TaxTMI 
TaxTMI 
2017 (6) TMI 1155
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....ments made for import of goods and services from export turnover and upholding the exclusion of foreign travel related cost incurred in foreign currency from the export turnover in the facts and circumstances of the case. 3. The brief facts of the case is that the assessee is private limited company, primarily engaged in the business of software development. The assessee filed the Return of income declaring an income of Rs. 11,08,48,280/- under the subsequent provision of the act, after claiming deduction of Rs. 39,04,10,134/- u/s. 10A of the Act. The assessee also returned book profit of Rs. 51,08,13,364/-u/s. 115JB of the Act. The assessment was framed by the Ld. AO u/s. 143(3) of the Act computing the total income under normal provisions as well as u/s. 115JB of the Act after making certain additions thereon. One such addition made was with regard to the exclusion of expenditure in the form of salary, wages and allowances, travelling expenses and import payment for goods and services from export turnover for the purpose of computing deduction u/s. 10A of the Act. The reason for making this exclusion was in view of the fact that the Ld. AO had treated such expenditure as expen....
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....g reliance on the decision of this Tribunal directed the Ld. AO to exclude this expenditure from total turnover also and accordingly the deduction u/s. 10A of the Act does not get disturbed thereon. Hence, the reliance placed by the Ld. AR on the decision of this Tribunal order (Supra) was never adjudicated by Ld. CIT(A) and accordingly, he prayed for setting aside of this issue to the file of the Ld. CIT(A) for obtaining his findings thereon. 8. We heard the rival submissions and perused the material available on record including the compilation of various case laws in the form of various Tribunal orders in the assessee's own case and others filed by the Ld. AR. We find that the first dispute of this issue is squarely covered by the decision of this Tribunal in assessee's own case (Supra) wherein it was held: " 7. The case as put forth by Dr.Anita Sumanth, the Id.Advocate, is that the assessee is engaged in the business of 'software development' and not in providing 'technical services' as has been alleged by the Department. This contention of the Id.AR is found supported by the STPI approved (for assessment year 2002-03) annexed at page 97 of t....
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....the course of the arguments addressed on behalf of M/s. Sak Soft Ltd., a question arose as to what would happen if these items are not separately shown in the invoice and are included in the total amount raised by the invoice. It was conceded on behalf of the assessee by its learned representative that in such a case, the Assessing Officer will have the power to go behind the invoice and find out how much of the invoice amount pertains to the recovery of the aforesaid items. We are also of the view that in an appropriate case it would be open to the Assessing Officer to exercise such a power in order to apply the formula in a meaningful manner. 32. The learned representative for Adventnet Development Centre (India), one of the interveners submitted that the definition of 'export turnover' in clause (iii) of Explanation 2 below section 10B was not based on the concept of "Net inflow of foreign exchange" as sought to be made out in the order of the Chennai Bench of the Tribunal in California Software Co. Ltd. 's case (supra) because the condition that the assessee should have used foreign currency is applicable only to the expenses incurred by it in providing the....
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....n exchange. However, the observation of the Bench that there can be no logical reason to exclude from the total turnover what was never part of it in the first instance, with respect, appears to be in favour of the contention canvassed before us on behalf of the assessee and the interveners, whose contention also is that the items excluded from the export turnover should also be excluded from the total turnover because they can never be considered as part of the turnover, for they have no element of turnover in them and are mere reimbursement of the expenses. 35. In California Software Co. Ltd.'s case (supra), the Chennai Bench of the Tribunal, as already noticed, has held that the objective of the definition of 'export turnover' in section 10B was to apply the principle of netting by comparing the inflow and outflow of foreign exchange from or into the country. We have already held that this could not have been the objective. The order of the Chennai Bench, to the extent it holds so, with respect, cannot be approved. However, in the same paragraph (para 23) the Bench has also held that what was never part of tile turnover in the first instance cannot be exclud....
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....sue to be decided in this appeal is as to whether the Ld. CIT(A) was justified in upholding the disallowance u/s. 14A of the Act in the sum of Rs. 2,43,50,989/- in the facts and circumstances of the case. 11. The brief facts of this issue is that the assessee derived an amount of Rs. 6,98,42,823/- towards dividend income and claimed the same as exemption u/s. 10(35) of the Act. The Ld. AO observed that assessee had not disallowed any expenditure u/s. 14A of the Act for the purpose of earning this exempt income. Accordingly, he sought to invoke the provisions of section 14A of the Act r.w.r. 8D of the Income Tax Rules and made disallowance under the 3rd limb of Rule 8D(2) and made disallowance of Rs. 2,43,50,989/-. The Ld. AO arrived at the average value of investment of Rs. 2,43,50,989/- and applied 1% thereon for the purpose of making this disallowance. The Ld. AO disallowed the said amount of Rs. 2,43,50,989/- for the computation of book profits u/s. 115JB of the Act. The Ld CIT(A) upheld the action of the Ld. AO by stating that definitely some amount of expenditure in the form of manpower cost and infrastructure facilities would have to be used by the assessee for the purpose....
