Tribunal Decisions: Deductions for SEZ, Foreign Subsidiaries, Disallowance under Section 14A, Subscription Charges

The Tribunal allowed the deduction claimed by the assessee for SEZ units, upheld the interest rate for foreign subsidiaries, remanded the issue of disallowance under section 14A, allowed the appeal regarding subscription charges, remanded the issue of software expenses, brand building expenditure was allowed, remanded the commission paid to non-resident agents issue, directed verification for late realization of export turnover, allowed rental income inclusion for SEZ units, deleted disallowance under section 115JB, remanded the income enhancement issue, held the state taxes deduction issue academic, directed verification for foreign tax credit claim, and dismissed the deduction for education cess and higher secondary cess.

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Issues Involved:

1. Denial of deduction under section 10AA for SEZ units.
2. Transfer pricing adjustment for interest receivable from foreign subsidiaries.
3. Disallowance under section 14A.
4. Disallowance under section 40(a)(i) for subscription charges.
5. Disallowance under section 40(a)(ia) for software expenses.
6. Treatment of software expenses as capital expenditure.
7. Disallowance of brand building expenditure.
8. Disallowance of commission paid to non-resident agents.
9. Reduction of export turnover for late realization.
10. Reduction of rental income from profits of 10A units.
11. Addition of SEZ book profits under section 115JB.
12. Enhancement of income by CIT(A) for new sources.
13. Deduction under section 37 for state taxes paid in foreign countries.
14. Additional foreign tax credit claim.
15. Deduction for education cess and secondary and higher secondary cess.

Detailed Analysis:

1. Denial of Deduction Under Section 10AA for SEZ Units:
The Tribunal considered the denial of deduction under section 10AA for SEZ units in the years 2010-11 and 2011-12. The Tribunal referred to its previous order for A.Y. 2012-13 and applied the same view, allowing the deduction claimed by the assessee for SEZ units, including Chennai, Chandigarh, Mangalore, and Pune units. The Tribunal found that the SEZ units were not formed by splitting up or reconstruction of an existing business.

2. Transfer Pricing Adjustment for Interest Receivable from Foreign Subsidiaries:
For the years 2010-11 and 2011-12, the Tribunal upheld the interest rate of 6% computed by the assessee for interest receivable from Infosys China and Infosys Brazil, dismissing the revenue's appeal.

3. Disallowance Under Section 14A:
The Tribunal remanded the issue of disallowance under section 14A to the Assessing Officer (AO) for computation as per directions, partially allowing the assessee's appeals and dismissing the revenue's appeals.

4. Disallowance Under Section 40(a)(i) for Subscription Charges:
The Tribunal allowed the assessee's appeal, holding that no disallowance was warranted for subscription charges paid to M/s Forester Research and M/s Gartner, as there was no amount payable as of the last day of the previous year.

5. Disallowance Under Section 40(a)(ia) for Software Expenses:
The Tribunal remanded the issue to the AO to consider in accordance with the Supreme Court decision in Engineering Analysis Centre of Excellence Pvt. Ltd. vs. CIT, directing verification of the nature of expenses.

6. Treatment of Software Expenses as Capital Expenditure:
The Tribunal remanded the issue to the AO to verify the claim as per the Supreme Court decision in Engineering Analysis Centre of Excellence Pvt. Ltd. vs. CIT, allowing both revenue and assessee's appeals for statistical purposes.

7. Disallowance of Brand Building Expenditure:
The Tribunal allowed the assessee's appeal, following the decision in Infosys BPO Ltd v DCIT, and held that the brand building expenditure was allowable.

8. Disallowance of Commission Paid to Non-Resident Agents:
The Tribunal remanded the issue to the AO to verify the claims in accordance with the Supreme Court decision in Engineering Analysis Centre of Excellence Pvt. Ltd. vs. CIT, allowing both revenue and assessee's appeals for statistical purposes.

9. Reduction of Export Turnover for Late Realization:
The Tribunal directed the AO to verify the RBI approval for late realization of export turnover and consider the claim in accordance with the Bombay High Court decision in CIT vs. Morgan Stanley Advantage Services.

10. Reduction of Rental Income from Profits of 10A Units:
The Tribunal allowed the assessee's appeal, directing the AO to include the rental income received from SEZ units for computing profits under section 10A, following the Karnataka High Court decision in Subex Ltd. vs. ITO.

11. Addition of SEZ Book Profits Under Section 115JB:
The Tribunal directed the AO to delete the disallowance added while computing book profits under section 115JB, following the Special Bench decision in ACIT vs. Vireet Investment (P) Ltd.

12. Enhancement of Income by CIT(A) for New Sources:
The Tribunal remanded the issue to the AO to verify the technical aspects of the Finacle software and determine if it was a new product eligible for 100% deduction under section 10A.

13. Deduction Under Section 37 for State Taxes Paid in Foreign Countries:
The Tribunal held the issue to be academic at this stage, as the main issue of foreign tax credit was remanded to the AO for verification in light of the Karnataka High Court decision in Wipro Ltd. vs. DCIT.

14. Additional Foreign Tax Credit Claim:
The Tribunal directed the AO to verify the taxes paid in respect of the income for the previous year 2010-11 and grant credit as per section 90.

15. Deduction for Education Cess and Secondary and Higher Secondary Cess:
The Tribunal dismissed the additional ground raised by the assessee for deduction of education cess and secondary and higher secondary cess, following the Supreme Court decision against the assessee.

Conclusion:
The appeals filed by the assessee and revenue were partly allowed as indicated in the detailed analysis. The Tribunal directed the AO to verify various claims and compute deductions as per the directions and relevant case laws.

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