CAPGEMINI TECHNOLOGY SERVICES INDIA LTD,,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE - 11,, PUNE

आदेश / ORDER PER R.S. SYAL, VP :

These two cross appeals – one by the assessee and the other

by the Revenue - arise out of the order passed by the CIT(A)-1,

Pune on 23-05-2017 in relation to the assessment year 2013-14.

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company engaged in providing Software Development services

and also IT enabled services. The e-return was filed declaring

total income at Rs.6,98,02,52,640/- as per the normal computation

and book profit u/s.115JB of the Income-tax Act, 1961

(hereinafter also called ‘the Act’) at Rs.7,08,45,55,209/-.

Thereafter, the return was revised twice. The assessee claimed

deduction u/s.10AA. The assessment was completed by

determining the total income, under the regular provisions of the

Act, at Rs.766,09,96,530/-.

I. SET OFF OF LONG TERM CAPITAL LOSS OF

AMALGAMATING COMPANY

no. 9, is against not allowing brought forward long term capital

loss of Rs.104,46,39,309/- in respect of erstwhile iGATE

Computer Systems Limited (ICSL), which amalgamated with the

assessee company w.e.f. 01-04-2012 under the Scheme approved

by the Hon’ble High Court.

claimed brought forward long term capital loss of Rs.109.86

crore. On perusal of the details, the AO observed that a sum of

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Rs.104,46,39,309/- was long term capital loss of the erstwhile

ICSL which got amalgamated with the assessee company on the

first day of the financial year under consideration. On being

called upon to explain as to how such long term capital loss could

be allowed set off against the assessee’s income, it was submitted

that the amalgamation took place w.e.f. 01-04-2012 and the

Scheme of amalgamation, as approved by the Hon’ble High

Court, provided through para 10(f) that the loss etc., of the

amalgamating company shall be available to the amalgamated

company. The AO took note of the provisions of section 72A of

the Act, which provide for the set off and carry forward only of

the brought forward loss and unabsorbed depreciation of the

amalgamating company in the hands of the amalgamated

company. He found such provision as not covering long term

capital loss. He also did not find any force in the contention of the

assessee about the applicability of section 74 of the Act. The ld.

CIT(A) accorded his imprimatur to the view canvassed by the

AO.

relevant material on record. ICSL got amalgamated with the

assessee company w.e.f. 01-04-2012. A copy of the Scheme of

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arrangement, as approved by the Hon’ble High Court, has been

placed at page 68 onwards of the paper book. As per the Scheme

of arrangement u/s.391 and 394 of the Companies Act, 1956, it

has been provided that all the assets and liabilities of the

undertaking of the amalgamating company shall stand transferred

and vest in and deemed to be the assets and liabilities of the

amalgamated company. Clause 4(h) of the Scheme provides that

all the benefits including entitlements and incentives of any nature

whatsoever including tax concessions (not limited to income tax,

unexpired credit for minimum alternate tax, minimum alternate

tax, fringe benefit tax, sales tax) of the Transferor company shall

be transferred to and vest in the Transferee Company and: `these

shall relate back to the appointed date as if the Transferee

Company was originally entitled to all benefits to such incentive

schemes and policies subject to the continued compliance by the

Transferee Company of all the terms and conditions’. Para 10(f)

of the Scheme provides that: `with effect from the appointed date

and up to and including the effective date, any exemption from or

any assessment with respect to any tax which has been granted or

made, or any benefit by way of set off or carry forward as the case

may be of any unabsorbed depreciation or investment allowance

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or other allowance or loss which has been extended to or is

available to the Transferor Company under the Income Tax Act,

1961 shall be available to the Transferee Company.’ On going

through the approved Scheme of amalgamation, it is discernible

that all the assets and liabilities of the amalgamating (transferor)

company vested in the assessee-amalgamated (transferee)

company, which “shall be claimed by the Transferee Company

and these shall relate back to the appointed date as if the

Transferee Company was originally entitled to all the benefits”. It

has further been provided that any exemption which was benefit

by way of set off or carry forward, as the case may be, of any

unabsorbed depreciation/investment allowance or “other

allowance or loss” which is available to the Transferor Company

shall be available to the Transferee Company. On an analysis of

the relevant clauses of the Scheme, it is overt that any loss which

was available to amalgamating company shall become available

to the amalgamated company for necessary set off.

the shoes of the predecessor, as a result of which all the liabilities

and assets of the predecessor fall upon or vest in the successor

subject to the specific stipulations under the relevant statutes. The

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liabilities of the predecessor under the Income-tax Act, 1961

(hereinafter also called `the Act’) become the obligations of the

successor. In the like manner, the successor becomes entitled to

all the entitlements, benefits or privileges that had accrued to the

predecessor under the Act subject to the restrictions, if any, under

the Act.

judgment of the Hon’ble Supreme Court in CIT Vs. T.

Veerabhadra Rao (1985) 155 ITR 152 (SC). In that case, a

partnership firm took over the business of an earlier firm and all

the assets and liabilities of the predecessor firm passed on to the

successor firm. The assets included a certain amount of debt due

from a certain party to the predecessor firm. Later on, the amount

became bad and the successor assessee-firm claimed deduction of

the same as bad debt. The AO denied the deduction on the

ground that the debt was due originally to the predecessor firm

and hence, the successor-assessee could not claim the deduction.

When the matter finally came up before the Hon’ble Supreme

Court, it allowed the deduction by holding that if the debt had

been taken into account in computing the income of the

predecessor firm, which was subsequently written off as

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irrecoverable by the successor-firm, the assessee-successor will

be entitled to the deduction. It further laid down that: `it is not

imperative that the assessee referred to in sub-clause (a) must

necessarily mean the identical assessee referred to in sub-

section (b). A successor to the pertinent interest of a previous

assessee would be covered within the terms of sub-clause (b)’.

This judgment emphasizes the point that the successor-in-interest

becomes entitled to all the entitlements and deductions which

were due to the predecessor firm subject to the specific provisions

contained in the Act.

amalgamation is distinct from winding up. Whereas in winding

up, the entity, as such, comes to an end along with the business

that it was hitherto carrying; in amalgamation, only the entity

carrying on the business either ceases to exist or is divested of its

business, but the business continues albeit in the hands of another

entity. All the assets and liabilities of the business of the

amalgamating company devolve upon to the amalgamated

company. The only difference which occurs is that the business

which was earlier run by the amalgamating company is now

continued by the amalgamated company. Thus, it is evident that

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the per se existence of the business of the amalgamating entity

does not extinct in amalgamation in contrast to the business

coming to an end in the winding up. It is imperative to draw a line

of distinction between `business’ of an entity and the `entity’

itself. When the business of the entity continues despite the

closure of the entity or divesting of the business, then all the

obligations and privileges attached to the business of the erstwhile

entity, must go along with the business in the hands of the new

entity carrying on such business, save as otherwise provided

under the Act.

amalgamating company had long term capital loss of Rs.104.46

crore which vested in the assessee company along with all other

assets and liabilities of ICSL. The assessee claimed set off of

such long term capital loss of the amalgamating company, which

the AO denied by relying on section 72A of the Act.

