TaxTMI 
TaxTMI 
2022 (11) TMI 1317
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....eturn of income totally amounting to Rs. 2227,82,65,630 in respect of profits of 4 SEZ units viz., Chennai - Unit 1, Chandigarh, Mangalore - Unit 1 and Pune Unit 1. 3. The learned assessing officer has erred in denying deduction computed under section 10AA (after making certain disallowances) in the assessment order for the impugned reason that the 4 SEZ units viz., Chennai - Unit 1, Chandigarh, Mangalore - Unit 1 and Pune Unit 1have been formed by splitting up and reconstruction of the already existing business. 4. The learned assessing officer has erred in concluding that the 4 SEZ units have been formed by splitting up and reconstruction of an already existing business and hence these SEZ units are not eligible for deduction under section 10AA. 5. On the facts and in the circumstances of the case and law applicable, the 4 SEZ units viz., Chennai - Unit 1, Chandigarh, Mangalore - Unit 1 and Pune Unit 1were not formed by splitting up and reconstruction of an already existing business and consequently these SEZ units are eligible for deduction under section 10AA. Grounds on transfer pricing adjustment 6. The learned Assessing Officer has....
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....s and in the circumstances of the case and law applicable, the impugned computation of disallowance and the net addition is liable to be deleted in entirety. Grounds on protective disallowance under section 40/ 40(a)(i) in respect of subscription charges paid / payable to M/s Forester Research and M/s Gartner 14. The learned assessing officer has erred in making protective disallowance of expenditure incurred on subscription charges amounting to Rs. 2,82,09,462 and Rs. 3,17,31,606 under section 40/ 40(a)(i) which was paid / payable to M/s Forrester Research and M/s Gartner respectively. 15. On facts and in the circumstances of the case and law applicable, no disallowance should be made under section 40/ 40(a)(i) in respect of the subscription charges paid / payable to M/s Forester Research and M/s Gartner respectively. 16. Without prejudice to ground 9&10 above, the protective disallowance, if any, is to be limited to the amount of subscription charges payable to M/s Forester Research and M/s Gartner as on 31st March 2012 and no disallowance is to be made in respect of subscription charges actually paid during the relevant previous year. ....
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.... treating brand building expenses of Rs. 81,79,53,112 as 'capital expenditure' and making net addition of Rs. 56,85,08,898. On facts and in the circumstances of the case and law applicable, brand building expenses should be fully allowed as deduction. Grounds on disallowance of Commission paid 26. The learned assessing officer has erred in disallowing commission paid to foreign entities amounting to Rs. 23,68,35,533. On facts and in the circumstances of the case and law applicable, commission paid should be fully allowed as deduction. Grounds on non reduction of communication expenses from total turnover while computing deduction under section 10AA 27. The learned assessing officer has erred in not reducing the communication expenses totally amounting to Rs.2,71,11,231 from total turnover while computing deduction u/s 10AA in respect of SEZ units at Chennai (Unit 2), Trivandrum, Mysore, Hyderabad and Jaipur, for which deduction under section 10AA has been allowed. On facts and in the circumstances of the case and law applicable, communication expenses should be reduced from total turnover also in computing deduction under section 10AA for the afo....
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....in respect of interest income from GLES deposits totally amounting to Rs. 2,05,18,841 in respect of the aforesaid units. 32. The learned assessing officer has erred in concluding that interest income from GLES deposits totally amounting to Rs. 8,66,54,955should be reduced from profits of SEZ units at Chennai (Unit No 1), Chandigarh, Pune and Mangalore respectively while computing deduction under section 10AAand for which deduction under section 10AA has not been allowed. On facts and in the circumstances of the case and law applicable, interest income from GLES deposits totally amounting to Rs. 8,66,54,955 should be held as eligible for deduction under section 10AA in respect of the aforesaid SEZ units. Grounds on reduction of interest income from loans given to employees from profits of SEZ units while computing deduction under section 10AA 33. The learned assessing officer has erred in reducing interest income from loans given to employees totally amounting to Rs.13,75,022 from profits of SEZ units at Chennai (Unit 2), Trivandrum, Mysore, Hyderabad and Jaipur respectively, while computing deduction under section 10AA and for which deduction under sectio....
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....ively, while computing deduction under section 10AA and for which deduction under section 10AA has been allowed. On facts and in the circumstances of the case and law applicable, deduction under section 10AA should be allowed in respect of incentive receipts from Airlines amounting to Rs.76,176 relating to aforesaid SEZ units. 38. The learned assessing officer has erred in concluding that incentive receipts from Airlines totally amounting to Rs.3,21,709 should be reduced from profits of SEZ units at Chennai (Unit No 1), Chandigarh, Pune and Mangalore respectively while computing deduction under section 10AA and for which deduction under section 10AA has not been allowed. On facts and in the circumstances of the case and law applicable, incentive receipts from Airlines totally amounting to Rs.3,21,709 should be held as eligible for deduction under section 10AA in respect of the aforesaid SEZ units. Grounds on reduction of income in the nature of Inter Company cessation of trading liability while computing deduction under section 10AA 39. The learned assessing officer has erred in reducing income in the nature of Inter Company cessation of trading liability....
