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2015 (9) TMI 897 - AT - Income TaxComputation of deduction under Section 10A/ 10B - CIT(A) reducing from the profits of the business eligible for deduction under Section 10A/ 10B an amount on account of recoveries of under- utilised dedicated human resources - Held that:- Tribunal while adjudicating the issue in the AY.2002-03 decided the matter as undisputedly, the expenses incurred by the assessee on account of export of computer software are much higher than the amount of ₹ 81.91 crores received by the assessee from these two parties. Therefore,the amount received by the assessee is nothing but reimbursement of expenses.By reimburse -ment of expenses, the expenses of the assessee had been reduced and the profit has been increased. Therefore, the assessee is entitled for deduction u/s 10A because these receipts are directly linked with the business of the assessee. Various decisions relied upon by the assessee before the CIT(A), which have been discussed by the CIT(A) in his order and also reproduced somewhere above in this order, clearly indicates that the reimbursement of expenses are nothing but directly linked with the business of the assessee. - Decided in favour of the assessee. Reducing from the profits of the business eligible for deduction under Section 10A/10B an amount in respect of recovery of Global Recruitment Cell(GRC)cost - Held that:- Identical issue is decided in favour of the assessee by the order of the Tribunal for the AY.2002- 03 - Decided in favour of the assessee. Applicability of provisions of section 10A(7) - Held that:- It was agreed by the Representatives of both the sides that the tribunal had decided the issue in favour of the assessee,while adjudicating the appeal filed by the assessee for the AY.02-03 as held that the CIT(A) has also found that the assessee’s main business is export and depreciation etc. has been claimed very less and it is considered that the profit can be more than in comparing with the average profits of other industries.In view of the above facts and circumstances of the case, we hold that the provisions of sec.10A(7) are not applicable on the facts of the present case. Accordingly, this ground of the assessee is also allowed. Not considering the claim that the interest income derived from the industrial undertaking - not allowing deduction u/s 10A/10B of the Act in respect of the said interest income - Held that:- his issue is also covered in favour of the assessee by the decision of the Tribunal in assessee’s own case for the AYrs. 99-2000 and 2000-01 wherein it has been held to have a direct nexus with the business and development of export of software. Respectfully following the decisions of the coordinate bench, these grounds of the assessee are allowed. Foreign exchange loss on sales/debtors, balance in EFFC account and its treatment while computing deduction u/s. 10A - Held that:- During the assessment proceedings the AO found that the assessee had computed business profit for the year under appeal after debiting exchange loss of about ₹ 6.51 crores in the P&L account and after reducing the export turnover amount by ₹ 6,51,30,323/-. In the earlier year the AO had not accepted the similar position when there was gain because of exchange rate.The assessee, before the FAA stated that the issue for the earlier years was pending for adjudication, that the AO should be directed to modify the order after the issue was adjudicated by higher authorities. The FAA was of the opinion that the assessee should not have any grievance,that the AO had accepted the figure shown in the return by the assessee itself, that it was open to the AO to take a consistent view on the issue as and when the issue was decide by higher appellate authorities. Therefore,we allow the last ground of appeal for statistical purposes. Disallowance of deduction under section 10A/10B on the gross receipts netted off in the respective accounts - Held that:- There is no basis for Assessing Officer’s exclusion of the above receipts from computation of business profit as the assessee has not claimed the expenditure in its P & L Account and these amounts are netted off in the respective expenditure accounts and only the net expenditure related to the assessee’s business were claimed in the P & L Account. In view of this we are of the opinion that the order of the CIT(A), who analysed the factual matrix of the assessee’s claims and arrived at the correct conclusion, does not require any modification. Similar issue in earlier years was also held in favour of the assessee, as submitted, and the department has not challenged the findings of the ITAT even though that order was taken up in appeal on another issue, which also was dismissed - Decided in favour of assessee. Deduction on delayed payment of employer and employee's contribution to P. F - Held that:- FAA found that the assessee had made payments within the grace period.In our opinion,there is no legal infirmity in the order of the FAA.Therefore, confirming his order,we decide ground no.2 against the AO. - Decided in favour of assessee. Disallowance u/s 14A - Held that:- We find that the assessee earned dividend income of ₹ 13,870/-,that the FAA made a disallowance of ₹ 54.49 lakhs,that the AY.under appeal is prior to AY.2008-09.In pursuance of the judgment of Hon’ble Bombay High Court,we hold that provisions of Rule 8D of the Income tax Rules,1962 are applicable from AY.2008-09 only.Therefore,in our opinion the calculation made by the AO adopting the formula suggested by Rule 8D cannot be endorsed.Respectfully,following the judgment of the Hon’ble Delhi High Court delivered in the case of Joint Investment Pvt. Ltd. (2015 (3) TMI 155 - DELHI HIGH COURT ) we hold that the disallowance should not exceed exempt income.- Decided in favour of assessee.
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