ITAT ‘A’ Bench, Bangalore
Before Shailendra Kumar Yadav (JM) and
A. Mohan Alankamony (AM)
ITA Nos. 344 & 345/Bang./2009
A.Ys. : 2003-04 & 2004-05. Decided on : 4-8-2009
Counsel for revenue/assessee :
Vishweshwar Mudigonda/Preeti Garg
S. 70 read with S. 10A — Exemption u/s.10A was of income
earned without setting off of loss of non-STPI unit — Loss of the non-STPI
unit is allowed to be carried forward.
Per Shailendra Kumar Yadav :
Facts :
The assessee, a wholly owned subsidiary of Honeywell, USA,
was engaged in the business of performing high quality software development,
offer testing and support services to other units of the Honeywell group. One
of its units was a 100% software development export oriented undertaking under
the Software Technology Parks Scheme of Government of India. One of the issues
before the tribunal was whether the exemption u/s.10A was of the income earned
without setting off of loss of the non-STPI unit.
Held :
Analysing the provisions of S. 10A, the tribunal noted
that :
à
The provisions of S. 10A were placed under Chapter III which only relates to
‘Incomes which do not form part of total income’;
à
The word ‘such’ refers to the profits and gains of the undertaking which is
engaged in the export of articles or things or computer software; and
à
The word ‘an’ which qualifies the word ‘undertaking’ means that it refers to
a single undertaking.
Referring to the provisions governing computation of
business income, it was noted that as per S. 29, profits and gains of business
are to be computed in accordance with the provisions contained u/s.30 to
u/s.43D. Thus, the provisions of S. 10A do not form part of the sections
mentioned in S. 29. It further noted that the provisions of S. 70 govern
setting off of a loss from one source against income from another source under
the same head of income. Therefore, it observed that since S. 10A was not
forming part of the sections mentioned in S. 29, business losses of the
undertaking whose income was not exempt u/s.10A cannot be set off against the
profits of the undertaking whose income is exempt u/s.10A. Further, relying on
the decisions of the Bangalore tribunal in the cases of Yokogawa India Ltd.
and in the case of Nous Infosystems Pvt. Ltd., the tribunal upheld the
decision of the CIT(A) directing the AO to allow exemption u/s.10A without
setting off of loss of non-STPI unit and consequently, allowing the carry
forward of such losses of non-STPI unit.
Cases referred to :
1. ACIT v. Yokogawa India Ltd., 111 TTJ 548/13 SOT
470 (Bang.);
2. Nous Infosystems Pvt. Ltd. v. ITO, (ITA No.
1042/ Bang./2007 dated 3-6-2008)
