TaxTMI 
TaxTMI 
2009 (1) TMI 884
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....sted out, as under: 1) The CIT(A) erred in directing the AO/TPO to rework the additions on account of ALP adjustment. He ought to have appreciated that the rate adopted in the TPO's order is arm's length rate as it represents uncontrolled transactions; 2) The CIT(A) erred in directing the AO to delete the disallowance of depreciation on imported software. He ought to have appreciated that:- i. the payments made on account of software import for in house utilization are in the nature of royalty within the meaning of Explanation 2 under section ii. the assessee has failed to deduct tax at source as per the provisions of sec. 195. iii. Applying the provisions of section 40(a)(i) that the depreciation on software imports is disallowable 3)the CIT(A) erred in deleting the warranty provision amounting to Rs. 6,98,28,965/- disallowed by the AO, following the decision of the ITAT in the case of Wipro Ge Medical Systems Ltd. in ITA No: 322 to 328/B/94. He ought to have appreciated that the decision relied on him in the case of Wipro Ge Medical Systems Ltd. has not become final and appeal before....
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....ght must directly emerge from the running of that undertaking yielding profits. The CIT(A) erred in directing the AO not to exclude gain on exchange rate fluctuation amounting to Rs. 15,52,56,290/- from the profits eligible for deduction u/s.10A. He ought to have appreciated that as per the ratio of decision of apex Court in 237 ITR 579 in the case of CIT v. Sterling Foods and Pandian Chemicals v. CIT 262 ITR 278 the source of a particular income on which exemption is sought must directly emerge from the running of that undertaking yielding profits. The CIT(A) erred in directing the AO not to exclude interest income received amounting to Rs. 69,61,059/- from the profits eligible for deduction u/s.10A. He ought to have appreciated that as per the ratio of decisions referred above, the source of a particular income on which exemption is sought must directly emerge from the running of that undertaking yielding profits. He ought to appreciated that the decision of the ITAT in the case of the assessee relied on by him has not become final and an appeal before High Court is pending. The CIT(A) erred in remitting back the issue regarding other ....
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....ision of the ITAT relied on by him is rendered with regard to deduction u/s 80HHE whereas the deduction claimed by the assessee was u/s 10A of the Act and is not applicable to the facts of the assessee's case and the decision has not been accepted by the Department and has not become final. The CIT(A) has failed to appreciate that:- i. As per section 80HHE there are two aspects to the software development business. The first limb of the business will be export of computer software which was produced by the assessee itself and exported. The second aspect is that of providing technical services in developing the computer software as per the specification of the client. ii. unlike section 80HHE section 10A applies only to profits derived by an under-taking from the export of articles or things or computer software and not for providing technical services. Even explanation 2(i)(a) to section 10A referred by the CIT(A) is with regard to any computer programme recorded on any disc, tape, perforated media or other information storage device and not with regard to providing technical services. The CIT(A) had failed to appreciate that: ....
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....s at Bangalore satisfy various conditions set by section 10A(2) on the ground that the units have been formed without splitting up or reconstruction of business already in existence and without transfer of old plant and machinery. He further erred in holding that the AO has overlooked specific requirement of section 10A(2) but has evaluated the claim u/s 10A by imposing conditions not found in section 10A(2). The CIT (A) was wrong in holding that the decision os the Hon'ble Apex Court reported in 107 ITR 195 is clearly applicable. The CIT(A) erred in holding that the issue before the ITAT in 85 ITD 325 was not whether the expansion resulted in a new unit as no claim to that effect was made by the assessee in that case. He has erred in observing that the Tribunal for the AYs 98-99 and 99-00 in ITA Nos:895 and 896/B/2005 has given a finding on the eligibility of deduction u/s 10A by extensively bringing the details of eligible units, year of commencement, the approval granted by STP and the AO had admitted the claim for earlier years. He ought to have appreciated that the question of allowability of exemption u/s 10A in respect of Bangalore units was not an issue e....