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....n u/s 80JJAA should be fully allowed as deduction. Grounds on disallowance of Sub Contracting charges paid to Infosys Technologies China Co Ltd under section 40(a)(i) for not deducting tax at source under section 195. 44. The learned assessing officer has erred in disallowing sub contracting charges paid to Infosys Technologies (China) Co Ltd amounting to Rs.262,02,26,125 under section 40(a)(i) for the impugned reason that TDS under section 195 has not been made in respect of the said payments. 45. On facts and circumstances of the case and law applicable, as payments made to Infosys Technologies (China) Co Ltd amounting to Rs.262,02,26,125 were not chargeable to tax in India under the IT Act, 1961 and / or under the India - China DTAA, the said payments were not liable for TDS u/s 195 and consequently not liable for disallowance under section 40(a)(i). 46. Assuming without admitting that the payments made to Infosys Technologies (China) Co Ltd amounting to Rs.262,02,26,125 are liable for TDS u/s 195, deduction under section 10AA should be allowed in respect of increase in profits on account of the impugned disallowance as relatable to SEZ units.....
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....allowed in the Draft assessment order 54. The learned assessing officer has erred in not allowing foreign tax credit to the extent of Rs.343,52,84,882 [680,43,71,180 less336,90,86,298] in the final assessment order, which in turn was allowed in the draft assessment order. 55. The learned assessing officer has erred in not allowing additional deduction for state taxes paid amounting to Rs.37,30,57,123, while computing net business income as claimed during the assessment vide letter dated 29.02.2016. Grounds on allowability of state taxes paid outside India. 56. The learned AO has erred in i.not allowing incremental deduction in respect of state taxes paid outside India to local authorities of foreign countries amounting to Rs.37,30,57,123 ii.disregarding the claim made by assessee before the learned AO vide letter dated 29th February 2016. 57. Without prejudice, the learned AO has erred in not allowing relief under section 91 in respect of state tax paid outside India totally amounting to Rs.141,01,15,640 as per the decision of the Jurisdictional High Court in the case of Wipro Ltd v CIT [2016] 382 ITR 179. Inte....
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....ncome on 30/11/2012 and the return was revised on 25/03/2014 declaring an income of Rs.8543,76,14,970/-. Subsequently, the case was selected for scrutiny and the notice u/s. 143(2) was sent to the assessee asking for details. 4.2. In response to the statutory notices, representatives of assessee appeared before the Ld.AO and filed requisite details and documents as called for. As there was international transaction of assessee with its associated enterprises, the appeal was referred to the transfer pricing officer. The Ld.TPO called for economic details of the international transaction in form 3CEB. The Ld.TPO issued notice on 05/09/2014. The assessee filed all requisite details. The Ld.TPO examined the international transactions. The Ld.TPO noted that the assessee had entered into following international transactions with its AE. The Ld.TPO noted that assessee aggregated all the transactions related to export of software services and had earned a profit margin of 43.07%. As this was higher than the margins of the comparables, no adjustment was proposed. 4.3. The Ld.TPO observed that assessee has made advances to its associated enterprises being Infosys China & Infosys Bra....
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....eduction u/s. 10AA of Rs.2919.14 crores, 2. deduction u/s. 80IAB of Rs. 28.8 crores 3. deduction u/s. 80JJAA of Rs.307.52 crores. 4.7.1. The Ld.AO also noted that assessee had substantial tax free income that was earned during the year under consideration amounting to Rs.23,45,95,152/- however assessee had only shown an expense of Rs.1,72,86,259/-. 4.7.2. The Ld.AO noted that assessee had made certain payment to M/s. Forrester Research and Subscription during the year under consideration against which no TDS was deducted. 4.7.3. Assessee had also incurred an amount in respect of software expenses which was claimed as revenue expenditure at Rs.462,77,39,077/-. 4.7.4. Brand building expenses was incurred by assessee to the tune of Rs.81,79,53,112/- for the year under consideration. 4.7.5. It was noted by the Ld.TPO that assessee paid commission amounting to Rs.23,68,35,553/-; 4.7.6. Assessee had debited an expenditure of Rs.41,07,67,587/- towards repairs and building. 4.7.7. The Ld.AO also noted that assessee made payment of Rs.3,96,03,448/- to Gartner Research and Services on which TDS was not deducted. The Ld.AO disallowed all the above expens....
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....009-10 does not contest the relief allowed by CIT(A). TPO for subsequent AYs has accepted the interest charged at 6% 10 to 13 Disallowance under section 14A read with rule 8D(2)(iii) No satisfaction recorded by the AO Infosys BPM Ltd v DCIT - ITA No 493/B/2018 decision dated 23.8.2021 ITAT Bangalore deleted the 14A disallowance in the absence of satisfaction by the AO Without prejudice, ACIT v Vireet Investment (P) Ltd [2017] 82 taxmann.com 415 - only actual dividend yielded investments should be considered under rule 8D(2)(iii) 14 & 15 Protective disallowance under section 40(a)(i) in respect of subscription charges paid / payable to M/s Forester Research and M/s Gartner Karnataka High Court in assessee's own case vide order dated 20.9.2021 in ITA No 281/2018 c/w ITA No 279/2018 deleted identical disallowance following Engineering Analysis decision of SC 16 No disallowance as there was no amount payable as on 31st March 2012 Not Pressed 17 to 21 Disallowance under section 40(a)(ia) / 40(a)(i) in respect of software expenses Karnataka High Court in assessee's own case vide order dated 20.9.2021 in ITA No 281/2018 c/w ITA No 279/2018 dele....
