Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, Hyderabad ‘ B ‘ Bench, Hyderabad
Before: Smt. P. Madhavi Devi & Shri D.S.Sunder Singh
This is the assessee’s appeal for the A.Y 2013-14 against the order of the CIT (A)-2, Hyderabad, dated 28.02.2017.
The case was taken up for hearing through Video- Conferencing and both the parties i.e. the learned Counsel for the assessee and the learned DR were heard.
Brief facts of the case are that the assessee firm, engaged in rendering Software Development Services, filed its return of income for the A.Y 2013-14 electronically on 29.09.2013 admitting income of Rs.3,77,030/-. During the assessment Page 1 of 7 of 2017 Value Labs Technologies LLP Hyderabad..
proceedings u/s 143(3) of the Act, the representative of the assessee firm appeared before the AO from time to time and produced the details and information called for. From the said details, the AO noticed that the assessee is a newly established unit in SEZ incorporated on 13.08.2009 and commenced its operations on 09.04.2010 and accordingly, the assessee claimed exemption u/s 10AA of the Act for an amount of Rs.5,06,79,363/- as income from its unit in SEZ. During the course of assessment proceedings, the AO required the assessee to justify as to why telecommunication expenses of Rs.10,29,473/- should not be disallowed. He also required the assessee to explain the miscellaneous expenses to the tune of Rs.11,03,592/- and also the customs clearance charges of Rs.23,683/-. The assessee filed its submissions stating that the telecommunication expenses were not included in the export turnover and therefore, the same should be reduced from the export turnover for computation of exemption/deduction u/s 10AA of the Act. The AO, however, did not accept the same and treated it as part of the export turnover, but did not allow it as expenditure and determined the exemption at Rs.5,01,00,076/- only. He also disallowed the customs clearance charges and 10% of the miscellaneous expenses on the ground that they could not be explained by the assessee and of 2017 Value Labs Technologies LLP Hyderabad.. brought the customs clearance charges, telecommunication charges and 10% of the miscellaneous expenses also to tax.
Aggrieved, the assessee preferred an appeal before the CIT (A) who dismissed the same and the assessee is in second appeal before us by raising the following grounds of appeal:
“1. Ground No. 1
1.1 That, the order of the Learned Commissioner of Income-Tax (Appeals) -2, (I/Ld. CIT(A)") is erroneous both on facts and in law and thus the CIT(A) has erred in confirming the order of the Assessing Officer (1/ AD").
1.2 That, further while confirming the order of the learned AO the CIT(A) has failed to appreciate the material on record and submissions made before him and thus the order of the CIT(A) is vitiated on account of irrelevant and erroneous consideration and by disregarding the relevant material.
1.3 That, further the order of the CIT(A) is based on incorrect assumption of facts which are based on no material and the unwarranted inference have been drawn which are both factually incorrect and is based on pre-conceived opinion which is unsupported by any material. 2. Ground No. 2
2.1 The Ld. CIT(A) has erred in law in not specifically adjudicating all the Grounds of Appeal raised by the Appellant in Form 35. 3. Ground No. 3
3.1 The Ld. CIT(A) has erred both in facts and in law in confirming the re-computation of deduction u/ s 10AA of the Act at Rs.5,01,00,076/-.
3.2 The Ld. CIT(A) has erred both in facts and in law in confirming that telecommunication charges of Rs. 10,29,473/- have to be reduced from the export turnover for the purposes of computing available deduction under section 10AA of the Act.
3.3 The Ld. CIT(A) has erred both in facts and in law in not appreciating that having excluded of 2017 Value Labs Technologies LLP Hyderabad.. telecommunication charges from export turnover, the said charges should also have been excluded from the total turnover for the purposes of computing available deduction under section 10AA of the Act. 4. Ground No. 4
4.1 The Ld. CIT(A) has erred both in facts and in law in confirming disallowance of Rs. 10,29,4731- made by the learned Aa under the head telecommunication expenditure. 5. Ground No. 5
5.1 The Ld. CIT(A) has erred both in facts and in law in confirming ad hoc disallowance of Rs. 1,10,3591- made by the learned Aa under the head miscellaneous expenditure. 6. Ground No. 6
6.1 The Ld. CIT(A) erred in confirming the disallowance of Rs.23,6831 - made by the learned Aa under the head customs clearance charges.
6.2 The Ld. CIT(A) has erred both in facts and in law in not appreciating the fact that custom clearance charges of Rs.23,6831 - paid by the Appellant in relation to purchase of laptops is a revenue expenditure in accordance with the nature of business of the appellant.
6.3 The Ld. CIT(A) has erred both in facts and in law in not appreciating that the appellant is in the business of development and export of software and that the purchase of laptops is directly incidental to the business of the appellant and that the expenditure of Rs.23,6831 - is allowable ul s 37(1) of the Act. 7. Ground No. 7
7.1 The Ld. CIT(A) erred both in facts and in law in confirming the determination of total income at Rs.5,22J9,906/ - where in the AO has not even allowed the deduction of Rs.5,01,OO,076/ - u/ s 10AA of the Act that has been re-computed by AO himself in the assessment order. 8. Ground No. 8
8.1 The Ld. CIT(A) erred both in facts and in law in not allowing/computing deduction under section 10AA of the Act on the enhanced profits determined by the AO on account of disallowance of various expenses. of 2017 Value Labs Technologies LLP Hyderabad..
The above grounds are independent and without prejudice to one another. The appellant craves leave to alter, amend or withdraw all or any of the grounds of appeal herein or add any further grounds as may be considered necessary and to submit such statements, documents and papers as may be considered necessary either before or during the appeal hearing”.
The learned Counsel for the assessee submitted that all the expenditure which have been disallowed by the AO have to be reduced from the export turnover as well as the total turnover.
He, therefore, sought a direction that the disallowed expenditure may be reduced from both the export turnover as well as total turnover for the purpose of computation of exemption u/s 10AA of the Act. In support of this contention, he placed reliance upon the following case law. a) Deloitte Consulting India (P) Ltd in b) Microsoft Global Services Center (I)MPvt. Ltd in ITA No.1245/Hyd/2014 c) Trendy Works Technology Pvt Ltd in ITA No.478/Hyd/2016. d) CIT vs. HCL Technologies Ltd in Civil Appeal No.8489- 8490 of 2013 e) CBDT Circular 4/2018 dated 14.08.2018 f) Planet Online Pvt Ltd vs. ACIT in ITA No.464 ^ 608/Hyd/2014 g) Value Labs vs. ACIT in ITA No.342/Hyd/2013 & 425/Hyd/2013 of 2017 Value Labs Technologies LLP Hyderabad.. h) CIT (A) vs. Assessee’s own case for the A.Y 2012-13 in ITA No.0063/2015-16. i) CIT (A) vs. Assessee’s own case for the A.Y 2011-12 in (A)-6/2016-17. j) CBDT Circular No.37/2016 dated 02.11.2016 k) ITO vs. Keval Construction reported in 33 Taxmann.com 277.
The learned DR, however, opposed the said contention of the assessee.
7. Having regard to the rival contentions and the material on record, and particularly the decision of the Hon'ble Supreme Court in the case of CIT vs. HCL Technologies Ltd. (cited supra), we direct the AO to exclude the disallowed expenditure from both the export turnover as well as total turnover while computing the exemption u/s 10AA of the Act. Accordingly, the assessee’s appeal is allowed.
In the result, assessee’s appeal is allowed. Order pronounced in the Open Court on 11th September, 2020.