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....l is pending before the High Court. 13) The CIT(A)erred in directing the AO to exclude Excise duty and sales tax from the total turnover for the purpose of computing deduction u/s 80HHC following the decision of the ITAT in ITA No:881, 882, 895 and 896/B/2003 which has been challenged before the High Court. The CIT(A)erred in directing the AO to consider only the total turnover and profit of the assessee which are eligible for deduction u/s 80HHC for the purpose of computing deduction u/s 80HHC following the decision of the ITAT in ITA No:881, 882, 895 and 896/B/2003 which has been challenged and pending before the High Court. He ought to have appreciated that while computing the deduction u/s 80HHC total profit of the assessee's business has to be considered and not the profit of the eligible business. The CIT(A) erred in directing the AO not to consider the difference in exchange of Rs. 22.90 crores for exclusion while computing the deduction u/s 80HHC on the ground that the same would fall within the ambit of operational income and exclusion is not warranted. He has erred in directing the AO not to consider Brand fees of Rs. 2.20 crores for excl....
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....ering the facts and circumstances under which the Revenue was prevented by a reasonable cause in preferring the appeal within the stipulated time limit, the delay of nine days is condoned and the appeal is admitted for adjudication. 4. Similarly, the assessee company, through its Chairman, vide letter dated 8-7-2008 has filed Form of Memorandum of cross objections along with enclosures. The Chairman's letter is reproduced as under: "This is with reference to the above referred appeals filed by the Department against the order dated 9.7.07 of the learned Commissioner of Income-tax (Appeals)-VI, Bangalore [CIT(A)] in our case for assessment year 2004-05. In the said appellate order of the CIT(A) which was received by us on 16.7.2007, relief was granted in respect of many issues and the additions/disallowances made in the order of the assessing officer were sustained only in respect of three principle issues. The grounds of appeal in respect of these issues confirmed by the CIT(A) were finalized by us in consultation with our counsels but it appears that the actual filing of the appeal in the statutory Form 36 was inadvertently omitted. On receipt of notice dated....
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....ction under section 10A of the Act. The Ld. CIT(A) having held that the deduction under sub-section 1 of section 10A is to be computed as per the mathematical formula defined in sub-section 4 of section 10A, erred in remitting the issue back to the AO. (2) Deemed exports not eligible for deduction under section 10A: a) the Ld. CIT(A) having appreciated that the amount reckoned as deemed exports are exports as per the EXIM policy erred in excluding the same from the purview of export turnover and thereby concluding that the same is not entitled to deduction under section 10A. (3) Issue of exclusion of foreign taxes (VAT/GST) from export and total turnover: The learned authorities below erred in excluding the foreign tax (VAT/GST) from the export turnover and total turnover and thereby granting a lower deduction under section 10A for the undertaking in software technology parks. Without prejudice, similar amount should have been reduced not only from the total turnover but also from the expenditure incurred by the units under section 10A. (4) Software development centre outside India: a) The lea....
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....ncial result from such a trading could have been only a business loss as no consideration was realized for monitors so sold. (6) Interest under section 234B: (a) the appellant denies the liabilities for interest u/s 234B/234D. Further prays that the interest u/s 234B if any, should be levied only on the returned income and the levy should be limited to the date of regular assessment. (b) Without prejudice to the appellant's right of seeking waiver before the appropriate authority, the appellant begs for consequential relief in the levy of interest under section 234B. 5. Since most of the issues raised by the Revenue as well as the assessee company are common, for the sake of convenience, these appeals are disposed off in a common order. 6. Most of the issues agitated by the either parties in these appeals have since been considered by the Hon'ble Tribunal in the earlier assessment years. Let us first take up the Revenue's appeal for consideration. 7. In the first effective ground, the grievance of the revenue was that the CIT(A) erred in directing the AO/TPO to rework the additions on account of adjust....
