TaxTMI 
TaxTMI 
2016 (3) TMI 1350
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....d took our attention to the question of law framed by the Hon'ble High Court as under :- "Whether learned ITAT erred in law in holding that income of Rs. 50,42,764/- from trading activities is derived from Industrial undertaking within the meaning of Section 80-IA of the Income Tax Act, 1961?" The Hon'ble High Court dealt with the issue as under in Paras 10, 11 & 12 of the said order wherein it was held as under :- "10. The question raised in ITA 284/2011 again requires an order or remit. The Assessing Officer noticed that the assessee had shown sales of Rs. 2,12,28,512/-. On scrutiny of details, it was noticed that major sales were in respect of Antenna, RFT and other miscellaneous items, which included computer printer, UPS, CTV, air conditioner, hand camera, generator sets, telephone instruments, video conferencing systems, monitor etc. He held that the said equipments could be bought and procured from the Original Equipment Manufacturers (OEMS, for short) including the foreign vendors. Accordingly, Rs. 50,42,717/- was excluded from the deduction claimed under Section 80IA of the Act as income not derived from specified services, after noticing that the cost....
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....ant and required examination was the contracts under which the sales were made. Sale of TV Camera, Air Conditioner, generator sets per se or on standalone basis would not qualify for deduction 80IA read with sub-section (4) clause (ii). On the other hand, in case the assessee has been awarded a contract for providing telecommunication service, network of trunking and broadband/internet services and while and for executing the said contract, generator sets, air conditioner etc. were sold as a part of a complete package, then the income earned may qualify for deduction under Section 80IA. Therefore, each contract and nature thereof has to be examined. It has to be ascertained whether it was a case of supply of goods or it was a case where the assessee was providing qualifying services which mandated and required inextricably or as an necessary requirement, (under the same contract or under a different contract), sale/supply goods to operationalize and use/provide the telecommunication services. In case, the sale of goods was inextricably linked, had nexus and was connected with the primary purpose of providing or starting telecommunication services, the assessee will be entitled to b....
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....evelopment and sale of software and whether the said amount qualifies for deduction under Section 80IA. The tribunal has not treated the proceeds from sale of software declared by the assessee as Eligible for deduction under Section 80IA on the ground that the income derived from the sale of software was not derived from qualifying business i.e. telecommunication services. It has been observed that development of software was a separate source of business income. Accordingly, the total receipt of Rs. 61,58,000/- from the sale of software should be excluded from the deduction claimed under Section 80IA of the Act. 14. The contention of the assessee, which is recorded in the order passed by the tribunal, is that the software developed was for upgrading the Network Management System (NMS, for short), to enable smooth working of VSAT service under the technology from Via Sat and HSN at the request and on confirmed purchase orders from TVC India Pvt. Ltd. The justification given by the assessee to treat and regard the said income as eligible for deduction under Section 80IA, reads as under:- "............The Hub controls the entire operations of the communication netwo....
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....rred higher amount of expenses than Rs. 4,00,000/- on the development of software because apart from personnel/staff, the appellant had incurred various other overhead charges also. But the appellant had not furnished any details of expenses in excess of 4,00,000 incurred for the development of software. In these circumstances, the calculation made by the A.O. does not warrant any interference. Since the income earned from development of software was not profit and gains derived from the eligible business of providing Telecommunication service, the A.O. was justified in excluding the income from software development for computing deduction u/s 80IA." 16. We find that the Assessing Officer as well as the appellate authorities have not examined the issue/question keeping in mind the mandate of the section and contention of the assessee. Nature, character and type of the software and whether or not it could be treated and regarded as income earned from the business referred to in sub-section (4) clause (ii) to Section 80IA has not been examined and considered. Without examining the said aspect and the factual position regarding nature and type of software, the Assessing Offic....