forward and set off of accumulated loss and unabsorbed

depreciation allowance in amalgamation or demerger etc.,”

defines the term `accumulated loss’ under sub-section (7) to

mean: `so much of the loss of …. the amalgamating company …

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under the head "Profits and gains of business or profession" (not

being a loss sustained in a speculation business) which such ….

amalgamating company….would have been entitled to carry

forward and set off under the provisions of section 72 if the …

amalgamation … had not taken place’. It is thus graphically clear

from the prescription of section 72A, that it applies only in

respect of accumulated losses and unabsorbed depreciation under

the head “Profit and gains of business or profession”. The benefit

of accumulated loss and unabsorbed depreciation of the

amalgamating company, which would have been otherwise

available to the amalgamated company under the general law of

succession, has been circumscribed by certain conditions set out

in section 72A. This is a specific provision containing the

conditions to be fulfilled for taking the benefit of accumulated

loss and unabsorbed depreciation of the amalgamating company

by the amalgamated company under the head “Profit and gains of

business or profession”. It is not as if section 72A is the only

provision taking care of all the benefits, privileges or entitlements

under the Act, originally pertaining to the amalgamating company

now vesting in and passing on the amalgamated company. To

reiterate and summarize, all the benefits under the Act due to the

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amalgamating company devolve upon the amalgamated company

because of succession. However, we need to find out the

restrictions, if any, imposed by provisions of the Act upon

availing such benefits.

head `Profits and gains of business or profession’, section 35AB

contains a specific provision dealing with amortization of

expenditure of know-how in the case of amalgamation. This

section provides that any expenditure incurred on acquiring any

know-how for the purpose of business shall be amortized in six

years beginning with the year in which the amount is paid. Sub-

section (3) was inserted by the Finance Act, 1999 w.e.f. 01-04-

2000 to provide that where there is transfer of an undertaking

under scheme of amalgamation etc., and the amalgamating

company is entitled to deduction under the section, then the

amalgamated company etc., shall be entitled to claim deduction

under the section in respect of such undertaking to the same

extent and in respect of residual period as it would have been

allowable to the amalgamating company on such amalgamation

not taking place. This provision is clarificatory qua preliminary

expenditure reiterating the-ever existing position of law on this

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score that all the benefits and privileges etc. available to the

predecessor-amalgamating company pass on to the successor-

amalgamated company. Though sub-section (3) has been inserted

w.e.f. 01-04-2000, the Pune Tribunal in Kirloskar Oil Engines

Ltd. Vs. JCIT (ITA Nos. 1039 and 1040/PUN/2000) has held for

the assessment years 1995-1996 and 1996-97 that the

amalgamated company is entitled to deduction in respect of the

residual period of expenditure on know-how incurred by the

amalgamating company de hors sub-section (3) of section 35AB.

MAT credit of the amalgamating company is to be allowed in the

hands of the amalgamated company after amalgamation. The

Chennai bench of the Tribunal in ACIT Vs. M/s. Caplin Point

Laboratories Ltd. (ITA No.667/Mds/2013) has held, vide order

dated 31-01-2014, that MAT credit is no different from the TDS

credit and hence the carry forward of MAT credit of erstwhile

company has to be allowed to the amalgamated company.

some other provisions distinctly dealing with the effects of

amalgamation, exclusively applies to accumulated losses and

unabsorbed depreciation of the amalgamating company in relation

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to the income under the head “Profit and gains of business or

profession”. It is not a panacea for all the tax related issues of

amalgamation, so as to have application insofar as the other tax

entitlements, privileges or benefits in the hands of the

amalgamating company, are concerned.

gains”. It specifically provides that where in respect of any

assessment year, the net result of the computation under the head

“Capital gains” is loss to the assessee, the whole loss shall,

subject to the other provisions of this Chapter, be carried forward

to the following assessment year and clause (b) of sub-section (1)

provides that: “insofar such loss relates to long term capital asset,

it shall be set off against income, if any, under the head “Capital

gain” assessable for that assessment year in respect of any other

capital asset not being a short term capital asset”. Clause (c) of

section 74(1) provides that “if the loss cannot be wholly so set off,

the amount of loss not so set off shall be carried forward to the

following assessment year and so on”. Sub-section (2) of section

74 provides that no loss shall be carried forward under this section

for more than eight assessment years immediately succeeding

assessment year for which the loss was first computed. On going

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through the directive of section 74, it becomes comprehensible

that the amount of long term capital loss, not set off as per the

relevant provisions, is carried forward to the following assessment

years and so on for set off subject to other conditions including

that of sub-section (2). In view of the fact that the business of the

amalgamating company under amalgamation continues

uninterruptedly by the amalgamated company, the benefit of such

carry forward and set off earned by the business of the

amalgamating company has to be allowed as per the mandate of

section 74 to the amalgamated company, more so, when the

Scheme of amalgamation as approved by the Hon’ble High Court

specifically declares that benefits, inter alia, under tax laws `shall

be transferred and vest in the Transferee Company….. as if the

Transferee Company was originally entitled to all benefits’. The

term “the assessee” as used in sub-section (1) of section 74, which

was originally referring to the amalgamating company which

suffered the loss, shall now substitute the amalgamated company

to be considered as the assessee entitled to set off of the brought

forward long term capital loss not only because of the Scheme of

amalgamation so providing but also because of the assessee

becoming a successor-in-interest of such loss. Going with the

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phraseology of section 74, the sequitur is that the long term

capital loss of the amalgamating company is available for set off

in the hands of the assessee-amalgamated company. This ground

is, thus, allowed.

II. FRINGE BENEFIT TAX PAID IN AUSTRALIA

deduction towards Fringe Benefit Tax (FBT) paid in Australia.

The facts apropos this ground are that the assessee claimed

deduction of Rs.9,84,270/- in respect of FBT paid in Australia

both for the purposes of computation of income under regular

provisions as well as book profits u/s.115JB of the Act. The AO

refused to grant such deduction. The ld. CIT(A) allowed the

benefit of deduction in the computation of book profit u/s.115JB

by relying on Board Circular No.8/2005. However, the deduction

was not allowed in the normal computation of income on the

ground that it was hit by section 40(a)(ic) of the Act. Both the

sides have come up in appeal on their respective stands.

material on record, it is seen that the Board, vide Circular

No.8/2015, has opined that the prohibition for claiming deduction

in respect of FBT does not apply in the computation of book

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profits u/s.115JB and the same has to be allowed as deduction in

such computation. We therefore countenance the view taken by

the ld. CIT(A) on this score. The Department’s ground No.8 is

not allowed.

under the regular provisions of the Act as well, we find that

section 40(a)(ic) stipulates that no deduction shall be allowed in

respect of “any sum paid on account of fringe benefit tax under

Chapter XIIH”. The Chapter XIIH deals with income tax on FBT

under the provisions of the Act. Section 115W is the first section

of the Chapter, which is a definition clause. Clause (b) states that

fringe benefit tax: `means the tax chargeable under section

115WA’. Section 115WA dealing with `Charge of fringe benefit

tax’ provides through sub-section (1) that: `In addition to the

income-tax charged under this Act, there shall be charged for

every assessment year commencing on or after the 1st day of

April, 2006, additional income-tax (in this Act referred to as

fringe benefit tax) in respect of the fringe benefits provided or

deemed to have been provided by an employer to his employees

during the previous year at the rate of thirty per cent on the value

of such fringe benefits.’ Ergo, it gets explicit that section 40(a)(ic)

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talks of not allowing deduction for fringe benefit tax paid under

the Act in the computation of business income. It does not refer to

any fringe benefit tax paid abroad outside the ambit of the Act.