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....the reasons set out in the grounds of appeal and forcefully urged that the decision of the Ld.CIT(A) may be assailed. 8.2. At the out-set, we would like to point out that the issue in question has been covered by the decision of the Hon'ble Tribunal referred supra. The Hon'ble Tribunal while disposing of the appeal for the AYs.01-02 and02-03 had followed the earlier orders for the AYs 98-99, 99-00 and 00-01. Thus, this issue is also decided in favour of the assessee company. 9. The third effective ground is with regard to the provision for warranty. The assessee had provided for the incremental warranty expenses in its books amounting to Rs. 6,98,28,965/-. It was the contention of the assessee that such warranty expenses were allowed by the Hon'ble Tribunal for the AYs.98-99 and 99-00. However, the Ld.AO rejected the assessee's contention on the ground that the order of the Hon'ble Tribunal is being challenged before the Hon'ble High Court. Aggrieved, the assessee has reiterated before the Ld.CIT(A) that since this issue is covered by the appellate orders for earlier years, it should be decided in its favour. The Ld.CIT(A) was of the view that the fact....
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....the case of CIT vs Indo Nippon Chemicals Co. Ltd. reported in 261 ITR 275. Further, it was submitted that the issue stands covered by the orders of Ld.CIT(A) and Hon'ble Tribunal for the AYs.98-99 and 99-00. Considering the issue in depth and also identical to the one in the earlier years, the Ld. CIT (A), following the decisions of the Hon'ble Apex Court referred supra had reversed the order of the Ld.A.O. 10.2. Before us, the Ld.D.R. forcefully argued that the Ld. CIT(A) had grossly erred in deleting the addition made following the decisions of the Hon'ble Tribunal which has been challenged before the Hon'ble High Court. On the other hand, the Ld.A.R has brought to our reference that a similar issue was deliberated by the Hon'ble Tribunal for the AY 2000-01 which was followed for the AYs 2001-02 and 02-03 wherein the issue was restored back on the file of the Ld. A.O for re-computation and, therefore, prayed that the same treatment may be handed out for this AY too. 10.3. Rival submissions were carefully considered. We have also critically perused the earlier years' orders of the Hon'ble Tribunal on which strong reliance was placed by the assesse....
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....nnot be allowed as deduction u/s 43B as per the decision of the special Bench in the case of DCIT v. Glaxco Smithkline (supra). Modvat credit is also available on capital goods purchased. We are not having the details of Modvat credit. If the excise duty paid by the assessee is to be included in the closing stock then the same is to be considered in purchases as the closing stock is a figure to balance the item of purchases left at the end of the year. Hence, in the example given above, Rs. 4 will have to be debited in the manufacturing account. As per decision of Apex Court in the case of Berger Paints India Ltd. 266 ITR 99 provisions of section 43B are also applicable in respect of amount included in closing stock. If Modvat credit available on closing stock is set off before the due date of filing of return, then such amount is available for set off u/s 43B of the I.T.Act. It means that if modvat credit of Rs. 1,32,50,765/- is availed before the due date of filing of return, then there will be no addition. For re-computation, the matter is restored back on the file of the assessing officer." 10.4. Considering the facts and circumstances of the issue and respectfully following....
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.... Tribunal in ITA No:651/Bang/94 for the AY 1997-98 in the assessee's own case which is in favour of the assessee company, the Ld. CIT(A) has deleted the addition on this count. 11.3. Before us, it was reiterated by the Revenue that the CIT(A) had grossly erred in vacating the allocation of corporate expenses made by the Ld.AO and also failed to take cognizance of the very fact that the decisions of the Hon'ble Tribunal have been challenged before the Hon'ble High Court. 11.4. We have carefully considered the submissions of both the parties. We have also perused the decisions of the Hon'ble Tribunal on which the assessee company has placed strong reliance. The order of the Hon'ble Tribunal for the AY 97-98 in assessee's own case in ITA No:651/B/94 has decided the issue in favour of the assessee and relevant findings of the Tribunal is reproduced as under: "27.14. In view of these entire facts of the case and, in the absence of any specific finds by the authorities below that the expenditure is incurred for the various units claiming exemption/deduction in an artificial way of allocating the expenses and that too on surmises is not justifi....
