2016 (11) TMI 1554 - AT - Income Tax

Tribunal ruling on turnover inclusion for deduction & interest levy, affirming export expenses deduction

M/s. Patni Telecom Solutions P. Ltd. Versus The Income Tax Officer, Ward-16 (2) And The Income Tax Officer, Ward-16 (3), Versus M/s. IGATE Information Services P. Ltd.,

The Tribunal allowed the assessee's appeal, directing the inclusion of unbilled revenue in both total turnover and export turnover for section 10A ... Deduction u/s 10A - total turnover of the assessee-company, is its export turnover and has no domestic turnover - Held that:- In the case of this assessee, the export turnover is equal to the total turnover. The assessee has been claiming deduction under section 10A on this basis and the Revenue has been allowing the same, by accepting the claim of the assessee. Though the Ld. D.R. submitted that there is no res judicata in tax proceedings, for the sake of consistency and to avoid chain reaction in future assessment years, and as the tax rates for all the years are same and as the assessee has claimed deduction under section 10A on this year unbilled revenues in the next assessment year and as the revenue has accepted this claim, we are of the opinion that the unbilled revenues have to be eliminated from the total turnover as well as the export turnover in this year and the deduction under section 10A be computed. We direct the Assessing Officer accordingly. Hence, we allow this ground of the assessee. Charging of interest u/s 234A - Held that:- As return of income in this case was filed well within time i.e., on 30.10.2007. Thus the levy of interest under section 234A is bad in law. Ground of the assessee is allowed. Exemption under section.10A is to be allowed in respect of the amounts in question relating to the disallowance u/s 40(a)(ia) - Decided in favour of assessee. Issues Involved:1. Computation of deduction under section 10A of the I.T. Act, 1961.2. Charging of interest under section 234A of the I.T. Act, 1961.3. Inclusion of certain expenses in the export turnover for the purpose of deduction under section 10A.4. Allowability of deduction under section 10A on disallowed expenditure under section 40(a)(ia).Detailed Analysis:1. Computation of Deduction under Section 10A:The primary issue was whether the unbilled revenue of Rs. 9,55,76,699 should be included in the total turnover for computing the deduction under section 10A. The assessee excluded this unbilled revenue from both the total turnover and export turnover, arguing that it was not billed by the end of the financial year and was realized in the subsequent year. The Assessing Officer included this amount in the total turnover but not in the export turnover. The Tribunal observed that the yardstick for determining the total turnover and export turnover should be the same. It concluded that if the unbilled revenue is excluded from the total turnover, it should also be excluded from the export turnover. The Tribunal directed the Assessing Officer to compute the deduction under section 10A by eliminating the unbilled revenues from both total turnover and export turnover, aligning with the assessee's consistent method in previous and subsequent years.2. Charging of Interest under Section 234A:The assessee contested the charging of interest under section 234A, arguing that the tax return was filed within the stipulated time. The Tribunal found that the return was indeed filed on 30.10.2007, within the due date. Consequently, the levy of interest under section 234A was deemed incorrect, and this ground was allowed in favor of the assessee.3. Inclusion of Certain Expenses in Export Turnover:The Revenue appealed against the CIT(A)'s decision to include expenses like data link charges, foreign currency travel expenses, professional fees, and other expenses in the export turnover for computing the deduction under section 10A. The Tribunal referenced the jurisdictional High Court's decision in CIT vs. M/s. Aurobindo Pharma Ltd., which supported the assessee's stance. The Tribunal dismissed the Revenue's appeal on this ground, maintaining that these expenses should be included in the export turnover.4. Allowability of Deduction under Section 10A on Disallowed Expenditure under Section 40(a)(ia):The Revenue argued against allowing deduction under section 10A on the disallowed amount under section 40(a)(ia), asserting that such disallowance is penal in nature. The Tribunal, however, upheld the CIT(A)'s decision, which was consistent with the CBDT Circular No.37/2016 and previous Tribunal rulings. The Tribunal concluded that the disallowed expenditure under section 40(a)(ia) should be considered while computing the profits eligible for deduction under section 10A, as it pertains to the business income of the undertaking.Conclusion:The Tribunal allowed the assessee's appeal, directing the inclusion of unbilled revenue in both total turnover and export turnover for section 10A deduction computation, and ruled against the levy of interest under section 234A. The Revenue's appeal was dismissed, affirming the inclusion of certain expenses in the export turnover and allowing deduction under section 10A on disallowed expenditure under section 40(a)(ia).