Tribunal: Exclusion of Overseas Expenses for Deduction Upheld, Disallowance under Section 14A Denied

The Tribunal upheld the exclusion of overseas travel and communication expenditure from total turnover for deduction u/s 10B of the Act, dismissing the Revenue's appeal. It also ruled against adding disallowance under section 14A while computing book profit u/s 115JB, aligning with previous decisions and partially allowing the assessee's cross objection.

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Issues:
1. Exclusion of overseas travel and communication expenditure from total turnover for deduction u/s 10B of the Act.
2. Addition of disallowance under section 14A r.w. Rule 8D while computing book profit u/s 115JB of the Act.

Issue 1: Exclusion of overseas travel and communication expenditure
The appeal by the Revenue and cross objection by the assessee were against the order of the Commissioner of Income-tax (Appeals)-6, Chennai, for the assessment year 2010-11. The Revenue's appeal focused on the exclusion of overseas travel and communication expenditure in foreign currency from the total turnover for the purpose of deduction u/s 10B of the Act. The Tribunal referred to the Chennai Special Bench's decision in the case of ITO vs Sak Soft Ltd, where it was held that such deductions from the export turnover should also be deducted from the total turnover while applying the formula (Profit X Export turnover : Total turnover) as per the Act. Consequently, the Tribunal dismissed the Revenue's appeal, upholding the exclusion of the mentioned expenditure.

Issue 2: Addition of disallowance under section 14A r.w. Rule 8D
In the cross objection, the assessee challenged the addition of disallowance under section 14A r.w. Rule 8D made by the Assessing Officer while computing the book profit u/s 115JB of the Act. The Tribunal considered the issue in light of previous decisions. It referred to the case of Dy. CIT vs M/s Lanco Tanjore Power Co. Ltd. and observed the similarity between the provisions of c1. (f) of the Explanation to s. 115JA and sub-s. (1) of s. 14A of the Act. The Tribunal also cited decisions from the cases of Goetze (India) Ltd. v. CIT and Quippo Telecom Infrastructure Ltd. v. ACIT to support its conclusion that no addition to the book profit should be made for expenditure incurred to earn exempt income while computing income under section 115JB of the Act. The Tribunal further cited decisions from the Chandigarh Bench and Mumbai Bench, aligning with the above stance. Consequently, the Tribunal allowed the claim of the assessee in its cross objection, partly allowing the cross objection.

In conclusion, the Tribunal upheld the exclusion of overseas travel and communication expenditure from the total turnover for deduction u/s 10B of the Act, dismissing the Revenue's appeal. Additionally, the Tribunal ruled against the addition of disallowance under section 14A while computing the book profit u/s 115JB of the Act, aligning with previous decisions and allowing the claim of the assessee in its cross objection.

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