Tribunal upholds Commissioner's decisions on internet expense deduction & sec.10A timing

The Tribunal upheld the decisions of the Commissioner of Income-tax(Appeals) on all issues raised by the Revenue regarding the deduction of internet expenses from total turnover under sec.10A, the claim of deduction under sec.10A, and the timing of allowing the claim in relation to adjusting brought forward losses and unabsorbed depreciation. The Tribunal dismissed the Revenue's appeal, affirming the Commissioner's orders.

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Issues:
1. Whether the deduction of internet expenses from total turnover under sec.10A should be allowed.
2. Whether the claim of deduction under sec.10A should be allowed.
3. Whether the claim under sec.10A should be allowed before adjusting brought forward losses and unabsorbed depreciation.

Analysis:

1. The first issue raised by the Revenue in the appeal was regarding the deduction of internet expenses from the total turnover while calculating the deduction under sec.10A. The Commissioner of Income-tax(Appeals) allowed the appeal, relying on the Special Bench decision of the Madras Tribunal in the case of Sak Soft Ltd. and the judgment of the Hon'ble Karnataka High Court in the case of CIT v. Tata Elxsi Ltd. The Tribunal found no infirmity in the order passed by the Commissioner of Income-tax(Appeals) and dismissed this ground raised by the Revenue.

2. The second issue pertained to the claim of deduction under sec.10A. The Revenue contended that the Commissioner of Income-tax(Appeals) erred in allowing the appeal against the order of the Assessing Officer disallowing the claim of deduction. The Commissioner of Income-tax(Appeals) based the decision on the Tribunal's rulings in the assessee's own case for the assessment years 2002-03 and 2005-06. The Tribunal upheld the Commissioner's order, stating that the view taken by the Commissioner was justified.

3. The third issue raised by the Revenue concerned the timing of allowing the claim under sec.10A in relation to adjusting brought forward losses and unabsorbed depreciation. The Commissioner of Income-tax(Appeals) held that the claim under sec.10A should be allowed before adjusting the losses and depreciation. This decision was supported by references to orders of the ITAT, Chennai Benches in cases like M/s. Ford Business Services Centre P. Ltd. and M/s. Changepond Technologies (P) Ltd. The Tribunal found no error in the Commissioner's order on this issue.

In conclusion, the Tribunal dismissed the appeal filed by the Revenue, upholding the decisions of the Commissioner of Income-tax(Appeals) on all three grounds. The order was pronounced in an open court in Chennai on November 7, 2012.

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