2013 (1) TMI 767

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....ction under section 10A of the Income-tax Act, 1961. The Income-tax Appellate Tribunal, Hyderabad Bench in the case of Patni Telecom P. Ltd. vs. ITO, 308 ITR (AT) 414 (Hyderabad), has held that expenses incurred in foreign exchange, as part of the export carried out by the assessee, cannot be excluded from the export turnover. In that case the assessee had incurred expenditure for the purpose of export turnover by way of expenses incurred in foreign exchange. The Tribunal held that providing technical services outside India was not in connection with providing technical services. The assessee did not render any independent technical service. It developed software on contract basis according to the agreement and handed over the same to the customer. The expenditure incurred was for development of software according to the software development agreement entered into between the client and the assessee and therefore the expenses incurred in that connection in foreign currency cannot be excluded from the export turnover. The facts of the present case are also exactly similar. Therefore, we direct the Assessing Officer to include the foreign currency expenditure as well to form part of ....

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....of the assessee that the profit for the purpose of section 10A will be enhanced to the extent of the above disallowance. Therefore proportionate enhancement will be made in the amount of deduction available under section 10A. This issue is partly decided in favour of the assessee. 3. The assessee is partly successful in its appeal filed for the assessment year 2005-06. 4. Next we will consider the appeal filed by the Revenue for the very same assessment year 2005-06. 4.1. The first issue raised by the Revenue is that the foreign currency expenditure reduced from the export turnover should have been reduced from the total turnover by the Commissioner of Income-tax(Appeals). This ground is rejected in view of the decision of the Income-tax Appellate Tribunal, Hyderabad Bench delivered in the case of Patni Telecom P. Ltd. vs. ITO, 308 ITR (AT) 414. In assessee's own case for the earlier assessment year 2002-03, this issue was decided in favour of the assessee. This issue is decided against the Revenue. 4.2. The second issue raised by the Revenue is that telecom expenditure incurred in Indian rupee reduced from the export turnover should not have been reduced from the total....

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....ded by the Hon'ble Delhi High Court in favour of the assessee in the case of CIT vs. Indian Toners and Developers Ltd., 326 ITR 435. This issue is decided in favour of the assessee by a series of Tribunal orders in the case of M/s.Rishabh International vs. JCIT, Mumbai in ITA No.2788 & 2789 of 2004; in the case of Discover India Tours(P) Ltd. vs. Assessing Officer, 9 SOT 665 (Del); in the case of CIT vs. Syntel Ltd. in ITA Nos.1974, 1976 & 1978 of 2009; in the case of Rajesh Exports Ltd. vs. ACIT in ITA No.51 of 2008, etc. Accordingly, we direct the Assessing Officer to include the gain from EEFC account as part of the profits eligible for deduction under section 10A of the Act. This issue is decided in favour of the assessee. 6.2. The second issue raised by the assessee is that the foreign currency expenditure should not be excluded from the export turnover in computing the deduction under section 10A of the Act. As decided for the earlier assessment year 2005-06 and in the light of the decision of the Hyderabad Bench of the Tribunal in the case of Patni Telecom(P) Ltd. vs. ITO, 308 ITR 414, we accept the contention of the assessee and direct the Assessing Officer not to exclud....

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....et off against other taxable profits. In the present case, the Assessing Officer has ignored the current year's loss of eligible units and has not allowed set off of such loss against the balance taxable profit of the assessee. The Assessing Officer has held that the losses of eligible units shall necessarily to be carried forward in the light of the provisions of sections 10A(6) and 10AA(6) of the Income-tax Act, 1961 and the losses carried forward will be eligible for set off in the subsequent years only when the assessee has filed a declaration under section 10A(8). This view of the Assessing Officer is not sustainable in law in view of the decisions of the Hon'ble Bombay High Court in the case of CIT vs. Galaxy Surfactants Ltd. (ITA No.3465 of 2010) and in the case of Hindustan Unilever Ltd. vs. DCIT, 325 ITR 102. It is also against the decision of the Income-tax Appellate Tribunal, Chennai Bench in the case of Scientific Atlanta India Technology(P) Ltd. vs ACIT, 129 TTJ 273. If we accept the finding of the Assessing Officer, it will be running against the ratio of the judgment rendered by the Hon'ble Karnataka High Court in the case of Yokogawa India Ltd., 341 ITR 385. Accordi....