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....) ITAT Bangalore in assessee's own case for AY 2005-06 and Ay 2006-07 allowed deduction u/s 10A on rental income. 41 & 42 Reduction of deduction under section 10AA in respect of pure onsite revenue DCIT v iGate Global Solutions Ltd IT(TP)A No 286/Bang/2013 decision dated 5.8.2019 - ITAT Pune allowed deduction u/s 10A in respect of pure onsite revenue Circular No 1 of 2013 CIT v Mphasis Software and Service India Pvt. Ltd decision dated 29th July 2015 62 taxmann.com 165 (Kar HC) 43 Deduction under section 80JJAA CIT v Texas Instruments India P Ltd [2021] 127 taxmann.com 59 (Karnataka) 44 & 45 Disallowance of Sub Contracting charges paid to Infosys Technologies China Co Ltd under section 40(a)(i) for not deducting tax at source under section 195 Held against the assessee in assessee's own case by ITAT Bangalore in IT(IT)A No 4/Bang/2014 & 1182/Bang/2014 11.4.2022 ITAT C Bench for AY 2011-12 & AY 2012-13 on the issue of liability on Infosys Ltd to deduct tax at source on such payments under section 195. 46 Deduction under section 10AA in respect of the above disallowance under section 40(a)(i) Increase in SEZ profits on account of the above di....
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....of the decision in the case of Wipro Ltd v DCIT 382 ITR 179 (Kar) 55 & 56 Deduction for State Taxes paid Not Pressed 57 Relief under section 91 for state taxes paid outside India Not Pressed 58 & 59 Interest on IT Refund granted under section 143(1) but subsequently recovered on completion of assessment proceedings is allowable as deduction AO to verify and allow as per law. 60 Interest levied under section 234B and 234D Consequential Additional ground Additional grounds of appeal filed on 28.6.2021 on deduction for education cess Not pressed 6. Ground nos. 2 - 5 - It is submitted by the Ld.AR that the assessing officer has denied the claim of Rs.2227,82,65,630/- in respect of four SEZ units being 1) Chennai - Unit 1 2) Chandigarh 3) Mangalore - Unit 1 and 4) Pune - Unit 1 6.1. The Ld.AO disallowed deduction claimed under section 10AA in respect of the aforesaid 4 SEZ Units relying on similar disallowances made in the assessment orders passed for the earlier years. For all the 4 SEZ units, it was held by the Ld. AO that the projects undertaken by the new SEZ units were based on Master Service Agr....
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....157 c) Decision of Hon'ble Karnataka High Court in case of CIT v. Nippon Electronics (India) P. Ltd. reported in [1990] 181 ITR 518 6.5. The Ld.AR submitted that, the condition of splitting up and reconstruction cannot be examined once it stands satisfied and accepted by the revenue authorities in the initial years. He also placed reliance on the decision of Hon'ble Bombay High Court in case of CIT vs. Western Outdoor Interactive P. Ltd. reported in (2012) 349 ITR 309 (Bom). 6.6. Referring to Circular No. 01/2013 dated 17/01/2013, the Ld.AR further submitted that the statement of work prevails over the Master Service Agreement in determining the eligibility of deduction u/s. 10A/10AA. Master Service Agreements are in the nature of an umbrella agreement outlining broad terms and conditions for the relation between customer and Infosys. The MSA's outline the general relationship between the assessee and the client and does not describe the scope of work to be carried out. The scope of work is outlined in the SOW's. The actual work is performed as per the statement of work (work order /purchase order /task order) issued by the customer to Infosys. The SOW's ....
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....lates the conditions which an undertaking as a unit must fulfill to get benefit under Section 10AA of the Act. Thus the eligibility requirements are unit specific and not assessee specific. The section 10AA of the Act referrers to the 'unit' of the assessee to be eligible and entitled to exemption. Each unit in the SEZ must meet the conditions specified in clauses (i) - (iii) of sub-section (4) to Section 10AA of the Act. In case there are multiple units in the SEZ, each unit would, on satisfaction of the conditions, be entitled to exemption. Further the condition under section 10AA(4)(iii) is that it is not formed by transfer to a new business of machinery or plant previously used for any purpose, and Explanation 1&2 under 80IA(3) would be applicable. We have perused the submissions advanced by both sides in the light of records placed before us. 6.10 Conditions of splitting up and reconstruction as per clause (ii) of section 10AA(4) was inserted by Finance Act, 2007 with retrospective effect from February 10, 2006. The business of the SEZ unit 1 in Chennai was formed and commenced on 16.7.2005 i.e., before 10.2.2006. 6.11 The SEZ unit No. 1 at Chennai was form....
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.... cannot be considered for every year of claim of deduction, but can be considered only in the year of formation of the business." 6.14. Before us the Ld.AR submitted that the employees transferred to new SEZ units were less than 20% of the total number of the employees, and therefore the condition stipulated in Circular 12 & 14 of 2014 dated 18/07/2014. This criteria has not been considered by the Ld.AO. 6.15. We have referred to the observations by the Ld.CIT(A) for assessment years 2007-08 to 2009-10 wherein there is a categorical finding that these units have not been formed by splitting up or restructuring. This observation has not been challenged by the revenue in appeals filed in ITA No.1557/B/2017 for AY 2007-18, ITA No.1849/B/17 for AY:2008-09 and ITA No.1848/B/2017 for AY: 2009-10. And thus this issue has attained finality. For sake of convenience, we reproduce the relevant observation by the L.dCIT(A) has been tabulated by the Ld.AR. We therefore direct the Ld.AO to grant the deduction claimed by the assessee in respect of the Chennai SEZ Unit I, Chandigarh nit, Mangalore Unit I and Pune Unit I. Accordingly these grounds raised by the assessee stands allowed. ....
