TaxTMI 
TaxTMI 
2021 (10) TMI 1248
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....IT(A) in confirming the exclusion of telecommunicating expenses and internet usage charges from the export as well as total turnover while computing deduction u/s. 10AA of the Act in the facts and circumstances of the case. 5. Heard both the parties and perused the material available on record. The AO reduced the telecommunication expenses and internet usage expenses only from export turnover. The CIT(A) considering the submissions of the assessee and directed the AO to reduce telecommunication expense and internet usage from total turnover in computing deduction u/s. 10AA of the Act. A similar issue came up before this Tribunal in assessee‟s own case for A.Y. 2010-11, wherein we note that the Co-ordinate Bench, while taking into consideration the order dated 05-08-2019 passed in IT(TP)A No. 286/Bang/2013 in assessee‟s own case held that any amount reduced from export turnover should also be reduced from the amount of total turnover in the computation of deduction u/s. 10AA of the Act. The Co-ordinate Bench discussed the issue in detail from Para Nos. 12 to 14 which are at Page No. 172 of the paper book. The relevant portion of the Para No. 14 is reproduced here-in-b....
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....nover only for the purpose of computation of deduction u/s. 10AA of the Act. The CIT(A) basing on his own order in A.Y. 2010-11, directed the AO to reduce from the total turnover also vide its finding at Para No. 2.2.3 of impugned order. A similar issue came up before this Tribunal for A.Y. 2009-10, wherein, we note that this Tribunal held that the amount of foreign exchange expenses be excluded from export turnover and total turnover also. Again in A.Y. 2010-11, this Tribunal followed the same reasoning rendered in A.Y. 2009-10 and held the expenditure incurred in foreign exchange need to be excluded from total turnover also. 9. The ld. DR did not bring on record any contrary view or order against the order of this Tribunal. Therefore, we hold that any amount of foreign exchange expenses reduced from export turnover should also be reduced from the amount of total turnover in the computation of deduction u/s. 10AA of the Act. Thus, ground No. 2 raised by the assessee is allowed. 10. Ground No. 3 raised by the assessee challenging the action of CIT(A) in confirming the view of AO in holding an amount of Rs. 2,25,18,608/- disallowed on account of onsite/deputation of technical ....
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....f the assessee, under which software engineers were sent to the US or Europe for working in companies on short term basis. He further observed that on an average, such companies abroad were paying to the assessee US$ 6000 for each of the software professionals, against which the assessee was paying equivalent of approximately US$ 4000 to them. He further held that the services rendered by the professionals at locations abroad were not under the control and supervision of the assessee. In the ultimate analysis, the AO recomputed the amount of deduction u/s.10A by considering the amount of deduction originally worked at Rs. 62,06,33,422/-, from which a sum of Rs. 2,43,57,452/-, being 4% of profits ascribed to Deputation of Technical Manpower business was reduced and a further sum of Rs. 12,17,87,260/-, being 20% of profits ascribed to onsite software services not related to STP undertakings in India was reduced, which brought down the amount of revised deduction u/s.10A to Rs. 47,44,88,710/-. The Ld. CIT(A) accepted the assessee's claim and overturned the action of the AO on this point. 17. Having heard both sides and gone through the relevant material on record, it is obser....
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....such with the assessee and is not required to be customized. The second clause deals with a customized electronic data or any product, which is required to be tailor-made. Whereas the first clause encompasses a computer programme which has already been developed by the assessee on a standard basis and is exported as such, the second clause covers developing a new computer software as per the specific requirements of the customer. 21. One has to pass through various stages to develop a computer software, such as, Conceptualization, Planning, Designing, Developing, Testing and then Maintaining. In the Conceptualization stage, the requirements of the customer are first identified to form a view of the work to be done. In the Planning stage, an overall plan of proceeding with is formalized. In the Designing stage, blueprint of the work to be done is drawn. In the Development stage, which is also called coding stage, the actual work is started for translating the plan into action. It is one of the most important stages of software development. In this stage, the work is divided into several modules/programmes, each of which is independently developed and coded. This activity of....
