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2015 (8) TMI 1038 - ITAT BANGALORE

2015 (8) TMI 1038 - ITAT BANGALORE - TMI - Eligibility for claim of deduction u/s 10A on netting off exports receipts against import payments - Held that:- The export proceeds of ₹ 6,00,000 US $ should have been realized by the assessee before 29.3.2011 within one year from the date of export. The same was realized by the assessee on 18.3.2011, since the assessee imported from Evergreen Technology Ltd. goods to the value of ₹ 9,94,500 US $. In other words, within the period of one ye .....

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t order by the AO. In such circumstances, it has been held in several decisions that the permission applied is deemed to have been allowed. It is in accordance with this Circular that the authorised dealer has granted the requisite permission to the assessee. CIT(A) is right upholding the assessees claim of net off of exports and import payments in the absence of permission from the Competent Authority before the due date (one year from the date of export) to bring in the export receipts. Also s .....

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pplicable. Even otherwise, under the provisions of Rule 46A(4), the Commissioner had power to call for evidence necessary for adjudication of the appeal. Accordingly, no fault can be found with the order of CIT(Appeals) on the ground that additional evidence ought not to have been admitted.- Decided against revenue.

Applicability of provisions of section 40(a)(ia) in respect of default in short deduction of tax - CIT(A) deleted disallowance - Held that:- As far as disallowance u/s. 40 .....

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the Act and no disallowance can be made by invoking the provisions of section 40(a)(ia) of the Act. The law has however been prospectively amended w.e.f. AY 2015-16. In view of the above legal position, we are of the view that no fault can be found with the order of the CIT(A) on this issue.- Decided against revenue.

Revenue v/s capital expenditure - expenditure on purchase of UPS - Held that:- UPS cannot be claimed back by the assessee from the rural colleges in which it is installed .....

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treated the expenditure as revenue expenditure.- Decided against revenue. - ITA No. 1520/Bang/2013 - Dated:- 23-6-2015 - N. V. Vasudevan, JM And Abraham P. George, AM,JJ. For the Appellant : Shri T S N Murthy, CIT-III(DR) For the Respondent : Shri H Shambhu Sharma, CA ORDER Per N. V. Vasudevan, Judicial Member This appeal by the Revenue is against the order dated 30.8.2013 of the CIT(Appeals), Hubli relating to assessment year 2010-11. 2. Ground Nos. 1 to 3 read as follows:- "1. In the cir .....

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to bring in the export proceeds within the stipulated time. 3. In the circumstances of the case and in law, whether the CIT(A) was right in admitting the additional evidences and allowing relief to the assessee in view of the provisions of Rule 46A." 3. The assessee is a company engaged in software development. It was having a unit registered under Software Technology Park of India Scheme (STPI), income from which was eligible for deduction u/s. 10A of the Income-tax Act, 1961 ["the A .....

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rcular, the assessee sought extension upto 31-03-2011 as per letter dated 21-09-2010 filed before the Authorised Dealer of Reserve Bank of India, i.e., Union Bank of India. Incidentally Reserve Bank of India also unilaterally extended for realisation of export proceeds upto 31-03-2011 as per its circular No. RBI/2009-10/513 A.P.(DIR Series) Circular No. 57 dated June, 29, 2010. 5. Subsequently, the assessee imported software on 18-03-2011 from the same customer i.e., Evergo Technology Limited, H .....

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ay traffic of foreign exchange; or Second Option:- Setting off export proceeds of US $ 6,00,000 from Evergo Technology; against the import cost of US$ 9,94,500 to Evergo Technology, thereby avoiding unnecessary effecting two-way traffic of foreign exchange; AND resulting in amount payable US$ 3,94,500 to Evergo Technology. 7. The assessee, based on advice of experts and also keeping in view judicial decisions (which decisions specifically permitted setoff without adversely affecting tax benefits .....

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0 from Evergo Technology, Hongkong. Accordingly, the assessee applied to Authorised Dealer, Union Bank of India, requesting for Netting off the bills and also asking for extension of time for getting balance amount upto 31-03-2012 as per the letter dated 26- 03-2011. The details of transactions with Evergo Technology, Hongkong over a period 3 financial years were as under: Date of Invoice or Bill Nature of transactions Amount in US $ Net effect in US $ 29.03.2010 Export 6,00,000 Receivable 6,00, .....

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India through its letter dated 13.8.2013 acknowledged set-off of imports & exports. 9. The AO, however, denied the claim of assessee for deduction u/s. 10A for the following reasons:- "The assessee's plea cannot be accepted. In view of the assessee's submission it is evident that the assessee has not received or brought in the export proceeds as provided u/s 10A of the Act. The assessee has not been permitted by the Authorised Dealer to receive the export proceeds beyond six mo .....

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n 10A(3) specifically provides that "This section applies to the undertaking, if the sale proceeds of articles or things or computer software exported out of India are received in, or brought into, India by the assessee in convertible foreign exchange, within a period of six months from the end of the previous year or, within such further period as the competent authority may allow in this behalf". Hence the assessee's claim of deduction u/s 10A is disallowed." 10. Before the .....

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by the assessee, who imported gold bars from foreign clients, exported gold ornaments after conversion, claimed deduction on the amount of exports, though he had received only the net amount payable by the foreign party. The Hon'ble Allahabad High Court relying on the decision of the Hon'ble Supreme Court in J.B. Boda & Co. Pvt. Ltd., 223 ITR 271 (SC), held that exemption u/s. 10A cannot be denied to the assessee. In the case of J.B. Boda & Co. Pvt. Ltd. (supra), the Hon'ble .....

