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of <h1>Tribunal rules in favor of taxpayer on various tax issues, directs reexamination by AO</h1> <h3>M/s. Wipro Limited Versus Addl CIT Range-12 Bangalore, Deputy Commissioner of Income-tax, Circle 7 (1) (2), Circle-12 (5), Bangalore, Asst. Commissioner of Income-Tax Circle-7 (1) (2) Bangalore, JCIT Special Range-7 Bangalore (Vice-Versa)</h3> M/s. Wipro Limited Versus Addl CIT Range-12 Bangalore, Deputy Commissioner of Income-tax, Circle 7 (1) (2), Circle-12 (5), Bangalore, Asst. Commissioner ... Issues Involved:1. Setting off of loss of STPI/SEZ units against business income from non-STPI/non-SEZ units.2. Exclusion of miscellaneous income while computing deduction u/s 10A/10AA/10B.3. Exclusion of net interest income for deduction u/s 10A/10AA/10B.4. Eligibility of deemed exports for deduction u/s 10A/10AA/10B.5. Deduction u/s 10A for delayed collections of export proceeds.6. Foreign tax credit/deduction.7. Depreciation on software and applicability of section 40(a)(ia).8. Allocation of corporate overheads to units claiming deduction u/s 10A/10AA/10B.9. Eligibility of STPI units located at Bangalore for deduction u/s 10A.10. Inclusion of foreign VAT/GST in export turnover for deduction u/s 10A/10AA/10B.11. Taxability of interest granted u/s 244A.12. Deduction u/s 80IB.13. Deduction u/s 80IB on profit from sale of monitors.14. Deduction u/s 80IB on other incomes.15. Exclusion of other income while computing deduction u/s 80IC.16. Exclusion of expenditure incurred in foreign currency from export turnover for deduction u/s 10A/10AA/10B.17. Exclusion of reimbursements from export turnover for deduction u/s 10A/10AA/10B.18. Allocation of corporate overheads to units claiming deduction u/s 80IAB & 80IC.19. Disallowance u/s 14A.20. Exclusion of profits attributable to overseas development centers for deduction u/s 10A/10AA/10B.21. Interest u/s 234B/234C/234D.22. Deduction of educational cess.23. Deduction of employees’ contribution to ESIC.24. Disallowance of loss on marked to market valuation of outstanding forward contracts.25. Addition of disallowed amount u/s 14A to book profit u/s 115JB.26. Disallowance of expenditure u/s 115BBD.27. Disallowance of advertisement, publicity, and sales promotion expenditure as brand building expenses.28. Disallowance of fees paid to Registrar of Companies for increasing authorized capital.29. Disallowance of payment to M/s. Gartner Group u/s 40(a)(ia).30. Non-granting of TDS credit.31. Tax charged u/s 115O.32. Refund adjustment.33. Transfer pricing adjustment on short-term advances to foreign subsidiaries.34. Transfer pricing adjustment for guarantee commission.35. Transfer pricing adjustment for software development services and IT services to AEs.36. Transfer pricing adjustment for specified domestic transactions.37. Transfer pricing adjustment for liquidated damages.Detailed Analysis:1. Setting off of loss of STPI/SEZ units against business income from non-STPI/non-SEZ units:The tribunal held that the loss arising in eligible SEZ/STPI undertakings should not be adjusted against the profits arising from other SEZ/STPI undertakings and can be adjusted against profits arising from non-SEZ/non-STPI units. This decision was based on the jurisdictional Karnataka High Court’s ruling in the assessee’s own case.2. Exclusion of miscellaneous income while computing deduction u/s 10A/10AA/10B:The tribunal directed the AO to allow deduction u/s 10A/10AA/10B in respect of income earned on sale of scrap/newspaper and rental income, following the Karnataka High Court’s decision. The issue relating to interest income was dealt with separately. The tribunal restored the issue of 'other income' to the AO for examination.3. Exclusion of net interest income for deduction u/s 10A/10AA/10B:The tribunal restored the issue to the AO for fresh examination to ascertain whether the interest income has nexus with the business of the undertaking. The tribunal followed the Karnataka High Court’s ruling that if there is a direct nexus, the interest income should be eligible for deduction.4. Eligibility of deemed exports for deduction u/s 10A/10AA/10B:The tribunal directed the AO to include deemed exports as part of turnover while computing deduction u/s 10A/10AA/10B, following the Karnataka High Court’s decision in the assessee’s own case.5. Deduction u/s 10A for delayed collections of export proceeds:The tribunal directed the AO to include sale amounts in the export turnover where applications were filed by the assessee to RBI for extension of time for receipt of export proceeds, following the Karnataka High Court’s decision.6. Foreign tax credit/deduction:The tribunal directed the AO to allow foreign tax credit as claimed by the assessee, following the Karnataka High Court’s decision in the assessee’s own case. The tribunal emphasized that the foreign tax credit should be allowed even if the income is exempt under Indian law, provided it is taxed in the foreign jurisdiction.7. Depreciation on software and applicability of section 40(a)(ia):The tribunal directed the AO to delete the disallowance of depreciation on software, holding that depreciation is a statutory allowance and not an expenditure, following the decision of various benches of the Tribunal.8. Allocation of corporate overheads to units claiming deduction u/s 10A/10AA/10B:The tribunal restored the issue to the AO for fresh examination, following the Karnataka High Court’s decision that corporate expenses should be allocated to various units, including those claiming deduction u/s 10A/10AA/10B.9. Eligibility of STPI units located at Bangalore for deduction u/s 10A:The tribunal held that the new STPI undertakings located in Bangalore are eligible