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2010 (8) TMI 1057 - ITAT BANGALORE

2010 (8) TMI 1057 - ITAT BANGALORE - TMI - ITA No. 944/Bang/2009 - Dated:- 10-8-2010 - O.K. Narayanan (Vice President) And P. Madhavi Devi (Judicial Member) For the Appellant : S. Sukumar, FCA For the Respondent : Gopala Rao, CIT-I ORDER P. Madhavi Devi (Judicial Member) This is an appeal filed by the assessee against the order of the CIT u/s 263 of the Act dated 31.07.2009. 2. The assessee has raised the following grounds of appeal:- i) The Hon'ble CIT erred in holding that the order u/s 14 .....

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vant provisions of the Act, ignoring the fact that the issue of allowance u/s 10A was subject matter of appeal before CIT on the issue of determination of quantum of relief and also in the appeal filed by the department before ITAT. iii) The Hon'ble CIT, overlooked the fact relief under section 10A is certified by a Chartered Accountant as required under sub-section (5) to section 10A in the prescribed form enclosed to the return and the Assessing Officer has completed the assessment after v .....

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ssue of computation of deduction u/s 10A which clearly indicates that what could not be done in the departmental appeal cannot be a matter for exercise of revisionary power under section 263 and hence the order u/s 263 dated 31.7.2009 is beyond the powers granted u/s 263 and the order is to be annulled as held by the ITAT in the case of AXA Business Services Pvt. Ltd. ITA 101/Bang/2008 dated 13.2.2009. 3. The brief facts of the case are that the assessee company, which is engaged in the business .....

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included expenses of ₹ 1,43,11,508/- incurred in foreign exchange in respect of link charges for its Systems Division. The Assessing Officer disallowed the same holding that freight, insurance and telecommunication charges in respect of articles or things exported from India were to be excluded from the purview of export turnover. He therefore disallowed the entire amount. 4. Aggrieved by the order of Assessing Officer, the assessee preferred an appeal before the CIT(A), who allowed the sa .....

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prejudicial to the interest of the revenue. He therefore issued a notice u/s 263 of the I T Act to the assessee, in response to which, the assessee submitted its reply stating that the deduction u/s 10A was claimed after duly filing the certificate of Chartered Accountant as required under sub-section (5) of section 10A and the Assessing Officer, after verifying the details filed by the assessee only, has made the disallowance of the link charges and this matter was subject matter of appeal bef .....

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inced with the submissions of the assessee and held that the issue of set off of loss of non-eligible STPI unit from the profits of the STPI unit was not the subject matter of appeal before the CIT or the Tribunal and the Assessing Officer has not examined the issue at all. He therefore held that there was no application of mind by the Assessing Officer and therefore, the order of the Assessing Officer is erroneous and prejudicial to the interest of the revenue. 5.1 As regards the merits of the .....

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grieved by this order of the CIT, the assessee is in appeal before us. 7. The learned counsel for the assessee, while reiterating the submissions of the assessee before the authorities below, submitted that the assessee had a profit of ₹ 2.95 crores from the eligible business and incurred a loss of ₹ 4.22 crores in respect of the non-eligible STPI unit. He submitted that all the details were very much available before the Assessing Officer and therefore, when the Assessing Officer ha .....

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was considered and it was held that "it has to be read in conjunction with the expression "erroneous" order passed by the Assessing Officer and every loss of revenue as a consequent of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue. It was further held that when the Assessing Officer adopts one of the two courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Assessing Officer .....

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of the revenue. 7.1 As regards the merits of the issue, i.e. whether the loss of the non-STPI unit is to be set off against the profits of eligible STPI unit is concerned, he placed reliance upon the decision of the Special Bench of the Tribunal at Chennai in the case of M/s Scientific Atlanta India Technology Pvt. Ltd. v ACIT reported in ITA Nos.229/Mad/2007, 352/Mad/2008 and 536/Mad/2007, wherein it has been held that deduction u/s 10A is not an exemption but only a deduction under the Chapte .....

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er book filed by him. 8. The learned DR, on the other hand, supported the order of the CIT and submitted that deduction u/s 10A is to be allowed from the total income, which is to be computed after aggregating the income and loss of all the units of the assessee company. He submitted that the Assessing Officer has incorrectly assessed the loss as per the revised income without going into the issue as to whether the loss has been set off against the profits of the other one unit or against the pr .....

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assessee's argument is on two grounds; (1) that the assessment order has finally merged with the order of the Tribunal and (2) that the deduction u/s 10A is undertaking specific and therefore, the loss of non-eligible unit cannot be set off against the profits of the eligible unit. As regards the first argument is concerned, we are unable to agree with the contention of the learned counsel for the assessee because the Assessing Officer had restricted the deduction u/s 10A by disallowing cert .....

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the Tribunal in the case of Scientific Atlanta Technology Pvt. Ltd. cited supra. In that case, the Tribunal was considering the following question of law:- "Whether the business loss of a non-eligible unit, whose income is not eligible for deduction u/s 10A of the Act, has to be set off against the profits of the undertaking eligible for deduction u/s 10A for the purpose of determining the allowable deduction u/s 10A of the Act? The Tribunal, after considering various decisions, has held t .....

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