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2015 (3) TMI 933 - AT - Income TaxTreatment of income from lease rent - Profits & Gains of Business or Profession OR Income from House Property - assessee reiterated its alternative claim that the income should be taxed under the head ‘Other Sources’- Held that:- Ld. CIT(A) has very categorically and correctly stated that provisions of Sec. 56(2)(iii) are not applicable on the facts of the case. In the light of the decision of the Hon’ble Supreme Court in the case of Shambu Investment wherein held that where prime object of the assessee under the agreement was to let out the portion of the said property to various occupants by giving them additional right of using the furniture and fixtures and other common facilities for which rent was being paid month by month. Income derived from the said property is an income from property and should be assessed as such - Decided against assessee. Computation of deduction u/s. 10A - CIT(A) reduced the allocation to 25% as pertaining to incurred for the purpose of providing technical services outside India and accordingly directed the AO to recomputed the deduction u/s. 10A of the Act - Held that:- It can be seen that the expenditures considered in the immediately preceding assessment years are identical to the expenditure considered during the year under consideration. A similar issue was considered in the case of Patni Telecom (P) Ltd. Vs ITO (2008 (1) TMI 452 - ITAT HYDERABAD-A ) wherein the issue was that the assessee had incurred certain expenditure on account of travelling allowance for the purpose of development of Software at clients cited outside India and had also incurred certain expenditure on the delivery of software booked under Internet Service Provider (ISP), since it got leased ISP line exclusively. It was explained by the Tribunal that if the quoted price is inclusive of such expenses, then consolidated value of the goods is only mentioned in the invoice. In a case where only value of goods is quoted, expense is borne by the supplier. The logic and reason behind this have been explained by the CBDT vide its Circular No. 564 dt. 5.7.1990 that the delivery of the goods should be free on Board. In respect of expenses incurred in foreign exchange in providing technical services outside India, the Tribunal observed that on reading of clause (iv) of Explanation -2 to Sec. 10A, it is evident that all expenses need not be reduced from consideration received in convertible foreign exchange for the purpose of calculation of ‘export turnover’ u/s. 10A of the Act. Only those expenses which are incurred in foreign exchange in providing technical services outside India are required to be reduced. Considering the facts of the case in hand, in the light of the decision of the Tribunal discussed hereinabove, we set aside the findings of the Ld. CIT(A) and direct the AO to allow the claim of deduction u/s. 10A as computed by the assessee. - Decided in favour of assessee. Deduction u/s. 10A on the profits in respect of Units I & II - loss of Unit-III be set off against the income computed under the head “Profits & Gains of Business or Profession” - Held that:- We find force in the contention of the Ld. Counsel wherein the Hon’ble High Court in case of Hindustan Unilever Ltd. Vs DCIT & Another [2010 (4) TMI 206 - BOMBAY HIGH COURT] has held that all the four units of the assessee were eligible u/s. 10B of the Act. Three units had returned a profit during the course of the assessment year, while one unit had returned a loss. Hon’ble High Court held that the assessee was entitled to deduction in respect of the profits of the three eligible units while the loss sustained by the fourth units could be set off against the normal business income. Facts being identical to the facts of the case in hand, respectfully following the decision of the Honb’ble jurisdictional High Court, we set aside the findings of the Ld. CIT(A) and direct the AO not to set off eligible unit with the profits of the ineligible unit - Decided in favour of assessee. Disallowance made u/s. 14A of the Act r.w. Rule 8D. - Held that:- A perusal of the assessment record shows that the AO has computed the disallowance u/s. 14A r.w. Rule 8D of the Act. It is a settled proposition of law that application of Rule 8D is w.e.f 2008-09 as held by the Hon’ble High Court of Bombay in the case of Godrej & Boyce Manufacturing Co. Ltd. Vs DCIT [ [2010 (8) TMI 77 - BOMBAY HIGH COURT] ]. Therefore, the action of the AO is not as per the settled position of the law. In our considered opinion, disallowance of ₹ 1,00,000/- would meet the ends of justice. We, accordingly direct the AO to restrict the disallowance u/s. 14A of the Act at ₹ 1,00,000/- - Decided Partly in favour of assessee.
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