved, the Revenue has come up before us. The elaborate submission of the Revenue has been listed out under ground No. 11 supra. The Ld.D.R had drawn our attention to the fact that the Ld. CIT(A) had decided the issue against the revenue by placing reliance on the decisions of the Hon'ble Tribunal which have not become final as they have been challenged before the Hon'ble High Court and, as such, the order of the Ld.AO may be upheld. On the other hand, the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company in its written submission had mainly rebutted the AO's justification in drawing strength from the decision of the Madras Tribunal which had dealt with the issue pertaining to the AYs 87-88 and 88-89 whereas section 90 had undergone a sea change by amendments made to the Act by the Finance Act 1991 and as such the case law relied on by the AO has no relevance to the issue on hand. It was, further, brought on record by the assessee that a similar issue was dealt by the Hon'ble ITAT, Bangalore in assessee's own case for the AYs 98-99 and 99-00 in ITA Nos:881, 882, 895 and 896/Bang/2003 and decided the issue in favour of the assessee. 18.1. Considering the submissions of both the parties and following his earlier finding for the AY 2002-03 and the ruling of the Hon'ble Tribunal for the AYs 98-99 and 99-00 in the assessee's own case, the Ld.CIT(A) directed the AO to grant full foreign tax credit of ₹ 37.28 crores. 18.2. Aggrieved, the revenue has come up before us with a plea that the Ld.CIT(A) was not justified in deciding the issue in favour of the assessee by following the earlier decision of the Hon'ble Tribunal in ITA Nos:881,882,895 and 896/B/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... similar one on which the Hon'ble Tribunal has deliberated and arrived at a conclusion cited supra, we are of the considered opinion that this issue should go back to CIT(A) for reconsideration. Accordingly, the issue is restored on the file of the Ld. CIT(A) for reconsideration. 19. The effective thirteenth ground raised is with regard to deduction u/s.80HHC. The Ld.AO had included excise duty and sales tax in the total turnover and adopted the total turnover and profits of the assessee company as the total turnover and profits for the purpose of computing deduction u/s 80HHC. Further, the AO had reduced 90% of other income and profits of offices abroad in arriving at the profits eligible for deduction u/s 80HHC. Reliance is placed on the decision of the special Bench in the case of Pearl Polymers vs DCIT reported in 80 ITD 1 and in the case of CIT vs. Parry Agro Industries Limited reported in 257 ITR 41(Kerr). 19.1. The assesee company's objections are summarized as under: (i) inclusion in total turnover: As per the decision of the Bombay High Court reported in 245 ITR 769, it should not be included. It also drew strength from the Hon'ble Tribunal's decision in it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of CIT v. Catapharma (India) P.Ltd. 292 ITR 641. The Apex Court has held that excise duty and sales tax are not to be included in the total turnover. In view of the decision of the Apex Court, the order of the learned CTT(A) on this issue requires no interference . 19.5. Respectfully following the decisions of Hon'ble Supreme Court which were relied on by the Hon'ble Tribunal referred supra, we are of the considered view that no interference is called for on this issue. Computation of deduction u/s 80HHC. The Ld.CIT (A) directed the Ld.AO to consider only the total turnover and profit of the assessee which are eligible to claim deduction u/s 80HHC for the purpose of computing deduction u/s 80HHC. The Ld.D.R submitted that the Ld.CIT(A) was wrong in deciding the issue by placing reliance on the decision of Hon'ble Tribunal in ITA Nos:881,882,895 and 896/B/2003 which has been challenged before the Hon'ble High Court. However, the Ld.A.R urged that the Hon'ble Tribunal in its decision referred supra for the AYs 2001-02 02-03 has decided the issue in favour of the assessee company. 19.6. We have carefully considered the issue on hand and also had taken note of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ministrative expenses of Wipro Infotech Division to the undertakings at Pondicherry for the purpose of computing deduction u/s 80-IB. 20.1. The Ld. AO had made adjustments to the deduction claimed u/s 80IB in respect of allocation of expenses of Wipro Corporate Division. Considering the issue, the Ld. CIT(A) was of the view that a similar issue had cropped in the assessment years 2001-02 and 02-03 which had been dealt with a finding. Following the same, he had vacated the artificial allocation made over as the above allocation already considered by the assessee in computing the deduction u/s 80-IB. 20.2. Aggrieved, the revenue has come up with the issue before us. The Ld. D.R. argued that the major expenses of Wipro Infotech Division are common and relates to undertakings at Pondicherry and, hence, the allocation of expenditure on the basis of turnover was required to arrive at the correct profit of the undertaking. It was wrong on the part of the Ld.CIT(A) to delete the allocation of corporate overheads of Wipro corporate division to lighting factory at Pondicherry-unit on the basis of turnover. On the other hand, the Ld. A.R submitted that the Hon'ble Tribunal has decided the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set-aside certain issues to lower authorities has been dispensed with. However, we find that no tangible evidence has been brought to our reference by either of the parties to substantiate their respective claims. In view of the above, the issues of commission and other income , are restored on the file of Ld.CIT(A) with a direction to decide the issues on merits after affording reasonable opportunities to either parties of being heard. 