Tribunal grants deduction for interest income but denies for miscellaneous income due to lack of evidence.

NTT Data Global Delivery Services Ltd. Versus DCIT, Circle-13 (1), New Delhi

NTT Data Global Delivery Services Ltd. Versus DCIT, Circle-13 (1), New Delhi - TMI Issues Involved:
1. Eligibility of interest income for deduction under Section 10A/10AA.
2. Eligibility of miscellaneous income for deduction under Section 10A/10AA.

Detailed Analysis:

1. Eligibility of Interest Income for Deduction under Section 10A/10AA:

The assessee, engaged in providing IT services, claimed a deduction under Section 10A of the Income Tax Act for the Assessment Year 2009-10. The Assessing Officer (AO) disallowed the deduction on interest income, arguing that it could not be considered as income derived from export-oriented undertakings. The CIT(A) upheld the AO's decision, stating that the interest income did not have an immediate source from the eligible undertaking.

The assessee appealed, contending that the issue was covered in their favor by previous decisions, including those from the Karnataka High Court in *Commissioner of Income Tax vs Motorola India Electronics Pvt. Ltd.* and *Principal Commissioner of Income Tax vs American Express India Pvt. Ltd.*, which held that interest income, if treated as business income of the eligible export-oriented unit, is eligible for deduction under Section 10A.

The Tribunal referred to the Full Bench decision of the Karnataka High Court in *Commissioner of Income Tax v. Hewlett Packard Global Soft Ltd.*, which clarified that interest income earned by a 100% Export Oriented Unit (EOU) from deposits and loans made from surplus funds is to be construed as income derived from the business of the undertaking. The decision emphasized that the profits of the business of the undertaking include all incidental incomes derived from the business, not just the profits from export sales.

The Tribunal concluded that the interest income earned by the assessee from parking surplus funds in fixed deposits is eligible for deduction under Section 10A, aligning with the Karnataka High Court's interpretation. Thus, the AO was directed to grant the deduction on the interest income of INR 24,306,435.

2. Eligibility of Miscellaneous Income for Deduction under Section 10A/10AA:

For the miscellaneous income of INR 1,281,527, the assessee did not provide sufficient details or evidence to demonstrate the nature of the income. The Tribunal noted that the assessee's submissions before the CIT(A) focused solely on the interest income, with no mention or details of the miscellaneous income.

In the absence of specific information about the nature of the miscellaneous income, the Tribunal upheld the lower authorities' decision to exclude it from the deduction under Section 10A. The assessee's failure to furnish necessary evidence precluded any adjudication on this aspect.

Conclusion:

The Tribunal partly allowed the appeal. The interest income of INR 24,306,435 was deemed eligible for deduction under Section 10A, while the miscellaneous income of INR 1,281,527 was not. The order was pronounced in the open court on 20/12/2018.