Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2021 (5) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (5) TMI 188 - AT - Income TaxForeign Dividend income - CIT(A) directing the Assessing Officer to assess the foreign dividend income received on net basis - HELD THAT:- As of now, the issue is squarely covered in assessee’s favor by the orders of Tribunal for AY 1995-96 as well as for AY 2000-01. In AY 2000-01, the bench following the decision of Hon’ble Bombay High Court in CIT V/s Ambalal Kilachand [1994 (4) TMI 67 - BOMBAY HIGH COURT] decided the issue in assessee’s favor. Respectfully following the binding judicial precedents, we hold that the directions of Ld. CIT(A) would not require any interference on our part, in any manner. Ground No.1 of revenue’s appeal stand dismissed. Assessee received foreign interest income and offered the same net of tax. The Ld. AO did not consider the assessee’s submissions. The Ld. CIT(A) directed Ld. AO apply the analogy of foreign dividend income. Aggrieved, the revenue is before us by way of Ground No.2. Since we have dismissed ground no.1, this ground would also stand dismissed since Ld. CIT(A) has followed the analogy of foreign dividend income only, which we have already confirmed. Disallowance of Software expenditure - CIT(A) opined that the software which was purchased for resale was akin to purchases of raw material and therefore the same was an allowable expenditure and the remaining expenditure was held to be a capital expenditure - HELD THAT:- Before us, it is undisputed position that software was purchased for-resale and it was akin to purchase of raw material for the business. This being the case, no fault could be found in the adjudication of Ld. CIT(A). Ground No. 3 of revenue’s appeal stands dismissed. Deduction u/s 10A and deduction u/s 80HHE against software exports - whether the old units which was earlier claiming deduction u/s 80HHE could claim deduction u/s 10A in this year? - HELD THAT:- We find that this issue is covered in assessee’s favor by the decision of Hon’ble Bombay High Court in group concern titled as CIT V/s Tata Consultancy Services [2019 (4) TMI 1439 - BOMBAY HIGH COURT] as relying on DAMCO SOLUTIONS (P.) LTD. [2010 (10) TMI 592 - DELHI HIGH COURT] Section 80HHE of the Act pertains to deduction in respect of profits from export of computer software etc. Sub-section (5) of Section 80HHE provides that where deduction under said section is claimed and allowed in respect of the profits of the business referred to in sub-section (1) for any assessment year, no deduction shall be allowed in relation to such profits under any other provision of the Act for the same or any other assessment year. What sub-section (5) of Section 80HHE thus prohibits is the claim deduction allowed under Section 80HHE under any other provision, be it in the same assessment year or in other assessment year. In the present case, it is not even the ground of the revenue that the deduction under section 10A of the act claimed by the assessee in the present year is in relation to the profit for which the assessee was granted deduction under section 80HHE. Sub- section 5 of Section 80HHE of the Act, therefore, in the present case would have no applicability. Similar is the ratio of decision of Hon’ble Delhi High Court in Pr.CIT V/s E-fund International India P. Ltd. [2015 (10) TMI 488 - DELHI HIGH COURT] wherein Hon’ble Court observed that making of claim u/s 80HHE in one year would not preclude an assessee from claiming the benefit u/s 10A in respect of the same unit in succeeding year. The purpose of sub-section (5) of Sec.80HHE was to avoid double benefit but that would not mean that if for a particular assessment year the assessee wants to claim a benefit only under Sec.10A of the act and not u/s 80HHE, then it would be denied to the assessee. We further find that the allegations of Ld.AO that there was extension of existing business or the new units were formed by splitting or reconstruction of existing business is bereft of any positive material on record. Therefore, we do not find any infirmity in the impugned order, on this issue. Resultantly, Ground No.4 of revenue’s appeal stand dismissed. Adjustment of uncollected / unrealized debtors from total turnover in denominator - HELD THAT:- Upon careful consideration of subsequent decision of Hon’ble Madras High Court in Maars Software [2019 (3) TMI 578 - MADRAS HIGH COURT] we find that Hon’ble Court has distinguished the decision in Galaxy Granites [2012 (9) TMI 68 - MADRAS HIGH COURT] by observing that this decision was rendered in the context of Sec.80HHC and the same would not advance the case of the revenue as far as the scheme of Section 10A or 10B was concerned. The Hon’ble Court chose to follow the same principle of interpretation as followed by Hon’ble Apex Court in HCL Technologies [2018 (5) TMI 357 - SUPREME COURT] and held that the export turnover in numerator as well as denominator could not assume two different characteristics for two parts of the same formula. Therefore, if export turnover in numerator has excluded the unrealized foreign exchange, than the same figure has to be adopted in denominator. The other decisions has cited by Ld. AR has also taken the same view. Therefore, going by the ratio of these decisions, we direct Ld. AO to reduce the unrealized debtors from total turnover in denominator while computing deduction u/s 10A / 80HHE. Correct formula to compute deduction u/s 80HHE - revenue is aggrieved by the action of Ld. CIT(A) in directing Ld. AO to consider entire profits of software business as a whole and apply the ratio of export turnover to total turnover including the total turnover of Sec.10A units - HELD THAT:- As relying on M/S SASKEN COMMUNICATION TECHNOLOGIES LTD [2014 (1) TMI 1538 - KARNATAKA HIGH COURT] AO is directed to deduct the profits of Sec.10A undertakings from the profit of the software business as a whole and applying the ratio of the export turnover (excluding the export turnover of 10A units) as divided by total turnover (excluding the total turnover of 10A units). AO is directed to re-compute deductions u/s 10A as well as u/s 80HHE in terms of our above order including our decision on overseas taxes, software etc. Disallowance of interest expenditure - HELD THAT:- We do not concur with the approach of Ld. CIT(A) in invoking the provisions of Sec.14A of the Act. Consequently, the interest expenditure of ₹ 246.88 Crores would be fully deductible u/s 36(1)(iii) of the Act. The various case laws as enumerated in para 10.3 & relied upon by Ld. AR supports our conclusion. Accordingly, Ld. AO is directed to rework allowable deduction u/s 80M. Ground No.4 of assessee’s appeal stand allowed to that extent.
|