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2021 (3) TMI 418 - AT - Income TaxComputing deduction u/s10A/10AA - Treatment to amount of expenses incurred by the assessee in foreign exchange - HELD THAT:- The CBDT in its circular No.04/2018 has provided that while computing deduction u/s.10A, the amount of freight, telecommunication charges and insurance expenses should be excluded from both the `Export turnover” and `Total turnover’. The Hon’ble Punjab & Haryana High Court in CIT Vs. Mercer Consulting (India) Pvt. Ltd. [2016 (8) TMI 1163 - PUNJAB AND HARYANA HIGH COURT] has also held that telecommunication charges should be excluded from both the `Export turnover’ and also the `Total turnover’ in the formula while computing deduction u/ss.10A/10AA. In view of the foregoing, it is evident that the amount of expenses incurred by the assessee in foreign exchange should be reduced from both the `Export turnover’ as well as `Total turnover’ while computing deduction u/ss.10A/10AA. As the AO reduced such amounts only from the `Export turnover’ and not the `total turnover’, we direct to exclude these amounts from `Total turnover’ as well while computing the deductions. MAT Computation - disallowance of `Provision for performance bonus’ and `Provision for expenses’ while computing book profits u/s.115JB of the Act on the ground that such expenses are ‘unascertained liabilities’ - HELD THAT:- There is an apparent contradiction in the recording made by the AO. We have gone through the relevant parts of the assessee’s tax audit report for the year under consideration, as per which the assessee made provision for bonus. Except for a sum of ₹ 6.36 lakh, the assessee paid the entire amount of bonus in the succeeding year. Thus, it is overt that the provision for bonus is an ascertained liability which was largely discharged in the immediately succeeding year. The next is the item of `Provision for expenses’. Details of such provision have been placed at page 64 of the paper book. Such provision includes salary, employee incentive, staff cost, car hire charges, staff training expenses, staff welfare expenses, repairs, maintenance, electricity, travelling, bank charges and insurance etc. On the later pages, the assessee has placed copious details of such expenses. All these expenses are in the nature of regular business expenses incurred by the assessee during the year for which bills were not received by the year end, leading to creation of a provision. Since such provision is in respect of ‘ascertained liability, the same cannot be added back while computing book profit u/s.115JB of the Act. We, therefore, order to treat both the amounts in question as provisions for ascertained liability and not to make any addition to the book profit in this regard. This ground is allowed. Depreciation on computers/computer peripherals - AO allowed depreciation on computers/computer peripherals @15% as against the assessee’s claim of 60% - HELD THAT:- , in respect of computer peripherals, the Special Bench of the Tribunal in DCIT Vs. Data Craft India Ltd.[2010 (7) TMI 642 - ITAT, MUMBAI] has held that routers and switches should also be classified under the term “computers” subject to higher rate of depreciation. The Hon’ble Delhi High Court in CIT Vs. BSES Yamuna Towers Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT] has also made the assessee entitled to higher rate of depreciation in respect of routers and switches. In view of the foregoing discussion, it is graphically clear that the assessee is rightly entitled to the higher rate of depreciation of 60% on computers/computer peripherals etc. The impugned order is overturned on this issue and the necessary relief is allowed.
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