Such latter tax cannot be brought within the purview of section

40(a)(ic) because it is not a FBT under Chapter XIIH. As a

corollary, the amount of the FBT paid in Australia is eligible for

deduction under the normal provisions of the Act.

High Court in Reliance Infrastructure Ltd. Vs. CIT (2017) 390

ITR 271 (Bom.) holding that income tax paid in Saudi Arabia was

allowable as deduction in computing the income under the

provisions of the Act as the same was not taken benefit of by the

assessee either under section 90 or 91 of the Act. This position

stands accepted by the legislature as is manifest from the insertion

of Explanation 1 to section 40(a)(ii) of the Act declaring: `that for

the purposes of this sub-clause, any sum paid on account of any

rate or tax levied includes and shall be deemed always to have

included any sum eligible for relief of tax under section 90 or, as

the case may be, deduction from the Indian income-tax payable

under section 91.’ This implies that the deduction of income tax

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paid outside India will be admissible if no benefit of such tax has

been availed either u/s 90 or 91.

the FBT paid in Australia and further unlike section 40(a)(ic) of

the Act, it is also not hit by any specific provision calling for

disallowance. On a parity of the reasoning, such FBT is held to be

deductible. This ground of the assessee is, therefore, allowed.

III. FOREIGN TAX CREDIT

the credit for taxes i.e., inhabitant tax, enterprise tax etc., paid in

Japan. The Department has also raised connected ground no. 10

by which it has assailed certain relief granted by the ld. CIT(A) on

account of tax paid in Japan and other countries.

foreign tax credit. On perusal of the details, the AO observed that

the amount of total claim, including tax paid in Japan, was

Rs.13,05,33,028/-. He noticed that the assessee claimed credit for

four types of taxes paid in Japan viz., Corporation tax, Local

Corporation Taxes, Inhabitant Taxes –Surcharge and Enterprise

tax – Income based aggregating to 5,15,69,314/- Yen. Noticing

the language of the Double Taxation Avoidance Agreement

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(DTAA) between India and Japan, the AO opined that it covered

only Corporation taxes. As such, the credit was allowed only in

respect of Corporation taxes of 3,55,02,000/- Yen. He further

noticed that the assessee company claimed deduction u/s.10AA in

respect of the eligible units. Turnover of these eligible units was

8.90% of the total turnover, which, in his view, meant that no

Indian income-tax was paid to the extent of profits of the eligible

units qualifying for deduction u/s.10AA. He held that the

proportionate foreign tax credit in respect of income of 10AA

units could not be allowed as deduction. The AO thus allowed

total foreign tax credit of Rs.10,92,54,956/- as against the

assessee’s claim of Rs.13.05 crore. The ld. CIT(A) approved the

action of the AO to the extent of allowing credit for taxes paid in

Japan as per the DTAA, referring only to income-tax as well as

corporation tax. He, however, accepted the assessee’s alternate

contention of allowing deduction u/s.37(1) in respect of such

taxes paid in Japan. On the other foreign tax credit not allowed by

the AO on the ground of income of 10AA units not suffering any

tax in India, he relied on the judgment of the Hon’ble Karnataka

High Court in Wipro Ltd. Vs. DCIT (2016) 382 ITR 179 (Kar) to

hold that such credit was admissible. This is how, both the sides

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have come up in appeal before the Tribunal on their respective

stands.

material on record. The AO computed the amount of foreign tax

credit available to the assessee as under:

Table No.1:

(in Rs.) Total claim by the assessee as per the 13,05,33,028/- submission made Less : Reduction in respect of Japan taxes: 1,06,04,427/- Yen 5,15,69,314 less Yen 3,55,02,000/- x conversion rate of 0.66 Revised amount 11,99,28,601/- Less : 8.90% in respect of 10AA units 1,06,73,645/- Balance claim 10,92,54,956/- 23. The detail of foreign tax credit claimed by the assessee

during the year, is as under:

Table No.2:

Branch Tax payable on Amount of tax paid Credit available converted income in foreign currency being lower of two in India Australia 1,14,58,119 1,87,730 1,05,94,642 Belgium 84,13,219 1,23,432 84,13,219 Canada 7,52,27,873 11,57,102 6,28,15,596 Japan 2,51,97,787 5,15,69,314 2,51,97,787 Switzerland 2,15,35,045 2,30,520 1,59,93,284 Malaysia 97,57,502 4,26,751 75,18,499 15,15,89,547 13,05,33,028 24. The assessee has given further break-up of the amount of

taxes paid in Japan in the following two tables:

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Table No.3:

Particulars Amt. JPY Remarks Eligibility for FTC Corporation taxes 35,502,000 Taxes are based on Yes Eligible the taxable income (@30% on JPY 118 Mio) Local Corporation 4,954,700 Taxes are based on Yes Eligible taxes the taxable income (4.19% on JPY 118 Mio) Inhabitant taxes - 7,348,914 This is in the nature of Yes Eligible surcharge surcharge on the taxes (@20.7% on the corporation taxes of JPY 35.5 Mio) Inhabitant taxes – 1,210,000 These taxes are paid Not Eligible Capital base on the capital base Enterprise taxes – 3,763,700 Taxes are based on Yes Eligible income based the taxable income (3.18% on JPY 118 Mio) Enterprise taxes – 1,276,500 These taxes are paid Not Eligible Value added base on the Value added base (including taxable income of JPY 118 Mio) Enterprise taxes – 51,500 These taxes are paid Not Eligible Capital base on the capital base Total taxes 54,107,600 Table No.4:

Particulars Amt. in JPY Remarks Corporation taxes 35,502,000 Taxes are based on the taxable income (@30% on JPY 118 Mio) Local Corporation 4,954,700 Taxes are based on the taxable income taxes (4.19% on JPY 118 Mio) Inhabitant taxes – 7,348,914 This is in the nature of surcharge on the Surcharge taxes (@20.7% on the corporation taxes of JPY 35.5 Mio) Enterprise taxes – 3,763,700 Taxes are based on the taxable income income based (3.18% on JPY 118 Mio) 51,569,314

amount of credit on foreign taxes paid by the assessee in six

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countries totals up to Rs.13,05,33,028/-, which is the opening

figure taken by the AO in Table No.1. The AO did not allow

credit of foreign tax totaling to Rs.2.13 crore (Rs.13.05 crore –

Rs.10.92 crore), which has two parts.

