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2015 (1) TMI 1445 - AT - Income TaxDeduction u/s 10A - disallowance of business expenditure/marketing service charges - reduction of tele-communication charges from the export turnover - disallowance u/s 40(a)(i) - HELD THAT:- We find that the assessee has furnished the copies of the agreement between the assessee and its AE for rendering of marketing services and the invoices raised by the AE before the AO but the AO has not verified the genuineness or reasonableness of the same but has only made the disallowance on a proportionate basis of the increase in revenue to sales. This, in our view, is not sustainable in view of the decision of the Hon’ble Delhi High Court in the case of EKL Appliances [2012 (4) TMI 346 - DELHI HIGH COURT ] We also find that the assessee has made the same plea before the CIT(A) and has also filed the above details and documents but the CIT(A) also has neither called for a remand report nor has verified the genuineness or reasonableness of the payment made by the assessee to its AE but has only confirmed the addition made by the AO by further holding that the said payment is chargeable to tax in India and since the assessee has failed to deduct tax at source, the disallowance u/s 40(a)(i) is called for. This, in our view, is not justified without verification of facts. In view of the same, we deem it fit and proper to remand the issues to the file of the AO for de novo consideration of the issue as regards the genuineness and also the reasonableness of the expenditure claimed by the assessee. It is made clear that the AO cannot make disallowance on the ground that the assessee has not generated revenue in proportion to the expenditure. This ground of appeal is accordingly allowed for statistical purposes. Exclusion of tele-communication expenses from the export turnover for the purpose of deduction u/s 10A - We find that the alternate prayer of the assessee is covered in favour of the assessee by the decision of the jurisdictional High Court in the case of CIT vs. Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] which has been followed by the CIT(A) in directing the AO to exclude the same from the total turnover also for the purpose of computation of deduction us 10A. Therefore, we see no reason to interfere with the order of the CIT(A) on this issue. This ground of appeal is rejected. Deduction u/s 10A should be granted on ‘the profits and gains as are derived by an undertaking from the export of articles or things or computer software’ as assessed by the AO - We find that the AO is bound to first compute the income from export of articles or things or computer software, as the case may be, and thereafter allow the deduction u/s 10A in accordance with law. Therefore, the AO is directed to grant the deduction u/s 10A in accordance with law. Interest u/s 234B and 234C are consequential in nature and therefore the AO is directed to give consequential relief to the assessee, if any.
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