TaxTMI 
TaxTMI 
2016 (9) TMI 1565
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....ices at Mumbai and Chennai. While Mumbai is a non STPI unit dealing with purchase and installation of ATM machines, the Chennai Branch has got both STPI and non STPI units. For the A.Y.201112 the assessee has claimed the amount of Rs. 1,01,53,363/- as an expenditure under travel expenses relating to 100% STPI unit. Since the expenditure towards the travelling amounting to Rs. 1,01,53,363/- incurred outside India in Foreign Currency, the assessing officer presumed that the assessee should have rendered the services outside India and excluded the amount of foreign travel from the export turnover for the purpose of computing the deduction u/s 10A. 4. The assessee went in appeal to the CIT(A) and the Ld. CIT(A) held that the impugned expenditure was incurred in foreign exchange therefore, the Assessing Officer rightly excluded the expenditure from the export turnover. Aggrieved by the order of the CIT(A) the assessee filed appeal before us. 5. The Ld. A.R submitted that the foreign travel expenditure should not be excluded from the export turnover since the act does not provide for exclusion of foreign travel expenditure unless it is incurred in rendering the service....
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....red outside India. Foreign travel expenditure is a business expenditure which should be allowed as deduction unless it is attributable to the services rendered outside India and the said expenditure incurred in foreign currency. The assessee's case is not a case where the assessee had rendered the services outside India and incurred the expenditure in Foreign currency. The Assessing Officer has not made out a case that the expenditure was incurred for the services rendered outside India and did not relate to the assessee's business. The assessee relied on the Honble Special Bench judgment in the case of Zylog systems v. Income- tax Officer, Company Ward- III reported in [2010] 8 taxmann.com 276 (Chennai) (SB). The Special Bench held that There was no dispute about the fact that the assessee was a company engaged in business of development of software both by way of onsite development and offshore development and also that it had branch in USA for which separate accounts were maintained. There was also no dispute about the fact that there was approval of the authorized dealer namely 'C' Bank for opening the overseas branch in USA. [Para 20] Now it was n....
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.... on foreign soil in connection with development of software by the employees of the assesseecompany at foreign branch and nothing had been incurred on managerial or technical services rendered to any outsiders in foreign soil. In view of this discussion, it was to be held that said expenditure could not be excluded from the export turnover for computing deduction under section 10B. [Para 24] 9. The Special Bench held in the case law cited supra that the expenditure incurred for the purpose of business in the Foreign soil should not be excluded from the export turnover for the purpose of deduction u/s 10B. In the assessee's case the expenditure was incurred for the purpose of business and should not be excluded from the export turnover. The assessee's case is squarely covered by the special bench decision. Therefore respectfully following the Hon'ble special bench decision cited, we delete the addition made by the AO and set aside the Lower authorities orders. Accordingly ground No.2&3 of the assessee's appeal are allowed. 10. Ground No.4 is related to the exclusion of unrealized export proceeds from the export turnover. The AO ....
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.... it is clarificatory in nature and accordingly sustained the addition made by the Assessing Officer. 13. The Ld A.R argued that in the section 80JJAA the words used are 'Industrial undertaking' and the 'workmen' as defined in Industrial Disputes Act. As per Expln-1 of section10(15) , the definition of Industrial undertaking includes computer software and as per the decided case Laws the work force of the computer software are also covered under the definition of workmen as per the Industrial Disputes Act 1947. Therefore he argued that the assessee is entitled for deduction u/s 80JJAA . He has referred the following decisions: (i)ACIT vs Texs Instruments(India) P. Ltd 27 SOT 72 (Bang) (ii) P.L. Goel vs ITO, 12 ITD 137(Delhi) (iii) CIT vs Comp-Help Services P. Ltd, 246 ITR 722 (iv) OnMobiole global Ltd. (2014)45 taxmann.com346 The ld. AR also referred the Tamilnadu Government letter No.9172/K2/2015-6 dated 30.5.2016 addressed to Puthiya Jananayaga Thozhilalar Munnani on the subject of the empl....
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.... ten per cent. of existing number of workmen employed in such undertaking as on the last day of the preceding year ; (ii) ''regular workman'', does not include- (a) a casual workman ; or (b) a workman employed through contract labour; or (c) any other workman employed for a period of less than three hundred days during the previous year ; (iii) ''workman'' shall have the meaning assigned to it in clause (s) of section 2 of the Industrial Disputes Act, 1947 (14 of 1947). 16. The expression 'industrial undertakings' is not defined in sec. 80JJAA. However, in Explanation 1 of sec. 10(15) of the Act 'industrial undertaking' is defined as under: Explanation 1.- For the purposes of this sub-clause, the expression "industrial undertaking" means any undertaking which is engaged in - (a) the manufacture or processing of goods; or (aa) the manufacture of computer software or recording of programme on any disc, tape, perforated media or other information device ; or; 17. Since the industrial undertaking is not defined in sec. 80JJAA of the Act, we have taken the help of Ex....