credit paid in Japan in respect of Local corporation taxes,

Inhabitant taxes – surcharge and Enterprise taxes – income based,

which figures are available from Table No.4. The currency in

Japan has been converted into Indian rupees to work out the

amount of Rs.1.06 core, which has not been allowed as foreign

tax credit.

by the AO is Rs.1.07 crore (Rs. 2.13 crore minus Rs.1.06 crore),

which is the proportionate amount of tax paid by the assessee in

the six countries as noted in Table No.2 towards the sales made to

such countries in respect of 10AA units in the proportion of such

sale to total sales, computed at 8.90%.

assessee in Japan in respect of Inhabitant tax – capital base,

Enterprise tax – value added base and Enterprise tax – capital

base, being, the figures emerging from Table No.3, which is the

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subject matter of the assessee’s ground, has been allowed by the

ld. CIT(A) as deduction u/s 37(1) of the Act by specifically

recording in para No.53 that: “However, I find force in the

alternate claim of the appellant in respect of allowing inhabitant

taxes, enterprise taxes etc. paid in Japan to be allowed u/s.37(1) of

the I.T. Act”. The assessee’s ground No.10 is confined only to

the action of the AO in not granting deduction for the foreign tax

credit in respect of inhabitant tax, enterprise tax etc., paid in

Japan, which amount has, in fact, been allowed by the ld. CIT(A)

in the above terms. As the ld. CIT(A) has himself allowed such

deduction, the ground raised by the assessee seeking the relief

already allowed, becomes infructuous. The ld. AR was fair

enough to accept this position.

we find that the Department has assailed the impugned order on

two scores.

erred in directing the AO to allow deduction under section 37(1)

of the Act in respect of the taxes paid in Japan, which is the first

part of the foreign tax credit as discussed above. The ld. CIT(A)

directed to allow deduction u/s.37(1) in respect of Inhabitant tax,

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Enterprise tax etc., paid in Japan. Since such a deduction is in

respect of taxes for which no benefit of foreign tax credit has been

allowed in terms of section 90/91 of the Act, the same has been

rightly allowed u/s.37(1) of the Act in view of Explanation 1 to

section 40(a)(ii) of the Act as discussed supra in the context of

Fringe benefit tax paid in Australia. The grievance of the Revenue

on this count is, ergo, repelled.

foreign tax credit in respect of sales made by the assessee which

were eligible for deduction u/s.10AA of the Act, which has been

discussed above as the second part of foreign tax credit allowed

by the ld. CIT(A). The AO did not allow foreign tax credit of

Rs.1.07 crore, computed at 8.90% of the remaining foreign tax

credit in respect of the sales made from the 10AA eligible units

on the ground that since such income did not suffer tax in India

because of its deduction u/s 10AA, the foreign tax credit to that

extent could not be allowed. The ld. CIT(A) allowed the benefit

of such foreign tax credit by following the judgment of Hon’ble

Karnataka High Court in Wipro Ltd. (supra).

support the impugned order granting relief. This judgment has

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been rendered in the context of section 90 of the Act. It would be

apposite to consider the relevant parts of section 90, at the

material time, providing as under:

`90. (1) The Central Government may enter into an agreement with the Government of any country outside India or specified territory outside India,— (a) for the granting of relief in respect of— (i) income on which have been paid both income-tax under this Act and income-tax in that country or specified territory, as the case may be, or (ii) income-tax chargeable under this Act and under the corresponding law in force in that country or specified territory, as the case may be, to promote mutual economic relations, trade and investment, or’ (b) for the avoidance of double taxation of income under this Act and under the corresponding law in force in that country or specified territory, as the case may be’

DTAA with a country, then India needs to provide relief in

respect of taxes paid in the other country, depending upon the

terms and conditions of the DTAA. Whereas, sub-clause (i) of

section 90(1)(a) talks of granting relief in respect of income on

which have been paid both income tax under this Act and income

tax in the other country; sub-clause (ii) talks of granting relief in

respect of income-tax chargeable under this Act and under the

corresponding law in force in the other country. The Hon’ble

Karnataka High Court in Wipro Ltd. (supra) considered a

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situation in which the assessee had claimed deduction u/s.10A

and the AO did not allow foreign tax credit paid in USA and

Canada on the ground that such income was not taxed in India

because of the availability of deduction u/s 10A. The Hon’ble

High Court, while considering the prescription of sub-clause (ii)

of section 90(1)(a), held that the same talks of income

“chargeable” under this Act and does not mandate the actual

payment of income tax. If income-tax is chargeable on certain

income even though tax is not actually paid thereon because of

certain deductions/exemptions, the requirement of sub-clause (ii)

stands fulfilled. That is how, the benefit in respect of foreign tax

paid in the USA was allowed. It also considered foreign tax

credit paid in Canada in respect of income of 10A units but did

not allow credit because of the language of the Article 23 of

DTAA with Canada dealing with elimination of double taxation,

specifically providing that the income should be “subjected to tax

both in India and Canada”. It is, thus manifest that Wipro Ltd.

(supra) is confined to the interpretation of section 90.

the Hon’ble jurisdictional High Court in Reliance Infrastructure

(supra) to contend that the ld. CIT(A) erred in following Wipro

26 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

Ltd. (supra) and allowing benefit of foreign tax credit despite the

fact that income was not chargeable because of the availability of

deduction u/s 10AA of the Act. This judgment has been rendered

in the context of section 91 of the Act, relevant part of which

reads as under:

`91. (1) If any person who is resident in India in any previous year proves that, in respect of his income which accrued or arose during that previous year outside India (and which is not deemed to accrue or arise in India), he has paid in any country with which there is no agreement under section 90 for the relief or avoidance of double taxation, income-tax, by deduction or otherwise, under the law in force in that country, he shall be entitled to the deduction from the Indian income-tax payable by him of a sum calculated on such doubly taxed income at the Indian rate of tax or the rate of tax of the said country, whichever is the lower, or at the Indian rate of tax if both the rates are equal.’

obliged to allow credit for taxes paid in the countries with which

it has not entered into any DTAA on doubly taxed income. We

find that the second question before the Hon’ble Bombay High

Court was whether the Tribunal was right in holding that the sum

of Rs.47,30,951/-, being, the amount deducted u/s.80HHB and

Rs.5,59,919/-, being, weighted deduction allowed u/s.35B were to

be excluded for allowing foreign tax credit. The Hon’ble High

Court answered the question in favour of the Revenue by holding

that the amount of deduction claimed u/s.80HHB and section 35B

27 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

could not be construed as ‘doubly taxed income’ as it did not bear

any tax in India. It is pertinent to note that the judgment deals

with section 91 of the Act, which specifically talks of providing

relief only in respect of `doubly taxed income’, which language is

at variance to some extent with that of section 90(1)(a)(ii).

Before deciding the issue in favour of the Revenue, the Hon’ble

jurisdictional High Court also took into account the judgment in

Wipro Ltd. (supra) and held the same to be not applicable

inasmuch as the question before the Hon’ble Karnataka High

Court was on the interpretation of section 90 and the observations

made in the context of section 91 in that case were held to be

obiter dicta.

that

- Section 90(1) applies in the context of countries with which

India has entered into DTAAs as against section 91 applying in

the context of countries with which India has not entered into

DTAA.

