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Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ Bench, Hyderabad
Before: Smt. P. Madhavi Devi & Shri S.Rifaur Rahman
Per Smt. P. Madhavi Devi, J.M.
Both are cross appeals of the assessee as well as the Revenue for the A.Y 2006-07 against the order of the CIT (A), Guntur, dated 26.02.2010.
Brief facts of the case are that the assessee company, engaged in the business of “Software Development”, filed its return of income for the A.Y 2005-06 on 27.11.2006 declaring a
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ITA Nos 1414 and 756 of 2010 Seven Hills Business Solutions Ltd Hyderabad.
total income of Rs.2,69,837 after claiming exemption of Rs.30,36,344 u/s 10A of the I.T. Act. During the assessment proceedings u/s 143(3) of the Act, the AO observed from the P&L A/c of the assessee, that the assessee’s turnover includes US Branch Sales of Rs.8,74,09,485 which is to be excluded from the export turnover. When confronted, the assessee argued that such sales are excluded from the export turnover, the same should be reduced from the total turnover also. The AO however, was not convinced and he reduced the same only from the export turnover.
Further, the AO also noticed that the assessee has incurred Rs.15,71,412 in foreign exchange on foreign travelling. He excluded this amount also from export turnover for computation of exemption u/s 10A of the Act.
Thereafter, the AO also observed from the details of the TDS made by the company that though the assessee company has made TDS as required, it has failed to remit the same to the A/c of the Central Govt. within the due date u/s 200 of the I.T. Act. Therefore, he disallowed the same u/s 40(a)(ia) of the Act and brought it to tax.
Aggrieved, the assessee preferred an appeal before the CIT (A), who granted partial relief to the assessee and both the assessee as well as the Revenue are in appeal before us. In the assessee’s appeal, the assessee is aggrieved by the order of the CIT (A) that the US Branch sales and the foreign exchange
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ITA Nos 1414 and 756 of 2010 Seven Hills Business Solutions Ltd Hyderabad.
expenditure on foreign travel should be included in the export turnover as it is part of business income. However, we find that the CIT (A) has directed that such expenditure should be excluded from both the export as well as total turnover and this issue is now covered in favour of the assessee by the decision of the Hon'ble Supreme Court in the case of CIT vs. HCL Technologies Ltd, in CIVIL APPEAL NOS. 8489-8490 OF 2013 and Others, dated 24th April, 2018. Therefore, we see no reason to interfere with the order of the CIT (A) on this issue and the assessee’s grounds 1 to 8 are rejected.
As regards the additional grounds rasied by the assessee, they are not admitted at this stage as this issue is being dealt with in the Revenue’s appeal.
In the Revenue’s appeal, the only issue is against the order of the CIT (A) in deleting the disallowance made by the AO u/s 40(a)(ia) of the Act on the ground that the amount is already paid and is not payable. We find that the Hon'ble Supreme Court in the case of Palam Gas Services vs. CIT in Civil Appeal No.5512 of 2017 has held that irrespective of whether the amount is paid or payable, the TDS has to be done. Therefore, the Revenue’s ground needs to be allowed. However, we are in agreement with the claim of the assessee that even if the disallowance u/s 40(a)(ia) is to be confirmed, it only enhances the business income which is eligible for exemption u/s 10A of the Act. Therefore, the addition which results in increase in the income of the eligibile unit, the exemption u/s 10A has to be allowed on such income as
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ITA Nos 1414 and 756 of 2010 Seven Hills Business Solutions Ltd Hyderabad.
well as held by the Hon'ble Bombay High Court in the case of Gem Plus Jewellery India Ltd reported in 330 ITR 175 (Bom.). AO is directed accordingly. Therefore, the Revenue’s appeal is allowed for statistical purposes only.
In the result, the assessee’s appeal is dismissed and the Revenue’s appeal is allowed for statistical purposes.
Order pronounced in the Open Court on 29th June, 2018.
Sd/- Sd/- (S.Rifaur Rahman) (P. Madhavi Devi) Accountant Member Judicial Member
Hyderabad, dated 29th June 2018. Vinodan/sps
Copy to: 1 p. Murali & Co. CAs, 6-3-655/2/3 1st Floor, Somajiguda, Hyderabad 500082 2 Dy.CIT, Circle 3(1) Hyderabad 3 CIT (A)-Guntur 4 CIT – III Guntur 5 The DR, ITAT Hyderabad 6 Guard File
By Order
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