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Income Tax Appellate Tribunal, ‘SMC’ ‘C’ BENCH, CHENNAI
Before: Shri A. Mohan Alankamony
आदेश / O R D E R
These appeals by the Revenue and assessee are arising out of the order passed by the Ld. Commissioner of Income Tax (Appeals)-III, Chennai dated 28.02.2014 in for the assessment year 2006-07 passed U/s.250(6) r.w.s.143(3) of the Act.
There is a delay of 61 days in filing the appeal by the Revenue. The Ld.ACIT has furnished an affidavit before us stating that the delay had occurred due to the acute shortage of staff and time taken to trace the records. It was therefore pleaded that the delay in filing the appeal may be condoned.
The Ld.AR objected to the submission of the Ld.DR. However, after hearing both sides, though we do not appreciate the lethargic attitude of the Revenue, in the interest of justice we are of the considered view that the short delay in filing the appeal requires to be condoned. Accordingly I hereby condone the delay of 61 days in filing the appeal by the Revenue and proceed to hear the case on merits.
The Revenue has raised several grounds in its appeal however the crux of the issue is as follows:-
The Ld.CIT(A) has erred in directing the Ld.AO to allow deduction u/s 10A of the Act, on the enhanced profit arrived at, because of the disallowance of the expenditure incurred towards belated payment of provident fund.
The assessee has raised several grounds in its appeal, however the cruxes of the issues are as follows:-
(i) The Learned Commissioner of Income Tax had erred in excluding the Work in Progress amounting to Rs.41,34,600/- from the eligible profits for 10A deduction.
(ii) The Learned Commissioner of Income Tax, Appeals- III though rightly has excluded the Foreign Travel expenditure from the Export Turnover, however erred in not excluding the same from total turnover.
Revenue’s Appeal in ITA No.2143/Mds/2014:-
At the outset, the Ld.AR submitted before me that the appeal of the Revenue is not maintainable in lieu of the Circular No.21/2013 dated 10.12.2015 issued by the CBDT with respect to monetary limit. Hence, it was pleaded that the appeal of the Revenue may be dismissed. The Ld. DR could not controvert to the submission of the Ld.AR.
5.1 After hearing both Ld.A.R and the Ld.D.R, I find merit in the submission of the Ld.AR. The CBDT has directed the Revenue not to file appeal before the Tribunal where the tax effect does not exceed Rs.10 lakhs. From the facts of the case, it is not disputed that in the case of the assessee the tax effect is less than Rs.10 lakhs as stipulated by the CBDT in the circular cited supra. Therefore, I hereby hold that the appeal filed by the Revenue is not maintainable.
Assessee’s appeal in ITA 1641/Mds/2014:
6.1 Ground No. 4 (i): Addition with respect to work-in- progress of Rs.41,34,600/-:-
The Assessing Officer had excluded the work-in-progress of Rs.41,34,600/- while computing the eligible profit of the assessee for the purpose of granting deduction U/s.10A of the Act. The reason adduced by the Ld.AO was that the assessee had not furnished any details with respect to the work-in- progress; hence he was not able to ascertain the nature of expenditure incurred by the assessee such as capital expenditure or revenue expenditure. On appeal, the Ld.CIT(A) also confirmed the order of the Ld.AO since the assessee has not further made any clarification on the issue. Before me, the Ld.AR requested that one more opportunity may be provided to the assessee for furnishing the details before the Revenue authorities. The Ld.DR strongly opposed to the submission of the Ld.AR.
After hearing both the parties, I do not find much strength in the submission of the Ld.AR, because he has not furnished any details neither before the Revenue authorities nor before me at this stage. However, in the interest of justice, I remit back the matter to the file of Ld.AO for de-nova consideration. I also direct the assessee to co-operate with the Revenue, in order to expedite their orders failing which the Ld. Revenue authorities shall be at liberty to decide the matter in accordance with merit and law based on the materials on record.
6.2 Ground No. 4(ii) : Foreign Travel Expenditure:-
The Ld.AO while computing the deduction U/s.10A of the Act, had excluded the foreign travel expenditure from the export turnover, however failed to exclude the same from the total turnover. The Ld.CIT(A) also confirmed the order of the Ld.AO because the assessee had not furnished any details of the same.
Before me, the Ld.AR cited the decision of the Special Bench of the Tribunal in the case ITO v. Sak Soft Ltd reported in 30 SOT 55, wherein it was held that for the purpose of applying the formula under the Act, such expenditure when excluded from the export turnover (numerator), the same shall also be excluded from the total turnover (denominator). The Ld.AR further argued that the same decision may be followed in the case of the assessee also. The Ld.DR though argued in support of the order of the Ld.CIT(A) could not controvert to the submission of the Ld.AR. After hearing both sides, I find merit in the submission of the Ld.AR. As pointed out by the Ld.AR the Special Bench of the Tribunal had held that in such situation, the expenditure should be deducted from the total turnover (denominator) also.
Therefore, following the decision of the Special Bench of the Tribunal, I hereby direct the Ld.AO to deduct the foreign travel expenditure from the export turnover (numerator) as well as from the total turnover (denominator) while applying the formula laid down under the Act.
In the result the appeal filed by the Revenue is dismissed and the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced on the 22nd August, 2017 at Chennai.