- Section 90 provides two types of reliefs, exemption of income

[section 90(1)(b)] or allowing of foreign tax credit [section

90(1)(a)(i) and (ii)] depending upon the terms and conditions of

28 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

the DTAA. Whereas, most of the treaties, such as USA and

Canada provides for relief in respect of foreign tax credit, some

treaties, such as Poland and Bulgaria, provide for exemption of

income. On the other hand, section 91 provides only foreign tax

credit and not exemption of income.

- Section 91 specifically provides that only the “doubly taxed

income” can be subjected to relief in respect of foreign tax paid in

a country with which no DTAA exists. To the extent of section

91 providing for relief on “doubly taxed income”, this language is

somewhat similar to section 90(1)(a)(i) which also talks of

income on which tax has been paid both in India and the other

country and in contrast to the language of section 90(1)(a)(ii)

which provides for allowing relief in respect of income tax

“chargeable” under this Act, whether or not actually paid.

Whereas income-tax may be chargeable on certain income under

the Act but not actually payable because of certain

deductions/exemptions, an income is said to be doubly taxed only

when the income is both chargeable to tax as well as subjected to

tax in India.

- Even the extent of relief of foreign tax credit is different in both

the sections. Section 5 provides that the scope of total income of a

29 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

resident covers his world income, whether accruing or arising etc.

in or outside India. Section 91 provides a limited credit for doubly

taxed income `which is not deemed to accrue or arise in India’. In

other words, it stipulates two things so as to qualify for relief,

first, that the income should be doubly taxed in both the countries

and second, that the income accruing or arising outside India on

which tax is paid there, should not be deemed to accrue or arise in

India. It is only when the income is exclusively accruing or

arising outside India and is not also deemed to be accruing or

arising in India, that it will be eligible for credit for tax paid in

foreign country. On the other hand, Section 90 is more liberal in

terms of granting foreign tax credit and does not require the

income to be exclusively accruing or arising in foreign country. It

simply states that where income is either taxed in both the

countries or chargeable to tax in India and also in the other

country that the benefit of foreign tax credit shall follow. There is

no further requirement, like section 91, that the income bearing

foreign tax should not be deemed to accrue or arise in India.

the rival parties rendered in the context of sections 90 and 91, we

turn to the facts of the instant case to examine how these are

30 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

placed. Table No.2 reproduced above indicates that the assessee

paid foreign tax in six countries, viz., Australia, Belgium, Canada,

Japan, Switzerland and Malaysia. India has entered into DTAAs

with all such countries. As such, section 90 governs the

allowability or otherwise of foreign tax credit in the extant case

and as a corollary, section 91 goes out of reckoning, leaving the

reliance of the ld. DR on Reliance Infrastructure (supra)

superfluous.

the foreign tax credit in terms of section 90 of the Act in respect

of the all the six countries, in seriatim.

between India and Australia deals with elimination of double

taxation. Para 4(a) of this Article provides as under:

“(a) the amount of Australian tax paid under the laws of Australia and in accordance with the provisions of this Agreement, whether directly or by deduction, by a resident of India in respect of income from sources within Australia which has been subjected to tax both in India and Australia shall be allowed as a credit against the Indian tax payable in respect of such income but in an amount not exceeding that proportion of Indian tax which such income bears to the entire income chargeable to Indian tax; and”.

the DTAA between India and Australia, it is amply borne out that

31 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

the India is obligated to eliminate double tax by allowing relief in

respect of taxes paid in Australia only in respect of income

“which has been subjected to tax both in India and Australia”.

This case falls u/s 90(1)(a)(i) of the Act, which talks of granting

relief in respect of `income on which have been paid both income-

tax under this Act and income-tax in that country’. As the

assessee did not pay any tax in India in respect of 10AA units

sales made to Australia, the benefit of tax paid in Australia cannot

be allowed against the Indian income tax liability of the assessee

under Article 24.

Belgium. Article 23 of the DTAA between the India and Belgium

deals with elimination of double taxation. Para 2(a) of the Article

reads as under:

“(a) Where a resident of India derives income which, in accordance with the provisions of the Agreement, may be taxed in Belgium, India shall allow as a deduction from the tax on the income of that resident an amount equal to the income-tax paid in Belgium whether directly or by deduction. Such deduction shall not, however, exceed that part of the income-tax (as computed before the deduction is given) which is attributable to the income which may be taxed in Belgium.”

between India and Belgium indicates that the elimination of the

32 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

tax paid in Belgium is contemplated in India. It calls upon India to

allow as a deduction from the tax on the income of that resident

an amount equal to the income-tax paid in Belgium. There is no

further requirement, like the DTAA between India and Australia

seen above, that the income should be subjected to tax both in

India and Belgium. The elimination of double taxation under this

DTAA is governed by section 90(1)(a)(ii) of the Act, which

simply contains requirement of income-tax chargeable under this

Act’ and under the corresponding law in force in Belgium. There

is no further stipulation of actual payment of tax in India. As the

income from 10AA units arising in Belgium is chargeable to tax

in India, even though it is not subjected to tax because of the

deduction provided by this section, the requirement of chargeable

under the Act gets fulfilled. As the assessee admittedly paid tax

on such income in Belgium, fulfilling the mandate of section

90(1)(a)(ii), the DTAA provides for granting relief by India of the

tax paid on such income in Belgium. However, there is a cap that

such deduction shall not exceed that part of the income-tax (as

computed before the deduction is given), which is attributable to

the income.

33 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

credit is Canada. Article 23 of DTAA between India and Canada

deals with elimination of double taxation. Para 3(a) of the

Article, dealing with India, to the extent it is relevant for our

purpose, reads as under:

“(a) The amount of Canadian tax paid, under the laws of Canada and in accordance with the provisions of the Agreement, whether directly or by deduction, by a resident of India, in respect of income from sources within Canada which has been subjected to tax both in India and Canada shall be allowed as a credit against the Indian tax payable in respect of such income but in an amount not exceeding that proportion of Indian tax which such income bears to the entire income chargeable to Indian tax.”

tax paid in Canada only when the income has been subjected to

tax both in India and Canada. The language of this DTAA is

similar to the treaty between India and Australia as discussed

above. As the income from Canada in respect of 10AA units has

not been subjected to tax in India because of the deduction, no

benefit of tax paid in Canada thereon can be allowed under

Article 23 of the DTAA.

tax are Japan, Swiss Federation and Malaysia. We have gone

through the relevant Articles of the DTAAs between India and the

34 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

three countries dealing with elimination of double taxation by

India in respect of taxes paid in such countries. Article 23(2)(a)

of the DTAA between India and Japan provides for elimination of

double taxation. Language of such para is similar to DTAA

between India and Belgium. Similarly, Article 23 of the DTAA

between India and Swiss deals with elimination of double

taxation. The language of para 1(a) of Article 23, dealing with

India providing relief of tax paid in Switzerland, is almost similar

to the language of the DTAA between India and Belgium.

