(Prayer: This ITA is filed under Section 260-A of I.T. Act, 1961 arising out of order dated 31.10.2007 passed in ITA No.3464/Bang/2004 for the Assessment Year 2000-01, Praying to:(i) formulate the substantial questions of law stated therein.(ii) allow the appeal and set aside the orders passed by the ITAT, Bangalore in ITA No.3464/Bang/2004 dated 31-10-2007 confirming the order of the appellate commissioner and confirm the order passed by the Deputy Commissioner of Income Tax, Circle-11(1), Bangalore.)Alok Aradhe, J.1. This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the revenue. The subject matter of the appeal pertains to the Assessment year 2000-01. The appeal was admitted by a bench of this Court vide order dated 28.03.2012 on the following substantial question of law:(i) Whether the Appellate Authority were correct in holding that estimated overhead expenses of STP units and non STP units should be taken into account for computing exemption u/s 10A of the Act despite the assessee having willfully chosen not to segregate the same in order to claim exemption as stated in his letter dated 18.03.2003 and as worked out for the earlier Assessment Years 1998-99 and 1999-00?(ii) Whether the appellate authority were correct in accepting the estimation in respect of payments to sub contractors, royalties, technical fees, communication expenses based on the turnover when the accounts originally rendered and subsequent to survey was found to be inaccurate and especially when the cost of materials and services in respect of STP units and non STP units had been correctly worked out?(iii) Whether the appellate authority were correct in holding that maintenance of separate accounts for STP units and non STP units was only directory and not mandatory in accordance with RBI conditions Government Notification and Income Tax Act?(iv) Whether the appellate authority were correct in holding that payments made to sub contractors who have separately exported and have been issued foreign inward remittance certificate and have also claimed 10A exemption will also be entitled to double exemption under Section 10A of the Act in hands of the assessee?(v) Whether the appellate authority were correct in holding that the assessee would be entitled to exemption under Section 10A of the Act when the export (56.056%) is less than 75% of the total sales as contemplated under Section 10A(2)(1a) of the Act?2. The factual background in which the aforesaid substantial questions of law arise for consideration of this court need mention. The assessee is in the business of export of software solutions and maintenance services. The assessee filed the return of income on 30.11.2000 for the Assessment Year 2000-01 wherein it admitted loss to the extent of Rs.28,55,17,275/-. The return was processed under Section 143(1) of the Act which resulted in refund of an amount of Rs.3,92,44,964/-. Thereafter, the case was taken up for scrutiny and a notice under Section 143(2) of the Act was issued on 22.06.2001. The Assessing Officer by an order dated 31.03.2003 inter alia held that assessee had Software Technology Park (STP) unit as well as non STP unit and all over head expenses have been charged in relation to non STP unit and no expenditure is claimed in respect of STP unit for which exemption under Section 10A of the Act has been claimed. It was further held that in respect of Assessment Years 1998-99 and 1999- 00, the assessee has drawn up separate profit and loss account for STP as well as non STP units. It was also held that after survey, the assessee bifurcated the over heads between STP units and non STP units, in respect of cost of materials / services. However, in respect of payments to sub contractors, royalties, technical fees, communication expenses, the assessee estimated on the basis of turnover instead of actuals. It was also held that revised computation furnished by the assessee contradicts itself the correct STP turnover and turnover under Section 80HHE as well as domestic turnover has been suppressed. It was also held that the assessee has not fulfilled the stipulations laid down in Software Technology Parks of India Scheme (STPI) and the conditions laid down by Reserve Bank of India regarding maintenance of separate accounts and other conditions and therefore, the assessee is not entitled to exemption under Section 10A of the Act. It was further held that the audit report does not exclude payment made to sub contractors or other expenses incurred aboard. It was also held that turnover brought into the country is 56.056% which is below 75% as stipulated under Section 10A of the Act. Accordingly, the claim for exemption under Section 10A of the Act was denied.3. The assessee thereupon approached the Commissioner of Income Tax (Appeals) by filing an appeal, who by an order dated 08.09.2004 inter alia held that there is no provision under Section 10A of the Act that 50% of the sales from STP units have to be exported and similarly, the statute does not lay down any condition