TMI Blog2022 (5) TMI 1030X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 / ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DRAS 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. - ITA No.2003/Chny/2016 And 2004/Chny/2016 And 2005/Chny/2016 And 259/Chny/2018 And 2105/Chny/2016 And 2020/Chny/2016 And 2019/Chny/2016 And 242/Chny/2018 - - - Dated:- 18-5-2022 - Hon ble Shri Mahavir Singh, Vice President And Hon ble Shri Manoj Kumar Aggarwal, Am For the Appellant : Shri Ajay Rotti (CA)-Ld. AR For the Respondent : Shri Abani Kanta Nayak (CIT)-Ld. DR ORDER PER BENCH: 1. Aforesaid cross-appeals for Assessment Years (AY) 2008-09 to 2011-12 arises out of separate orders of learned first appellate authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08-09 arise out of the order of learned Commissioner of Income Tax (Appeals)-15, Chennai [CIT(A)] dated 01.03.2016 in the matter of assessment framed by learned AO u/s 143(3) r.w.s. 147 on 28.02.2014. Though the assessee has raised multiple grounds of appeal, however, the only ground urged before us is ground no.2 which read as under: - 2. That the Learned CIT(A) has erred in upholding the disallowance of Business Development Commission and arriving at the conclusion that payments made by the Appellant to US Parent Company towards Business development Commission (marketing services) result in income chargeable to tax in India. The grounds raised by the revenue read as under: - 1. The order of the learned CIT(A) is contrary to law and facts of the case. 2 The CIT(A) erred in directing the AO to include the disallowance made u/s 40(a) (ia) in the profits for while computing the deduction u/s 10A 10AA. 2.1 The Ld. CIT(A) ought to have noted that technical disallowance made u/s 40(a)(ia) while computing the taxable income of the assessee does not alter the profit of the eligible unit. 2.2. The Ld. CIT(A) erred in directing the AO to exclude the FE not brought t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT(A), vide order dated 03.02.2014 for AYs 2011-12 2012-13, held that BDC could not be held as Fees for Technical Services or consultancy services. Further, 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. In other words, 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. 6. Provision for D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aised by the revenue stand dismissed. 7. Set-off of STPI and SEZ Units 7.1 The assessee had two units in STPI, one of which earned profits whereas the other incurred losses. These units were eligible for deduction u/s 10A.The assessee had three units in SEZ, two of which earned profits during the year whereas the third one incurred loss. These units were eligible for deduction u/s 10AA. The assessee set-off the losses of STPI unit as well as SEZ unit against taxable income which was held to be not acceptable. The Ld. 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 to Rs.7905.64 Lacs. However, Ld. CIT(A) reversed the stand of Ld. AO against which the revenue is in further appeal before us. 7.2 We find that this issue is covered in assessee s favor vide Tribunal order ITA No.2002/Chny/2016 for AY 2008-09 order dated 27.02.2018 as under: 13. In our opinion, the issue raised by the Revenue stands settled in favour of the assessee by the judgment of Hon ble Apex Court in the case of CIT vs. Yokogowa India Ltd (2017) 145 DTR 0001. Considering the above judgment, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e u/s 40(a)(i) would be attracted in the hands of the assessee. The assessee s grounds of appeal stand allowed whereas the revenue s ground stand dismissed as infructuous. The remaining grounds in revenue s appeal are adjudicated as under: - 10. Deduction of Expenses incurred by SEZ Units against other units 10.1 The assessee incurred losses in SEZ-DLF2 unit and set-off the same from taxable income. The Ld. 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 of Rs.101.27 Lacs was denied to the assessee. The Ld. 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). Aggrieved, the revenue is in further appeal before us. 10.2 After going through the impugned order on this issue, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inition of the term 'total turnover', Explanation 2(iv) defines 'export turnover' in the following terms: (iv) export turnover means the consideration in respect of export by the undertaking of articles or things or computer software received in, or brought into, India by the assessee in convertible foreign exchange in accordance with subsection (3), but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India; 21. The issue of whether the items reduced from 'export turnover', such as freight, telecommunication charges or insurance as provided for in the definition would also stand reduced from 'total turnover' was the subject matter of consideration by the Supreme Court in the case of CIT V. HCL Technologies [2018] (404 ITR 719) and the issue was held in favour of the assessee. The conclusion of the Bench was to the effect that items excluded/reduced from the numerator would stand excluded/reduced from the denominator as well. Paragraphs 18 to 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;export turnover' cannot assume two different characteristics for two parts of the same formula. 24. In the present case, the quantum of 'export turnover' has been taken to be the actual remittances of foreign exchange after excluding the unrealised foreign exchange. This then would be the same figure to be adopted so far as the denominator is concerned as well. In fine, 'total turnover' for purposes of the formula would be the actual sale receipts excluding unrealised foreign exchange as adopted for 'export turnover'. This conclusion is also supported by the reasoning that the provisions of Section 10A/10B are beneficial in nature and seek to encourage an assessee engaging in a prescribed activity. 25. In the light of the discussion as above, we answer the question of law in the negative, in favour of the assessee and against the Revenue. The Tax Case (Appeal) is dismissed. No costs. Respectfully following the same, we direct Ld. AO to exclude this item from total turnover also. This ground stand allowed. 12.4 No other grounds have been urged in assessee s appeal. The assessee s appeal stands partly allowed. The revenue s appeal stands dism ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal stand dismissed. The assessee s appeal stands partly allowed. 16. Disallowance u/s 14A excluded from exempt profit 16.1 The disallowance as made u/s 14A for Rs.68.54 Lacs was held to be deemed income and not derived from export activity and therefore, the same could not be considered as exempt income. 16.2 The Ld. CIT(A), relying on the decision of Chennai Tribunal in Cognizant Technology Solutions (ITA No.114 2100/Mds/2011; 23.01.2103) as well as the decision in Polaris Financial Technology Ltd. (2013 (9) TMI 296), directed Ld. AO to include the disallowance in Profit Gain derived from export. Aggrieved, the revenue is in further appeal before us. 16.3 Considering the fact that Ld. 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. 17. Set-off within deduction units The losses of units eligible for deduction u/s 10A and 10AA amounting to Rs.3227.08 Lacs were set-off from taxable income to the extent of Rs.1905.82 Lacs. The set-off of the same was denied to the assessee. The Ld. CIT(A) relying on the decision of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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