Income Tax Tribunal dismisses Revenue appeals for AYs 2010-11 & 2011-12, orders re-examination by Assessing Officer

The Income Tax Appellate Tribunal dismissed Revenue appeals for AYs 2010-11 and 2011-12 and partially allowed other appeals for statistical purposes. The Tribunal directed a re-examination and fresh assessment by the Assessing Officer in various disallowance and deduction issues, emphasizing the need for accurate verification and adherence to legal precedents. The judgments were pronounced on 10th January 2018.

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Issues involved:
Cross-appeals by Assessee and Revenue for AYs 2009-10, 2010-11 & 2011-12 against the orders of the Commissioner of Income Tax (Appeals)-2, Hyderabad, involving common issues.

Analysis:

1. Disallowance u/s. 14A:
- The AO disallowed a portion of the dividend income under Section 14A. The ITAT found discrepancies in the AO's calculations and directed a re-examination, emphasizing the need for verification of direct expenditures. The matter was remanded to the AO for a fresh assessment.

2. Deduction claimed u/s. 80IB(8A):
- The AO denied the deduction under Section 80IB, contending that the activities did not qualify as 'Scientific Research and Development.' The ITAT upheld the CIT(A)'s decision based on previous rulings and granted the deduction, highlighting the consistency in facts and approvals.

3. Deduction towards ESOP:
- The AO disallowed ESOP deductions, following a specific case law. The CIT(A) allowed the claim, citing a Special Bench decision. The ITAT upheld the CIT(A)'s decision, considering the binding nature of the Special Bench ruling.

4. Disallowance of communication charges u/s. 10A:
- The AO disallowed communication charges while computing deduction u/s. 10A. The ITAT directed the AO to exclude such charges from the Total Turnover as well, following established legal precedents, and ordered a re-calculation of the disallowance.

5. Disallowance of entire claim u/s. 10A:
- The AO disallowed the entire claim u/s. 10A based on FIRC descriptions. The ITAT found inconsistencies in the AO's approach and directed a re-examination, emphasizing the need to evaluate actual invoices and remittances to determine eligibility for the deduction. The matter was remanded to the AO for a fresh assessment.

In conclusion, the ITAT dismissed Revenue appeals for AYs 2010-11 and 2011-12, while partially allowing other appeals for statistical purposes. The judgments were pronounced on 10th January 2018.

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