5. We have considered the facts of the case and submissions made before us. The facts are that the assessee set up a unit at A-30, Kailash Colony, New Delhi, for which in-principle approval was granted by STPI, Noida, on 26.3.2001, subject to fulfillment of certain conditions. It appears that there were delays in fulfilling the conditions and the registration was finally obtained on 14.1.2003. Since the assessee had set up the unit in financial year 2000-01 and earned profits therefrom, deduction u/s 80HHE was claimed for assessment years 2001-02, 2002-03 and a part of the previous year relevant to assessment year 2003-04. On receipt of the approval on 14.1.2003, deduction was also claimed u/s 10A from 14.1.2003 to 31.3.2003. The case of the AO in this year was that the assessee has claimed deduction under two provisions in respect of the same profits, which accrued at the end of the year. The same was not allowable as per law. In a subsequent year, the appeal for which is pending before us, it was also held that the assessee did not set up any new unit in this year and, therefore, it was a case of reconstruction of the old business. The learned CIT(Appeals) did not accept the first line of argument by referring to the order of the Tribunal in the case of Legato Systems India (P) Ltd. (supra). He did not accept the second line of argument also by observing that the assessee had set up only one unit. Although it was set up in previous year relevant to assessment year 2001-02, but the intention was to obtain deduction u/s 10A right from the beginning, which becomes evident from in-principle approval obtained on 26.3.2001. Thus, he came to the conclusion that on obtaining approval, the assessee was entitled for deduction u/s 10A from 14.1.2003 to 31.3.2003. From the facts narrated above, it is clear that the assessee had set up only one unit. Therefore, there is no question of reconstruction of a business already in existence. Sub-section (1) of section 10A contains a provision for deduction of profits and gains derived by an undertaking from the export of articles or things or computer software for a period of 10 consecutive assessment year & beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be. Sub-section (2) inter-alia contains a condition that the deduction as aforesaid shall not be allowed if the undertaking is formed by splitting up or reconstruction of a business already in existence or that it is formed by the transfer to the new business of machinery or plant previously used for any purpose. As mentioned earlier, the assessee set up only one unit, which started the production of software in the previous year relevant to the assessment year 2001-02. Therefore, it cannot be a case of the formation of the undertaking by splitting up or reconstruction of the business already in existence. It is also not a case where the undertaking is formed by transfer of machinery or plant previously used for any other purpose. Thus, we are not in agreement with the argument of the Id. DR that the undertaking was formed by reconstruction etc. of the business already in existence. Since the undertaking continued as it was in assessment year 2001-02 and in subsequent years, it cannot be said in assessment year 2003-04 that any of the aforesaid conditions was not satisfied in this year. Thus, it is held that the assessee set up only one unit in the previous year relevant to assessment year 2001-02, which continued to exist in this and subsequent years. Therefore, the profits of this unit were entitled to deduction once other conditions mentioned in section 10A were satisfied.
5.1 As mentioned earlier, there were delays in registration of the undertaking after obtaining in-principle approval. The reasons for delay are not ascertainable from record and which were also not specifically stated before us. The reason of financial difficulties is not correct in view of the argument of the learned DR that the undertaking earned profits in all the years. However, the reasons for delay are not of any consequence in our considered view. What is important is that the approval was obtained on 14.1.2003 in respect of the existing business for which in-principle approval had been obtained on 26.3.2001. The AO or the learned DR has not pointed out any legally tenable circumstance which prevented the assessee from obtaining the deduction with effect from 14.1.2003. The case of the AO was that the profits of a business accrue at the end of the year and, therefore, exemption u/s 10A could not have been granted for the period 14.1.2003 to 31.3.2003. He allowed deduction u/s 80HHE for the whole period and mentioned that sub-section (5) of section 80HHE came in the way of grant of deduction under both the provisions in the same year. We are of the view that this argument is not tenable. The principle of apportionment of income or expenditure is well entrenched in the taxation laws. The assessee computed profits for the two periods on a reasonable basis by taking receipt on actual and expenditure on a proportionate basis. The AO has not found any fault with the allocation of profit in the two periods. It is settled that in law, the profits of a business accrue on the last date of the previous year. However, that does not mean that allocation of profits of the year in two different periods is an impossibility because of the aforesaid principle of law. Such an apportionment was necessary as the assessee became entitled to deduction under two different provisions for the two periods. To our mind, the principle of accrual of profit does not come in the way of allocation of profit in the two periods. What can be done at best is to ensure that the allocation is made on a proper basis so as to avoid excessive claim of deduction under one or the other provision. However, as stated earlier, no fault has been found by the AO with the allocation made by the assessee. His other argument that deduction under two provisions has been claimed in respect of the same profits is also not correct as the assessee has claimed deduction u/s 80HHE on the profits for the period 1.4.2002 to 13.1.2003 and deduction u/s 10A on the profits for the period starting on 14.1.2003 and ending on 31.3.2003. The profits of these periods are not the same but they are different. The order in the case of Legato Systems India (P) Ltd. (supra) supports the case of the assessee that deduction under different sections can be allowed on different profits, if the same are admissible. We also do not find any force in the argument of the Id. DR that the facts of the case of Legato Systems India (P) Ltd. are distinguishable because in that case the deduction u/s 10A was claimed on the profits of the whole year in respect of the undertaking which was established in an earlier year. The reason is that sub-section (5) uses the expression “same profits” and profits of the two periods are different. In coming to this conclusion, we are relying only on the statutory language contained in sections 10A and 80-HHE(5), without supplying any words for any omission in the language. Thus, the argument that the principle of statutory interpretation, namely, the causus ommisus cannot be invoked except in a case of clear necessity, although true, has not been invoked in coming to the aforesaid conclusion. The case of the assessee is also supported by Board circular No. 1/2005 dated 6.1.2005, clarifying the provision contained in section 10B, containing analogous law. It is mentioned that where an undertaking is set up in DTA and derives profits from export of articles, things or computer software, which is subsequently converted into an EOU shall be eligible for deduction u/s 1oB of the Income-tax Act, on getting approval as 100% export oriented undertaking. Thus, where a DTA is converted into an EOU, the exemption u/s 10B is admissible on getting approval as 100% EOU. In the case at hand also, the approval as an STPI unit has been obtained on 14.1.2003. By using the analogy, the assessee becomes entitled to get deduction u/s 10A on getting approval as aforesaid, i.e., in respect of the profits of the undertaking for the period 14-1-2003 to 31-3-2003.