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.... the Industral disputes sact 1947. 21. The Bangalore Bench also in the case of OnMobiole global Ltd. (2014)45 taxmann.com346 has taken similar view and allowed the deduction u/s 80JJAA. In the cited case the ITAT held that Section 80JJAA allows for deduction of additional wages paid to new workmen for an industrial undertaking. While the term "industrial undertaking" has not been defined in section 80JJAA, it has been defined in other provisions; like sections 10(15) and 72A so as to include undertaking which is engaged, inter alia, in : - the manufacture of computer software - the manufacture of computer software or recording of programme on any disc, tape, perforated media or other information device. [Para 6.5.1] ■ The co-ordinate bench of this Tribunal in the case of Asstt. CIT v. Texas Instruments India (P.) Ltd. [2009] 27 SOT 72 (Bang.)(URO), has held that a company that is engaged in development, design and manufacture of software should be considered as being an industrial undertaking for the purposes of section 80JJAA. As the assessee is engaged in the development and manufacture of software, the assessee i....
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....y', 'workman', 'industrial dispute', etc., so as not to whittle down, but to advance the object of the Act. The words 'any skilled, or unskilled manual, supervisory, technical or clerical work' used in the definition of workman given in section 2(s) of the Industrial Disputes Act are not intended to limit or narrow the amplitude or the definition of workman. On the other hand, they indicate and emphasise the broad sweep of the definition which is designed to cover all manner of persons employed in an industry, irrespective of whether they are engaged in skilled work or unskilled work, manual work, supervisory work, technical work or clerical work. Quite obviously, the broad intention is to take in the entire 'labour force' and exclude the 'managerial force'. On going through the agreement entered into between the assessee and the Corporation, in the instant case, it was evident that the assessee was a skilled person and was given work of a technical and supervisory nature. He had no authority whatsoever, to bind the Corporation in any way. It was clear that a consultant, as the assessee was, could not, by any stretch of imagination, be said to be engaged in any ad....
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....ct of the employees of IT industry clarified that IT industry is not exempted from ID Act 1947. For ready reference, we reproduce below the contents of the letter dated 30.5.2016: "2. On the above demands I am to inform you as follows: (i) All the Labour Welfare Legislations are applicable to all the IT and ITES companies and they are being monitored by the enforcement officials for proper implementation of Labour legislations and thereby ensures the welfare of the employees. The IT company employees also are free to form trade union and can redress their grievances through evoking the provisions of Industrial Disputes Act 1947. It is also informed that, no IT industry has been exempted from the provisions of Industrial Disputes Act 1947. The affected employees can approach the conciliation officers to redress their problems regarding retrenchment or termination or for any other grievance. Any trade union with the IT employees as its members can rise industrial disputes under section 2(k) of the Act and seek remedy. (ii) The Inspectors of Labour are inspecting IT companies. In case of any contraventio....
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....eduction u/s 80JJAA and accordingly, we set aside the orders of the lower authorities and allow deduction u/s 80JJAA. The assessee's grounds on this issue are allowed. 26. Ground No.10 relates to giving short credit for the TDS. As per the grounds, the assessee claimed TDS of Rs. 14,82,45,072/- and the Assessing Officer has allowed only Rs. 14,19,47,495/-. The Assessing Officer is directed to verify the assessee's claim and give credit for the shortfall. The assessee's groungd on this issue is allowed for stastical purposes. 27. In the result, appeal of the assessee is partly allowed. 28. Now coming to Revenue's appeal I.T.A.No.1177/Mds/2016. Ground No.1.1 to 1.5 are related to the exclusion of travel and communication expenditure incurred in foreign currency from total turnover. 29. The Ld. CIT(A) directed the A.O to exclude the Travel and communication expenses from the export turnover as well as the total turnover while computing the deduction u/s 10A. Aggrieved by the order of the CIT(A) the Revenue is in appeal before us. The Ld.D.R relied on the order of the AO and the Ld.DR relied on the order of C....
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....ee has not earned any revenue from these countries. Therefore, the Assessing Officer was of the opinion that there was no business exigency to incur the said expenditure. Accordingly, he added the sum of Rs. 2,80,00,000/- to the income of the assessee. The assessee went in appeal before the CIT(A) and the Ld CIT(A) allowed the assessee's appeal by observing that the revenue has been generated where ever the subsidiary marketing companies had operated. Further CIT(A) obseerved that it is not necessary that revenue need to be generated every year failing which allowance for expenditure will be denied as it is totally the discretion of the assessee to run its business and utilize its resources. As per the CIT(A) in the present case the Australian subsidiary had been successfully generating revenues for the assessee through its activities and accordingly deleted the addition. 35. During appeal, the ld. DR argued that the assessee-company made payment to Australian company. Since there was no income earned and the expenditure incurred in Australia and US companies has no business connection, hence the....