22. Deemed exports not eligible for deduction under section 10A: It was the contention of the Ld. AR that the Ld. CIT(A), having appreciated that the amount reckoned as deemed exports are exports as per the EXIM policy erred in excluding the same from the purview of export turnover and thereby concluding that the same is not entitled to deduction under section 10A. 22.1. The Hon'ble Tribunal in assessee's own case for the AYs 2001-02 and 02-03 had an occasion to consider a similar issue. After an exhaustive deliberation and also drawing strength from its earlier decision in the case of Tata Elxsi Ltd. in ITA No: 315/Bang/2006 has confirmed the order of the Ld. CIT(A) on the issue. Respectfully following the said decision of the Hon'ble T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 263 of the Act, the issue was dropped by the learned commissioner of income-tax, Central Circle, Bangalore, the authorities below are precluded from pursuing a different view. It was, further contended that the software development centers outside India were only facilitating the on-site development of computer software in software technology parks. 24.1. After due consideration of the reasoning of the Ld. AO and also forceful arguments of the assessee, the Ld. CIT(A) had confirmed the action of the AO on the ground that the issue was squarely covered by his findings for the AYs. 2001-02 and 02-03. 24.2. We have carefully considered the argument put-forth by the Ld. A.R. and also the reasoning of the Ld. AO and the Ld. CIT (A) in their respective orders. The Hon'ble Tribunal, for the AYs 2001-02 and 02-03 in the assessee's own case had an occasion to deal with an identical issue. After deliberations, the Hon'ble Tribunal had concluded thus - 34.4. The learned CTT(A) has also not recorded a finding that such goods or services have been transferred at the market value. In absence of such a finding, it is not possible to uphold the finding of the learned CIT(A). This i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve appreciated that if the supply of monitors as an integral part of computers manufactured was a trading activity, the financial result from such a trading could have been only a business loss as no consideration was realized for monitors so sold. It was, therefore, pleaded the actions of the lower authorities may be assailed. 25.2. On the other hand, the Ld.D.R. was of the firm opinion that the decisions taken by the lower authorities were in conformity with the provisions of law and, therefore, does not require any interference at this stage. 25.3. Rival submissions were duly considered. The Hon'ble Tribunal in its order referred supra, has dealt with a similar issue in the assessee's own case for the AYs.01-02 and 02-03, comprehensively. After taking into account the Ld.AO's action, the findings of the Ld. CIT(A) and also a detailed rebuttal submitted by the assessee, the Hon'ble Tribunal has observed thus:- 33.5. We have heard both the parties. As per section 80IB(3), the deduction is available as a percentage of profit and gains derived from the industrial undertaking. The industrial undertaking has not been defined u/s 80IB of the I.T.Act. Industrial undertak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, the learned CIT (A) was justified in holding that profit from sale of monitor is not includible for computation of deduction u/s 80-IB. 25.4. Respectfully following the said decision, we are of the considered view that (i) profit from AMC cannot be included and (ii) the profit from sale of monitors cannot be included for computation of deduction u/s 80-IB. 26. Interest under section 234B: The assessee denies the liabilities for interest u/s 234B/234D. It was, further prayed that the interest u/s 234B, if any, should be levied only on the returned income and that the levy should be limited to the date of regular assessment. 26.1. At the out-set, we are inclined to make it clear that the levy of interest is mandatory and it has to be charged as per the provisions of I.T.Act. However, the Ld.AO is directed to give consequential relief u/s 234B on account of reduction in income, if any. 26.2. With regard to levy of interest u/s 234D of the Act, we are of the firm view that section 234D is a machinery provision and will, therefore apply from the date they are brought in the Statute. Levy of interest u/s 234D is chargeable when a regular assessment is made on or after 1-6-2003 irresp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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