DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-5(1)(2), BANGALORE vs. M/S OCWEN FINANCIAL SOLUTIONS PVT LTD, BANGALORE

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ITA 1510/BANG/2018Status: DisposedITAT Bangalore08 November 2019AY 2013-143 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the revenue's appeal was not maintainable due to low tax effect. The assessee's counsel pointed out that the tax effect of the relief granted by the CIT(A) would be below Rs. 50 Lakhs, a threshold for maintaining appeals as per CBDT instructions.

What were the facts?

The revenue filed an appeal against the CIT(A)'s order concerning the deduction under Section 10AA of the Income Tax Act. The primary issue was the CIT(A)'s direction to reduce foreign currency expenditure from both export and total turnover.

What were the issues?

Whether the revenue's appeal is maintainable on grounds of low tax effect. Whether foreign currency expenditure should be reduced from both export and total turnover for Section 10AA deduction.

Which sections of the Income-tax Act were involved?

Section 10AA

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH : BANGALORE

Before: SHRI ARUN KUMAR GARODIA & SHRI PAVAN KUMAR GADALE

For Appellant: Smt. Vidya Kurup, CA
For Respondent: Smt. R. Premi, JCIT (DR)
Hearing: 18.09.2019Pronounced: 08.11.2019

O R D E R

Per Shri A.K. Garodia, Accountant Member

1.

This appeal is filed by the revenue and the same is directed against the order of ld. CIT(A)-5, Bangalore dated 01.02.2018 for Assessment Year 2013-14.

2.

The grounds raised by the revenue are as under. “(a) The order of the learned CIT(A) is opposed to law and facts of the case. (b) Whether on the facts and in the circumstances of the case, the learned CIT(A) was justified in deleting the disallowance made in respect of Assessee's claim of exemption made U/s 10AA of the I.T. Act,1961 on account of gain on fluctuation of foreign exchange, without appreciating the fact that the Apex Court has considered the legislative intent behind the use of the word "derived from" in the section 10AA in the case of Liberty India and Others Vs CIT and reaffirmed that these words are narrower in connotation as compared to the words "attributable to" in which the Hon'hle further held that by using the Page 2 of 3 expression "derived from", the Parliament intended to cover sources not beyond the first degree? (c) Whether on the facts and in the circumstances of the case, the learned CIT(A) was justified in directing the Assessing Officer to reduce the expenditure incurred in foreign currency, both from Export Turnover as well as Total Turnover for the purpose of computation of deduction u/s 10AA, without appreciating that the statute allows exclusion of such expenditure only from the Export Turnover by way of specific definition as envisaged by sub-clause (4) of Explanation 2 below Sub-section 8 of Section 10A. On the other hand, there is no specific provision in Section 10A warranting exclusion of the above expenses from the Total Turnover also? (d) For these and other grounds that may be urged upon at the time of hearing, it is prayed that the order of CIT(A) in so far as it relates to the above grounds, may be reversed and that of the Assessing Officer may be restored. (e) The appellant craves leave to alter, amend or delete any of the grounds mentioned above and / or add any new grounds on or before the hearing.”

3.

The ld. DR of revenue supported the assessment order whereas the ld. AR of assessee although supported the order of ld. CIT(A), but this was her submission that this appeal of revenue is not maintainable because of low tax effect. She pointed out that as per grounds raised

by the revenue in this appeal, the only issue raised in this appeal by revenue is regarding direction of ld. CIT(A) to the AO to reduce the expenditure incurred in foreign currency both from export turnover as well as total turnover for the purpose of computation of deduction allowable to assessee u/s. 10AA of the IT Act. Thereafter she pointed out that as per page no. 4 of the assessment order, the AO has computed the deduction allowable to the assessee u/s. 10AA of the IT Act at Rs. 13,20,72,930/- as against the assessee’s claim for such deduction at Rs. 14,43,51,891/- and in this manner, he has reduced the amount of deduction allowable to the assessee u/s. 10AA of the IT Act by Rs. 1,22,78,961/-. She submitted that even if the entire disallowance of assessee’s claim for deduction u/s. 10AA of the IT Act is deleted by ld. CIT(A), the tax effect of such relief allowed by ld. CIT(A) is bound to be below Rs.

50. Lakhs and therefore, as per the recent CBDT instructions, this appeal of revenue is not maintainable because of low tax effect. In reply, the ld. DR of revenue could not show that Page 3 of 3 the tax effect in the present case is not below Rs. 50 Lakhs and in this view of the matter, we hold that this appeal of revenue is not maintainable because of low tax effect and dismiss the same accordingly.

4.

In the result, the appeal filed by the revenue is dismissed. Order pronounced in the open court on the date mentioned on the caption page.

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