for deduction u/s 10A, following the Karnataka High Court’s decision in the assessee’s own case.10. Inclusion of foreign VAT/GST in export turnover for deduction u/s 10A/10AA/10B:The tribunal directed the AO to include foreign VAT/GST in the export turnover, following the Karnataka High Court’s decision that export profits realized by the assessee include VAT/GST.11. Taxability of interest granted u/s 244A:The tribunal restored the issue to the AO to ascertain the interest withdrawn out of the interest given to the assessee u/s 244A and reduce the same from the interest income, following the Karnataka High Court’s decision.12. Deduction u/s 80IB:The tribunal restored the issue of allocation of corporate expenses to the file of the AO for fresh examination, following the Karnataka High Court’s decision. The tribunal also directed the AO to allow deduction u/s 80IB on the profit derived from sale of monitors sold along with computer hardware.13. Deduction u/s 80IB on profit from sale of monitors:The tribunal directed the AO to allow deduction u/s 80IB on the profit derived from sale of monitors sold along with computer hardware, following the Karnataka High Court’s decision.14. Deduction u/s 80IB on other incomes:The tribunal decided the issue against the assessee, following the coordinate bench’s decision in assessment year 2008-09 that rental income and interest income are not eligible for deduction u/s 80IB.15. Exclusion of other income while computing deduction u/s 80IC:The tribunal decided the issue against the assessee, following the coordinate bench’s decision in assessment year 2008-09 that miscellaneous income is not eligible for deduction u/s 80IC.16. Exclusion of expenditure incurred in foreign currency from export turnover for deduction u/s 10A/10AA/10B:The tribunal directed the AO to compute the deduction u/s 10A/10AA/10B by excluding only those expenses specifically mentioned in the definition of export turnover, following the decision of various benches of the Tribunal.17. Exclusion of reimbursements from export turnover for deduction u/s 10A/10AA/10B:The tribunal restored the issue to the AO for fresh examination, directing that if any amount is excluded from export turnover, the same should be excluded from total turnover as well, following the Karnataka High Court’s decision.18. Allocation of corporate overheads to units claiming deduction u/s 80IAB & 80IC:The tribunal restored the issue to the file of the AO for fresh examination, following the Karnataka High Court’s decision.19. Disallowance u/s 14A:The tribunal restored the issue to the file of the AO for fresh examination, following the coordinate bench’s decision in assessment year 2008-09.20. Exclusion of profits attributable to overseas development centers for deduction u/s 10A/10AA/10B:The tribunal restored the issue to the file of the AO for fresh examination, following the coordinate bench’s decision in assessment year 2008-09.21. Interest u/s 234B/234C/234D:Charging of interest is consequential in nature and does not require adjudication.22. Deduction of educational cess:The tribunal held that education cess is allowable as deduction, following the decisions of the Rajasthan High Court and the Bombay High Court.23. Deduction of employees’ contribution to ESIC:The tribunal restored the issue to the file of the AO for fresh examination, following the Karnataka High Court’s decision in the case of Essae Teraoka Pvt. Ltd.24. Disallowance of loss on marked to market valuation of outstanding forward contracts:The tribunal restored the issue to the file of the AO for fresh examination to ascertain whether the value of underlying assets is more than the value of outstanding forward contracts.25. Addition of disallowed amount u/s 14A to book profit u/s 115JB:The tribunal restored the issue to the file of the AO for fresh examination, following the special bench’s decision in the case of Vireet Investments Pvt. Ltd.26. Disallowance of expenditure u/s 115BBD:The tribunal held that the provisions of section 115BBD are not applicable as the total income of the assessee does not include any dividend income from specified foreign companies.27. Disallowance of advertisement, publicity, and sales promotion expenditure as brand building expenses:The tribunal held that the AO was not justified in disallowing part of advertisement expenses and directed him to allow the entire advertisement expenses, following the decisions of the Delhi High Court.28. Disallowance of fees paid to Registrar of Companies for increasing authorized capital:The tribunal confirmed the disallowance, following the Supreme Court’s decisions in the cases of Punjab Industrial Corporation Ltd. and Brooke Bond Ltd.29. Disallowance of payment to M/s. Gartner Group u/s 40(a)(ia):The tribunal held that the payment made to M/s. Gartner Group is in the nature of royalty and the assessee is liable to deduct tax at source. The tribunal restored the alternative contention to the file of the AO for examination.30. Non-granting of TDS credit:The tribunal restored the issue to the file of the AO for fresh examination, directing the AO to consider the TDS certificates furnished by the assessee and make due enquiries.31. Tax charged u/s 115O:The tribunal restored the issue to the file of the AO for fresh examination after affording adequate opportunity of being heard to the assessee.32. Refund adjustment:This is a general ground and does not require adjudication.33. Transfer pricing adjustment on short-term advances to foreign subsidiaries:The tribunal directed the AO/TPO to adopt the ALP rate of interest at Libor + 150 basis points, following the coordinate bench’s decision in assessment year
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