Similar is the position regarding DTAA between India and

Malaysia. Article 24 deals with elimination of double taxation.

The language of para 2 of Article 24 providing for elimination of

double taxation in the case of India is similar to the language of

DTAA between India and Belgium. Thus, the credit for taxes

paid by the assessee in Japan, Swiss Federation and Malaysia is

eligible for credit subject to the limitation of such relief not

exceeding that part of the tax (as computed before the deduction

is given) which is attributable to the income which is taxed in

Japan, Swiss and Malaysia.

countries, it is entitled to foreign tax credit only from Belgium,

35 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

Japan, Swiss and Malaysia. The foreign tax paid by the assessee

in the remaining two countries, namely, Australia and Canada,

does not qualify for credit.

8.90% of revised amount of foreign tax credit as per Table I

drawn above by considering the proportionate sales made by the

10AA units to these six countries vis-à-vis total sales of the

assessee. This working made by the AO cannot be upheld because

of the discussion made above about the question for consideration

not being the deductibility of such income from Indian income-

tax, but the credit in respect of tax paid on such income in six

countries. Thus, we need to find out the precise amount of foreign

tax in respect of sale of 10AA units made to Australia and

Canada, which cannot be allowed credit. However, such amount,

though not available for credit, will be eligible for deduction

u/s.37(1) of the Act, as being not hit by section 40(a)(ia) of the

Act in line with our decision on the first part of the ground raised

by the Department. The taxes paid in other four countries,

namely, Belgium, Japan, Swiss and Malaysia in respect of sale of

10AA units, will be available for credit in terms of the relevant

Article of the concerned DTAAs as discussed supra. We,

36 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

therefore, set-aside the impugned order and remit the matter to the

file of the AO for deciding this issue accordingly. Needless to

say, the assessee will be allowed reasonable opportunity of

hearing.

IV. MAT CREDIT OF AMALGAMATING COMPANY

allowing MAT credit available in the hands of erstwhile ICSL

which was amalgamated with the assessee company w.e.f. 01-04-

2012. Going with his view of not allowing set off of long term

capital loss in the hands of amalgamating company in terms of

section 72A of the Act, the AO held that, in the absence of any

specific provision entitling the amalgamated company to avail

MAT credit of amalgamating company, no such credit could be

allowed in the hands of the amalgamated company. The ld.

CIT(A) concurred with the view expressed by the AO.

the relevant material on record. The AO has denied the claim, at

the threshold, on the ground that the MAT credit of the

amalgamating company is not covered u/s 72A of the Act. He has

not referred to the non-fulfillment of any other eligibility

condition for claiming such credit.

37 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

of not allowing set off of long term capital loss available in the

hands of the amalgamating company discussed supra. While

allowing such ground above, we have found that the eligible

business of the amalgamating company continued and thus got

transferred to the amalgamated company. The business, as such,

did not cease to exist. All the benefits and privileges available to

the amalgamating company have been held to pass on to the

successor amalgamated company. In view of the fact that the

Hon’ble High Court approved the Scheme of amalgamation by

also specifically providing that credit for minimum alternate tax

shall be claimed by the Transferee company, there remains no

doubt whatsoever that MAT credit of the amalgamating company

has to be allowed in the hands of the amalgamated company.

the allowability of the MAT credit in the hands of the

amalgamating company. Section 115JAA deals with tax credit in

respect of tax paid on deemed income relating to certain

companies. Sub-section (2) provides that where any amount of tax

is paid u/s.115JA by an assessee, being, a company for an

assessment year, then credit in respect of tax so paid shall be

38 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

allowed to him in accordance with the provisions of this Act.

Because of the assessee-amalgamated company stepping into the

shoes of the amalgamating company, it will satisfy the

requirement of allowing credit to `him’ in accordance with the

provisions of this section. The above position of allowing MAT

credit of the amalgamating company in the hands of the

amalgamated company seems to have been accepted by the

legislature when we read sub-section (7) of section 115JAA

containing a specific prohibition, which provides that: “In case of

conversion of a private company or unlisted public company into

a limited liability partnership under the Limited Liability

Partnership Act, 2008 (6 of 2009), the provisions of this section

shall not apply to the successor limited liability partnership.”

This provision indicates that the Parliament wanted to restrict the

allowing of MAT credit to the successor only on conversion of a

company into LLP and not any other case of succession, including

the amalgamation. Had the intention of the legislature been not to

allow MAT credit of the amalgamating company, it would have

specifically covered the cases to amalgamation in addition to the

cases of conversion of a company into LLP. In view of the

specific provision contained in sub-section (7) prohibiting the

39 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

MAT credit only in case of a conversion of a private company

into a limited liability partnership and not extending such

prohibition to the cases of amalgamation, there is no doubt that

the MAT credit earned by the amalgamating company has to be

allowed in the hands of the amalgamated company. We,

therefore, hold that the MAT credit of the amalgamating company

has to be allowed in the hands of the amalgamated company.

This ground is, therefore, allowed.

V. OTHER ISSUES

assessee’s claim of deduction of Rs.85,89,36,700/- u/s. 10AA of

the Act in respect of three undertakings. The AO observed that

the assessee claimed deduction u/s.10AA in respect of three

undertakings belonging to the erstwhile ICSL. He noticed that the

matter regarding the eligibility for deduction u/ss.10A/10AA was

subject matter of dispute in the assessment of the erstwhile ICSL

since A.Y. 2004-05, in which it was held that it was a case of

mere expansion or sub-letting of the existing business and hence,

the benefit u/s.10A was not available. The ld. CIT(A) overturned

the assessment order on this score.

40 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

material on record, we find that this issue came up for

consideration in the hands of erstwhile iGATE Global Solutions

Ltd. for earlier assessment year, including, A.Y. 2012-13. The

Tribunal, following its decision for earlier years, held the assessee

to be entitled to the benefit of deduction u/s.10A as the new units

were not split-up of the existing units. In view of the clear

decision of the Tribunal holding that the erstwhile 3 units of the

amalgamating company were newly established units and hence,

eligible for deduction u/s.10AA, we do not find any infirmity in

the impugned order in granting such deduction in the hands of the

assessee, as the very foundation, being, the three units were not

newly established, does not exist in view of the orders passed by

the Tribunal in earlier years in the hands of the amalgamating

company.

of the ld. CIT(A) to allow deduction u/s.10AA in respect of Pune

unit without appreciating the fact that such deduction was not

claimed in the original return of income but was claimed in the

revised return of income and further Form No. 56F was uploaded

at the time of filing of the revised return.

41 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

deduction u/s.10AA in respect of three units of the amalgamating

company, which issue has been discussed above. He gave

another reason for making the disallowance in respect of Pune

unit, which is subject matter of the instant ground. Such other

reason for making disallowance was that the assessee did not

claim deduction u/s.10AA in respect of this unit in the original

return. The assessee claimed deduction of Rs.5,23,54,148/- in

respect of such unit only in the revised return and further Form

No.56F was also uploaded at the time of filing of the revised

return. The ld. CIT(A) overturned the assessment order on this

score.

allowing deduction u/s.10AA in respect of the Pune unit is that

such deduction was not claimed in the return filed u/s.139(1).

