TaxTMI 
TaxTMI 
2023 (1) TMI 1292
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....ated 26.03.2010 passed by Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] on the grounds inter-alia that: ITA No.4489/M/2010 (Grounds of Assessee) "Ground No - 1 Denial of deduction under section 10A of the Income-tax Act, 1961 ('the Act') on interest income and failed to adjudicate on treating interest income as 'Income from other sources' (i) On the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) ['CIT(A)'] ought to have held that interest income of Rs. 10,88,36,054 is derived from the business of Software Technology Park of India ('STPI') units eligible for section 10A deduction. (ii) On the facts and circumstances of the case and in law, the CIT(A) failed to adjudicate on the ground of appeal that interest income is 'Profits and gains of business or profession' and not 'Income from other Sources'. Ground No - 2 Unrealised Export Proceeds On the facts and circumstances of the case and in law, the CIT(A) ought to have held that the applications filed with the Prescribed Authority for realising export co....
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....in law, the Ld. CIT(A) erred in directing the AO to pass Rectification Order u/s. 155(10) in respect of non-realization of export sale proceeds resulting into allowance of exemption u/s.. 10 A without appreciating the fact that sub-section 10 section 155 has been omitted by the Direct Taxes Law (Amendment Act, 1987 w.e.f. 01.04.1992. 5. On the facts and in the circumstances of the case and in law, the Ld. Cit(A) erred in deleting the action of the AO to reduce the telecommunication expenses of Rs.1,49,38,508/- from the export turnover attributable to various units without appreciating the fact that the definition of the word "Export Turnover" in clause (iv) of Explanation 2 to section 10A specifically excludes the expenses incurred in foreign exchange towards telecommunication charges etc., attributable to delivery of articles or things or computer software or providing technical services outside India. 6. On the facts and in the circumstances of the case and in law, the Ld. CIT)(A) erred in deleting the addition made of Rs.4.28 crores u/s. 92CA(3) of the I.T. Act, 1961 on account of share of customization fee retained by overseas subsidiaries of the assessee comp....
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....tion the receipts beyond the first degree cannot be considered and as such interest income cannot be said to be derived from business of development of software being not of first degree thus upheld the findings returned by the AO that interest income by the assessee is income from other sources. The Ld. AR for the assessee at the very outset contended that this issue is already covered in favour of the assessee in its own case for A.Y. 2003-04 and 2004-05 in ITA Nos.4888 & 5023/M/2007 & ITA Nos.4488 & 5078/M/2010. 5. The assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has confirmed the addition by dismissing the appeal. Feeling aggrieved with the impugned order passed by the Ld. CIT(A) the assessee has come up before the Tribunal by way of filing present appeal. 6. We have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto. 7. We have perused para 15 of the order passed by the co-ordinate Bench of Tribunal in assessee's own case for A.Y. 2003....
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....uantification and attribution of such interest to the 10A units has to be examined by the AO. The assessee is directed to furnish necessary evidence in this regard to establish its claim of deduction under section 10A of the Act on the amount of Rs. 12,37,49,444/-. This ground is allowed subject to factual verification." 8. Since the facts and grounds are identical having not been controverted by Ld. D.R. following the order passed by the co-ordinate Bench of the Tribunal in assessee's own case (supra), we are of the considered view that earning interest from the surplus funds deposited with bank, bonds as well as loans to the employees and subsidiaries are eligible for deduction under section 10A of the Act subject to the quantification and attribution of such interest to 10A units by the AO. The assessee shall furnish evidence to established its claim under section 10A of the act which is to the tune of Rs.10,88,36,054/- derived from business of Software Technology Park of India (STPI) units. So ground No.1 of the assessee is allowed subject to the verification and quantification by the AO. Ground No.2 9. Ground No.2 has not been pressed during the course of argument....
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....e ordered to be deleted. ITA No.5079/M/2010 (Revenue's appeal) Ground No.1 15. The assessee received an amount of Rs.3,04,01,801/- as income arising on account of training imparted by the assessee company to its clients and included the same for the purpose of deduction under section 10A of the Act. The AO disallowed the same having not been arising from export of software development by the assessee. 16. The Ld. CIT(A) however by following the order passed by his predecessor in assessee's own case for A.Y. 2004 - 05 allowed the same which is under challenge before the Tribunal. 17. The Ld. A.R. for the assessee contended that this issue has already been decided in favour of the assessee in its own case for A.Y. 2002 - 03 and 2003-04. 18. We have perused the order passed by the co-ordinate Bench of the Tribunal in assessee's own case for A.Y 2003 - 04 which is on identical facts and decided in favour of the assessee by returning following findings: "7. We have considered rival submissions and perused the materials on record. The issue arising for consideration is, whether the income derived from training activity would qualify for deduction under ....
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....536/Mds/2007], deleted the same. 21. The Ld. CIT(A) deleted the addition of the losses of Chennai unit and Goregaon unit which is under challenge before the Tribunal by returning following findings: "7.2. This issue raised in appeal was also before my learned predecessor in office and in his order No. CIT(A)-VIII/DCIT- 8(2)/IT390/2007-08 dated 21.07.2009 for the AY 2004-05 this ground of the Appellant was allowed in favour of the Appellant. 7.3. Further, the Counsel for Appellant has brought to my notice the recent judgment of the Chennai Special Bench of the Tribunal in the case of Scientific Atlanta India Technology (P) Ltd vs. ACIT [ITA 536/Mds/2007] wherein the Honourable Tribunal has held that the section 10A is a deduction section and not an exemption section. Further, it held that the deduction has to be computed undertaking-wise while computing income under the head "profits and gains of business and profession and loss to be set-off against the profits of other units. 7.4. I have gone through the order of the Additional CIT, the submissions made by the Appellant's Counsel, the order of my predecessors in office and the judgment of the Chen....