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as approached the RBI or Authorised Bank to permit to receive the sale proceeds beyond six months and the RBI has given general permission through it circular dated 29.06.2010 where it is mentioned that "Attention of Authorised Dealer Category-1 (AD Category-1) banks is invited to increasing the period of realization and repatriation to India of the amount representing the full export value of goods or software exported, from six months to twelve months from the date of export, subject to r .....

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ry and the assessee can adjusted the receivable against the payments. Hence the contention of the AO that export receipts were not received within six months of the stipulated period is not justifiable as the assessee has approached the RBI to receive the receipts beyond six months of the stipulated period and the RBI has given general permission to receive the export proceeds beyond the stipulated time. Hence the disallowance made by the AO is dismissed and the assessee's ground of appeal i .....

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that the export proceeds of ₹ 6,00,000 US $ should have been realized by the assessee before 29.3.2011 within one year from the date of export. The same was realized by the assessee on 18.3.2011, since the assessee imported from Evergreen Technology Ltd. goods to the value of ₹ 9,94,500 US $. In other words, within the period of one year from the date of export, the assessee is deemed to have realized the export proceeds and to have made payment to the foreign party equivalent to 3,9 .....

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ard, the decision of the ITAT Bangalore in the case of Wipro Ltd. v. DCIT in ITA Nos. 426 & 427/Bang/2006 for A.Y. 2001-02 & 2002-03, has been rightly relied upon by the ld. counsel for the assessee before the CIT(A). Besides the above, on 13.8.2013, Union Bank of India allowed the claim of assessee for net off. The said letter is placed at page 59 of assessee's paperbook. In fact, the RBI Exchange Control Department has in its Circular No.91 dated 1.4.2003 laid down the following co .....

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netting may be done as on date of balance sheet of the unit in SEZ. (ii) The details of export of goods is documented in GR(O) forms/DTR as the case may be while details of import of goods / services is recorded through Al/A2 form as the case may be. The relative GR / SDF forms will be treated as complete by the designated authorised dealer only after the entire proceeds are adjusted / received. (iii) Both the transactions of sale and purchase in 'R' Returns under FET-ERS are reported se .....

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4. As far as ground No.2 is concerned, the decision of the Allahabad High Court in the case of Henna Jebart (supra) and the decision of the Hon'ble Supreme Court in the case of J.B. Boda & Co. Pvt. Ltd. (supra) referred to in the earlier part of this order, clearly support the conclusions arrived at by the CIT(Appeals). 15. With regard to ground No.3, the order of assessment was passed on 11.3.2013, whereas the permission of Union Bank of India, the authorised dealer, allowing net off is .....

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T(Appeals) and dismiss grounds No.1 to 3 raised by the Revenue. 17. Ground Nos. 4 & 5 read as follows:- "4. In the circumstances of the case and in law whether the CIT(A) is right in holding that the provisions of section 40(a)(ia) cannot he invoked in respect of default in short deduction of tax. 5. In the circumstances of the case and in law, whether the CIT(A) is right in holding that purchase of UPS Batteries are in the nature of revenue expenses." 18. The facts necessary for a .....

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the agreement with the State of Karnataka. KCPL rendered services and raised bills for payment for the services rendered. Assessee paid a sum of ₹ 5,85,25,180 to KCPL. Assessee deducted the tax at source on the said payment to KCPL @ 2% as required u/s. 194C of the Act. According to the AO, the services rendered by KCPL was in the nature of fees for professional or technical services, falling within the ambit of section 194J of the Act, and therefore the assessee ought to have deducted ta .....

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#8377; 58,52,518/-. But the assessee has only deducted tax of ₹ 11,70,504/-. Hence the tax of ₹ 46,82,014/-, which is deductible at source under Chapter XVII-B, and such tax has not been deducted, as provided u/s 40(a)(ia) of the Act. In view of the specific provisions of section 40(a)(ia), the assessee has failed to deduct tax u/s 194J to the extent ₹ 46,82,014/- against the payments made to M/s. Ken Computek , which are in the nature of fees for professional and technical ser .....

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he assessee. According to the assessee, since the UPS had to be provided on a permanent basis at the training centres, it had purchased UPS and shown the cost in the debit side of the P&L account and the amounts paid for the services rendered by the assessee were shown in the credit side. According to the assessee, it was a case of purchase and sale of UPS and therefore the expenditure was purely revenue expenditure as far as the assessee is concerned. The assessee also made it clear that UP .....

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was of the view that for short deduction of tax at source, there cannot be any disallowance u/s. 40(a)(ia). In coming to the aforesaid conclusion, the CIT(Appeals) relied on the decision of the Hon'ble Calcutta High Court in the case of CIT v. S.K. Tekriwal, ITA No.183/2012 , wherein it was held that disallowance u/s. 40(a)(ia) cannot be made when there is a short deduction of tax at source and can be made only when there is non-deduction of tax at source. 21. With regard to the cost of UPS .....

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installed for power back up at rural PU colleges for CET rural training programe 2009-10 and shall be handed over to the respective colleges after the completion of the training programme. Kindly inform the nodal executives regarding the same. The assessee had claimed the batteries that were purchased are to be handed over with UPS to the respective rural PU colleges and batteries are no longer with the assessee and the same may be considered as a revenue expenditure. As the same information not .....

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rounds 4 & 5 before the Tribunal. 23. We have heard the submissions of the ld. DR, who relied on the order of the AO. 24. We have considered his submissions, As far as disallowance u/s. 40(a)(ia) of the Act is concerned, we are of the view that disallowance u/s 40(a)(ia) shall not be made merely because TDS has been deducted u/s 194C instead of Section 194J. In ADIT, International Taxation vs. Express Drilling Systems LLC (ITAT Delhi), ITA no.751/Del/2013, dated 09th January, 2015 , it was h .....

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