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....CA(3) without any TP adjustments(placed at page 7037 to 7043 of case law compilation 4 filed on 12.11.2021).It is submitted that, there is no change in the facts and circumstances of the case in respect of interest received from overseas entities for all the years. 7.6. The Ld.AR thus submitted that assessee has considered the LIBOR rates and had computed 6% interest on the loans advanced to Infosys China as well as Infosys Brazil. He submitted that, for the year under consideration, highest 12 months USD LIBOR interest rate was 1.128% and therefore the interest charged by assessee is at arms length. Referring to the DRP directions for year under consideration, he submitted that the DRP passed its view on the basis of "opportunity cost", the principle which has been rejected by Coordinate Bench of this Tribunal in case of Advanta India Ltd. vs. ACIT reported in 64 taxmann.com 251. On the contrary, the Ld.St.Counsel relied on the observations by the Ld.AO/DRP. We have perused the submissions advanced by both sides in the light of records placed before us. 7.7. We note that, the assessee admittedly charged 6% interest rate on the loans advanced to Infosys China and Infosy....
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....s for the reason that no satisfaction was recorded by the AO as to how the disallowance made by the Assessee was incorrect. The Coordinate bench of this Tribunal in assessee's own case for the AY 2006-07 in ITA No 799/B/2015 vide order dated 10.11.2017 deleted the disallowance under section 14A as per rule 8D in the absence of satisfaction of the Ld.AO on incorrectness of the claim made by the assessee. 8.5. Without prejudice, Special bench of Hon'ble Delhi Tribunal in the case of ACIT vs. Vireet Investment (P) Ltd., reported in (2017) 82 taxmann.com 415, among other cases has held that only those investments are to be considered for computing average value of investment under Rule 8D(2)(iii) which yielded exempt income during the year. In the present case, as submitted earlier, no dividends were declared by Infosys BPO Ltd., for the year under consideration. Thus, the investments made in the equity shares of Infosys BPO Limited should not be considered for computation of average value of investments under Rule 8D(2)(iii). 8.6. It is submitted that, if investments made in the equity shares of Infosys BPO Ltd., are excluded for computation of average value of investments u....
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....rnataka High Court. In our opinion, as the decision of Hon'ble Supreme Court was not available to the revenue authorities in the interest of justice, we remand these issues back to the Ld.AO/TPO to verify these claims in accordance with the principles laid down by Hon'ble Supreme Court in case of Engineering Analysis Centre of Excellence Pvt. Ltd. vs. CIT (supra). In the event after verifying the relevant agreements / invoices and applying the ratio laid down by the Hon'ble Supreme Court, no TDS is liable to the deducted, the disallowance u/s. 40(a)(i) / 40(a)(ia) deserves to be deleted. The Ld.AO is directed to carry out necessary verifications in accordance with law by granting proper opportunity of being heard to assessee. Accordingly, ground nos. 14-15 and 17-21 stands allowed for statistical purposes. 10. The Ld.AR submitted that Ground no. 16 is not pressed and accordingly the same is dismissed. 11. Ground nos. 22-24 - Disallowance of software expenses as capital expenditure. Alternatively, assessee has prayed for depreciation to be granted at 60% as against 25%. The assessee is engaged in the business of development and export of computer software. During the yea....
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....icense to use the software. The license was available for a limited period. The license was renewable, by payment of the fees at pre-defined intervals. In many cases, the software licenses were used by the employees for software development, maintenance, testing of applications etc. The Ld.AR submitted that Coordinate Bench of this Tribunal in assessee's own case for AY 2005-06 IT(TP)A No 102/Bang/2013 dated 10.11.2017 set aside the issue of allowability of software expenses to Ld.AO with a direction to verify the nature and purpose of software expenses and decide in the light of decisions in, Empire Jute Co Ltd reported in 124 ITR 1, Alembic Chemicals Works Co Ltd reported in 177 ITR 377, IBM India Ltd 357 ITR 88 etc. The relevant extracts are under. The Ld.AR submitted that, following the direction of this Tribunal, the Ld.AO passed the OGE to ITAT order on 3.9.2019 and allowed the software expenses as revenue expenditure. 11.5. The Ld.AR submitted that the software expenses were for software licenses in respect of application software. It was not in the nature of system software. The Ld.AR submitted that the assessee incurred regular expenditure for renewal, upgrades and m....