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....ties kept on refusing the claim of the assesses u/s 10A, as is the case under consideration, to the extent of the profits derived from onsite development of computer software and rendering of services by technical manpower outside India. The CBDT had to step in by issuing a Circular no.1/2013 dated 17.1.2013 providing that (a) : `it is clarified that the software developed abroad at a client's place would be eligible for benefits under the respective provisions, because these would amount to 'deemed export' and tax benefits would not be denied merely on this ground' and (b) `that profits earned as a result of deployment of Technical Manpower at the client's place abroad specifically for software development work pursuant to a contract between the client and the eligible unit should not be denied benefits under sections 10A, 10AA and 10B provided such deputation of manpower is for the development of such software and all the prescribed conditions are fulfilled.' It was brought to the notice of the CBDT that the AOs were not even following the clarification given in the Circular dated 17.1.2013. Once again, the CBDT issued Instruction no. 17/2013 dated 19.11.2013 clarifying that:....
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.... the onshore activities etc. performed outside India remain in furtherance of the final product to be delivered, there can be no doubt on the eligibility of profit from such activities for deduction. 23. The AO has drawn a table on page 24 of his order which gives a comparative number of professionals working onsite and offshore totalling 5062. Out of this, only 725 professionals worked outside India onsite and remaining 4337 worked offshore in India only. No evidence has been placed on record to demonstrate that the employees of the assessee sent abroad for rendering onsite services were working under the direct control and supervision of the overseas customers and further that their services were alien to the agreements for software development projects which the assessee had undertaken to perform, generating the income otherwise deductible u/s 10A of the Act. Rather the position of the employees of the assessee working outside India under its own control and guidance has been acknowledged by the AO in his order for the A.Y. 2009-10 and the ld. DR could not controvert that the nature of business in such later year was any different from that for the year under considerat....
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....it to be performed as per the first clause of the Agreement, income from which has been otherwise held as eligible for deduction. Notwithstanding that, the ld. AR, in reply to ld. DR's reliance on Consulting service agreement with Royal Bank of Canada, invited our attention towards another Agreement with Royal Bank of Canada dated 16-06-2005 in which services were to be rendered wholly in India. Showing to the same reference number of 2005164 in both the Agreements, viz., the one relied by the ld. DR and the one submitted by him, the ld. AR explained that there is one umbrella agreement with Royal Bank of Canada and these are subagreements, under which some part of the services were rendered in India while others onshore outside India. This fortifies the view point of the assessee that even the onshore services rendered abroad have link with agreement for services from eligible units in India. 26. On circumspection of the sample copy of the Agreement, filed by the ld. DR, between the assessee and Royal Bank of Canada as a representative of all such similar Agreements, it turns out that the assessee entered into Masters Service Agreement with several customers outside India....
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....derived from' used in the provision as an opening gate for eligibility of deduction. It was contended that since income from DTM and onsite services was not derived from export of computer software, the same did not qualify for the benefit of deduction. 28. This contention, in our considered, is sans merit. There are two reasons. The first is that the Explanation 3 is a deeming provision, which specifically brings profits and gains derived from on site development of computer software and services for development of software outside India within the meaning of `the profits and gains derived from the export of computer software outside India'. The second is that subsection (1) of section 10A containing the words `derived from' is not an exhaustive provision in itself. The expression `profits ... derived ...from .. export of ... computer software' employed in sub-section (1) of section 10A of the Act has been further elaborated in sub-section (4) to mean: `the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business ca....
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.... the business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking. The Co-ordinate Bench opined when there exists a direct link between the eligible undertaking and some income, the same is profit of the business of undertaking, even if may not be derived from the export of computer software etc. The proposition as enunciated by the Co-ordinate Bench in assessee‟s own case i.e. iGATE Global Solution Ltd, as it was the then, in A.Y. 2007-08 has been followed by this Tribunal in assessee‟s own case in A.Y. 2010-11, therefore, we hold that the income from onsite/DTM rendered abroad is considered to be derived from the export of computer software, is eligible for deduction u/s. 10A/10AA of the Act. 15. Both the parties consented that the facts in the year under consideration with that of A.Y. 2010-11 are similar. Therefore, following the order of Co-ordinate Bench in assessee‟s own case for A.Y. 2010-11, we hold that onsite/deputation of technical manpower (DTM) software services are part of export turnover. Thus, Ground No....
