Act. In View Of The Above Legal Provisions In Myconsidered View, Exemption Under Section 10B Has Tobe Computed On The Profits Determined After Taking Intoaccoun v. Acitita No. (2012) 2188 & 2189/Hyd/2011(Hyd-Itat) (Copy Enclosed As Annexure-6)Has Heldthat

THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTISENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR Writ Petition No.18721 of 2014 DATED:17.07.2014 Between:Microsoft Global Services Center (India) Pvt. Ltd.,Hyderabad. … Petitioner And The Deputy Commissioner of Income Tax,Hyderabad.….Respondent THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTISENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR Writ Petition No.18721 of 2014 Order:(per the Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta) This writ petition is filed seeking to challenge the orderdated 10.6.2014, impugned notice dated 13.3.2014 issued underSection 148 and notice dated 28.5.2014 issued under Section143(2) of the Act relating to assessment year 2009-10, thatpreceded order dated 10[th] June, 2014. The Assessing Officer wanted to re-open the assessmentunder Section 147 of the Income Tax Act, 1961 (for short ‘theAct’). So, the assessee sought for reasons and as the reasonswere supplied by the Revenue Officials, the writ petitioner raisedobjections thereto and, requested to allow a hearing to considerthe objections. While overruling the objections, the Revenueofficials have proceeded to make assessment once again. It istherefore against the aforesaid decision basically overruling theobjections of the writ petitioner, this writ petition has been filed. Learned counsel for the petitioner submits that while passing impugned order, the Assessing Officer did not considerthe relevant judgments cited by his client to support plea ofobjection, and taking note of the inappropriate decisions as aprecedent, this matter has been proceeded with further. He hasdrawn our attention to paragraph-16 of the writ petition to advancehis argument on the fact and also on Ground No.D at page 18 andhe has also taken us to the written objections raised before theAssessing officer. According to him, had those decisions beenconsidered, which are binding on the question of law, theAssessing Officer would have no option, but to decide that he hasno jurisdiction to re-open the assessment. There is no answer in the counter filed on the ground takenas above. Mr. J.V. Prasad, learned counsel appearing for the Revenuecontends that at this stage, once the formation of opinion of reasonto believe is done, it is good enough. According to him, whetherthese judgments are applicable or not is for the Assessing Officerto decide and if for any reason, some judgments are notconsidered, it shall be deemed to have been irrelevant. Relying onsome precedent, including the Hon’ble supreme Court, the orderhas been passed to proceed with the re-assessment. At this stage, in our view, after considering the abovecontentions of the parties, the Court has to see whether theAssessing Officer has decided the matter considering the relevantmaterial or not. We have seen his order and we have taken note of thestatement and averments in paragraph-16 and Ground-D of thewrit petition accompanying documents, including written objectionsraised before the Assessing Officer. In the counter, theseaverments of the writ petition, have not been dealt with, but we areof the view that on this issue, counter affidavit filed by theDepartment has no relevance, as the act of the Assessing Officeris a quasi judicial function and not a departmental function. Hisrecording of fact on any subject is reflected from his own orderand no further material is required. In the context of thissubmission of the learned counsel for the petitioner, we haveexamined the written objections and we find that at page-64 of thewrit petition, in paragraphs 2.2.3 and 2.2.4 thereof, it is specificallystated as follows: “2.2.3. Further the Company humbly wishes tobring to the notice of your goodself that various Courtshave analyzed the similar facts and have affirmed that“profits” of the business of the undertaking for beneficialprovision of Section(s) 80-IB/80HHC/10B/10A, are to becalculated as per the provisions of Section 28 of the Act. “2.2.3. Further the Company humbly wishes tobring to the notice of your goodself that various Courtshave analyzed the similar facts and have affirmed that“profits” of the business of the undertaking for beneficialprovision of Section(s) 80-IB/80HHC/10B/10A, are to becalculated as per the provisions of Section 28 of the Act. Hon’ble Jurisdictional ITAT in case ofDCIT vs.Planet-Online Pvt. Ltd., ITA No. (2008) 1016/HYD/07(HydITAT)(Copy enclosed as Annexure-5) has held that : “Profits and gains of business is defined in Section28 and as per Section 29 income referred to in Section28 shall be computed in accordance with the provisionsof Section 30 to 43D. From the above provisions in thestatute, it is thus clear that the profit of the undertaking inthe case of the appellant has to be computed inaccordance with the provisions of the Section 30 to43D, i.e., including the provisions of Section 43-B of the Act. In view of the above legal provisions in myconsidered view, exemption under Section 10B has tobe computed on the profits determined after taking intoaccount the disallowances to be made under Section43B of the Act.” (emphasis supplied). Hon’ble Jurisdictional ITAT in case ofBartronics India-Ltd., vs. ACITITA No. (2012) 2188 & 2189/HYD/2011(Hyd-ITAT) (Copy enclosed as Annexure-6)has heldthat: “if AO re-computes profit from eligible business bydisallowing certain expenditure and liability underSection 40(a)(ia) and 43B, such recomputed profit shallbe considered for purpose of deduction under Section10B”. 