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....ling and Marketing expenses' in the financial statements and claimed as revenue expenditure. 12.2. In the draft assessment order, the Ld.AO treated the brand building expenses of Rs.81,79,53,112/-, as deferred revenue expenditure, and allowed 20% of the said expenditure amounting to Rs.16,35,90,622/- and held that the balance sum of Rs.65,43,62,490/- constituting 80% of the expenditure will be amortized over the next 4 years. 12.3. The DRP directed the Ld.AO to consider the expenses of Rs.81,79,53,112/- as capital expenditure incurred for creating intangible asset in the form of 'brand', instead of deferred revenue expenditure. However, the Ld.AO was directed to grant depreciation at 25% considering brand as an asset eligible for depreciation. Following the DRP Directions, the Ld.AO treated the brand building expenditure of Rs.81,79,53,112/- as capital expenditure. From this, disallowance of payments made to Forester research and Gartner totally amounting to Rs.5,99,41,068/- was reduced, as they were the subject matter of separate assessment and on the remaining sum of Rs.75,80,11,864/-, the Ld. AO allowed depreciation at the rate of 25% amounting to Rs.18,95,02,966/-, an....
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.... order to procure new business outside India, and strengthen its existing business outside India and to meet the demands and requirements of its existing clients outside India, the assessee solicits help from agencies operating outside India. These agencies are termed Business Alliance partners (BAP), for the services rendered by these Business Alliance Partners outside India, and commission is paid to them in accordance with the terms of the agreement entered with them. The Ld.AR submitted that, no tax was deducted at source in respect of the impugned payments. It was submitted that, as stated above, the BAP render services outside India. They do not render services from India or in India. BAP are also 'non resident's under section 2(30) read with section 6 of the Act. Hence, no tax was deducted at source in respect of the commission paid to these non residents. 13.2. The Ld.AO relying on the decision of the Hon'ble Karnataka High Court in case of CIT v Samsung Electronics Co Ltd., reported in (2010) 320 ITR 209 held that, the assessee should have either made TDS on commission paid or should have obtained an exemption certificate from the IT Dept. It was held that, in the absen....
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.... HOMES SAVINGS AND LOANS PLC Nigeria 26,90,280 Towards License Commission WEMA BANK PLC. Nigeria 2,23,98,439 Towards License Commission Segmentist Yazilim ve Danismanlik L Turkey 40,29,941 License Fees Commission SIMBA TECHNOLOGY LIMITED, Kenya 86,21,565 BAP Commission Square IT Corporation Japan 43,23,811 Fees Commission & Subscription Taldor Israel 32,67,330 Commission Fees TALDOR COMPUTER SYSTEMS (1986)LTD Israel 15,67,500 Commission Fees ATS Project THE TRIZETTO GROUP INC USA 1,56,41,366 Trizetto Referral Fees & revenue share TOTAL INFORMATION MANAGEMENT (TIM) Philippines 1,86,46,433 BAP Commission Trevally Financial Software South Africa 3,15,57,928 Fees Commission TREVALLY FINANCIAL SOFTWARE South Africa 35,15,794 Fees Commission WAREEF UNITED COMPANY, Saudi Arabia (30,88,272) BAP Commission TOTAL 23,68,35,533 13.5. The Ld.AR relied on the decision of Hon'ble Delhi High Court in case of DIT(IT) v Panalfa Autoelektrik Ltd reported in (2014) 49 taxmann.com 412 and submitted that, commission paid by assessee to ....
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....ot taxable under the treaty EGABI Solutions Egypt Same as above No FTS clause under the Treaty; No PE in India; further, other income taxable only in Nepal and not in India; hence payment not taxable under the Treaty Millennium Information Technologies Sri Lanka Same as above No FTS clause under the Treaty; No PE in India; further, other income taxable only in Srilanka and not in India; hence payment not taxable under the Treaty (i) Nihon Unisys Ltd, (ii) Square IT Corporation Japan Same as above Definition of FTS is similar to s. 9(1)(vii); Payment not in the nature of managerial, technical or consultancy; no PE in India; hence not taxable under the treaty (i) Oceanic Bank Int (Nigeria), (ii)First Bank of Nigeria PLC, (iii) First City Monumnet Bank, (iv) Spring Bank PLC, (v) Fidelity Bank PLC, (vi) Kakawa Discount House Limited (vii) United Bank for Africa PLC (viii) Union Homes Savings and Loans PLC (ix) Wema Bank PLC. Nigeria Same as above NO DTAA. Same as above BPI Bank Ghana Same as above NO DTAA. Same as above Segmentist Yazilim ve Danismanlik L Turkey Same as above Definition of FTS is similar to s. 9(1)....
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....dent in the course of his business would be regarded as 'business profits' under Article 7. And in the absence of a PE in India, such payments cannot not be held to be taxable in India. The Ld.AR submitted that the non resident BAP's provided services outside India and did not have a permanent establishment in India is an admitted fact and therefore, the same is not taxable in India. He relied on following decisions in support: decision of Hon'ble Madras High Court in Bangkok Glass Industry Co Ltd v ACIT reported in (2013) 257 CTR 326; Decision of Hon'ble Mumbai Tribunal in Channel Guide India Ltd v ACIT reported in (2012) TaxCorp (INTL) 50, Decision of coordinate bench of this Tribunal in case of JCIT v WiFi Networks P Ltd ITA Nos. 189 & 190/Bang/2012 and CO Nos. 60 & 61/Bang/2012 decision dated 8.3.2013, Decision of coordinate bench of this Tribunal in case of Exotic Fruits P Ltd v ACIT ITA Nos. 1008 to 2013/B/12 decision dated 40.10.2013, Decision of coordinate bench of this Tribunal in case of IBM India P Ltd v DDIT (IT) ITA Nos. 489 to 498/B/13 decision dated 24.1.2014. The Ld.AR thus submitted that, commission paid to BAP's of P....