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....an aggregate Miscellaneous income of Rs. 16,63,93,949/- which comprised of the following: Rs. i) scrap sales 30,45,077 ii) gain on exchange rate fluctuation 15,53,56,390 iii) interest expenses (46,48,609) Sub-total(A) 15,37,52,858 iv) interest income 69,61,059 v) rental income 3,21,500 vi) commission received 34,88,676 vii) Other income 7,55,405 viii) Profits on sale of fixed assets 28,78,270 Less:Loss on sale of fixed assets (17,63,818) 11,14,452 Sub-total(B) 1,26,41,092 Total (A+B) 16,63,93,950 The sum of Rs. 15,37,52,858 [ sub-total (A) in the above table] was considered by the assessee for computing profit eligible for deduction u/s 10A for the STP units forming part of Wipro Technologies Division. However, the Ld.AO took a stand that only the income which can be held to be directly attributable to the business activity of the units claiming 10A can be treated as part of total turnover. Source of a particular income on which exemption is sought must directly emerge from the running of the undertaking yielding profits. 12.2. After considering the submissions of the either parties, the L....
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....hat the sale of scrap reduced the quantum of expenditure debited for that purpose. On that basis, the amount received from the sale of scrap cannot be excluded for the purpose of computing deduction u/s 10A." (2) In respect of exclusion of exchange rate fluctuation, the Hon'ble Tribunal in its decision referred supra has observed: "11.3. It is seen that the Tribunal for the asst. year 2000-01, following its order for the asst. years 1998-99 and 1999-2000, held that foreign exchange gain due to fluctuation in the rate of rupee is to be included in the profit of the undertaking and is to be considered as eligible for deduction u/s 10A. The excess amount is received because the sale proceeds when received are more as compared to the price at which the goods were exported on account of exchange rate fluctuation. The exports are made at a price in foreign exchange and the amount is received in India subsequently and, therefore, some gain is there on account of fluctuation. For the purpose of section 80-HHC, the Mumbai Bench in the case of ACIT vs Muthu Mandir Tardev Road, Mumbai (2006) 10 SOT 148 held that exchange gain itself is to be considered as par....
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.... "9..3..........The assessing officer in his order has commented that rent received is not in the nature of direct income derived from the undertaking. However, in the computation of total income, the assessing officer has not taxed such rent under the head "income from house property" or 'income from other sources'. It is true that the rent received either through letting out of property or leasing out manufacturing facility is not an income derived from industrial undertaking but unless that rent was taxed under the head 'income from house property' or 'income from other sources', the same cannot be excluded in view of the provisions of section 10A(4). Hence, we are of the opinion that the Ld.CIT(A) was justified in directing the assessing officer not to exclude rent from the receipts for the purpose of computing deduction u/s 10A." 12.8. As the issue dealt with by the Hon'ble Tribunal is similar to the issue on hand, respectfully following the said decision, we direct the AO not to exclude the rent receipt for the purpose of computing deduction u/s 10A. 12.9. With regard to commission and other income, the Revenue has vehemently agit....
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....A) erred in observing that the competent authority is deemed to have allowed delayed realisation made after expiry of six months from the end of the relevant financial years and, therefore, his order may be assailed on this count. On the other hand, the ld. A.R was firm in his submission that the issue has since been decided by the Hon'ble Tribunal in favour of the assessee for the AYs 01-02 and 02-03 which holds good for this assessment year as well. 13.5. Rival submissions were duly taken note of. The Hon'ble Tribunal in its order referred supra after analyzing the issue exhaustively, debating section 8 of the Foreign Exchange Management Act, 1999 and also section 155(13) of the Income-tax Act extensively and quoting Rule 15 of RBI Regulations came to a conclusion that the Ld.CIT (A) was justified in directing the AO to include in export turnover the collections made after the expiry of six months. As the issue before hand is similar which was decided by the Hon'ble Tribunal and respecting its view, we have no hesitation in upholding the action of the Ld. CIT(A) in the matter. 14. The next effective eighth ground is with regard to reimbursement of communication ....
