TMI Blog2013 (9) TMI 296X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. (supra). Therefore, we direct the Assessing Officer to exclude the expenditure incurred in foreign currency which was excluded from export turnover from the total turnover for the purpose of computing relief under section 10A of the Act - Decided in favour of assessee. Disallowance u/s 14A - Whether DRP and the Assessing Officer ought to have granted deduction under section 10A on the enhanced income on account of the aforesaid disallowance - Held that:- Though the counsel for the assessee submits that during this year there were no borrowings and all the investments were made out of own funds, therefore, the provisions of section 14A cannot be invoked as it becomes academic, in view of the alternative ground of the assessee that deduction under section 10A has to be granted on the enhanced income on account of disallowance made under section 14A. As we incline to accept the alternative ground of appeal that the deduction under section 10A has to be granted on enhanced income on account of disallowance under section 14A - Disallowance shall go to enhance the profit eligible for deduction under section 10A. Accordingly, we direct the Assessing Officer to enhance the disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turnover as well for the purpose of computing deduction u/s.10A in light of the decision of the Hon ble Special Bench of the Chennai Tribunal in the case of ITO Vs. Sak Soft Ltd., 121 TTJ 865 = (2010-TII-44-ITAT-BANG-TP). 3. Reduction of export proceeds from export turnover as the same was not brought into India within the prescribed time limit. 3.1 The DRP and Assessing Officer having reduced the export proceeds as the same was not brought into India within the prescribed time limit export turnover has erred in not excluding the same from total turnover for the purpose of computing deduction under section 10A. 4. Disallowance of interest under section 14A 4.1 The DRP and Assessing Officer without appreciating the law, facts and circumstances applicable to the case of the appellant, has erred in disallowing expenditure amounting to rs 3,088,512 u/s.14A has erred in disallowing the expenditure under rule 8 of the Act without recording a finding that the expenditure relates to earning exempt income. 4.2 The DRP and Assessing Officer has failed to appreciate that provisions of section 14A have no application in the facts of the appellant s case as no expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se relied on by the counsel for the assessee. The Assessing Officer has given a finding that the assessee has incurred these expenses in the process of exports of software. This expenditure incurred was in providing technical services outside India. Therefore, this expenditure was excluded from the export turnover by the Assessing Officer which was affirmed by the DRP. The assessee could not able to substantiate its claim that such expenditure was not incurred in rendering any technical services. In the circumstances, the contention of the assessee that this expenditure should not be excluded from the export turnover is rejected. However, we agree with the assessee that this expenditure having excluded from the export turnover, it should also be excluded from the total turnover, in view of the decision of the Special Bench Tribunal in the case of Sak Soft Ltd. (supra). Therefore, we direct the Assessing Officer to exclude the expenditure incurred in foreign currency which was excluded from export turnover from the total turnover for the purpose of computing relief under section 10A of the Act. Therefore, the alternative ground raised by the assessee is allowed. 8. The next issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded from the total turnover also affirming the decision of the Tribunal. 12. The Mumbai Bench of the Tribunal in the case of Aftek Infosys Ltd. (supra) even though held that the unrealized export proceeds not brought into India within six months should be excluded from export turnover and it should not be excluded from total turnover. We are inclined to follow the decision of the Hon ble Kerala High Court cited above and hold that foreign exchange which was not brought into India within the stipulated time should be excluded from total turnover also as having excluded the same from export turnover. Thus, the grounds raised by the assessee are allowed on this issue. 13. The last issue in the appeal of the assessee for the assessment year 2008-09 is that the DRP and the Assessing Officer has erred in disallowing expenditure under section 14A of the Act. In the alternative, the ground raised by the assessee is that having made the disallowance under section 14A, the DRP and the Assessing Officer ought to have granted deduction under section 10A on the enhanced income on account of the aforesaid disallowance. 14. The counsel for the assessee submits that during the assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 10A has to be granted on the enhanced income on account of disallowance made under section 14A. As we incline to accept the alternative ground of appeal that the deduction under section 10A has to be granted on enhanced income on account of disallowance under section 14A, in view of the decision of the co-ordinate Bench of this Tribunal in the case of M/s. Cognizant Technology Solutions India Pvt. Ltd.(supra), the question of whether the assessee has incurred any expenditure or not for earning the exempt income becomes academic. The co-ordinate Bench of this Tribunal in the case of M/s. Cognizant Technology Solutions India Pvt. Ltd. (supra) had considered similar issue and held as under:- "6.8. The next issue raised by the assessee is regarding the disallowance made under section 14A of the Act. The Assessing Officer has invoked Rule 8D and we confirm the disallowance made by him. This issue is decided against the assessee. 6.9 But, we accept the alternate contention of the assessee that the disallowance shall go to enhance the profit eligible for deduction under section 10A. Accordingly, we direct the Assessing Officer to enhance the disallowance made unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame and without appreciating the facts that the assessee has not incurred any expenditure towards earning of exempt income. 4.2 The Assessing Officer has erred in disallowing expenditure on estimate basis as section 14A requires finding of incurring of expenditure. Here it is found that earning exempted income no expenditure has been incurred, hence disallowance under section 14A cannot withstand. 5. Levy of interest u/s.234B of the Act. 5.1 Consequentially the Assessing Officer has erred in levying interest of Rs. 2,69,16,890/- under section 234B of the Act." 19. As far as the appeal for the assessment year 2007-08 is concerned, the counsel for the assessee submits that the impugned order dated 26.09.2012 in appeal has been withdrawn by the Deputy Commissioner of Income Tax, Company Circle-V(2), Chennai by order dated 27.05.2013 passed under section 154 of the Act. The counsel also endorsed that the appeal was filed against the impugned order dated 26.09.2012. The counsel submits that by virtue of order passed by the Deputy Commissioner of Income Tax, Company Circle-V(2), Chennai under section 154 dated 27.05.2013 withdrawing the impugned order dated 26.09.2012 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
