Tribunal grants relief to assessee on deduction of expenses under sec. 10A and orders disallowance under sec. 14A

The Tribunal partly allowed the appeal filed by the assessee and allowed the cross objection filed by the assessee. It directed a fresh examination by the assessing officer regarding the deduction of telecommunication and insurance expenses from the Export turnover for u/s 10A of the Act. Additionally, the Tribunal ordered a round sum disallowance of Rs. 25,000 under sec. 14A of the Act.

---

---

Issues:
1. Deduction of telecommunication charges and insurance expenses from Export turnover for computing deduction u/s 10A of the Act.
2. Disallowance of expenses under sec. 14A of the Act while computing income under normal provisions and book profit u/s 115JB of the Act.

Issue 1: Deduction of Telecommunication Charges and Insurance Expenses from Export Turnover for u/s 10A of the Act:
The appeal by the revenue challenges the decision of the CIT(A) regarding the deduction of insurance and telecommunication expenses from the Export turnover for computing deduction u/s 10A of the Act. The AO had deducted these expenses from the Export turnover but not from the Total turnover. The CIT(A) followed the decision of his predecessor and directed not to deduct these expenses from the Export turnover. However, the alternative contention of the assessee that these expenses should also be deducted from the Total turnover was not adjudicated by the CIT(A). The Tribunal held that a fresh examination is needed by the assessing officer to determine if any portion of these expenses can be attributed to the delivery of articles or software outside India.

Issue 2: Disallowance of Expenses under sec. 14A of the Act:
The AO disallowed expenses under sec. 14A of the Act while computing income under normal provisions and book profit u/s 115JB of the Act. The CIT(A) confirmed this disallowance, considering the movement in investment portfolios and activities related to investments. The Tribunal noted that the AO did not reject the claim of the assessee regarding expenditure before applying Rule 8D(2)(iii) of the IT Rules. The Tribunal found that a round sum disallowance of Rs. 25,000 would be appropriate to meet the ends of justice, modifying the order of the CIT(A) accordingly.

The Tribunal allowed the appeal filed by the revenue for statistical purposes, partly allowed the appeal filed by the assessee, and allowed the cross objection filed by the assessee. The Tribunal directed a fresh examination by the assessing officer regarding the deduction of telecommunication and insurance expenses from the Export turnover and ordered a round sum disallowance of Rs. 25,000 under sec. 14A of the Act.

---