2.2.4 Further following the decision of PlanetOnline Pvt Ltd., (Supra) similar view has been taken byJurisdictional Hyderabad ITAT in the followingjudgments wherein the profit of the undertaking isarrived in accordance with the provisions of Section 30to 43D of the Act for computing the tax holiday benefitunder Section 10A of the Act. Hon’ble Jurisdictional ITAT in case ofACIT vs. Zavata-India Pvt. Limited (2010) ITA No. 1100/Hyd/2009 (Hyd-ITAT)has held that : (copy enclosed as Annexure7) “the profit of the undertaking which has to beconsidered for computing deduction under Section 10Bof the Act, is the profit which has been arrived inaccordance with the provisions of Section 30 to 43D ofthe Act and thus taking into account the disallowancemade under Section 43B of the Act and thedisallowance covered under the provisions of the abovesections has to be taken into account for the purpose ofcomputation of deduction under Section 10A of theIncome Tax Act.” Hon’ble Jurisdictional ITAT in case ofITO vs.Promantra Synergy Solutions Ltd., (2013) ITA No.-140/Hyd/2013 (HydITAT)has held that: (copy enclosedas Annexure-8) “We find that as per Section 10A of the Act, adeduction shall be allowed of such profits and gains asare derived by an undertaking from the export of such articles or things or computer software. By reading theSection 29 of the Act read with Section 28 of the Act, itis clear that income shall be computed in accordancewith the provisions of Section 30 to 43D of the Act. Hence, the profit of the undertaking in the present casehas to be computed in accordance with the provisionsof Section 30 to 43 D i.e., including the provisions ofSection 40a(ia) of the Act. In view of the above, in ourconsidered opinion, exemption under Section 10A hasto be computed on the profits determined after takinginto account the disallowance to be made under Section40a(ia) of the Act.” Hon’ble Jurisdictional ITAT in case of DCIT vs. SevenHills Business Solutions Ltd.(2012) ITA No.-819/Hyd/2011 (HydITAT)has held that: “that enhanced income, if any, on account of anydisallowance is construed as income from exports only,consequently boosting the income eligible for exemptionunder Section 10A of the Act.” Hon’ble Jurisdictional ITAT in case of DCIT vs. SevenHills Business Solutions Ltd.(2012) ITA No.-819/Hyd/2011 (HydITAT)has held that: “that enhanced income, if any, on account of anydisallowance is construed as income from exports only,consequently boosting the income eligible for exemptionunder Section 10A of the Act.” Hence in view of the above submissions and judicialpronouncements, it is submitted that tax holiday benefitunder Section 10A of the Act should be calculated onthe profit as per the provisions of Section 29 of the Acti.e., after giving effect to allowance/disallowanceprovided in Section 30 to 43D of the Act. Also in thescenario where the returned income is enhanced bymaking addition/disallowances in the assessment order,tax holiday benefit under Section 10A of the Act shouldbe recomputed considering such enhanced income. Again in paragraph 2.5 at page 67 of the writ petition, it isspecifically stated thus: 2.5. Further, the judgment of Ahmedabad ITAT inthe case of Keval Constructions (Supra) was alsoupheld by the Hon’ble Gujarat High Court in the caseITO vs. Keval Construction (2013) 354 ITR 13 (GujHC) (Judgment dated 10.12.2012), wherein theHon’ble High Courtheld that: “we find no error in the Tribunal’s ultimateconclusion. Even if a certain expenditure which was incurred by the assessee for the purpose of developinghousing project was not allowable by virtue of section40(a)(ia) of the Act, since the assessee had notdeducted the tax at source as required under law, itcannot be denied that such disallowance wouldultimately go to increase the asssessee’s profit from thebusiness of developing housing project. Whatever bethe ultimate profit of assessee as computed even aftermaking disallowance under Section 40a(ia) of the Act,would qualify for deduction as provided under the law.” We find from the impugned order, there is no mention ofconsideration of the aforesaid decisions. According to us,whenever any materials are produced whether on fact or on law, itis the duty of the Officers of any level in discharging his quasijudicial function to consider as to whether those are relevant ornot. He is required to say why such materials are not acceptable,at least, this duty should be performed as being part of thecompliance of the principles of natural justice. There are many afacets of natural justice. We think that this is one of the facets ofnatural justice, to be informed why the materials were rejected. We accordingly pass the following order: We hold that the impugned order has not been passed withappropriate decision making process. Consequently, the orderpassed thereon is not in appropriate exercise of jurisdiction. We,therefore, feel that the Assessing Officer before proceedingfurther, must consider those decisions, which have beenmentioned in the written objections. After considering them, hewould come to a fresh conclusion. In that process, it would be open for him either to withdraw the order or to vary, modify orretain the same. We think that the impugned order should be keptin abeyance till such time a decision is taken in the matter interms of this order. This exercise is to be completed within aperiod of three weeks from the date of communication of thisorder. We make it clear that the decision will be rendered only on the non-considered decisions. The writ petition is accordingly disposed of. Consequently, the miscellaneous applications, if anypending, shall also stand closed. No order as to costs. __________________ K.J. SENGUPTA, CJ _________________ SANJAY KUMAR, J 17[h] July, 2014pnb