that the assessee should maintain separate accounts in respect of STP units and non STP units. Accordingly, it was held that the condition laid down by the Reserve Bank of India is only directory in nature and the assessee is entitled to exemption under Section 10A of the Act. It was further held that sub contractors have exported the goods on the basis of foreign inward remittance certificates and even if they have claimed exemption, the same would not tantamount to double exemption as it is permissible in law. Being aggrieved, the assessee as well as the revenue preferred appeals before the Income Tax Appellate Tribunal (hereinafter referred to as 'the tribunal' for short). The tribunal by an order dated 31.10.2007 dismissed the appeal preferred by the revenue and allowed the appeal preferred by the assessee in part. Being aggrieved, the revenue is in appeal before us.4. Learned counsel for the revenue while referring to substantial question of law Nos.1 and 2 submitted that the finding recorded by the tribunal that allocation of overhead expenses is on turnover basis is not based on any material on record. With reference to substantial question of law No.3, it is argued that the Commissioner of Income Tax (Appeals) as well as the tribunal grossly erred in holding that maintenance of separate accounts by the assessee is directory. It ought to have been appreciated that the unit of the assessee was registered as STP under STPI scheme and was subject to conditions imposed in the registration scheme. The registration certificate issued to the assessee itself imposes the condition to maintain separate accounts. It is contended that STPI scheme itself mandates maintenance of separate accounts, which is mandatory and under the provisions of the Act, if an undertaking is registered as STP it has to comply with the conditions imposed under the scheme and the registration certificate.5. It is argued that substantial question of law No.4 has to be answered in favour of the revenue as the Commissioner of Income Tax (Appeals) as well as the tribunal have failed to consider that the assessee as well as sub contractors have claimed exemption under Section 10A of the Act, whereas, scheme of Section 10A of the Act provides for exemption / exemption only to manufacturing activity and it ought to have been appreciated that the assessee had entrusted the manufacturing activity to sub contractor and sub contractor has also claimed exemption under Section 10A of the Act, which does not provide for the benefit to the multiple assesses on the same manufacturing activity. It is also urged that even the EXIM policy issued by the Government, which was considered by this court has permitted benefit under Section 10A / 10B of the Act. Only in the circumstances where the assessee has produced certificate to the effect that other contract manufacturer has not claimed the exemption under Section 10A of the Act on the same manufacturing activity. It is pointed out that no finding on the aforesaid aspect has been recorded by the Commissioner of Income Tax (Appeals). With reference to substantial question of law No.5, it is argued that the assessee has to export 75% of the total manufactured items and in the instant case, the assessee has only exported to 56.056% and since, the assessee had violated the provision of Section 10A(2)(1a) of the Act, therefore, it is not entitled to exemption under Section 10A of the Act. It is also submitted that the Commissioner of Income Tax (Appeals) as well as the tribunal have not recorded any finding on this issue and the aforesaid aspect of the matter requires examination. In support of aforesaid submissions, reference has been made to the provisions of STPI Registration Scheme and STP Scheme.6. On the other hand, learned Senior counsel for the assessee while inviting the attention of this court to para 2.24 of the order passed by the Commissioner of Income Tax (Appeals) as well as paras 18 to 22 of the order passed by the tribunal submitted that with regard to first two substantial questions of law, concurrent findings of fact have been recorded by the Commissioner of Income Tax (Appeals) as well as the tribunal, which is based on meticulous appreciation of evidence on record and it has rightly been held that allocation of overhead expenses has to be made on turnover basis. The aforesaid finding cannot be said to be perverse. It is also urged that the assessee's claim for exemption under Section 10A of the Act is dependant on fulfillment of conditions prescribed in Sub-Section (2) of Section 10A of the Act and the conditions prescribed in sub-Section (2) no where provide that the assessee has to maintain separate accounts. Therefore, the finding recorded by the Commissioner of Income Tax (Appeals) and the tribunal that the compliance with the conditions prescribed in STPI Registration Scheme and the conditions prescribed by the Reserve Bank of India are directory in nature does not call for any interference. It is also contended that the