2021 (6) TMI 987 - AT - Income Tax

ITAT Bangalore rules in favor of assessee on key deductions under Income-tax Act

Robert Bosch Engineering and Business Solutions Pvt. Ltd. Versus Deputy Commissioner of Income-tax Large Tax Payers Unit Bangalore And ACIT LTU, Circle-1 Bangalore Versus Robert Bosch Engineering and Business Solutions Pvt. Ltd., Bangalore

Robert Bosch Engineering and Business Solutions Pvt. Ltd. Versus Deputy Commissioner of Income-tax Large Tax Payers Unit Bangalore And ACIT LTU, Circle-1 ... Issues:1. Deduction allowed u/s 10A of the Act2. Exclusion of foreign currency expenses from export turnover3. Technical services rendered by the assessee4. Unrealized export proceeds deduction5. Additional foreign tax credit claimDeduction allowed u/s 10A of the Act:The assessee claimed a deduction under section 10A of the Income-tax Act, 1961, for the assessment year 2009-10. The Assessing Officer (AO) disallowed certain expenses like communication charges, expenditure in foreign currency, and unrealized export proceeds from the export turnover while computing the deduction. The AO also disallowed these expenses from the total turnover, contrary to the provisions of section 10A. The AO's decision was supported by a Tribunal decision. The assessee contended that the exclusion of expenses from the total turnover should align with the reduction from the export turnover. The assessee relied on previous court decisions to support this argument.Exclusion of foreign currency expenses from export turnover:The AO disallowed the unrealized sale consideration from the export turnover as it exceeded the stipulated 6-month period for realization. The assessee, holding an export house certificate with a 360-day realization period, contested this decision. The AO's interpretation of the 6-month period was based on section 10A of the Act. The assessee argued for the exclusion of expenses in foreign currency from the export turnover, citing previous court decisions and the nature of its business activities.Technical services rendered by the assessee:The CIT(A) determined that the assessee was involved in providing technical services in addition to software development services based on service agreements. This led to the requirement of segregating receipts into software services and technical services for computing deductions under section 10A. The assessee disagreed with this interpretation, claiming to provide only software development services. Previous court decisions were cited to support the assessee's position.Unrealized export proceeds deduction:The issue of deducting unrealized export proceeds of a specific amount from the export turnover, due to non-realization within the specified period, was not addressed by the CIT(A). The assessee referred to a circular issued by the RBI regarding the realization period for export proceeds. This aspect was restored to the CIT(A) for further examination in light of the RBI circular.Additional foreign tax credit claim:The assessee raised an additional ground seeking foreign tax credit. This legal ground was admitted, and the matter was referred back to the AO for examination in accordance with the law. The decision treated the appeal filed by the assessee as allowed for statistical purposes and dismissed the appeal of the revenue.This detailed analysis of the judgment from the Appellate Tribunal ITAT Bangalore highlights the various issues addressed, including deductions under section 10A, treatment of foreign currency expenses, technical services rendered, unrealized export proceeds, and additional foreign tax credit claim. The arguments presented by the parties, interpretations of relevant legal provisions, and reliance on previous court decisions are outlined to provide a comprehensive understanding of the judgment.