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....pect of SEZ units at Chennai (Unit No 1), Chandigarh, Pune and Mangalore, for which deduction under section 10AA has not been allowed 12,48,70,626 3 Expenses incurred in foreign currency in respect of SEZ units at Chennai (Unit 2), Trivandrum, Mysore, Hyderabad and Jaipur, for which deduction under section 10AA has been allowed 358,08,30,087 4 Expenses incurred in foreign currency in respect of SEZ units at Chennai (Unit No 1), Chandigarh, Pune and Mangalore, for which deduction under section 10AA has not been allowed 1688,21,01,184 14.2. The DRP directed the assessing officer to treat the above adjustment and the consequent reduction of deduction under section 10AA as a protective addition till the final outcome with regard to the SLP filed by the department before the Hon'ble Supreme Court against the decision of the Hon'ble Karnataka High Court in the assessee's own case and in the case of CIT v TATA Elxsi Ltd reported in 349 ITR 98. We have perused the submissions advanced by both sides in the light of records placed before us. 14.3. This issue is no longer resintegra. Hon'ble Supreme Court in the case of CIT v HCL Technologies Ltd reported in (201....
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....ount. The LIC gives interest on such GLES deposit/premium and the same has been offered to tax under business income head as there is a nexus of GLES deposit with the business liability towards accumulated unused leave credits. Interest on employee loans:- As an employee welfare measure, the assessee extends loans to its employees. There were 3 types of loans- Soft loan, salary loans and salary advance. The soft loan carried an interest of 4% p.a, whereas salary loans and salary advances were interest free. The soft loan is recovered in 12/24 months (depending on eligibility), salary advance in the same month of disbursal and salary loan in 12 months. The perquisite value for soft loans and salary loans was taxed in the hands of the employees. Sale of scrap, Incentive from Airlines and Inter company cessation of trading liability:- During the year, the assessee realized certain amounts on sale of scrap. Similarly, few airline companies such as Lufthansa, Qatar Airways, Indigo, Spicejet etc provided incentive for travelling regularly. The inter company cessation of trading liability and write back of the said liability was on account of set off of receivables and p....
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....t. Hence, it was submitted that, the direction of the ld. DRP to make a protective addition is bad in law and liable to be quashed. Interest income from GLES deposit, employee loans and rec eipts from sale of scrap should be held as eligible for deduction under section 10AA. 15.8. On the contrary the Ld.St.Counsel relied on the observations of the authorities below. We have perused the submission advanced by both sides in light of records placed before us. 15.9. Amount of income that that qualifies for the deduction under section 10AA is the profits that arises out of the business undertaking, and not from any other income earned by the assessee de horse the business of the undertaking. If the income earned by the assessee is held to be falling under the head, Income from other sources, the same will not qualify for the deduction section 10 AA of the Act. 15.10. From the above sources that have yielded income to the assessee for the year under consideration, except for income from sale of scrap, no other income could be said to have arisen out of the business undertaking. Further in respect of cessation of trading liability, we direct the Ld.AO to verify if the trade recei....
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....esence of the employees outside the country was in the course of developing and creating software programs as also for the purpose of marketing the product and skill sets of the company. The Ld.AR submitted that various details in respect of the claim were filed during the assessment proceedings vide letter dated 02/03/2016 which is paced at pages 2039 to 2054 of paper book 4. The Ld.AR also submitted that assessee had submitted the master service agreements and statement of work along with invoices in respect of the developments carried out by assessee before the Ld.AO vide letter dated 04/03/2016 which is placed at page 2549 to 2856 of paper book 5. He submitted that at page 39, para 5.7, the Ld.AO in the assessment order stated that the assessee company has furnished very voluminous data including the copy of several SOWs during the assessment proceedings. It is stated that going through all the SOWs is practically not possible. The Ld.Ar submitted that, Ld.AO merely relied on the earlier assessment orders for making addition. The Ld.Ar thus Submitted that addition was made without properly considering the factual details on record and by relying on the earlier years' assessment....
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....specific and not project specific. According to him, only such production or manufacture which is carried at the site of the assessee's unit in the free trade zone would alone be eligible for the benefit under section 10A and not such production or manufacture which has been carried outside or by a third party. A mere reading of subsection (2) would not be sufficient. The entire section has to be read in conjunction with Explanation 3, which clarifies that profits and gains derived from 'on-site' development of software outside India shall also be deemed to be profits and gains derived from the export of software outside India, and same would also be entitled to such benefit. If the interpretation, as contended by the revenue is accepted, the very purpose of inserting Explanation 3 to section 10A of the Act would be lost." He also placed reliance on the CBDT Circular No. 01/2013 dated 17/01/2013 which is placed at pages 5156-5159 of paper book. 16.7 The Ld.AR submitted that, the Circular further clarifies regarding the software developed abroad at a client's place being eligible for benefits under the respective provisions, as it amount to 'deemed export' and tax ....