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.... the same only from export turnover. If it is held that the said sum is required to be excluded from export turnover then similar amount should be reduced from the total turnover also as held by Bombay High Court in Sudarshan Chemicals reported in 245 ITR 769." 14.4. After considering the rival submissions, the Ld. CIT(A) took a view that this issue was also covered by his decision for the AYs 01-02 and 02-03 and the same holds good for the AY under dispute and, accordingly, directed the AO to consider 5% of Rs. 14.66 crores for exclusion from the export turnover on account of telecommunications. The exclusion shall also be similarly made from the total turnover. 14.5. Aggrieved, the Revenue has come up before us. The Ld. A.R forcefully submitted that the issues stand covered by the decision of the Tribunal in the case of the assessee company for the AYs. 01-02 and 02-03. On the other hand, the ld. D.R urged that the action of the Ld. AO is in order which may be upheld. 14.6. We have carefully considered the submissions of the either parties. We find that the Hon'ble Tribunal has dealt with these issues comprehensively. After considering the pros and cons of the issues....
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....eloped as a result of an intellectual analysis of the system and method followed by the purchaser of the programme. It is often prepared on site with the software personnel going to the clients premises. Hence, when the expenditure is in respect of payments on site development, the same cannot be excluded from the export turnover by holding it as technical services. When export of services only is not entitled to deduction u/s 10A then the Legislature made clear that foreign exchange relating to technical services will be excluded. If there is export of goods as well as services then only that portion will be eligible for deduction which relates goods. Hence, the AO is not justified in excluding Rs. 4,86,63,187/- from export turnover. 24.6. The Hyderabad Bench in the case of Patni Telecom P. Ltd. vs. ITO vide order dated 11th January, 2008 in ITA NO.5/Hyd/2005 and 354/Hyd/2006 held that expenditure incurred on travel and allowances for the purpose of development of software at clients site outside India cannot be excluded from the export turn-over. Similar finding has been given by Chennai Bench vide order dated 15th February 2008 in ITA NO.731/Mad in the case of Cha....
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....sessee had rendered technical services and thus expenses incurred in foreign currency in rendering such technical services require exclusion from export turnover. On the other hand, the assessee company, extensively quoting the provisions of section 10A (4) of the Act and also placing strong reliance on the decision of the CIT(A) for the AYs 01-02 and 02-03 had argued that the exclusion of above sums of communication link and other reimbursements, VAT/GST, telecommunication expenses and expenditure in foreign currency as carried out by the AO be vacated. 15.1. After critically analyzing the rival submissions and also drew strength from his earlier decision on a similar issue, the Ld.CIT(A) has held that no exclusion was required on this issue and, accordingly, directed the Ld. AO to re-compute the deduction u/s 10A. 15.2. Protesting against the action of the Ld. CIT(A), the Revenue has brought up this issue before us for redressal. It was the case of the Revenue that the Ld.CIT(A) has grossly erred in deciding the issue in favour of the assessee by following the decision of Hon'ble Tribunal in the case of Infosys Technologies Limited which has been challenged before the H....
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....the profits, in any, from the said units. The assessee company, on the other hand, submitted that the prohibition contained in section 10A (6)(ii) speaks of sections 72 and 74 and not sections 70 or 71. The current year losses are set off in terms of sections 70 or 71 for which there was no prohibition. The assessee company drew support from the decision of Hon'ble Tribunal in the case of Mindtree Consulting Pvt. Limited. 16.2. Considering the rival submissions, the Ld.CIT(A), relying on the decision of the Hon'ble Tribunal referred supra and also his own ruling for the AYs.01-02 and 02-03 in the assessee's own case, decided that loss from units is allowed to be set-off against other business income of the assessee. While doing so, he drew support from the decision of the Hon'ble Supreme court reported in 161 ITR 320. 16.3. Agitated, the Revenue has come up with the present appeal. The Ld. D.R. had opposed the finding of the Ld.CIT(A) who solely relied on his decision for the AYs.2001-02 and 02-03 in the assessee's own case and merely followed the decision of the Hon'ble Tribunal which has been challenged before the Hon'ble High Court and, therefor....
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..... The effective eleventh ground is with regard to eligibility of deduction u/s 10A. The Ld. AO has stated that the main focus of the assessment was whether the new undertaking which came into existence was located in any software technology park and whether the said undertaking commenced manufacture or produced computer software during the previous year relevant to the AY commencing on or after 1.4.1994 in any software technology park. The AO was of the view that the new units located in Bangalore have been formed in software technology parks with approvals obtained from STP under the original licenses issued in 1992 and, thus, he concluded that the assessee had only two undertakings at Bangalore since these undertakings commenced operations prior to 1.4.1993, they were not eligible for deduction u/s 10A. With regard to the license and approval requirements of each undertaking established by the assessee in various years, the AO had followed the earlier years order's versions. 17.1. After considering the submissions of either parties exhaustively, critically analyzing the applicability of the provisions of relevant sections of the Act, legal implications and also perusing th....
