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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI RAJESH KUMAR & SHRI AMARJIT SINGH
O R D E R
Per Rajesh Kumar, Accountant Member:
The above titled appeal by the Revenue and cross objection by the assessee have been preferred against the order dated 23.03.2017 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2008-09.
“1. 0n the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in adopting the enhanced income that will be determined after disallowance U/S.14A r.w.rule 8D(2)(iii) for the purposes of computing deduction u/s.10A without appreciating the fact that the part of the enhanced income will not constitute profits and gains derived from the export of articles or things or computer software. 2. 0n the facts and in the circumstances of the case and in law, the Ld C1T(A) erred in deleting the addition of Rs.5,24,29,154/- made by the AO on account of reimbursement of marketing expenses without appreciating the fact that the assessee's total sales receipts is only from two AE's namely Client Logic Operating, USA and Client Logic USA or the fact that apart from the Marketing Agreement, the assessee failed to substantiate payments with any documentary evidence such as invoices, bills, receipts, break-up of expenses, bank statements, names and list of clients from whom sales have been made including comparative statement of the new clients.
3. On the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in directing the AO to exclude the freight, telecommunication charges, insurance expenses and expenses incurred in foreign exchange towards providing Technical Services outside India from the export turnover and the total turnover for the purposes of computation of deduction u/s.10A relying on the decision of the Hon'ble ITAT in the assessee's won case for A.Y.2004-05 without appreciating the fact that the decision of the Hon'ble ITAT has not been accepted by the Department and though appeal has been preferred before the Hon'ble High Court and the Hon'ble High Court dismissed the Revenue's appeal, the Department has not accepted the decision of the Hon'ble High Court on merits. However, no SLP has been preferred due to low tax effect.
3. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the A.O. be restored. 4.The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary."
The issue raised in the first ground of appeal is against the order of Ld. CIT(A) adopting the enhanced income after disallowance under section 14A read with rule 8D(2)(iii) for the purpose of computing deduction under section 10A of the Act by ignoring the fact that part of the enhanced income will not constitute profit and gains derived from export of article or things or computer software.
3 & CO 231/M/2019 M/s. Sitel India Pvt. Ltd.
At the outset, the Ld. Counsel of the assessee pointed out that the said ground is not arising out of the order of Ld. CIT(A) and therefore this ground has invalidly been raised by the Revenue. The Ld. A.R. drew our attention to the assessment order passed wherein the AO has made disallowance under section 14A read with rule 8D of Rs.15,70,598/- on account of disallowance under section 14A read with rule 8D and thereafter on the enhanced income computed the proportionate deduction under section 10A of the Act on the page No.14 of the assessment order which worked out to Rs.25,34,63,522/- and allowed the same. The Ld. A.R. therefore, submitted that AO has already granted the deduction under section 10A of the Act on the enhanced income after making addition under section 14A read with rule 8D and therefore the ground raised by the Revenue may kindly be dismissed.
The Ld. D.R., on the other hand, relied on the ground raised by the Revenue.
After hearing both the parties and perusing the assessment order of the first appellate authority, we find that the issue is not arising out of the Ld. CIT(A)’s order and therefore not maintainable. Accordingly, ground No.1 is dismissed.
The issue raised in 2nd ground is against the order of Ld. CIT(A) deleting the addition of Rs.5,24,29,154/- as made by the AO towards reimbursement of marketing expenses.
The facts in brief are that during the year the assessee has incurred expenditure of Rs. 5,24,29,154/- on account of marketing remuneration paid to its AE’s for the marketing
4 & CO 231/M/2019 M/s. Sitel India Pvt. Ltd. services provided by the AE’s. However according to the AO the assessee has been providing services to the AE’s only and therefore no marketing services from the AE’s are required and disallowed and added the same to the income of the assessee.
At the outset, the Ld. A.R. submitted that he has no objection if the ground No.2 is decided in favour of the Revenue. The ld Dr argued that the ground has to be decided in favour of the assessee in view of the clearcut findings by the AO that assessee is providing services to its AE’s only and therefore no marketing services are required.
After hearing both the parties and perusing the material on records , we are inclined to set aside the finding of the Ld. CIT(A) on this issue and uphold the order of AO on this issue. The ground no. 2 is allowed.
The issue raised in ground No.3 is against the order of Ld. CIT(A) directing the AO to include the freight, telecommunication charges, insurance expenses and expenses incurred in foreign exchange towards providing technical services outside India from export turnover and the total turnover for the purpose of computation of deduction under section 10A of the Act.
After hearing both the parties and perusing the material on record, we note that Ld. CIT(A) has directed the AO to exclude these expenses viz. freight, telecommunication charges, insurance expenses and expenses incurred in foreign exchange towards providing technical services outside India from export turnover and also from total turnover for the purpose of 5 & CO 231/M/2019 M/s. Sitel India Pvt. Ltd. computing deduction under section 10A after following the decision of the co-ordinate bench of the Tribunal in assessee’s own case in A.Y 2004-05. We also find that the Revenue has taken up this ground only on the plea that the appeal dismissed by the Hon’ble Bombay High Court and no further SLP has been filed before the Hon’ble Apex Court in view of the low tax affect. In our considered view there is no anomaly or infirmity in the order of Ld. CIT(A) which has followed the order of the co- ordinate bench of the Tribunal in assessee’s own case in A.Y. 2004-05 against which the appeal by the Revenue before the jurisdictional High Court has been dismissed and the order of the Tribunal stands merged with the Hon’ble Bombay High Court and attained finality. Therefore, we are inclined to dismiss the ground raised by the Revenue. The groundno. 3 is dismissed.
The issue raised in cross objection in ground No.1 is against the deletion of addition of Rs.5,24,29,154/-.
This ground has been filed by the assessee in support of the order of Ld. CIT(A). Since we have allowed this issue raised in Revenue’s appeal, the issue raised by the assessee in his cross objection becomes infructuous and accordingly is dismissed.
The issue raised in 2nd ground is without a prejudice and need not to be adjudicated.
Cross objection is dismissed.
Order pronounced in the open court on 13.01.2021.