2014 (6) TMI 1094 - HC - Income Tax

s.10A allows deduction of up-linking charges in computing export turnover; loss-making units and set-offs permitted; s.92(4)/s.92C(4) upheld

The Commissioner of Income Tax & The Assistant Commissioner of Income Tax, Bangalore Versus M/s. I. Gate Global Solutions Ltd.

HC answered the substantial questions in favour of the assessee and against the Revenue, holding that up-linking charges are deductible when computing ... Deduction u/s 10A - up-linking charges deducted for computing export turnover -HELD THAT:- This Court had an occasion to consider the same in the case of Tata Elxsi Ltd., & Others [2011 (8) TMI 782 - KARNATAKA HIGH COURT]. In view of the same, the said substantial question of law is answered in favour of the assessee and against the Revenue. Allowable deduction of Section 10A - scope of substituted Section 10A of the Act - by Finance Act, 2000 w.e.f. 1.4.2001 - Whether the tribunal was correct in holding that Section 10A of the Act deduction is allowable to the assessee in respect of profit making units only if they are found to be independent and the unit making loss cannot be setoff for the purpose of allowing deduction? - HELD THAT:- This Court in the case of Commissioner of Income Tax and Another Vs. Yokogawa India Ltd., & Others[2011 (8) TMI 845 - KARNATAKA HIGH COURT] and was answered in favour of the assessee and against the Revenue. Deduction u/s. 10A allowable in respect of income computed on the arms length price by ignoring the proviso to Section 92(4) - The error committed by the Assessing Officer was relying on Section 92(C)(4) to a case where Arm’s Length Price was determined by the assessee, whereas the said provision applies to a case where Arm’s Length Price was determined by the Assessing authority, that mistake has been corrected by the tribunal, set aside the order passed by the Commissioner as well as the assessing authority. No error committed by the Tribunal in the impugned order. The Revenue's appeal challenges the Tribunal's order in ITA No. 249/Bang/2007. The Court admitted four substantial questions of law, including: '(1) Whether the tribunal was correct in holding that up-linking charges deducted for computing export turnover u/s. 10A of the Act should also be reduced for computing total turn over when arriving at Section 10A of the Act deduction?' and whether deduction under Section 10A applies only to independent profit-making units or on the assessee's total income after the substituted Section 10A (w.e.f. 1.4.2001). Relying on precedents, the Court answered these questions in favour of the assessee and against the Revenue, citing Commissioner of Income Tax v. Tata Elxsi Ltd. and Commissioner of Income Tax v. Yokogawa India Ltd. The Court also held that the Assessing Officer erred in applying Section 92(4) to a case where the Arm's Length Price was determined by the assessee, and that the Tribunal correctly set aside the orders of the Commissioner and Assessing Officer. The matter is remitted for consequential orders under Section 260(1)(a) pending appeals before the Apex Court.