TaxTMI 
TaxTMI 
TaxTMI 
2015 (1) TMI 1445
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....paid by the assessee to M/s.Eka Software Solutions Inc.; ii. tele-communication charges for computation of deduction u/s 10A and 10AA of the Income-tax Act, 1961[hereinafter referred to as 'the Act']; iii. computation of deduction u/s 10A on the basis of assessed income; and iv. levy of interest u/ss.234B and 234C of the Act. 3. Brief facts of the case are that the assessee-company, which is engaged in the business of developing and licensing of software products and consultancy services, filed its return of income for the assessment year 2010-11 on 30/09/2010 declaring a total income of Rs. 27,94,820/-. During the assessment proceedings u/s 143(3) of the Act, the AO observed that the assessee has paid a sum of Rs. 4,82,62,51....
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....f sec.195 of the Act. Against these findings of the CIT(A) against the assessee, the assessee is in second appeal before us. 5. As regards the disallowance of business expenditure/marketing service charges is concerned, the learned counsel for the assessee submitted that there was an agreement entered into by the assessee with its AE in USA for rendering of marketing services and the assessee has received these services in view of the said agreement and has also benefitted in the form of increase in revenue. He submitted that all the details were filed before the AO and the CIT(A), but, none of the authorities have appreciated the same. He submitted that the AO has gone on the premise that there has to be proportionate increase in the reve....
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....sel for the assessee submitted that the same should be granted on the assessed income and not on the returned income of the assessee and in the event the disallowance of marketing service charges is confirmed by the Tribunal, then there should be a direction to the AO to allow the deduction u/s 10A of the Act on the finally assessed income. 5.2 The learned Departmental Representative, on the other hand, supported the orders of the authorities below and submitted that the genuineness and reasonableness of the transaction between the assessee and its AE has to be established by the assessee and since the assessee has failed to establish the same, the AO has rightly made the disallowance. 6. Having regard to the rival contentions and the mat....
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....e continued losses suffered by the assessee in his business, he could have fared better had he not incurred such expenditure. These are irrelevant considerations for the purpose of Rule 10B. Whether or not to enter into the transaction is for the assessee to decide. The quantum of expenditure can no doubt be examined by the TPO as per law but in judging the allowability thereof as business expenditure, he has no authority to disallow the entire expenditure or a part thereof on the ground that the assessee has suffered continuous losses. The financial health of assessee can never be a criterion to judge allowability of an expense; there is certainly no authority for that. What the TPO has done in the present case is to hold that the assessee....
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....t the assessee has not generated revenue in proportion to the expenditure. This ground of appeal is accordingly allowed for statistical purposes. 6.1 As regards exclusion of tele-communication expenses from the export turnover for the purpose of deduction u/s 10A is concerned, we find that the alternate prayer of the assessee is covered in favour of the assessee by the decision of the jurisdictional High Court in the case of CIT vs. Tata Elxsi Ltd. (349 ITR 98) which has been followed by the CIT(A) in directing the AO to exclude the same from the total turnover also for the purpose of computation of deduction us 10A. Therefore, we see no reason to interfere with the order of the CIT(A) on this issue. This ground of appeal is rejected. 6.....