THE COMMISSIONER OF INCOME TAX-V vs. PEROT SYSTEMS TSI (INDIA) LTD

UNREPORTED I-37 * IN THE HIGH COURT OF DELHI AT NEW DELHI

ITA 402/2008

THE COMMISSIONER OF INCOME TAX-V

..... Appellant Through: Ms. Suruchi Aggarwal and Mr. Chandramani Bharadwaj, Advocates

versus

PEROT SYSTEMS TSI (INDIA) LTD.

..... Respondent Through: Mr. Ajay Vohra and Ms. Kavita Jha, Advocates

DATE OF DECISION: September 23, 2010

CORAM: HON'BLE MR. JUSTICE A.K. SIKRI HON'BLE MS. JUSTICE REVA KHETRAPAL

A.K. SIKRI, J. (ORAL)

interest income from bank deposits made in connection with software business and interest from security deposits made in connection with software business. The assessing officer disallowed the claim of exemption in respect of these incomes on the ground that they were not directly derived from the export business. This decision of the assessing officer rejecting the claim of exemption in respect of aforesaid incomes has been maintained till the level of Tribunal and insofar as that part is concerned, the assessee has accepted the same. 2. The dispute is regarding three items of incomes in respect of which exemption was sought under Section 10A of the Act, which was disallowed by the assessing officer but the Income-Tax Appellate Tribunal has allowed the same. These are as under:- (i) Amount of ` 11.76 lakhs received by the assessee as reimbursement of expenses incurred in obtaining ISO certification. (ii) Reimbursement of ` 9,00,215/- relating to rent satellite charges, printing, stationery, etc. from HCL Technologies Ltd. (iii) Corporate charges amounting to ` 20 lakhs earned from the sister concern, i.e., HCL Technologies Ltd. 3. Insofar as first item is concerned, the admitted facts are that the assessee had spent a sum of ` 23,52,000/- in obtaining ISO quality 2010:DHC:4741-DB

by the EXIM Bank, which amounted to ` 11,76,000/-. It was in this backdrop that the assessee had claimed exemption of the receipt of the aforesaid amount under Section 10A of the Act. The Tribunal found, on the basis of aforesaid facts, and rightly so, that the total expenses incurred by the assessee were much higher, namely, ` 23,52,000/-, which was allowable as expenditure and, therefore, the aforesaid grant being 50% of the expenses incurred in obtaining ISO quality certification would qualify for exemption under Section 10A of the Act. Similar is the position in respect of other two claims which are dealt with by the ITAT in the following manner:- “7. We have considered rival submissions. The assessee company, part of HCL Group of Company, incurred certain expenses on behalf of HCL Technologies Ltd. The same were reimbursed in the form of corporate charges. Similarly, the assessee was also reimbursed for the use of work stations belonging to the assessee for and on behalf of HCL Technologies Ltd. Thus, what is received by assessee is by way of reimbursement of expenses. This implies that such receipt will be given to reduce the expenses incurred. Since the expenses are debited to profit and loss account and while computing profits of eligible undertaking, profits were reduced to the extent of expenses. The amount received by way of reimbursement of expenses cannot be reduced from the profits of business of eligible industrial undertaking. The AO is, therefore, directed not to reduce the profits of business by the amount of ` 20 lacs received by way of corporate charges and ` 9,00,250/- received by way of reimbursement recovered for use of work stations. Accordingly, Ground Nos. 6, 9 & 10 are ruled in favour of ” 2010:DHC:4741-DB

A.K. SIKRI, J.

REVA KHETRAPAL, J. SEPTEMBER 23, 2010 km

2010:DHC:4741-DB