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Income Tax Appellate Tribunal, BANGALORE BENCH ‘ B ’
Before: SHRI N.V. VASUDEVAN & SHRI INTURI RAMA RAO
order of Learned Commissioner of Income Tax (Appeals)-1, Bangalore dt.11.4.2017 for the Assessment Year 2012-13.
The assessee raised the following grounds :
Brief facts of the case are that the assessee is a company incorporated under the provisions of Companies Act, 1956. The assessee is engaged in the business of rendering IT Enabled Services. The return of income was filed for the Assessment Year 2012-13 on 30.11.2012 declaring a loss of Rs.10,92,63,254 belatedly after claiming deduction
Section 10AA of the Income Tax Act, 1961 (in short 'the Act') of Rs.16,26,03,245. The return of income was revised on 13.1.2014 declaring income of Rs.38,19,476 after claiming deduction under Section 10AA of the Act of Rs.10,58,30,802 and under Section 80 IAB of Rs.4,12,84,995. Against the said return of income, the assessment was completed vide order dt.24.3.2015 passed under Section 143(3) of the Act determining total income of Rs.88,43,225. While doing so, the Assessing Officer made the following disallowances :- i) Disallowance of excess claim u/s.10AA 10,52,302 ii) Disallowance of Belated remittance of 25,38,277 employees contribution to PF / ESI iii) Disallowance u/s.40(a)(ia) 7,92,590 iv) Disallowance u/s.14A r.w. Rule 8D 5,61,876 v) Disallowance of donations as discussed 7,704 Total : 49,52,749 Being aggrieved, the assessee filed appeal before the CIT (Appeals) who vide impugned order granted relief in respect of belated remittances of PF contribution of the employees and in respect of the disallowance of excess claim under Section 10AA of the Act, the learned CIT (Appeals) directed the Assessing Officer to reduce the telecommunication expenses, insurance incurred in foreign currency from both total turnover as well as export turnover following the law laid down in the case of CIT Vs. Tata Elxsi Ltd. 349 ITR 98 (Kar). The learned CIT (Appeals) however confirmed the addition under Section 14A of the Act. Being aggrieved, the assessee is in appeal before us in raising the present grounds of appeal.
4. Ground No.1 is general in nature and does not require any adjudication.
5. Ground No.2 challenges the finding of the learned CIT (Appeals) that the expenditure incurred on travel, insurance and telecommunication in foreign currency should not have been reduced from both export turnover and total turnover as they are not incurred in connection with the rendering of technical services.
We find that from perusal of the orders of assessment as well as first appellate order, this contention was never raised by the assessee at any stage of proceedings nor raised any additional ground of appeal before us. In any event, this is an issue which requires verification of facts and therefore cannot be entertained at this stage of proceedings.
Hence this ground of appeal filed by the assessee is dismissed.
The third ground of appeal challenges the addition under Section 14A of the Act on the ground that no exempt income was earned by the assessee.
8. From the perusal of the assessment order as well as the CIT (Appeals) order, it is clear that the assessee had been contending that the assessee had not earned exempt income and therefore Section 14A cannot be invoked. This proposition had been approved by the Hon'ble Delhi High Court in the case of Cheminvest Ltd. Vs. CIT 61 taxmann.com 118 & Special Bench of ITAT, Hyderabad in the case of ACIT Vs. Progressive Constructions Ltd. 92 taxmann.com 104 (Hyderabad – Trib.)
(SB) and therefore we allow this ground of appeal of assessee.
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open court on the 25th day of May, 2018.