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2022 (5) TMI 1030 - AT - Income TaxDisallowance made u/s 40(a)(ia) - non deduction of TDS - Business Development Commission paid to its US based Associated Enterprises (AE) - Claim of deduction u/s 10A / 10AA on such disallowance since the taxable profit increased - HELD THAT:- We find that the issue of disallowance u/s 40(a)(i) is covered in assessee’s favor by the decision of Hon’ble High Court of Madras in assessee’s appeal [2020 (9) TMI 1255 - MADRAS HIGH COURT] noted that the issue of TDS on BDC was considered by the TDS authority where the assessee was held to be assessee-in-default. However, Ld. CIT(A) decided the issue in assessee’s favor which had attained finality. The services were rendered outside India. Therefore, there was no question of TDS on these payments. On the basis of the same, it was held by Hon’ble Court that the Tribunal exceeded its jurisdiction while remanding the matter back to Ld. AO. Accordingly, the decision of Tribunal was reversed - it was held that there was no requirement on the part of the assessee to deduct TDS on such payments and accordingly, no disallowance u/s 40(a)(i) would be attracted. Since the issue of TDS itself has been decided in assessee’s favor on merits, the grounds thus raised in assessee’s appeal as well as in revenue’s appeal has become infructuous in view of the fact that the subject matter of reassessment proceedings was limited i.e., whether the disallowance made u/s 40(a)(i) would be eligible for deduction u/s 10A and 10AA or not? Since, the disallowance itself do not survive, the grounds raised in cross-appeal stand dismissed as infructuous. The assessee’s appeal stand dismissed as infructuous. Provision for Doubtful Debts - Inclusion/exclusion of revenue from export operation attributable to Sec.10A - AO proposed exclusion of the same from export turnover on the ground that time limit of Sec.10A (3) had expired - assessee submitted that provision was only 2.5% of export turnover as against limit of 10% put by RBI in Master Circular on export of goods & services - doctrine of parity between the export turnover in the numerator and total turnover in denominator for the purpose of Sec.10A / 10B - CIT(A) upheld the disallowance but directed Ld. AO to reduce the provisions from total turnover also - HELD THAT:- We find that the action of Ld. CIT(A) is in accordance with cited judicial decisions. The decision of Hon’ble Supreme Court in CIT V/s HCL Technologies Ltd. [2018 (5) TMI 357 - SUPREME COURT] as well as the decision of CIT V/s Maars Software International Ltd. [2019 (3) TMI 578 - MADRAS HIGH COURT] also supports the same view. Therefore, the impugned order, on this issue, do not require any interference on our part. The grounds thus raised by the revenue stand dismissed. Set-off of STPI and SEZ - two units in STPI, one of which earned profits whereas the other incurred losses - assessee set-off the losses of STPI unit as well as SEZ unit against taxable income which was held to be not acceptable - AO opined that current year’s losses have to be adjusted before arriving at total taxable income. Accordingly, total deduction u/s 10A and 10AA was reworked - HELD THAT:- We find that this issue is covered in assessee’s favour [2018 (2) TMI 2071 - ITAT CHENNAI] wherein held that ld. Commissioner of Income Tax (Appeals) was justified in directing the ld. Assessing Officer to allow the set off loss on the STP unit against income from other units. We do not find any reason to interfere with the order of the ld. Commissioner of Income Tax (Appeals) in this regard. Deduction of Expenses incurred by SEZ Units against other units - AO opined that the SEZ unit has to be considered separately and set-off would be available only if the business commences. Accordingly, the set-off was denied - CIT(A) allowed the set-off on the ground that though the business of the unit had not commenced, however, the business of the assessee, being ongoing, the expenditure incurred in the unit would be allowable u/s 37(1) - HELD THAT:- We concur with the reasoning of Ld. CIT(A). It is undisputed fact that the assessee’s business had already commenced. Only the unit was set-up which had not commenced operations. Therefore, the loss of one unit could be setoff against another units. Concurring with the adjudication, we dismiss the grounds raised by the revenue. Exclusion of unrealized debtors from total turnover for the purpose of computing deduction u/s 10A - HELD THAT:- As relying on case Maars Software International Ltd. [2019 (3) TMI 578 - MADRAS HIGH COURT] we direct Ld. AO to exclude this item from total turnover also. This ground stand allowed. Disallowance u/s 14A excluded from exempt profit - HELD THAT:- CIT(A), relying on the decision of Cognizant Technology Solutions [2013 (1) TMI 767 - ITAT CHENNAI] as well as the decision in Polaris Financial Technology Ltd. [2013 (9) TMI 296 - ITAT CHENNAI] directed Ld. AO to include the disallowance in Profit & Gain derived from export. - CIT(A) has followed the decisions of Tribunal while adjudicating the appeal, we do not find any reason to interfere in the same. The grounds raised by the revenue stands dismissed.
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