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....additional evidence and the amount of disallowance suo-moto offered by the assessee be verified by the Ld. AO and accordingly prayed for setting aside of this issue to the file of the Ld. AO. He also brought to the notice of this bench that the Ld. AO though sought to disallow only 0.5% of average value of investments, but erred in disallowing 1% of average value of investment under Rule 8D2(iii) of the Rules, for which he sought necessary directions to be given to the ld. AO in case if the plea made in additional evidence is not accepted. He also made a plea that the Ld. AO had not recorded any satisfaction in terms of Rule 8D(1) of the Rules and accordingly no disallowance under Rule 8D(2) would operate in the facts and circumstances of the case. With regard to the issue of disallowance u/s. 14A while computing the book profits u/s. 115JB of the Act, the Ld. AR argued that the same does not fall in the list of additions contemplated in the explanation to section 115JB of the Act and accordingly argued that the book profits cannot be disturbed thereon. In support of this, he placed reliance on the decision of this Tribunal in the assessee's own case in ITA No. 2277/Mds/2014 fo....
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.... investments yielding taxable income need to be excluded while computing disallowance under Rule 8D of the Rules. However, this finding becomes infructous in view of our earlier directions given herein above. 16. With regard to disallowance u/s. 14A in the computation u/s. 115JB of the Act, we find that the issue is squarely covered by the decision of Beach Minerals Limited reported in 64 Taxmann.com 218 (Supra) wherein it was held: " 8.1 Ground No. 5.(a) - Computation of book profit U/s. 115JB of the Act by giving effect to the disallowance of expenditure made invoking the provisions of the Section-14A of the Act for Rs. 3,11,34,630/- and also the disallowance of expenditure under the normal provisions of the Act. 8.1.1 The Ld. Assessing Officer while computing the tax as per provisions of section 115JB of the Act made additions to the book profit with respect to the disallowance made U/s. 14A of the Act read with Rules-8D of the Income Tax Rules. On appeal, the Ld. CIT (A) citing the provisions of clause (f) of Explanation-1 to Section-115JB, confirmed the order of the Ld. Assessing Officer. The relevant portion of the order of the Ld. CIT (A) is reproduced h....
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....mputing the profit for the purpose of Section 115JB of the Act another provision with fiction cannot be superimposed. Hence the question of increasing the 'Book Profit' due to the disallowance U/s. 14A of the Act will not arise. However, in the instant case of the assessee, since we have already deleted the addition made U/s. 14A, increasing the book profit will not arise. Further the decision of Hon'ble Apex Court cited by the assessee in the case Apollo Tyres Ltd. v. CIT [2002] 255 ITR 273/122 Taxman 562 is also squarely applicable to the case of the assessee. The gist of the same is reproduced herein below for reference:- "The Assessing Officer, while computing the book profits of a company under section 115J of the Income-tax Act, 1961, has only the power of examining whether the books of account are certified by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. The Assessing Officer, thereafter, has the limited power of making increases and reductions as provided for in the Explanation to section 115J The Assessing Officer does not have the jurisdiction to go behind the net profits shown in the....
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.... go to increase the profit derived from the eligible undertaking(s)/unit(s) for purpose of sections 10A of the Act." 18. The Ld. AR placed reliance on the decision of this Tribunal in assessee's own case in ITA No. 2277/Mds/2014 for assessment year 2008-09 dated 19.06.2015. No argument in this regard were advanced before Ld. DR by referring to any contrary decision of this Tribunal. 19. We have heard the rival submissions, we find that the issue is squarely covered by the decision of this Tribunal (Supra) wherein it was held : "9. In our opinion, this issue is squarely covered by the order of the Bombay High Court in the case of CIT V s M/s. Gem Plus Jewellery India Ltd 330 ITR 175, wherein it was held that the assessee was entitled to exemption u/s. 10A with reference to addition or disallowance of various payments, as the plain consequence of the disallowance and add back made by the Assessing Officer is an increase in the business profits of the assessee and the same to be considered for the purpose of computation of deduction u/s. 10A of the Act. Adopting the similar principles, we are inclined to direct the Assessing Officer to consider the disallowance u/s.....