Since the deduction was claimed by means of the revised return

and Form No.56F was also uploaded at that time, deduction

u/s.10AA was not allowed. Sub-section (8) of section 10AA

provides that the provisions of sub-section (5) and (6) of section

10A shall apply to the articles or things or services referred to in

sub-section (1). Sub-section (5) of section 10A, in turn, provides

42 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

that the deduction under this section shall not be admissible for

any assessment year beginning on or after 01-04-2001, unless the

assessee furnishes in the prescribed form, along with return of

income, the report of an accountant, as defined in the Explanation

below sub-section (2) of section 288. It is clear from the

command of sub-section (5) of section 10A that the assessee is

required to furnish the audit report in the prescribed form along

with the return of income. There is no reference to the filing of

such return u/s.139(1) or u/s.139(5) of the Act. The Finance Act,

2020 has carried out an amendment to sub-section (5) of section

10A by providing that the report of the auditor in the prescribed

form should be filed before the specified date referred to in

section 44AB, which, in turn, refers to section 139(1) of the Act.

Thus, for the period anterior to the amendment carried out by the

Finance Act, 2020, the only requirement was to furnish the audit

report in the prescribed form along with the return of income.

Such return of income may be u/s.139(1) or u/s.139(5). Since the

assessee claimed deduction by filing the revised return u/s.139(5)

and also uploaded the requisite audit report in Form No. 56F

along with that, no infirmity can be found in the impugned order

43 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

in accepting the assessee’s claim in this regard. This ground is,

therefore, not allowed.

of the ld. CIT(A) to delete the disallowance u/s.10AA(9)

r.w.s.80IA(10) of the Act. The facts apropos this issue are that the

assessee declared margin of 17.80% on sales to the Associated

Enterprises. While determining the ALP, the assessee chose

certain comparables giving average margin of 11.72%. The AO

held that the assessee earned excess margin of profit on such

software sales at 6.80% (17.80% - 11.72%). By applying such

excess percentage of margin to the sale made by the assessee to

its AEs, he worked out the excess profit of Rs.7,38,72,275/-.

Applying the provisions of section 10AA(9) r.w.s.80IA(10), he

held that the amount of deduction u/s.10AA was to be reduced to

this extent. The ld. CIT(A) overturned the assessment order by

relying on the orders passed for earlier years.

obviously be applied by the AO, but, before that it is incumbent

upon him to demonstrate that the assessee derived higher profit on

account of its arrangement with the Associated Enterprises in

such a manner that the same produced more than the ordinary

44 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

profit. Without doing so, the AO cannot make addition by taking

note of section 10AA(9) of the Act. Since the AO has simply

compared the profit margin of the assessee from the transactions

with the AE and that earned by the comparables, it cannot be said

that the mandate of section 10AA(9) r.w.s.80IA(5) is fulfilled

because the AO has not proved any arrangement with its AEs so

as to produce more than ordinary profits in the hands of the

assessee. It is further seen as an admitted position that similar

issue came up for consideration before the Tribunal in assessee’s

own case for immediately preceding assessment year, namely,

2012-13. A copy of such order has been placed on record at page

162 of the paper book. Relevant discussion has been made in

para 8 and ultimately the view point of the ld. CIT(A), in deleting

similar addition, has been countenanced. As the facts and

circumstances for the year are similar to those of the preceding

year, we uphold the impugned order on this issue.

Revenue is against the computation of deduction u/s.10AA qua

telecommunication charges. Certain telecommunication expenses

were incurred by the assessee in relation to the delivery of its

software abroad, which it did not exclude from the export

45 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

turnover as well as total turnover in the computation of deduction

u/s 10AA. The AO reduced the amount of telecommunication

expenses from the export turnover only. The ld. CIT(A) directed

to exclude such amount - both from export turnover as well as

total turnover. Whereas the assessee is aggrieved by the

exclusion of such costs from both the turnovers, the Revenue

wants their inclusion only in the total turnover.

material on record, it is seen that similar issue came up for

consideration before the Tribunal in assessee’s own case for the

immediately preceding assessment year, namely, 2012-13. Vide

order dated 09-11-2021, the Tribunal in ITA No. 1043/PUN/2017

and ITA No.1116/PUN/2017 has upheld the view point of the ld.

CIT(A) on this score. Respectfully following the precedent, we

countenance the impugned order on this score and dismiss the

grounds raised by the assessee as well as by the Revenue in this

regard.

against the exclusion of expenditure on providing technical

services abroad from export turnover as well as total turnover in

the computation of deduction u/s.10AA of the Act. The assessee

46 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

did not exclude this amount from the export as well as total

turnover. The AO excluded it only from export turnover. The ld.

CIT(A) directed its exclusion from both the export as well as total

turnover. Both the sides have come up in appeal against the

impugned order on this issue.

the Tribunal in assessee’s own case for the immediately preceding

assessment year. The Tribunal has upheld the view taken by the

ld. CIT(A) on this score. Following the same, we dismiss the

grounds raised both by the assessee as well as the Revenue.

of the ld. CIT(A) on deputation of technical manpower (DTM).

The AO did not allow deduction u/s.10AA on on-site/deputation

of technical manpower software services which resulted in

reduction of deduction by Rs.88,56,874/-. The AO, following his

order for earlier years, reduced the amount of deduction

accordingly. Similar course of action was adopted by the ld.

CIT(A) as well.

this issue is no more res integra in view of the decision taken by

the Tribunal in the immediately preceding assessment year, in

47 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

which the assessee has been entitled to deduction u/s.10AA on the

amount of profit on on-site/deputation of technical manpower

services. Following the same, we overturn the impugned order on

this score. This ground is allowed.

interest expenditure of Rs.71,95,967/- to section 10AA

undertakings for the purpose of computing deduction under this

section. The assessee, in computation of deduction u/s.10AA, did

not allocate certain expenses, including interest on loan, to the

eligible undertakings and claimed deduction u/s.10AA on the

enhanced amount of profits. The ld. CIT(A) sustained the action

of the AO.

Tribunal for the immediately assessment year. The ld. AR

candidly admitted that the facts and circumstances for the instant

year are similar. Following such view, we uphold the impugned

order on this score. This ground is not allowed.

deduction of Rs.28,20,289/- in respect of provision for doubtful

advances written back while computing total income as well as

book profit u/s.115JB of the Act.

48 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

back a sum of Rs.28,20,289/- on account of provision for doubtful

advances. Such amount was claimed as deduction under the

normal provisions of the Act as well as in the computation of

book profit u/s.115JB. On being called upon to explain as to how

the amount was eligible for deduction, the assessee submitted that

this amount was in respect of erstwhile iGATE Computer

Systems Ltd., which had made provision for doubtful loans and

advances in earlier years and such provision was suo motu added

back in the computation of total income as well as book-profit

u/s.115JB. As the assessee wrote back the amount of provision in

the year under consideration by means of credit to its Profit and

loss account by a sum of Rs.28.20 lakh, the same should not be

charged to tax. The AO jettisoned the claim of the assessee on

the ground that it could not correlate the figures of provision

created in earlier years and not claimed as deduction with the

amount of provision written back in the year in question. This

view was affirmed in the first appeal.