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....e for section 10A because both the sections are similar. Hence, we confirm the finding of the learned CIT (A) that the assessee is entitled deduction u/s 10A." 17.4. Considering the facts and circumstances of the issue and respectfully following the verdict of the Hon'ble Tribunal referred supra, we are of the considered view that the assessee company is entitled for deduction u/s 10A and, hence, we confirm the finding of the Ld. CIT(A) on this count. 18. The twelfth effective ground is with regard to the allow-ability of credit for foreign taxes paid. The AO had granted relief of foreign tax paid only in respect of units at Bangalore for which deduction u/s 10A was denied and alternate deduction u/s 80HHE was granted. Credit for foreign tax paid relatable to the units other than at Bangalore was denied. The AO had placed strong reliance on the decision of the Hon'ble Madras Tribunal reported in 85 ITD 442 on his action. On the other hand, the assessee company in its written submission had mainly rebutted the AO's justification in drawing strength from the decision of the Madras Tribunal which had dealt with the issue pertaining to the AYs 87-88 and 88-89 whereas ....
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....yzing the issue in depth, was, further, opined that "22.8...............credit for income-tax paid in other country in relation to income u/s 10A will not be available u/s 90(1)(a). U/s 90(1)(b), the Central Government may enter into an agreement with a Government of any country outside India for the avoidance of double taxation of income under this Act and under the corresponding law in force in that country. To see the applicability of section 90(1)(b), one is required to go through the DTAA agreements. Though the assessing officer has discussed this issue in detail in his order, but the learned CIT(A) has not considered the arguments advanced by the assessing officer in not allowing the tax credit. Hence, we feel that this issue requires to be reconsidered by the learned CIT(A) in view of the facts and arguments considered by the assessing officer in his order. Hence, this issue is restored back on the file of the learned CIT(A)." 18.5. In view of the above and also the issue before us is a similar one on which the Hon'ble Tribunal has deliberated and arrived at a conclusion cited supra, we are of the considered opinion that this issue should go back to CIT(A) fo....
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..../s 80HHC. 19.3. Agitated over the treatment of the Ld.CIT(A), the Revenue has come up before us. The Ld. D.R. submitted that the order of the Hon'ble Tribunal has been challenged before the Hon'ble High Court and as such, the Ld. CIT(A) has grossly erred in following the said decision in deciding the issue in favour of the assessee and urged that the order of the Ld. CIT(A) may be assailed and that of the AO may be restored. On the other hand, the Ld.A.R has drawn our attention to the decision of the Hon'ble Tribunal in the assessee's own case for the AYs.2001-02 and 02-03 which is in their favour. 19.4. Rival submissions were duly considered. Strong reliance placed by the either parties on the various decisions were duly perused. An identical issue was dealt by the Hon'ble Tribunal in its order referred supra and the relevant portion of which is reproduced as under: Excise duty and sales-tax: "20.1. The above-referred issue stands decided by the apex Court in the case of CIT v. Lakshmi Machine Works 290 ITR 667 and in the case of CIT v. Catapharma (India) P.Ltd. 292 ITR 641. The Apex Court has held that excise duty and sales ....
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....parate accounts for eligible business and other business. Subject to this direction, the finding of the learned CIT(A) is upheld in respect of the above referred grounds of appeal." 19.7. Respectfully following the decision of the Hon'ble Tribunal referred above, we are upholding the action of the Ld.CIT(A) on this count. Deduction u/s 80HHC: 1. Difference in exchange 2. Issue of brand fees 3. Exclusion of provision for doubtful debts written back 4. Exclusion of miscellaneous income 19.8. We have carefully considered the rival submissions and also the reasoning of the Ld.CIT(A) in the matter. The Hon'ble Tribunal in its decision for the AYs 2001-02 and 2002-03 in the assessee's own case, has dealt with the issues elaborately and comprehensively. As the issues on hand are identical to that of the issues dealt by the Hon'ble Tribunal, we are in full agreement with the decisions of the Hon'ble Tribunal and the same are hold good for the year under appeal also. 20. The effective fourteenth and last ground of the Revenue is against the deletion of the allocation of selling and general admi....
