TMI Blog2020 (8) TMI 666X X X X Extracts X X X X X X X X Extracts X X X X ..... upheld in the case of CIT v. HCL Technologies Ltd. [ 2018 (5) TMI 357 - SUPREME COURT ] - The aforesaid additional grounds by the assessee are therefore allowed. Disallowance u/s 14A - assessee submitted that disallowance u/s. 14A would go to increase profits of the business on which deduction u/s. 10AA will be allowed and prayed that AO should be directed to allow deduction u/s. 10AA on the profits of the business as enhanced by the disallowance u/s 14A - HELD THAT:- We find force in the submissions of the assessee on this issue because if part of expenses claimed by the assessee against business income is considered as expenses incurred for earning tax free income and is disallowed u/s 14A, the business income stands increased by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be reduced only to the extent they are attributable to delivery of article/ thing outside India and not for rendering of services outside India. In the present facts of the appellant, telecommunication expenses have been incurred by the appellant for providing services outside India. 2.2. That the Ld. DRP/ Ld. AO has erred in concluding that expenditure incurred on telecommunication is deemed to have been incurred for providing services outside India. The Ld. DRP/ Ld. AO has ignored the submission of the appellant that the said expenditure incurred cannot be attributed to providing services outside India since the appellant company works on an offshore model. 2.3. That the Ld. DRP/ Ld. AO ought to have appreciated that the intent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs under section 271(1)(c) of the Act mechanically and without recording any satisfaction for its initiation. The above grounds of appeal are mutually exclusive and without prejudice to each other. The Appellant craves leave to add, alter, amend or vary any of the above grounds either before or at the time of hearing as we may be advised. 3. The assessee filed additional grounds of appeal and prayed for admission of the same, which read as follows:- 2.4. Notwithstanding and without prejudice to the grounds 2 to 2.3, should the telecommunication expenses be reduced from the export turnover. the Ld. DRP/ Ld. AO ought to have reduced the above expenses from the Total Turnover also. The Ld. DRP/ Ld. AO ought to have appreciated th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This was not accepted by the TPO/DRP. 6. At the time of hearing, the ld. counsel for the assessee prayed for adjudication of additional ground Nos. 2.4 2.5 alone. Grounds 2.1 to 2.3 were not pressed. 7. As far as additional grounds 2.4 2.5 are concerned, taking into consideration the decision rendered by the Hon ble High Court of Karnataka in the case of CIT v. Tata Elxsi Ltd [2012] 349 ITR 98 (Karn), we are of the view that telecommunication charges should be excluded both from export turnover and total turnover. We are of the view that as of today, law declared by the Hon'ble High Court of Karnataka which is the jurisdictional High Court is binding on us. Moreover, the order of the Hon ble Karnataka High Court has been uph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r instant case then in such eventuality, the expenditure should be added back to the income of the undertaking and deduction u/s 10A should be allowed on such enhanced income. The CIT (A) in paragraph 173 of the order records the submission of the assessee in the following manner:- Deduction u/s 10A was allowed on profits earned by the appellant form of the business of its undertaking. Any adjustment made during the computation of income under the head profits and gains of business or profession increased the profit of the business of the undertaking which was then eligible for tax holiday benefits. The provisions of sec. 10A did not provide for any limitation the grant of tax holiday on any additions made. It was only the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the AO is increased in the business profit of the assessee. 12. We have considered the rival submissions and we find force in the submissions of the learned AR of the assessee on this issue because if part of expenses claimed by the assessee against business income is considered as expenses incurred for earning tax free income and is disallowed u/s 14A, the business income stands increased by that amount and only such increased business income should be considered for computing the amount of deduction u/s 10A. AO is directed accordingly. 10. Following the aforesaid decision, we direct the AO to allow deduction u/s. 10AA of the Act on the profits of the business as increased by addition u/s. 14A of the Act. 11. In the resu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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