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2012 (7) TMI 932 - AT - Income TaxComputation of deduction u/s 10B - Held that - When excess provision written back, the same cannot be said to be income derived from export turnover of article or thing or computer software. The misc. income which is consisting of recovery of notice period, writing off provision of internet expenses and refund for CST from STP1 requires further examination to determine whether these are derived from the exports of article or things or computer software by the undertaking. Such amount may be income in the conceptual sense under the Income-tax Act, 1961 but for working out the deduction u/s 10A it has to be the receipt derived from the exports of article or things or computer software by the undertaking in free trade zone. In view of these facts, we restore the issue to the file of Assessing Officer for fresh adjudication. The cross objection of the assessee is partly allowed for statistical purposes.
Issues Involved:
1. Inclusion of foreign exchange fluctuation gains in eligible profits for deduction under Section 10A of the Income-tax Act, 1961. 2. Verification and treatment of additional evidence related to the claim of payment of compensation. 3. Eligibility of excess provision written back and miscellaneous income for deduction under Section 10A. Issue-wise Detailed Analysis: 1. Inclusion of Foreign Exchange Fluctuation Gains in Eligible Profits for Deduction under Section 10A: The CIT (A) included gains from foreign exchange fluctuations in the eligible profits for deduction under Section 10A, directing the AO to include these gains in the total turnover and export turnover. The CIT (A) held that the foreign exchange fluctuation gain is part of sales proceeds and should be included in the turnover, citing various cases such as ACIT, Circle 16(1), Mumbai VS. Prakash L. Shah, CIT, Patiala VS. Roadmaster Industries of India, and others. The Tribunal agreed with the CIT (A), affirming that foreign exchange fluctuation gains are part of export turnover and eligible for deduction under Section 10A, referencing multiple legal precedents including Sujata Grover vs. DCIT, Sony India (P) Ltd. vs. DCIT, and CIT vs. Rachna Udhyog. 2. Verification and Treatment of Additional Evidence Related to the Claim of Payment of Compensation: The CIT (A) set aside the issue of verifying the additional evidence related to the payment of compensation of Rs. 45,88,500/- to the AO. The additional evidence included the employment letter, termination letter, and an email about the theft of information. The CIT (A) admitted these documents as crucial for deciding the issue and directed the AO to verify their genuineness. However, the revenue objected, stating that the CIT (A) has no power to set aside issues to the AO post 01.06.2001 and should have called for a remand report. The Tribunal agreed with the revenue, directing the CIT (A) to decide the issue after calling for a remand report from the AO. 3. Eligibility of Excess Provision Written Back and Miscellaneous Income for Deduction under Section 10A: The CIT (A) disallowed the deduction under Section 10A for excess provision written back and miscellaneous income, following the jurisdictional High Court's decision in CIT vs. K. Ravindranathan Nair. The CIT (A) held that these items are not derived from export activities and thus not eligible for deduction under Section 10A. The Tribunal reviewed the reliance on ITAT, Delhi Bench's decisions in ST Micro Electronics Pvt. Ltd. vs. DCIT and Jubiliant Enpro Ltd. vs. DCIT. The Tribunal found that the facts in the present case differed from those in the cited cases. The Tribunal restored the issue to the AO for fresh adjudication, emphasizing that the nature of every receipt must be examined to determine its eligibility for deduction under Section 10A. Conclusion: The Tribunal upheld the CIT (A)'s inclusion of foreign exchange fluctuation gains in eligible profits for deduction under Section 10A. It directed the CIT (A) to decide the issue of compensation payment after calling for a remand report from the AO. The Tribunal also restored the issue of excess provision written back and miscellaneous income to the AO for fresh adjudication. Both the revenue's appeal and the assessee's cross-objection were partly allowed for statistical purposes.
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