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....the Ld.CIT(A)'s action. Let us now take up the cross-objections raised by the assessee company. 21. Miscellaneous income not considered as part of income eligible u/s 10A: It was submitted by the Ld. A.R. that the authorities below erred in reducing the profits under section 10A by not considering commission received of Rs. 34,88,676/, rental income of Rs. 3,21,500/- and other income of Rs. 7,55,405/- though the said items of income directly emerged from the business of the under-takings located in software technology parks and qualified for deduction under section 10A of the Act. It was, further, submitted that the Ld. CIT(A), having held that the deduction under sub-section 1 of section 10A is to be computed as per the mathematical formula defined in subsection 4 of section 10A, erred in remitting the issue back to the AO. 21.1. With regard to commission and other income, the Revenue has vehemently agitated that the Ld.CIT(A) had no power, as per the amended provisions of section 251 of the Act, to remit back to the AO. We are in agreement with the Revenue. As per the amended provisions of section 251 of the Act [Finance Act, 2001 w.e.f. 1/6/2001], the power....
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.... or brought into India by the assessee in convertible foreign exchange in accordance with sub-section 3 of section 10A. The foreign taxes levied cannot be a consideration in respect of export of computer software received in India by the assessee in convertible foreign exchange. The foreign taxes are to be remitted in the foreign country and the foreign exchange to that extent cannot be brought into India. Considering the definition of export turnover contained in section 10A, we feel that the assessing officer was justified in not including the foreign taxes in the export turnover. Once the sum is not included in export turn-over, then the sum cannot be included in the total turnover." 23.3. Respectfully following the said decision of the Hon'ble Tribunal, we are of the considered view that no interference is called for on this count. 24. Software development centre outside India: The learned A.R. submitted that authorities below erred in stating that on-site is only client's site and the development of computer software in software development centers of the assessee outside India cannot be construed as on-site development of computer software referred to i....
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....d 02-03, had confirmed the action of the Ld.AO. 25.1. During the course of hearing before us, the Ld. A.R submitted that the activities of annual maintenance of computers, manufactured in the industrial undertakings at Pondicherry, is integral to the manufacture and sale of computers. The nature of AMC is on par with warranty and that the method of realizing the price for the goods should not make a difference in determining the eligibility for deduction under section 80-IB. The assessee manufactured and sold computers from its industrial undertakings at Pondicherry and that monitors were integral part of the computers manufactured therein. Since monitors are procured from outside, the profits derived from sale of computers manufactured in the industrial undertakings at Pondicherry and eligible for deduction under section 80 IB should not include profits, if any, derived from the sale of the monitors. The learned CIT(A) erred in treating such profits as trading profits. The learned authorities below erred in computing a trading profit even though the appellant had supplied the monitors as an integral part of the computers manufactured in the industrial undertakings at Pondicherr....
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....ronic instrument. If it is not charged in the sales bill, then sales tax or excise cannot be charged on these amounts. When the assessee is deriving income from the service contract, then it cannot be said that it is deriving income from the industrial undertaking. The deduction u/s 80-IB commences from the year in which the industrial undertaking begins to manufacture or produce articles or things. Hence, the intention of the Legislature is quite clear that the deduction should be allowed to an industrial undertaking which the profit is derived from the manufacturing or production of an article or thing. Therefore, the learned CIT(A) was justified in holding that profit from AMC cannot be included for the purpose of computing deduction u/s 80IB. 33.6. In respect of monitors, it was submitted before the learned CIT(A) that the monitors are sold along with the computer manufacture by the undertaking. It may be an integrated component of the computer. If there is no value addition without any change in name, character or and use, then such an activity cannot constitute manufacture or production. If the monitors have been sold as part of the computer without making any ....