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....es Ltd. held that acquired goodwill is an intangible asset and eligible for depreciation u/s. 32 of the Act. During the year under consideration, the assessee claimed depreciation by placing reliance in the case of Smifs Securities Ltd. and referred to Table No. 3 at Page No. 53 of the final assessment order which is as under : Financial Year Working to arrive at opening WDV for FY 2010-11 Opening WDV Depreciation @ 25% Closing WDV 2003-04 105,724,413 26,431,103 79,293,310 2004-05 79,293,310 19,823,327 59,469,982 2005-06 59,469,982 14,867,496 44,602,487 2006-07 44,602,487 11,150,622 33,451,865 2007-08 33,451,865 8,362,966 25,088,899 2008-09 25,088,899 6,272,225 18,816,674 2009-10 18,816,674 4,704,169 14,112,506 20. In the light of the above table, we note that the assessee has shown opening Written Down Value (WDV) at Rs. 10,57,24,413/- (Rs. 18,88,10,000/- + Rs. 83,085,587/-) for F.Y. 2003-04 and by claiming depreciation @ 25% shown closing WDV at Rs. 7,92,93,310/-. Likewise from F.Ys. 2004-05 to 2009-10 the assessee worked out depreciation @ 25% and for the year under co....
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....n down value has been computed in each of the succeeding year and for F.Y. 2009-10 arrived at Rs. 14,112,506/-. Thus, it is well constitutes the opening written down value of goodwill for the F.Y. 2010-11 relevant to A.Y. 2011-12 i.e. the year under consideration. We, therefore, direct the AO to grant depreciation @ 25% on written down value of the goodwill at Rs. 14,112,506/-. Thus, ground No. 5 raised by the assessee is allowed for statistical purpose. 21. Ground No. 6 raised by the assessee challenging the action of CIT(A) in confirming the denial of carry forward of long term capital loss in the facts and circumstances of the case. 22. During the course of draft assessment proceedings, the assessee shown short term capital gains at Rs. 80,78,318/-. The AO observed that the said amount is net of short term capital loss of Rs. 52,86,898/-. According to AO, the said short term capital loss is disallowable u/s. 94(7) of the Act. The assessee sought time for filing working as many of the mutual fund investments were in daily/periodic dividend schemes which are reinvested. According to AO, the assessee did not file such working but given liberty to file the same at the time of ....
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.... forward of loss to an extent of Rs. 4,19,81,110/- only as against the amount in difference found by him at Rs. 10,36,89,685/- by holding there was no provision in the Act to carry forward such loss. We note that the AO held in the final assessment order that the assessee neither claim such amount in its original return of income nor by filing a revised return of income. Admittedly, there was no revised return of income filed by the assessee seeking carry forward of loss to an extent of Rs. 10,36,89,685/- which was found during the course of final assessment proceedings but, however, denied carry forward to the subsequent year in the absence of revised return of income. The contention of the ld. AR is that without there being any revised income, the AO held the difference of amount under short term capital gain as chargeable to tax and the difference in short term capital loss disallowable u/s. 94(7) of the Act, but the AO arbitrarily denied carried forward of long term capital loss to the extent difference of amount found during the assessment proceedings is, in our opinion, illegal. 27. We note that the assessee declared positive income of Rs. 2,69,76,05,308/- before deduction....
