C.L. Sethi, Judicial Member. - This is direct first appeal, filed by the assessee, against the assessment order dated 27-7-2010 passed by the Assessing Officer under section 143(3) read with section 144C of the Income-tax Act, 1961 (the Act), after taking approval from the Dispute Resolution Penal (DRP) for the assessment year 2006-07.

2. Ground No. 1 is general in nature and it was agreed by the learned counsel for assessee that needs no adjudication inasmuch as all other grounds taken in the appeal shall take care of the various additions made by the Assessing Officer in the assessment.

3. Ground No. 2 raised by the assessee is as under:-

"2. That the Assessing Officer erred on facts and in law in not appreciating that in absence of any direction issued by the Dispute Resolution Panel (DRP), the following additions/disallowances, proposed in the draft order, could not be made in the order passed under section 144C read with section 143(3) of the Act:

(i)Disallowance of deduction under section 10A of the Act in respect of 3rd floor of (GE-GDC) STPI Unit;

(ii)Disallowance of set-off of profit of STPI Unit, of Rs. 1,38,883 against the loss of other units/income;

(iii)Disallowance of Misc. income as part of business income for the purpose of claiming deduction under section 10A of the Act;

(iv)Disallowance of Travelling Expenses amounting to Rs. 14.07 cr. (approx.);

(v)Depreciation on Computer Peripherals;

(vi)Disallowance of delayed payment towards EPF."

4. In this ground, the assessee has taken a general and preliminary objection that the Assessing Officer has made the various additions and disallowances mentioned in the ground without there being any direction or approval by the DRP under section 144C of the Act, and, as such, these additions could not be made in the assessment order passed under section 143(3) read with section 144C of the Act. However, the assessee has disputed all these additions or disallowances on their merit under ground Nos. 4 to 10.

5. The first item of disallowance raised in ground No. 2(i) read with ground Nos. 4 to 4.2 is on account of deduction under section 10A of the Act in respect of 3rd floor of (GE-GDC) STPI Unit.

5.1 In this connection, the assessee has submitted the facts and its arguments as enumerated just hereinafter.

5.2 The assessee had initially set up an undertaking at 2nd Floor, Block-III, Ganga Shopping Complex, Sector 29, Noida (hereinafter referred to as ‘First STP undertaking’) in the year 1995 vide STPI Approval No. 5(7)/94/17/2260 dated 29-11-1994.

In the year 1999, however, changes in equity holding structure of the assessee and GE took equity participation in Birlasoft Inc., the ultimate parent company of the assessee. As a result of GE picking up a stake in the ultimate parent company, aggressive business plans were prepared for growth as substantial business was expected from the overseas affiliates of GE.

For rendering software services to this new client base, a new independent and integrated unit was proposed to be set up. Consequently, the assessee applied for the registration of a new STP undertaking (hereinafter referred to as ‘GE-GDC undertaking’) in November, 2000. The approval to this new unit was granted by Software Technology Parks of India, an autonomous body under the Ministry of Information Technology, Government of India on 4-12-2000 vide approval No. Ref. No. PCMG/PSE/05/025-STPN/518.

On these facts, it was submitted by the assessee that the new GE-GDC unit was a separate undertaking for the purpose of deduction under section 10A of the Act.

5.3 The Assessing Officer, however, rejected the claim of the assessee that both the units are separate and held that GE-GDC unit is not altogether different or new unit but an extension of an existing STP unit as both the units are situated in the same building and doing the same business.

5.4 The assessee further submitted that the Assessing Officer did not appreciate the fact that old unit of STP was situated at 2nd floor and th