2010 (3) TMI 740 - AT - Income Tax

ITAT upholds AO's order on deduction u/s.10A for STP units, dismissing CIT's order u/s.263. Special Bench ruling applied.

The ITAT allowed the assessee's appeal, upholding the AO's order and dismissing the ld. CIT's order u/s.263 regarding deduction u/s.10A for STP units. The ... Revision u/s 263 - order prejudicial to revenue - Deduction u/s 10A – STP units – export turnover - Post & Communication and Insurance expenses - On being asked it was interalia submitted by the assessee that Post & Communication and Insurance expenses were not separately recovered in the invoices. Hence, the question of excluding these expenses to work out the export turnover does not arise and in support sample copies of invoices were also produced. – CIT directed to AO u/s 263 to reconsider the issue – Held that: - In the absence of any contrary material placed on record by the revenue against the factual matrix of the case shown by the assessee before the ld. CIT and also at this stage and respectfully following the decision of the Special Bench of the Tribunal in ITO vs. Sak Soft Ltd. (2009 -TMI - 70680 - ITAT MADRAS-D) we are of the view that the issue is squarely covered by the order of the Special Bench of the Tribunal, and hence, the order passed by the AO is not found to be erroneous in so far as it is prejudicial to the interests of the revenue and accordingly we cancel the order passed by the ld. CIT u/s.263 and uphold the order passed by the AO. Issues:Challenge against order passed by the ld. CIT u/s.263 of the IT Act, 1961 regarding deduction u/s.10A for STP units.Analysis:The appeal was filed against the ld. CIT's order regarding the deduction claimed u/s.10A for eight STP units. The ld. CIT observed an excess deduction of Rs.37,31,761/- allowed by the AO. The assessee argued that Post & Communication and Insurance expenses were not separately recovered in the invoices, thus should not be excluded from the export turnover. The ld. CIT set aside the assessment for further scrutiny. The assessee challenged this order before the ITAT.The assessee contended that the issue was covered by a Special Bench decision in ITO vs. Sak Soft Ltd., which held that certain expenses should be excluded from both export turnover and total turnover. The ld. CIT argued that these expenses were not deducted from the total turnover to arrive at the export turnover as per provisions of sec.10A. The ITAT noted that the issue was squarely covered by the Special Bench decision, which stated that such expenses should be excluded from both turnovers. As there was no contrary material against the factual matrix shown by the assessee, the ITAT upheld the order passed by the AO and cancelled the ld. CIT's order u/s.263.Therefore, the ITAT allowed the assessee's appeal, emphasizing that the order passed by the AO was not found to be erroneous in prejudicing the interests of the revenue. The ITAT's decision was based on the precedent set by the Special Bench decision, dismissing the ld. CIT's order and upholding the AO's order regarding the deduction u/s.10A for the STP units.(Order pronounced in the open court on 4.3.2010.)