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....unal that the aforesaid receipts cannot be included in the income derived from the specified activities in view of the decision of this Court in CIT Vs. Shri Ram Honda Power Equip (2007) 289 ITR 475. 18. The assessee has submitted that they had earned this interest of Rs. 8,38,626/- on FDRs pledged with the banks for availing non-fund based credit limits but they had paid interest of Rs. 1,70,99,277/- and, effectively the net interest Paid was the expense. Interest earned was business income directly connected with the qualifying service and therefore should be set off from the interest paid. It was stated that the interest earned had direct nexus with the business of the assessee since the FDRs were pledged as margin money for availing credit limits. The Assessing Officer, however, did not agree with the said contention. The CIT (Appeals) agreed with assessee and held that the interest on deposit was taxable as "business income" and not under the head "income from other sources" and therefore the assessee was entitled to deduction under Section 80IA(4)(ii). As noticed above, the tribunal has reversed the findings of the CIT(Appeals) and agreed with the Assessing Officer. ....
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....ceipts of income which are chargeable as profits and gains of business under Section 28 of the Act will have to be included. Similarly, in computation of such profits of business, different expenses which are allowable under Sections 30 to 44D have to be allowed as expenses. After including such receipts of income and after deducting such expenses, the total of the net receipts are profits of the business of the Assessee computed under the head "Profits and Gains of Business or Profession" from which deductions are to made under Clauses (1) and (2) of Explanation (baa). 13. x x x x x x x 14. x x x x x x x 15. Section 80M of the Act provided for deduction in respect of certain intercorporate dividends and it provided in Sub-section (1) of Section 80M that "where the gross total income of an Assessee being a company includes any income by way of dividends received by it from a domestic company, there shall, in accordance with and subject to the provisions of this Section, be allowed, in computing the total income of the Assessee, a deduction from such income by way of dividends an amount equal to" a certain percentage of the income mentioned in this Section....
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....ation and duty drawback it was held:- "39. Analysing the concept of remission of duty drawback and DEPB, we are satisfied that the remission of duty is on account of the statutory/policy provisions in the Customs Act/Scheme(s) framed by the Government of India. In the circumstances, we hold that profits derived by way of such incentives do not fall within the expression "profits derived from industrial undertaking" in Section 80-IB." 22. Reliance was placed by the assessee on AS 2 and explaining the same in Liberty India (supra), it was held:- "40. Since reliance was placed on behalf of the assessee(s) on AS-2 we need to analyse the said standard. AS-2 deals with valuation of inventories. Inventories are assets held for sale in the course of business; in the production for such sale or in the form of materials or supplies to be consumed in the production. "Inventory" should be valued at the lower of cost and net realisable value (NRV). The cost of "inventory" should comprise all costs of purchase, costs of conversion and other costs including costs incurred in bringing the "inventory" to their present location and condition. 41. The cost of purch....
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....ew of the aforesaid observations in the case of Liberty India (supra), the aforesaid second question of law in ITA No.130/2011 is answered in negative with an order of remand to the tribunal. In the absence of details, it is directed that the tribunal will examine the factual matrix of the present case including the balance-sheet and accounts of the assessee, to decide the question. It will be open to the tribunal to examine and consider the contention of the assessee, if raised and supported by facts, the quantum of expenditure incurred/attributed to earning of exempt income under Section 80IA of the Act." This issue also, both sides agree, should be remitted back to the file of AO as directed by Hon'ble High Court. So, we remit the matter back to the file of the AO to be decided afresh as per the direction of the Hon'ble High Court given to para 23 (supra). 11. Ground No.6 is against confirming the levy of interest u/s 234B of the Act. The charging of interest u/s 234B is consequential. The AO shall recalculate the interest under the aforesaid section, if any, while giving effect to appellate order. 12. In the result, the appeal of the assessee is disposed off as above f....
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....wide) and had not shown any income or receipts earned from any third party. The addition was made holding that the income included income from satellite services not in the nature of domestic satellite service as defined for purpose of the Section 80IA. The profit/income disclosed by the assessee was notionally on proportionate basis treated as profit/income earned from satellite services, not being domestic satellite services. 9. The assessee holds a VSA license to establish, maintain and operate closed users group, an Internet license to establish, maintain and operate internet services and a license/permission from the Ministry of Information and Broadcasting for providing uplinking services. The case of the assessee is that they have incurred an expenditure for utilization of space segment on a satellite to provide the said services. It is not their case that they are in the business of providing lease/ sale of space segment or satellite services or that they were providing domestic satellite services. Contention of the assessee was/is that as a broadband/internet service provider etc. it had procured space segment in the satellite and paid charges in foreign currency ....