Tribunal allows deductions, disallowances, and appeals in tax case

The Tribunal condoned the Revenue's delay in filing appeals, allowed re-computation of deduction under section 10B, and restored the disallowance issue for fresh consideration. The Tribunal also allowed the assessee's appeal on the disallowance under section 14A, holding that it was not applicable due to the absence of exempt income. The appeals of the Revenue were partly allowed for statistical purposes, while the assessee's appeal was fully allowed.

---

---

Issues Involved:
1. Condonation of delay in filing appeals by the Revenue.
2. Disallowance under section 40A(7)(b) of the Act.
3. Re-computation of deduction under section 10B of the Act.
4. Disallowance under section 14A read with rule 8D of the Act.

Detailed Analysis:

1. Condonation of Delay in Filing Appeals by the Revenue:
The Revenue filed petitions explaining a two-day delay in filing appeals due to the case records not being traceable immediately. The Tribunal, satisfied with the reasons, condoned the delay in the interest of justice, allowing the appeals to be admitted for hearing.

2. Disallowance under Section 40A(7)(b) of the Act:
The common issue in the appeals for the assessment years 2009-10 and 2011-12 was the disallowance made under section 40A(7)(b). The assessee's counsel referenced a decision by the co-ordinate Bench in the case of DCIT Vs. BS & B Safety Systems (I) Ltd., which allowed provision for gratuity under section 40A(7)(b). The Departmental Representative highlighted that a similar issue in the assessee's case for the assessment year 2008-09 was remitted back for fresh consideration. Following this precedent, the Tribunal restored the issue to the file of the Assessing Officer for fresh adjudication in line with the previous Tribunal's directions.

3. Re-computation of Deduction under Section 10B of the Act:
For the assessment year 2009-10, the Commissioner of Income Tax (Appeals) directed the Assessing Officer to recompute the deduction under section 10B by excluding freight and clearing expenses and business development fees from both export turnover and total turnover. The assessee's counsel supported this by referencing the Special Bench decision in ITO Vs. Sak Soft Ltd., which the Commissioner followed. The Tribunal found no infirmity in this direction, as it conformed with the Special Bench's decision, and thus dismissed the Revenue's appeal on this ground.

4. Disallowance under Section 14A read with Rule 8D of the Act:
The only issue in the assessee's appeal was the disallowance made under section 14A read with rule 8D for the assessment year 2011-12. The assessee's counsel argued that section 14A read with rule 8D was not applicable as no dividend was received during the year. The Tribunal referenced its decision in ACIT Vs. M.Baskaran, where it was held that disallowance under section 14A is not warranted if no exempt income is earned. This view was supported by various High Court decisions, including those of the Allahabad, Gujarat, and Bombay High Courts, which held that in the absence of exempt income, section 14A disallowance is not applicable. Consequently, the Tribunal allowed the assessee's appeal on this issue.

Conclusion:
- The appeals of the Revenue were partly allowed for statistical purposes.
- The appeal of the assessee was allowed.
- The order was pronounced in the open court on 18th December 2015.

---