aforesaid finding even otherwise has no bearing on the issue of eligibility of the assessee to claim exemption under Section 10A of the Act. It is also urged that there is no question of double exemption being claimed as to the extent the assessee has paid the sub contractors the profit it has claimed have stood reduced and even when the assessee had computed the exemption of Rs.96,97,50,443/-, it has taken into consideration the payments made to the sub contractors and therefore, at no point of time, the benefit of double exemption have been obtained by the two assesses on the same manufacturing activity. In this connection, our attention has been invited to the finding recorded in para 2.25 of the order of the Commissioner of Income Tax (Appeals). It is also argued that the finding recorded by the Assessing Officer that assessee has violated the conditions prescribed in Section 10A(2)(ia) of the Act is erroneous. It is stated that all the sales of the assessee from its STP units are export sales and there are no sales to domestic tariff area and therefore, it cannot be stated that exemption is not available on account of violation of the condition. It is also pointed out that Section 10A as it was in existence at the relevant time did not require that 75% of the total sales have to be exported under Section 10A(2)(ia) of the Act. In support of aforesaid submissions, reliance has been placed on Circular dated 17.01.2013 issued under Section 10A read with Section 10AA and Section 10B of the Act by the Central Board of Direct Taxes (CBDT) as well as decision of Supreme Court in 'T.R.F. LTD. VS. COMMISSIONER OF INCOME-TAX', (2010) 323 ITR 397 (SC) and decisions of this court in 'COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE VS. FUSION SOFTWARE ENGG. (P.) LTD.', (2012) 18 TAXMANN.COM 57 (KARNTAKA), 'COMMISSIONER OF INCOME TAX, BANGALORE VS. MILENNIA DEVELOPERS (P.) LTD.', (2018) 100 TAXMANN.COM 369 (KARNATAKA) and 'COMMISSIONER OF INCOME-TAX III VS. M/S QUINTILES RESEARCH', I.T.A.NO.282/2014 DECIDED ON 14.12.2020.7. We have considered the submissions made by learned counsel for the parties and have perused the record. We propose to deal with substantial questions of law ad seriatum. The substantial question of law No.1 and 2 are related to each other, therefore, we propose to deal with the same together. The Commissioner of Income Tax (Appeals) in paragraph 2.24 of its order has held that in the remand report dated 27.02.2004, the Assessing Officer has reported that the assessee has been able to bifurcate STPI receipts, 80HHE receipts and domestic receipts. It has further been held that direct expenses relating to domestic receipts and export receipts have also been segregated and direct expenses of export turnover are apportioned on the basis of percentage turnover of STPI and 80HHE receipts. The Assessing Officer in its remand report has accepted the fact that identification was possible and it has been correctly shown by the assessee. The Commissioner of Income Tax (Appeals) has concluded that since, the assessee has identified the turnover relating to STPI units and there is a reasonable basis for quantifying direct and indirect expenses pertaining to STPI units, the income pertaining to STPI units and therefore, exemption under Section 10A of the Act can be worked out. The tribunal in para 22 of its order has held that the assessee has units spread over various part of the country and may be abroad, the only plausible method of reasonable of allocating the overhead expenses is by relating them to the turnover. Thus, the tribunal has affirmed the finding that the aforesaid exercise would result in determination of the profit to a near accurate figure or a reasonable figure and has upheld the order of the Commissioner of Income Tax (Appeals) to the extent of Rs.68,72,88,748/- holding the same to be a reasonable figure. The aforesaid concurrent findings of fact are based on meticulous appreciation of evidence on record. The tribunal has rightly held that the allocation of the overhead expenses have to be made on turnover basis. No perversity in the aforesaid concurrent findings of fact could be pointed out. For the aforementioned reasons, we answer the first and second substantial question of law against the revenue and in favour of the assessee.8. Now we may advert to the third substantial question of law which pertains to requirement of holding of separate accounts for STP and non STP units. It is pertinent to note that assessee is entitled to exemption under Section 10A of the Act, which is a special provision in respect of newly established undertakings in Free Trade Zone (FTZ). Section 10A of the Act was substituted by Finance Act, 2000 with effect from 01.04.2001. The exemption under Section 10A of the Act is dependant on fulfillment of conditions mentioned in Sub-Section (2) of the Act. Sub-Section (2) of the Act, which was in existence at the relevant time, reads as under:10(2) This section applies to any financial undertaking which fulfils all the following conditions, namely :--(i) it has begun or begins to manufacture or produce articles or things during the previous year relevant to the assessment year--(a) commencing on or after the 1st day of April, 1981, in any free trade zone; or(b) commencing on or after the 1st day of April, 1994, in any electronic hardware technology park, or, as the case may be, software technology park;(ia) in relation to an undertaking which begins to manufacture or produce any article or thing on or after the 1st day of April, 1995, its exports of such articles or things are not less than seventy-five per cent of the total sales thereof during the Previous Year.(ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence :Provided that this condition shall not apply in respect of any industrial undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section;(iii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose.Explanation -- The provisions of Explanation 1 and Explanation 2 to sub- section (2) of section 80-I shall apply for the purposes of clause (iii) of this sub- section as they apply for the purposes of clause (ii) of that sub-section.9. Thus, from perusal of Sub-Section (2), it is evident that it does not contain any requirement with regard to maintenance of separate accounts. It is pertinent to note that wherever the legislature intended to incorporate the requirement of maintenance of either separate accounts or separate books of accounts, it has expressly said so. In this connection, reference may be made to Section 11(4A), Section 80HHB and Section 80HHBA of the Act, where the legislature has clearly prescribed the requirement of maintenance of separate books of accounts. In the instant case, in sub-Section (2) of Section 10A of the Act, there is no requirement of maintenance of separate accounts and the assessee is entitled to exemption under Section 10A of the Act. Therefore, the assessee cannot be deprived of the benefit of Section 10A of the Act, on the ground that it had not maintained separate accounts. It is pertinent to note that even in the substituted section viz., under Section 10(2) of the Act, there is no requirement to maintain separate accounts. The requirement of maintenance of separate accounts has been provided in STPI Registration Scheme and no consequences for its non compliance have been prescribed. Therefore, the same has rightly been held to be directory. Thus, the third substantial question of law is also answered against the revenue and in favour of the assessee.10. The fourth substantial question of law pertains to double deduction. The Commissioner of Income Tax (Appeals) in para 2.25 has held that sub contractor has given software support activity to the assessee and not to the customers of the assessee. It has further been held that the employees of the sub contractors are operating from the STP unit itself and the sub contractors have claimed exemption under Section 10A of the Act on the bas

is of foreign inward remittance certificate, which has no bearing with regard to assessee's claim of exemption under Section 10A of the Act. It has further been held that the question of double deduction being claimed does not arise as to the extent the assessee has paid to the sub contractors the profits claimed as exempt by the assessee stand reduced. The aforesaid finding has been affirmed by the tribunal in para 22 of its order. Therefore, in the fact situation of the case, the question of double deduction does not arise. For the aforementioned reasons, the fourth substantial question of law is also answered against the revenue and in favour of the assessee.11. This brings us to the last substantial question of law, which pertains to violation of the condition prescribed under Section 10A(2)(ia) of the Act. From perusal of Section 10A(2)(ia), which has been quoted supra, it is evident that the undertaking which beings to manufacture or produce any article or thing on or after 01.04.1995, its export of such articles or things are not less than 75% of the total sales thereof during the Previous Year. Thus, the total export has to be not less than 75% of the total sales. However, the Commissioner of Income Tax (Appeals) has held that there is no provision under Section 10A of the Act, which requires such a condition to be fulfilled and no finding in this regard has been recorded by the tribunal. Therefore, the order passed by the tribunal to the extent of fulfillment of the requirement under Section 10A(2)(ia) of the Act cannot be sustained. Accordingly, the fifth substantial question of law is answered.In view of preceding analysis, the order passed by the tribunal to the extent it pertains to requirement of compliance of the condition mentioned in Section 10A(2)(ia) of the Act is hereby quashed and the matter is remitted to the tribunal to decide the issue of requirement of compliance of the condition mentioned in Section 10A(2)(ia) of the Act afresh in accordance with law.In the result, the appeal is disposed of.