ITAT allows foreign currency expenditure inclusion in export turnover for section 10AA deduction calculation

The ITAT Chennai held that the CIT(A) was unjustified in confirming the AO's exclusion of foreign currency expenditure from export turnover for computing deduction under section 10AA, following the Madras HC precedent. Regarding double addition of interest from fixed deposits, the tribunal directed the AO to decide on the pending rectification application under section 154. For short grant of TDS credit, the tribunal ordered the AO to provide full TDS credit as originally granted in the assessment order dated 20.03.2015.

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Issues Involved:
1. Exclusion of expenses incurred in foreign currency from export turnover for the purpose of computation of deduction u/s 10AA of the Income Tax Act.
2. Inclusion of disallowance/addition as profits of the business in the computation of deduction u/s 10AA of the Act.
3. Double addition of interest from fixed deposits in the computation of income.
4. Granting TDS credit.

Summary:

Issue 1: Exclusion of Foreign Currency Expenses

The assessee challenged the CIT(A)'s confirmation of the Assessing Officer's decision to exclude expenses incurred in foreign currency from export turnover for the purpose of deduction u/s 10AA of the Income Tax Act. The Tribunal noted that the Assessing Officer did not examine the details provided by the assessee regarding these expenses. The Tribunal found that the issue was covered by the decision of the Hon'ble Jurisdictional High Court of Madras in the assessee's own case for AY 2009-10, which held that such expenses should not be excluded from export turnover. Consequently, the Tribunal allowed the assessee's grounds on this issue.

Issue 2: Inclusion of Disallowance/Addition as Profits

The assessee raised an additional ground regarding the non-inclusion of disallowance/addition as profits of the business in the computation of deduction u/s 10AA. The Tribunal noted that the CIT(A) had not adjudicated this issue and directed the CIT(A) to dispose of the matter by affording an opportunity of being heard to the assessee.

Issue 3: Double Addition of Interest from Fixed Deposits

The assessee contended that there was a double addition of interest from fixed deposits in the computation of income. The Tribunal observed that the Assessing Officer had added the interest twice and noted that the assessee had filed a rectification application u/s 154 of the Act, which was still pending. The Tribunal directed the Assessing Officer to pass orders on the rectification application, thus allowing the assessee's ground for statistical purposes.

Issue 4: Granting TDS Credit

The assessee challenged the CIT(A)'s confirmation of the Assessing Officer's decision to grant TDS credit only to the extent of Rs. 4,33,05,944/- as against Rs. 4,44,92,327/-. The Tribunal noted that the original assessment order had granted the full TDS credit and directed the Assessing Officer to give full TDS credit as was given in the original assessment proceedings, thereby allowing the assessee's ground for statistical purposes.

Conclusion:

Both appeals filed by the assessee are partly allowed for statistical purposes.

Order pronounced on 30th April, 2024 at Chennai.

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