TMI Blog2022 (9) TMI 766X X X X Extracts X X X X X X X X Extracts X X X X ..... forward losses from earlier year for the purpose of computing profit eligible deduction u/s.80HHE. Computation of deduction u/s 10A of the Act vis- -vis the transfer pricing adjustment - assessee submitted that no deduction under section 10A of the Act has been allowed in respect of transfer pricing adjustment by the AO order passed under section 143(3) and thus, the impugned addition amounts to double addition in the present case - HELD THAT:- We direct the Assessing Officer to comply with the directions of the CIT(A) on this issue and delete the addition in case of double addition after necessary verification. As a result, ground no.2 is allowed for statistical purpose. - ITA No.955/Mum./2013 And ITA No.276/Mum./2013 - - - Dated:- 14-9-2022 - Shri G.S. Pannu, President And Shri Sandeep Singh Karhail, Judicial Member For the Assessee : Shri Mihir Naniwadekar For the Revenue : Shri Anil Kumar Das ORDER PER BENCH The present cross appeals have been filed by the assessee and the Revenue challenging the impugned order dated 12/11/2012, passed under section 250 of the Income Tax Act, 1961 ( the Act ) by the learned Commissioner of Income Tax (Appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, the Assessing Officer failed to deduct such profit from the amount of deduction allowed under section 10A of the Act. 4. The learned CIT, accordingly, set aside the assessment order treating it to be erroneous and prejudicial to the interest of the Revenue and directed the Assessing Officer to give effect to its directions. As a result, the Assessing Officer passed the order dated 26/12/2007, under section 143(3) r.w.s. 263 of the Act complying with the directions of the learned CIT issued under section 263 of the Act. In appeal, the learned CIT(A) vide impugned order partly allowed the appeal filed by the assessee. Being aggrieved, both assessee and Revenue are in appeal before us. 5. At this stage, it is also relevant to note that assessee vide separate appeal being ITA No. 4137/Mum./2007 had challenged the revision order passed by the learned CIT under section 263 of the Act. The Co-ordinate Bench of the Tribunal vide order dated 17/05/2022, inter-alia, allowed the appeal filed by the Assessee and also dealt with merits of the aforesaid issues. ITA no.955/Mum./2013 Revenue s Appeal A.Y. 2002 03 6. In its appeal, the Revenue has raised following g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer vide order passed under section 143(3) r.w.s. 263 of the Act set off the loss amounting to Rs. 115.25 lakh of STP units against the profit amounting to Rs. 134.14 lakh of STP unit and accordingly, disallowed the deduction claimed under section 10A of the Act to an extent of Rs. 115.25 lakh. The learned CIT(A) vide impugned order allowed the appeal of the assessee following the decisions of the Co-ordinate Bench of Tribunal in CIT v/s Patni Computers Systems Ltd. (19 taxmann.com 180) (Pune ITAT) and Hon ble jurisdictional High Court in Hindustan Unilever Ltd. v/s DCIT (325 taxmann.com 102), wherein it has been held that after deduction under section 10A of the Act has been allowed in respect of each eligible units, loss of STP unit has to be set off against the normal business income. 9. We find that this issue is now settled in favour of the taxpayer by the decision of Hon ble Supreme Court rendered in CIT v/s Yokogawa India, [2017] 391 ITR 274 (SC), wherein it has been held that deductions contemplated under section 10A of the Act is qua the profits of eligible undertaking of an assessee on a stand-alone basis and without reference to the other eligible or non-elig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeals and the questions arising therein, as formulated at the outset of this order, by holding that though Section 10A, as amended, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI. All the appeals shall stand disposed of accordingly. 10. Thus, respectfully following the aforesaid decision of Hon ble Supreme Court, grounds raised by the Revenue are dismissed. 11. In the result, appeal by the Revenue is dismissed. ITA no.276/Mum./2013 Assessee s Appeal A.Y. 2002 03 12. In its appeal, the assessee has raised following grounds: 1. Based on the facts and circumstances of the case and in law, the learned Commissioner of Income-tax, (Appeals)-6 (CIT(A)) erred in confirming the action of the Assessing Officer (AO) of not granting deduction under section 80HHE by setting off brought forward losses for the purpose of computing business profits under the said section. 2. Based on the facts and circumstances of the case and in law, the learned CIT(A) erred in not directing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of Section 80HHE of the Act allows deduction of profit derived from the business of export out of India of computer software for providing all technical services outside India in connection with development or production of computer software. It is not in dispute that the assessee is eligible for deduction u/s.80HHE of the Act in the present case. As per Section 80HHE(3) of the Act, the said profit derived shall be the amount which bears to the profits of the business, the same proportion as the export turnover bears to the total turnover. We find from the perusal of the provisions of Section 80HHE of the Act, as per Clause(d) of the explanation below the said Section, the starting point for computation of profits of the business is the profits of the business as computed under the head profits and gains of business or profession. It is pertinent to note that Section 29 of the Act mandate that the business income shall be computed in accordance with the provisions contained in Section 30-43D of the Act. Hence, the profit qualifying for deduction u/s.80HHE of the Act is the profit of the current year. The set off of brought forward business loss is governed by the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd., in Civil Appeal No.1327 of 2021 with Civil Appeal No.1328 of 2021; Civil Appeal No.1329 of 221; Civil Appeal No.2537 of 2015; Civil Appeal No.1408 of 2021; Civil Appeal No.1508 and Civil Appeal No.1509 of 2021 dated 28/04/2021. We find that the facts of the case and the issue in dispute which went before the Hon ble Supreme Court has been duly addressed in para 3 4 of the said decision. In that case, the Hon ble Supreme Court was concerned with the deduction u/s.80IA of the Act. Based on the interpretation of Section 80IB and 80IA of the Act, it was held that in para 12 13 thereon that the profit eligible for deduction would be net profit made by the assessee from the eligible business and such deduction is to be allowed from gross total income. We find that similar view has been taken by the Hon ble Jurisdictional High Court in the following cases:- a) CIT vs. Tridoss Laboratories reported in 328 ITR 448 b) V.M.Salgaocar Brothers (P) Ltd., vs. ACIT reported in 81 taxmann.com 357. c) CIT vs. Eskay Knit (India) Pvt. Ltd., in Income Tax Appeal No.184 of 2007 dated 25/03/2010. d) CIT vs. J.B.Boda Co., Pvt. Ltd., in Income Tax Appeal No.3224 of 2009 da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s appeal, is pertaining to computation of deduction under section 10A of the Act vis- -vis the transfer pricing adjustment. 20. The brief facts of the case pertaining to this issue, as emanating from the record, are: The learned CIT vide order passed under section 263 of the Act observed that the payment received by the assessee for providing software personnel to its USA clients cannot be considered for deduction under section 10A of the Act. Accordingly, vide order passed under section 143(3) r.w.s. 263 of the Act, the Assessing Officer disallowed an amount of Rs. 1,77,29,000 being excess deduction under section 10A of the Act. In appeal before the learned CIT(A), assessee submitted that no deduction under section 10A of the Act has been allowed in respect of transfer pricing adjustment by the Assessing Officer vide order passed under section 143(3) of the Act and thus, the impugned addition amounts to double addition in the present case. The learned CIT(A) vide impugned order directed the Assessing Officer to verify the records and delete the addition in case of double addition. 21. Having considered the submissions and perusal of material available on record, we direct th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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