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....ces of the case. 29. Heard both the parties and perused the material available on record. The assessee claimed double tax credit of Rs. 11,76,27,728/-. The AO restricted the same at Rs. 7,32,63,047/- at the proportionate rate of tax @ 18% under book profit. It was claimed before the CIT(A) that the AO allowed tax credit only on the double tax and no credit under DTAA was provided. We note that the CIT(A) directed the AO to obtain documents as required under Rule 128(8) of the Income Tax Rules and to give benefit of foreign tax credit. It is seen that the several issues came up for consideration in assessee‟s own case for A.Y. 2009-10. The relevant discussion has been made on Pages 20 onwards going up to Page No. 30 of the order. Since, the facts and circumstances of the instant ground are similar to those of the earlier years as discussed in the aforesaid order for A.Y. 2009-10 in the said impugned order and remit the matter back to the file of AO for re-deciding this issue in conformity with the relevant discussion given by the Tribunal in the said order. Needless to say the assessee shall be offered reasonable opportunity of hearing. Thus, ground No. 7 raised by the asse....
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....r profession". Acceptance of such a contention will amount to reading something in the text of the provision which is not to be found in the text of the provision in Section 40(a)(ii) of the IT Act. 23. If the legislature intended to prohibit the deduction of amounts paid by an Assessee towards say, "education cess" or any other "cess", then the legislature could have easily included reference to "cess" in clause (ii) of Section 40(a) of the IT Act. The fact that the legislature has not done so means that the legislature did not intend to prevent the deduction of amounts paid by the assessee towards the "cess", when it comes to computing income chargeable under the head "profits and gains of business or profession"." The Hon‟ble Bombay High Court observing on the impugned order of the ITAT has reasoned at Para 33 of the said order that the Tribunal has observed that since "cess" is collected as a part of the income tax and fringe benefit tax, therefore, such "cess‟ is to be construed as "tax". However, the Hon‟ble Bombay High Court held that there is no scope for such implications when construing a taxing statute. Even though, "cess" may be colle....
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....ome Tax Act, 1961 (hereinafter referred to as "the Act‟) and placing reliance on the decision of the Hon‟ble Bombay High Court (supra.), we allow the additional ground of appeal raised by the assessee." 32. Therefore, in view of the above decision, we direct the AO to allow deduction in respect of Education Cess paid by the assessee. Accordingly, the additional ground raised by the assessee is allowed. 33. In the result, the appeal of assessee is allowed for statistical purpose. 34. Now, we shall take up appeal in ITA No. 2624/PUN/2017 filed by the Revenue. 35. With respect to Ground Nos. 1 and 2 raised by the Revenue, the ld. AR submitted that identical grounds were raised by the Revenue in A.Y. 2010-11 in assessee‟s own case and the Tribunal dismissed the same vide order dated 05-03-2020. The ld. DR did not dispute the same. Accordingly, ground Nos. 1 and 2 raised by the Revenue are dismissed. 36. With respect to Ground Nos. 3 and 4 raised by the Revenue, the ld. AR submitted that identical grounds were raised by the Revenue in A.Y. 2010-11 in assessee‟s own case and the Tribunal dismissed the same vide order dated 05-03-2020. The ld. DR did....
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....e was no satisfaction recorded by the AO as confirmed by the CIT(A) regarding the disallowance made by the assessee on its own is incorrect and we find that the AO categorically held that the disallowance made by the assessee is not accepatable, thereby, the submission of ld. AR is rejected. 39. Coming to the consolidated order for A.Y. 2011-12, we note that this Tribunal clearly observed "The perusal of the assessment order does not reflect the Assessing Officer to have recorded satisfaction as to why suomotu disallowance made by the assessee at Rs. 50 lakhs is not sufficient to cover disallowance of expenditure relatable to exempt income. In view of the provisions of section 14A(2) of the Act", which clearly shows this Tribunal categorically found on an examination of assessment order that there was no satisfaction recorded by the AO in respect of the disallowance made by the assessee on its own relating to exempt income. Therefore, in our opinion, the facts and circumstances reflected in the assessment order relating to A.Y. 2011-12 are not identical to the facts on hand, wherein, we find in the present case the AO clearly recorded is non-satisfaction regarding the disallowan....