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....that of Patni Telecom, in my view, the Assessing Officer was not correct in excluding telecommunication expenses amounting to Rs.1,49,38,508 from export turnover while calculating deduction under section 10A of the Act. Accordingly, I direct the Assessing Officer to compute deduction under section 10A without excluding the telecommunication expenses from the export turnover Accordingly the ground of the Appellant stands allowed." 26. Since this issue has already been thrashed by the special Bench of the Tribunal in case of Patni Telecom (supra) we find no scope to interfere in the findings returned by the Ld. CIT(A). Hence ground No.5 raised by the Revenue is dismissed. Ground No.6 27. The Ld. TPO/AO have made adjustment of Rs.4,28,06,836/- on account of customisation fee paid by the assessee to overseas subsidiaries, retained by overseas subsidiaries for marketing, distribution, administration and client management services of customisation work. 28. The Ld. CIT(A), by following the earlier years' order passed in favour of the assessee in its own case, allowed the claim of the assessee. The Ld. A.R. for the assessee contended that this issue has also been decided i....
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....hen the independent local distributors. It is argued that entire customisation work is done by the assessee only and there is no contribution by the subsidiaries in the customisation work entrusted by the users of the software manufactured by the assessee company. Per contra, the Learned Counsel argues that in addition to the sale of the software, the additional assignments or jobs for collection of customisation work is done by the subsidiaries (A.Es.). Ld. Counsel also referred to the sample copy of the agreement, which is placed in the paper book and submits that so fare as the local independent distributors are concerned, some of them are paid between 15 to 20% only on the selling the product of the assessee. He submitted that though the entire customisation work is done by the assessee but all the data collection work is done by the subsidiaries. The Learned Coursel supported the order of Learned CIT (A) deleting the addition." 30. Aforesaid order passed by the Tribunal has also been confirmed by the Honorable Bombay High Court vide order dated 24.03.2014 passed in CIT vs. M/s. I-Flex Solutions Ltd. in Income Tax Appeal No.2352 of 2011 by returning following findings: ....
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....e Tribunal in assessee's own case for A.Y. 2003-04 in ITA No.5023/M/2007 which is on identical facts. It is contended by the Ld. D.R. for the Revenue that Ld. CIT(A) has failed to appreciate the facts inter-alia that the result of overseas subsidiaries not having collected the amount from final end customers and do not represent any advantage conferred on the overseas subsidiaries. 35. The Ld. CIT(A) decided the issue in favour of the assessee by returning following findings : "17.5. I have perused the facts of the case and the TPO's order. It is seen that Nil rate of interest has been charged by the appellant in an uncontrolled transaction involving a third party and so an Internal CUP exists to establish that there is no need to levy interest on outstanding with AE's. 17.6. It is also seen that the AE's also did not charge interest to third party customers so as to pay corresponding interest to the appellant. The longer outstanding period is interalia, the result of AE's not having collected the accounts from final end customers and do not represent any advantage conferred on the AE. These material facts have escaped the attention of the TPO l....
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....delayed receivables has to be deleted. Accordingly, we do so. This ground is allowed." 37. So following the order passed by the co-ordinate bench of the Tribunal in assessee's own case for A.Y. 2003 - 04, we are of the considered view that when undisputedly AEs are not the end customers and their remittance to the assessee in turn depends upon the remittances by the end customers it cannot be said that the AEs have benefited because of delay in remitting the receivables. These facts have been duly thrashed by the Ld. CIT(A). So we find no illegality or perversity in the impuned findings returned by the Ld. CIT(A). Hence, ground No.7 is decided against the Revenue. Ground No.8 38. Ld. TPO/AO have made addition of Rs.1,18,97,000/- on account of interest charged to the overseas subsidiaries by the assessee in respect of the loans granted to them as well as deemed guarantee charge. However, the Ld. CIT(A) deleted this addition which is under challenge. 39. The Ld. A.R. for the assessee contended that this ground is also covered by the order passed by the Tribunal in assessee's own case for A.Y. 2004 - 05 available at page 1 to 16 of the paper book. 40. It is undi....
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....s). After considering the submissions of the assessee, learned Commissioner (Appeals) deleted the adjustment. 41. We have considered rival submissions and perused the material on record. As rightly observed by learned Commissioner (Appeals), question of providing a corporate guarantee will arise in a situation where the borrower has obtained debt from third party lender. In the facts of the present case, the assessee itself has advanced the loans to the AEs and has charged interest at the appropriate rate of LIBOR + certain basis points. No material has been brought on record by the TPO to demonstrate that the rate of interest charged by the assessee on the loans advanced is not at the appropriate rate prevailing in the countries, where the AEs are located. Therefore, in the aforesaid factual position, when the assessee has charged interest on the loans advance, there is no question of additionally charging guarantee commission for provision of corporate guarantee. In view of the aforesaid, we do not find any infirmity in the decision of learned Commissioner (Appeals). This ground is dismissed. In the result, appeal is dismissed." 42. Following the order passed by the co-ordi....