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....nsider the claim of assessee in accordance with law. Needless to say that proper opportunity of being heard is to be granted to the assessee. Accordingly, these grounds raised by assessee stands allowed for statistical purposes. 17. Ground no. 43 - Deduction under section 80JJAA being disallowed. 17.1 The Ld.AR submitted that copy of the Audit report under section 80JJAA, being Form No. 10DA was submitted to the Ld.AO vide submission dated 28.5.2014. The Ld.AO thereafter called upon assessee to justify the allowability of deduction under section 80JJAA. The assessee explained in detail as to why deduction under section 80JJAA should be allowed along with supporting case laws. It was also submitted that the DRP in its directions for AY 2011-12 allowed deduction claimed under section 80JJAA subject to verification of deduction of only those payments made to 'workmen' who are not employed in supervisory capacity. The Ld.AR submitted that, various details were filed before the Ld.AO explaining as to how: (i) salary and wages are synonymous (ii) employees of Infosys are workman under section 80JJAA (iii) amendment to section 80JJAA by the Financ....
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....mpany which was engaged in the business of software services, i.e., business of providing mobile value added services and products such as caller and ring back tones, dynamic voice mail, missed call alert service and other interactive media solutions like tele-voting, interactive programming by observing as under: Relevant observations of the ITAT are as under. "Held, that as the assessee was engaged in the development and manufacture of software, the assessee was covered within the definition of industrial undertaking. The definition of "industrial undertaking" as stipulated in section 10(15) and section 72A of the Act extended to undertakings that were engaged, inter alia, in the manufacture of computer software or recording of programmes on discs, tapes, perforated media or other information devices. The assessee was one such undertaking. The assessee had claimed deduction of only those payments made to "workmen" who were not employed in supervisory capacity. Therefore, the assessee was entitled to the deduction under section 80JJAA of the Act." 17.5 He submitted that, the question as to whether the software industry can be regarded as an 'industrial undertaking' ....
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....rounds namely: (1) that persons working in software units cannot be regarded as workmen as contemplated by the provisions of section 80JJAA of the Act. (2) Deduction under section 80JJAA cannot be allowed in respect of additional wages paid to employees who are working in 10A units because under the provisions of 80A(4) of the Act, the assessee cannot enjoy benefits both under sections 10A and 80JJAA of the Act in respect of the same income. On objections by the assessee before the DRP, the DRP rejected the claim of the assessee. The DRP also took the view that, the assessee has not given Form 10DA for each 10A unit separately. The AO in the order giving effect to the order of the DRP on this aspect has observed as follows: "7.5 Apart from the above, I would like to highlight the fact that as per the provisions of section 80JJAA, deduction is allowable taking each unit as a basis rather than the assessee as an undertaking. Accordingly, the assessee is required to compute deduction u/s 80JJAA in respect of each eligible unit separately. While doing so, all the conditions stipulated would be applied taking each unit as the reference point, i.e The additional wages are requir....
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...., any amount of profits and gains of an undertaking or unit of enterprise or eligible business is claimed and allowed as a deduction under any of those provisions for any assessment year, deduction in respect of, and to the extent of, such profits and gains shall not be allowed under any other provisions of this Act for such assessment year and shall in no case exceed the profits and gains of such undertaking or unit or enterprise or eligible business, as the case may be." However coming to the second limb of the reasoning given by the lower authorities, which is section 80A(4), the said section is reproduced hereunder : As per the assessee even if deduction under section 10A of the Act is allowed for these units, a further deduction u/s.80JJA of the Act, is also allowable. Argument of the assessee's counsel is that the limitation put in by Section 80A(4) of the Act, would apply only to profit linked deductions. There can be no dispute that deduction under Section 10A of the Act, is profit linked. In so far as deduction u/s.80JJA is concerned, a look at sub-section (1) of the said section is required, which is reproduced below : 80JJAA(1) : Where the gross tot....
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....led by the assessee, the learned CIT(A) held as under : "According to the AO if an employee or workman is getting a salary of more than Rs. 1,600 per month he is not covered by the definition of workman. However as per cl. (iv) of s. 2(s) of the Industrial. Disputes Act a worker, employed in supervisory capacity and getting a salary of more than Rs. 1,600 per month only be excluded from the definition of workman. In appellant's case the software engineers in respect of whom deduction under s. 80JJAA has been claimed have not been employed in a supervisory capacity even though they may be getting a salary of more than Rs. 1,600 per month. As the software engineers were not employed in supervisory capacity they cannot be excluded from the definition of workman. Further as per the notification of the Karnataka Government, the appellant company engaged in the development of software is covered by the Industrial Disputes Act. As such, I am of the considered opinion that the appellant has satisfied all the conditions for claiming relief under s. 80JJAA. However, I find that the appellant has claimed deduction of Rs. 2,55,81,220 with reference to the additional wages of Rs. 8....
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....ws that the assessee had claimed deduction in respect of employees, who had joined as engineers in their respective field such as systems engineer, test engineer, software design engineer, IC design engineer, lead engineer etc. A cursory perusal of those lists establishes that the assessee had claimed deduction in respect of the engineers employed not in the category of supervisory control. All these details were filed before the AO during assessment proceedings. These facts were not properly considered by the AO. Further, from the order of the CIT(A), it is seen that he had taken note of the notification issued by the Government of Karnataka and concluded that as per the notification issued, the assessee company engaged in the development of software is covered by the Industrial Disputes Act, 1947. Further it is not the case of the Revenue that the assessee did not fulfil the conditions extracted elsewhere in this order. Considering all those factual matters we do not find any infirmity in the order of CIT(A) according relief to the assessee. In fact he had clarified the relevant portions related to Industrial Disputes Act, 1947 and IT Act while granting relief to the asssessee wh....
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....ment of TDS demand. 19.1. The Ld.AR submitted that as the Tribunal has already held assessee to be an assessee in default for non-deduction of TDS on sub-contracting charges paid to Infosys China u/s. 201(1)/1(A) by order dated 28/03/2022. In Ground no 44 to 45 we have upheld the disallowance u/s.40(a)(ia)in the paragraphs herein above. The Ld.AR seeks deduction of the said amount u/s. 10AA as a consequence of the disallowance. He relied on the decision of Hon'ble Bombay High Court in case of CIT v Gem Plus Jewellery India Ltd reported in (2011) 330 ITR 175 and CBDT Circular No. 37 of 2016 dated 2.11.2016 in support of this contention. The Ld.St.Counsel relied on the orders passed by authorities below. 19.2. We note that the submissions of assessee deserves to be considered and the claim has to be considered in accordance with law. In our opinion there is no statutory provision to that effect having been made, as a consequence of the disallowance, claim of deduction of such disallowance under section 10A/AA must follow. Needless to say that proper opportunity of being heard is to be granted to the assessee. Accordingly, these grounds raised by assessee stands allowed for s....
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....ents filed by assessee having regards to the decisions relied upon by assessee hereinabove. Needless to say that proper opportunity of being heard is to be granted to the assessee. Accordingly, these grounds raised by assessee stands allowed for statistical purposes. 21. Ground nos.51- 52: TDS credit not allowed to the extent of Rs. 1,06,50,855. 21.1 The Ld.AR submitted that TDS credit was not allowed to the extent of Rs.1,06,50,855/- was not allowed by the Ld.AO. He has filed the evidences in support of this claim. In lieu of the above, we direct the Ld.AO to verify the above claim of assessee in accordance with law. Needless to say that proper opportunity of being heard is to be granted to the assessee. Accordingly, these grounds raised by assessee stands allowed for statistical purposes. 22. Ground no.53: TDS credit and advance tax relating to ICIL not allowed even though it was allowed in the Draft assessment order 22.1 It is submitted that the Ld.AO erred in not allowing TDS credit and advance tax relating to Infosys Consulting India Ltd which was merged with the assessee, amounting to Rs.27,73,096/- and Rs.75,00,000/- even though the same was allowed in the ....
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.... effect to the DRP directions. In the final assessment order, the Ld.AO held that as the claim of the assessee has to be allowed based on the return of income filed, the additional credit allowed in the draft assessment order is not allowed in the final assessment order. The Ld.AO was of the view that as the additional claim did not form part of the original return of income, the assessing officer could not have allowed such additional claim. The Ld.AO relied on the decision of Hon'ble Supreme Court in the case of Goetze India Ltd v CIT reported in (2006) 157 Taxman 1. 23.4 Before us the Ld.AR submitted that the DRP was not correct in directing the AO to verify and rectify the mistake in computation of foreign tax credit, if any, as allowed by the Ld.AO in the draft assessment order. This is because, the Ld.AO allowed the foreign tax credit after verification of all details and evidences on record. These details and evidences were also on record before the DRP. Hence, the direction of the DRP to Ld.AO to verify and rectify the mistake in computation of Foreign tax credit, if any, is invalid, bad in law and liable to be quashed. We have perused the submissions advanced by both....
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....e assessment. Hence, the Ld.AR submitted that Ground nos.55, 56 and Ground no. 57 on alternate claim for deduction for state taxes paid u/s. 91 are not pressed and the same was withdrawn vide submissions filed on 18/05/2022 as under: "2.1 Withdrawal of the Ground on deduction for State Taxes paid [Ground No 55 & 56] It is submitted that due to revision in the claim of state taxes paid outside India, the appellant is not eligible for the higher claim of Rs.37,30,57,123 made during the assessment. Hence, Ground No 55, 56 and Ground No 57 on alternate claim for deduction for state taxes paid under section 91 is not pressed." Accordingly, Ground nos. 55-57 are dismissed as not pressed. 25. Ground nos.58-59:Interest on IT Refund granted under section 143(1) but subsequently recovered on completion of assessment proceedings is allowable as deduction 25.1 It is submitted that the interest on IT refund has been offered to tax which was subsequently recovered upon completion of assessment proceedings. The Ld.AO disallowed the claim by holding that the same was not offered to tax that pertain to A.Ys. 2007-08 and 2008-09. Before us the Ld.AR submitted as under: "21....
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....poses. 26. Ground no. 60 is consequential in nature and do not require any adjudication. 27. The assessee has filed an application dated 28/06/2021 raising an additional ground of appeal in respect of deduction for Education Cess. This issue is no longer resintegra and is against assessee. The assessee therefore do not press this ground for adjudication. Accordingly, this application for admission of additional ground is dismissed at the threshold. In the result, the appeal filed by the assessee stands partly allowed. Order pronounced in the open court on 28th November, 2022. ============= Document 1 International transaction Amount (Rs.) Software development 17292848955 Technology consulting 1458318688 Software Services 1814565271 Business Process Outsourcing Services 18058861619 Loan Granted 28670000 Interest Received 19932396 Recovery of expenses 208911166 Reimbursement of expenses 286305672 Trade Payable 803497151 Trade Receivable 1633631029 Document 2 8.2.2 We, however, find that in the case on hand that the Assessing Officer has not examined the documentary evidence in respect of the so....