TaxTMI 
TaxTMI 
2023 (12) TMI 1442
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.... A.O in making disallowance of expenses relatable to exempt income by invoking the provisions of Section 14A of the Act r/w Rule 8D of the Income Tax Rules, 1962 (hereinafter "the Rules"). 3. The CIT(A) noted that the assessee has claimed exempt income being dividend income of Rs. 4,56,83,550/- u/s. 10(38) of the Act. The CIT(A) noted that the assessee-company has made substantial investments in subsidiary and other companies and the total investment stood at Rs. 386,52,26,050/- as on 31.03.2015. The CIT(A) confirmed the action of the A.O, but directed, on alternative ground raised by the assessee, that the disallowance made u/s. 14A of the Act results enhancement of business income and same shall be eligible for deduction u/s. 10AA of the Act. The CIT(A) directed the A.O vide para 7.3.5 as under: "7.3.5 The other alternative ground raised by the assessee was that disallowance u/s. 14A results in enhancement of business income and the same shall be eligible for deduction u/s 10AA of the Act. On this issue, there is a decision of the ITAT in the assessee's own case for the AY 2007-08 in ITA No.2100/Mds/2011 dated 23.01.2013. The disallowance u/s 14A would increase the busines....
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....Now, the assessee is in appeal before the Tribunal. 8. Before us, the Ld. counsel for the assessee submitted that admitted position is that these software applications and licenses are in the category of intangible assets, but these are held to be computer as held by Hon'ble Madras High Court in the case of CIT vs. Computer Age Management Services [2019] 109 taxmann.com 134 (Mad.). We noted that this issue is squarely covered by decision of Hon'ble Madras High Court in the case of CIT vs. Computer Age Management Services, supra, and the assessee even now on computer software licenses is eligible for claim of depreciation at 60%. The Hon'ble Madras High Court held as under: "7. As noticed above, the assessee is in the business of registrar and transfer agent as licensed by the SEBI handling large volume of market sensitive data and information, which is available only through general customized application software. The assessee acquired software licenses capitalized during the relevant years in the books of accounts and claimed depreciation at 60%. In paragraph 20 of the order passed by the Tribunal, the nature of items, on which, the assessee claimed depreciation at....
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....ipt of proceeds therefrom are disclosed. ● The redemption of the said preference shares has resulted in a long term capital loss in the hands of the Assessee, the details of which are as follows: Particulars Amount (INR) Amount received on redemption (Refer to Cash flow statement) 1,30,70,000 Less: Indexed cost of acquisition (Refer to Note No.11 to the Financial statements) [1,30,70,000 x 1024 + 463 ] (2,89,06,436) Long term capital gain/(loss) (1,58,36,436) ● The Assessee submits that the aforesaid long term capital loss was inadvertently not claimed in the return of income filed by the Assessee on 30 November 2015 for the subject AY. Accordingly, we request you to take the above on record and permit carry- forward of the above mentioned loss." 11. Further the assessee vide the same letter has also made claim of deduction towards compounding fee paid to the RBI and the relevant claim reads as under: " 8.2 Deduction towards compounding fee paid to the Reserve bank of India ● During the subject AY the Company had paid an amount of INR 1,14,81,500 as compounding fee under the provisions of the Foreign Exchange Management Act, 1999. A copy of the or....
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....e Act. The relevant finding of CIT(A) in para 7.2 reads as under: "7.2.1 The AO found that the assessee had set off the losses of Rs. 116,65,15,210/- incurred in eligible units for deduction u/s 10AA against the profits of non-tax holiday units (profits derived from units other than units covered u/s 10AA). The AO further found that the set off done by the assessee is not correct in the light of the findings arrived at in the assessee's own case in the earlier years. When the assessee was called upon to show cause as to why the set off of loss claimed should not be disallowed, the assessee submitted detailed explanation which is extracted in the assessment order itself. The AO did not accept the submission of the assessee. The AO relying on the decision of the Karnataka High Court in the case of Himatasingike Seide Ltd (286 ITR 285) held that the deduction u/s 10A should be allowed only after set off of brought forward losses. Reliance was also placed on the decision of the IT AT Chennai Bench in the case of M/s Sword Global India P Ltd (formerly known as M/s Global Software India P Ltd) (306 ITR AT-286), wherein it was held that all brought forward losses are required to be ....
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....ection 4 of Section 10A which provides for pro rata exemption, necessarily involving deduction of the profits arising out of domestic sales, is one instance of deduction provided by the amendment. Profits of an eligible unit pertaining to domestic sales would have to enter into the computation under the head "profits and gains from business" in Chapter IV and denied the benefit of deduction. The provisions of Sub-section 6 of Section 10A, as amended by the Finance Act of 2003, granting the benefit of adjustment of losses and unabsorbed depreciation etc. commencing from the year 2001-02 on completion of the period of tax holiday also virtually works as a deduction which has to be worked out at a future point of time, namely, after the expiry of period of tax holiday. The absence of any reference to deduction under Section 10A in Chapter VI of the Act can be understand by acknowledging that any such reference or mention would have been a repetition of what has already been provided in Section 10A. The provisions of Sections 80IIBC and 80HHE of the Act providing for somewhat similar deductions would be wholly irrelevant and redundant if deductions under Section 10A were to be made at ....
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.... the total income of the assessee from the gross total income. The somewhat discordant use of the expression "total income of the assessee" in Section 1 0A has already been dealt with earlier and in the overall scenario unfolded by the provisions of Section 1 0A the aforesaid discord can be reconciled by understanding the expression "total income of the assessee" in Section 10A as "total income of the undertaking' . 18. For the aforesaid reasons we answer the appeals and the questions arising therein, as formulated at the outset of this order, by holding that though Section 10A, as amended, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI. All the appeals shall stand disposed of accordingly." Accordingly, this issue of Revenue's appeal is dismissed. 16. The next issue in this appeal of Revenue is as regards to the order of CIT(A) in deleting the disallowance made by A.O on account of expenses relatable to exempt income by invoking the provisions of Section 14A of the Act r/w Rule 8D(2) of th....