Rs.28,20,289/- on the ground that it was a write back of the

provision created by the erstwhile ICSL which was not claimed as

49 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

deduction in the computation of total income as well as

computation of book profit u/s.115JB of the Act at the time of its

creation in the respective years. If that is a fact, then, in principle,

its reversal during the year under consideration, obviously, cannot

be included in the total income as well as book profits. However,

the onus is on the assessee to correlate the amount of provision

created in the earlier year by the erstwhile ICSL and not claimed

as deduction with the amount of provision written back during the

year under consideration by the assessee. The ld. AR submitted

that all the necessary details are available and the matter may be

considered by the AO. In such circumstances, we direct the AO

to examine such details which the assessee is now proposing to

file to prove its case and then decide accordingly in terms of the

discussion made above.

confirmation of disallowance of Rs.71,65,523/- out of Finance

Lease charges. The assessee claimed deduction of

Rs.2,58,58,545/- on account of finance lease charged paid.

During the course of assessment proceedings, the AO observed

that a sum of Rs.71,65,523/- was credited to the said account

against the narration “re-class during the year”. The nature of re-

50 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

classification was not explained. The AO allowed deduction

towards lease rentals for a sum of Rs.1,86,93,022/- as against

Rs.2.58 crore claimed by the assessee, thereby reducing the claim

to the extent of re-classed amount of Rs.71,65,523/- credited to

the account. The ld. CIT(A) echoed the assessment order on this

point.

Finance lease charges account by giving narration that the amount

was re-classed during the year, but claimed deduction for the

gross amount without reduction to that extent. Once the amount of

finance lease charges was reduced by the assessee by means of

credit to the account, the same ought to have been reduced for the

purpose of claiming deduction as well, unless proved otherwise.

The ld. AR fairly admitted that no detail of re-classification of

Rs.71.65 lakh was available. In such circumstances, we uphold

the impugned order in not allowing deduction of Rs.71.65 lakh as

finance lease charges. This ground is not allowed.

of addition made by the AO u/s.14A of the Act.

income from mutual funds amounting to Rs.9,80,400/-. The

51 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

assessee suo motu disallowed a sum of Rs.1,72,539/- u/s.14A of

the AO. The AO, after recording proper satisfaction, applied rule

8D to work out the amount disallowable at Rs.2.55 crore. After

reducing the amount earlier offered by the assessee as

disallowable u/s.14A, the AO made an addition of

Rs.2,53,65,287/-. The ld. CIT(A) deleted the addition.

relevant material on record. It is seen that the AO has recorded

proper satisfaction before making the disallowance u/s.14A. This

view accords with the similar view taken by the Tribunal in

assessee’s own case for the A.Y. 2011-12. Further, it is pertinent

to note that the total amount of exempt income earned by the

assessee is only to the tune of Rs.9,80,400/-. The Hon'ble Delhi

High Court in Cheminvest Ltd. vs. CIT (2015) 378 ITR 33 (Del)

has held that if there is no exempt income, there can be no

question of making any disallowance u/s 14A of the Act. Similar

view has been taken by the Hon'ble Delhi High Court in CIT vs.

Holcim India P. Ltd. (2014) 90CCH 081-Del-HC. More recently

the Hon’ble jurisdictional High Court in Pr. CIT VS. Kohinoor

Projects Pvt. Ltd. (2020) 425 ITR 700 (Bom) has held that in the

absence of any exempt income, there cannot be any disallowance

52 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

of expenses u/s 14A of the Act. Thus the disallowance has to be

restricted to the extent of exempt income of Rs.9,80,400/-. As the

assessee has suo motu offered disallowance of Rs.1,72,539/-, we

sustain the further disallowance at Rs.8,07,861/- (Rs.9,80,400 –

Rs.1,72,539). This ground is, therefore, partly allowed.

depreciation of Rs.19,84,571/- on goodwill. The AO, following

his order for earlier years, disallowed the amount of depreciation

on goodwill. The ld. CIT(A) allowed the same.

Tribunal in assessee’s own case for the A.Y. 2011-12. Copy of

such order has been placed on record. Relevant discussion has

been made at para 18 onwards of the order, in which the matter

has been restored to the AO with certain directions. Similar view

has been followed by the Tribunal in the immediately preceding

assessment year, namely, 2012-13 by remitting the matter to the

file of the AO for deciding it in conformity with the guidelines

laid down by the Tribunal in earlier years. We also take similar

view and send the matter to the file of the AO for deciding this

issue in conformity with the directions given for earlier years.

53 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

of addition of Rs.9,19,83,168/- on account of delisting expenses.

The assessee incurred expenses for delisting of the shares of the

erstwhile ICSL, which was a listed company and got

amalgamated with the assessee company w.e.f. 01-04-2012. In

support of the deduction, the assessee relied on CBDT Circular

dated 26-08-1965 issued vide F.No.10/67/65-IT(A-1). The AO

did not allow the deduction on the ground that said circular

provided for deduction in respect of listing expenses and not the

delisting expenses. The ld. CIT(A) accepted the assessee’s

contention by relying on the order passed by the Delhi Bench of

the Tribunal in the case of Eicher Motors Ltd. Vs. DCIT (ITA

No.207/Del/2013 dated 12-12-2014.

material on record, it is seen that the deductibility of delisting

expenses has been decided by the Delhi Bench of the Tribunal in

assessee’s favour in Eicher Motors Ltd. (supra). No contrary

view has been placed on record by the ld. DR. Respectfully

following the Tribunal order, we uphold the impugned order on

this score.

54 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

treatment given by the authorities to the amount of foreign

exchange fluctuation gain of Rs.3,33,88,214/- of overseas

branches credited to Reserves. The AO treated such amount as

part of total income. The ld. CIT(A) restored the matter to the file

of the AO for following the direction given in the appellate order

for the A.Y. 2010-11.

relevant material on record, it is seen that the Tribunal for the

A.Y.2011-12 held that the amount of foreign exchange fluctuation

gain relatable to the items of revenue field should be considered

as includible in the total income and the part relatable to the items

in capital field should be excluded. As the ld. CIT(A) has directed

to follow such view, we do not find any reason to interfere with

the impugned order on this score. This ground is, therefore, not

allowed.

by the ld. AR. The same is, therefore, dismissed as not pressed.

55 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; �दनांक Dated : 30th August, 2022 Satish

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order is forwarded to: 1. अपीलाथ� / The Appellant; 2. ��यथ� / The Respondent; 3. The CIT(A)-1, Pune The Pr.CIT-1, Pune 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “C” / 5. DR ‘C’, ITAT, Pune गाड� फाईल / Guard file 6.

आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune

56 ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited

Date 1. Draft dictated on 26-08-2022 Sr.PS 2. Draft placed before author 29-08-2022 Sr.PS 3. Draft proposed & placed before the JM second member 4. Draft discussed/approved by Second JM Member. 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *