2022 (11) TMI 1108 - AT - Income Tax

Assessee and Revenue Appeals Partially Allowed, Tribunal Directs Re-examination

The appeal filed by the assessee was partly allowed, and the appeal filed by the Revenue was partly allowed for statistical purposes. The Tribunal ... Income under the head ‘income from other sources’ - HELD THAT:- Although, the assessee has reported a sum under the head ‘income from other sources’, but no details have been furnished to prove source and nature of income except stating that it should be considered as income derived from non-export activities. In absence of any specific details, it is difficult to accept the contentions of the assessee that it should be derived from business activity. There is no error in the reasons given by the authorities below to assess a sum under the head ‘income from other sources’ and thus, we are inclined to uphold the findings of the CIT(A) and reject the ground taken by the assessee. Unrealized sale proceeds from profits as well as from the total turnover - HELD THAT:- We find that the Hon’ble Madras High Court in [2014 (1) TMI 1588 - MADRAS HIGH COURT], has considered the issue of allowing unrealized sale proceeds from profit or total turnover, and after considering relevant submissions held that the assessee could not furnish necessary evidences before the AO to prove that the RBI has permitted extension of time for remitting sale proceeds in foreign currency in India in order to allow the assessee to get the benefit. We are of the considered view that there is no error in the reasons given by the CIT(A) to sustain the additions made by the AO and thus, we reject the ground taken by the assessee. Non-exclusion of unrealized sale proceeds from export turnover as well as total turnover - HELD THAT:- The issue of exclusion of expenditure including foreign currency loss or unrealized sale proceeds from export turnover and also from total turnover, is no longer res integra. In the case of HCL Technologies Ltd.. [2018 (5) TMI 357 - SUPREME COURT] had considered an identical issue and held that expenses incurred in foreign currency, excluded from total turnover also needs to be excluded from total turnover. In the case of CIT v. Abad Fisheries [2002 (8) TMI 95 - KERALA HIGH COURT] held that unrealized sale proceeds have to be excluded from export turnover as well as total turnover. Therefore, considering the facts and circumstances of the case and also by following the decision of the Hon’ble Supreme Court in the case of HCL Technologies Ltd.(supra), we direct the AO to re-compute deduction u/s.10A of the Act, by excluding unrealized sale proceeds from export turnover as well as total turnover. Depreciation on STP assets - non-furnishing of sufficient evidences - AO has disallowed depreciation on STP assets on the ground that the assessee could not file supporting invoices for new assets acquired and installed during the Financial Year relevant to the assessment year 2001-02 - HELD THAT:- Even before us, the assessee could not explain with necessary evidences, the differential figures of depreciation claim in the P & L A/c and in the statement of total income, computation of income for STPI Units & non- STPI Units. Since, the assessee could not file necessary invoices in support of additions to fixed assets and also basis for adopting different figures of depreciation for computing income from STPI Units & non-STPI Units, we are of the considered view that the issue needs further verification from the AO and hence, we set aside the issue to the file of the AO and direct the AO to re-examine the issue in light of various averments made by the assessee and also taken into account computation of depreciation for STPI Units & non-STPI Units. Depreciation on Intellectual Property Rights - HELD THAT:- We are of the considered view that there is no error in the reasons given by the CIT(A) to delete the additions made towards depreciation on IPRs and thus, we are inclined to uphold the findings of the CIT(A) and reject the ground taken by the Revenue. Deduction u/s 10A - Quantification of Export Turn over - HELD THAT:- On the basis of subsequent development, the Ld.CIT(A) has re-computed total turnover by excluding unrealized sale proceeds by following the decision of the Hon’ble Kerala High Court in the case of Abad Fisheries [2002 (8) TMI 95 - KERALA HIGH COURT] because said findings are further fortified by the decision of the Hon’ble Supreme Court in the case of HCL Technologies Ltd. [2018 (5) TMI 357 - SUPREME COURT] where it has been held that any expenditure excluded from export turnover needs to be excluded from total turnover also. Therefore we are of the considered view that there is no error in relief allowed by the Ld.CIT(A) in re-computing deduction u/s.10A and thus, we are inclined to uphold the findings of the