Tax Tribunal decisions on deductions, expenses, penalties, and interest upheld for Assessment Years 2010-11, 2011-12.

The Deputy Commissioner of Income Tax, Circle – 7 (1) (1), Bangalore Versus M/s. Tecnotree Convergence Ltd.

The Deputy Commissioner of Income Tax, Circle – 7 (1) (1), Bangalore Versus M/s. Tecnotree Convergence Ltd. - [2019] 75 ITR (Trib) 505 (ITAT [Bang]) Issues Involved:
1. Reduction in deduction claimed under section 10A of the Income Tax Act.
2. Disallowance of commission expense on account of non-deduction of tax at source.
3. Levy of interest under sections 234B and 234D of the Act.
4. Penalty proceedings under section 274 read with section 271(1)(c) of the Act.
5. Exclusion of expenses incurred in foreign currency from export turnover.
6. Disallowance of employees’ contribution to Provident Fund (PF).

Detailed Analysis:

1. Reduction in Deduction Claimed Under Section 10A:
- Ground Nos. 3.1 to 3.3: The assessee contended that the AO erred in excluding export sales from export turnover for delayed realization of proceeds. The Tribunal upheld the assessee’s claim based on the Karnataka High Court's decision in Wipro Ltd. vs. DCIT (2016) 382 ITR 179 (Kar), which allowed deductions if the foreign exchange was received after the specified period but was not explicitly rejected by RBI.
- Ground No. 4: The AO excluded expenses incurred in foreign currency from export turnover. The CIT(A) allowed the alternate claim that if excluded from export turnover, they should also be excluded from total turnover, following the Delhi High Court's decision in CIT Vs. Genpact India.
- Ground No. 5: The Tribunal held that deduction under section 10A should be allowed on assessed income, not just returned income, following the Karnataka High Court's decision in CIT Vs. M. Pact Technology Services Pvt. Ltd.

2. Disallowance of Commission Expense on Account of Non-Deduction of Tax at Source:
- The AO disallowed commission expenses paid to non-residents under section 40(a)(i) due to non-deduction of tax at source. The Tribunal held that since the services were rendered outside India, the payments were not taxable in India, and thus, the provisions of section 195 were not applicable. This was supported by judicial precedents like GE India Technology Centre (P) Ltd. vs. CIT (327 ITR 456) (SC).

3. Levy of Interest Under Sections 234B and 234D:
- The Tribunal upheld the AO’s action in charging interest under sections 234B and 234D, citing that it is consequential and mandatory as upheld by the Supreme Court in Anjum H. Ghaswala (252 ITR 1) (SC).

4. Penalty Proceedings Under Section 274 Read with Section 271(1)(c):
- The Tribunal dismissed the ground as premature since no penalty was levied in the impugned order.

5. Exclusion of Expenses Incurred in Foreign Currency from Export Turnover:
- The Tribunal upheld the CIT(A)’s decision to exclude expenses incurred in foreign currency from both export turnover and total turnover, following the Karnataka High Court's decision in CIT v Tata Elxsi Ltd (349 ITR 98) (Kar) and the Supreme Court's decision in CIT V. HCL Technologies Ltd. (2018) 93 taxmann.com 33 (SC).

6. Disallowance of Employees’ Contribution to Provident Fund (PF):
- The AO disallowed employees’ contributions to PF deposited beyond the stipulated period. The CIT(A) allowed the claim, following the Karnataka High Court's decisions in CIT Vs. Sabari Enterprises (2008) 298 ITR 141 (Kar) and CIT Vs. Spectrum Consultants India Pvt. Ltd., which held that contributions paid before the due date for filing the return are deductible.

Conclusion:
- Assessee’s Appeals: Partly allowed for both Assessment Years 2010-11 and 2011-12.
- Revenue’s Appeals: Dismissed for both Assessment Years 2010-11 and 2011-12.