Ld.CIT(A) and reject the ground taken by the Revenue. Unrealized sale proceeds from total turnover - HELD THAT:- We find that this issue is covered in favour of the assessee by the decision of in the case of HCL Technologies Ltd. [2018 (5) TMI 357 - SUPREME COURT] where it has been clearly held that expenditure excluded from export turnover, also needs to be excluded from total turnover. Therefore, by respectfully following the decision in the case of HCL Technologies Ltd. (supra), we are of the considered view that there is no error in the reasons given by the Ld.CIT(A) to exclude unrealized sale proceeds from total turnover and thus, we are inclined to uphold the findings of the Ld.CIT(A) and reject the ground taken by the Revenue. Issues Involved:1. Assessment of other income under the head 'income from other sources'.2. Allowing unrealized sale proceeds from profits and total turnover.3. Non-exclusion of unrealized sale proceeds from export turnover and total turnover.4. Depreciation on STP assets.5. Depreciation on Intellectual Property Rights (IPR).6. Relief under Section 10A of the Income Tax Act.7. Exclusion of unrealized sale proceeds from total turnover.Issue-wise Detailed Analysis:1. Assessment of Other Income Under the Head 'Income from Other Sources':The assessee contended that the income of Rs.33,37,093 should be treated as income derived from non-export activities instead of being classified under 'income from other sources'. However, the assessee failed to provide specific details or evidence to support this claim. Consequently, the Tribunal upheld the decision of the lower authorities to classify the income under 'income from other sources'.2. Allowing Unrealized Sale Proceeds from Profits and Total Turnover:The assessee sought to exclude unrealized sale proceeds of Rs.24,32,35,200 from profits based on a previous High Court order. The Tribunal noted that the Madras High Court had already decided against the assessee on this issue, confirming that the RBI had not permitted the extension of time for remitting the sale proceeds in foreign currency. Thus, the Tribunal upheld the lower authorities' decision to include the unrealized sale proceeds in the total turnover.3. Non-exclusion of Unrealized Sale Proceeds from Export Turnover and Total Turnover:The assessee argued that unrealized sale proceeds should be excluded from both export turnover and total turnover, citing the Supreme Court's decision in HCL Technologies Ltd. The Tribunal agreed, directing the AO to re-compute the deduction under Section 10A by excluding the unrealized sale proceeds from both export turnover and total turnover.4. Depreciation on STP Assets:The AO disallowed depreciation of Rs.84,78,14,130 on STP assets due to the assessee's failure to furnish supporting invoices. The CIT(A) allowed the depreciation based on the audit report, but the Tribunal found this decision unsupported by evidence. The Tribunal remanded the issue back to the AO for further verification and directed the AO to re-examine the depreciation claim in light of the assessee's submissions.5. Depreciation on Intellectual Property Rights (IPR):The Tribunal noted that the issue of depreciation on IPR was already settled in favor of the assessee by the ITAT Chennai Benches for the AY 2002-03. The Tribunal upheld the CIT(A)'s decision to allow depreciation on IPRs, confirming that they are intangible assets eligible for depreciation under Section 32(1)(ii) of the Income Tax Act.6. Relief under Section 10A of the Income Tax Act:The CIT(A) computed the income eligible for deduction under Section 10A at Rs.19,22,24,915. The Revenue challenged the computation of total turnover by excluding unrealized sale proceeds. The Tribunal found that the CIT(A) correctly re-computed the total turnover by excluding unrealized sale proceeds, in line with the Kerala High Court's decision in Abad Fisheries and the Supreme Court's ruling in HCL Technologies Ltd. The Tribunal upheld the CIT(A)'s decision, confirming the exclusion of unrealized sale proceeds from both export turnover and total turnover.7. Exclusion of Unrealized Sale Proceeds from Total Turnover:The Tribunal reiterated that the issue of excluding unrealized sale proceeds from total turnover was settled by the Supreme Court in HCL Technologies Ltd., which mandated that any expenditure excluded from export turnover must also be excluded from total turnover. The Tribunal upheld the CIT(A)'s decision to exclude unrealized sale proceeds from total turnover.Conclusion:The appeal filed by the assessee in ITA No.1158/Chny/2011 was partly allowed, and the appeal filed by the Revenue in ITA No.1248/Chny/2011 was partly allowed for statistical purposes. The Tribunal directed the AO to re-examine certain issues and re-compute the deductions and turnovers as per the specified guidelines.