2009 (1) TMI 884 - AT - Income Tax

Levy of interest u/s 234D - HELD THAT - We are of the firm view that section 234D is a machinery provision and will, therefore apply from the date they are brought in the Statute. Levy of interest u/s 234D is chargeable when a regular assessment is made on or after 1-6-2003 irrespective of the assessment year is involved. An identical issue had cropped up in the case of Sigma Aldrich Foreign Holding Company vs ACIT 2005 (10) TMI 212 - ITAT BANGALORE-B and the Hon'ble Tribunal was pleased to decide the issue in favour of the Revenue. Accordingly, the charging of interest u/s 234D of the Act is upheld. In the result, both the appeals are partly allowed.

Issues Involved:
1. Arm's Length Price (ALP) Adjustment
2. Depreciation on Imported Software
3. Provision for Warranty
4. Unavailed MODVAT Credit
5. Allocation of Corporate Expenses
6. Inclusion of Miscellaneous Income in Export Turnover
7. Realization of Export Proceeds beyond Six Months
8. Reimbursement of Communication Links and Telecommunication Expenses
9. Expenditure Incurred in Foreign Currency
10. Set-off of Losses of STP Units
11. Eligibility for Deduction u/s 10A
12. Credit for Foreign Taxes Paid
13. Deduction u/s 80HHC
14. Allocation of Selling and General Administrative Expenses for Deduction u/s 80-IB
15. Miscellaneous Income not Considered as Part of Income Eligible u/s 10A
16. Deemed Exports not Eligible for Deduction u/s 10A
17. Exclusion of Foreign Taxes from Export and Total Turnover
18. Software Development Centre Outside India
19. Deduction u/s 80-IB
20. Interest u/s 234B

Summary of Judgment:

1. Arm's Length Price (ALP) Adjustment:
The CIT(A) was upheld in directing the AO/TPO to rework the additions on account of ALP adjustment, confirming that TP adjustment is possible only where comparable uncontrolled transactions are established.

2. Depreciation on Imported Software:
The CIT(A) was upheld in deleting the disallowance of depreciation on imported software, following earlier Tribunal decisions that the software imports for in-house utilization did not require tax deduction at source u/s 195.

3. Provision for Warranty:
The CIT(A) was upheld in allowing the provision for warranty, following earlier Tribunal decisions that such provisions were legitimate business expenses.

4. Unavailed MODVAT Credit:
The issue was restored back to the AO for re-computation, following earlier Tribunal decisions that MODVAT credit should be considered in the valuation of closing stock.

5. Allocation of Corporate Expenses:
The CIT(A) was upheld in vacating the allocation of corporate expenses, following earlier Tribunal decisions that such allocations should not artificially reduce profits eligible for deduction u/s 10A.

6. Inclusion of Miscellaneous Income in Export Turnover:
The CIT(A) was upheld in including scrap sales and gain on exchange rate fluctuation in the profits eligible for deduction u/s 10A, following earlier Tribunal decisions. However, the issues of commission and other income were restored to the CIT(A) for re-evaluation.

7. Realization of Export Proceeds beyond Six Months:
The CIT(A) was upheld in directing the AO to include the export turnover collections made after the expiry of six months, following earlier Tribunal decisions.

8. Reimbursement of Communication Links and Telecommunication Expenses:
The CIT(A) was upheld in including reimbursements as part of export turnover and excluding telecommunication expenses from both export and total turnover, following earlier Tribunal decisions.

9. Expenditure Incurred in Foreign Currency:
The CIT(A) was upheld in directing the AO not to exclude expenditure incurred in foreign currency from export turnover, following earlier Tribunal decisions.

10. Set-off of Losses of STP Units:
The CIT(A) was upheld in directing the AO to set off the losses of the units in STP from other taxable business income, following earlier Tribunal decisions.

11. Eligibility for Deduction u/s 10A:
The CIT(A) was upheld in holding that the undertakings at Bangalore are eligible for deduction u/s 10A, following earlier Tribunal decisions.

12. Credit for Foreign Taxes Paid:
The issue was restored to the CIT(A) for reconsideration, as the Tribunal found that the CIT(A) had not disposed of the issue on merits.

13. Deduction u/s 80HHC:
The CIT(A) was upheld in excluding excise duty and sales tax from total turnover and considering only the total turnover and profit of the eligible business for computing deduction u/s 80HHC, following Supreme Court decisions.

14. Allocation of Selling and General Administrative Expenses for Deduction u/s 80-IB:
The CIT(A) was upheld in deleting the allocation of selling and general administrative expenses, following earlier Tribunal decisions.

15. Miscellaneous Income not Considered as Part of Income Eligible u/s 10A:
The issues of commission and other income were restored to the CIT(A) for re-evaluation, as the CIT(A) had no power to remit back to the AO as per amended provisions of section 251 of the Act.

16. Deemed Exports not Eligible for Deduction u/s 10A:
The CIT(A) was upheld in excluding deemed exports from the purview of export turnover, following earlier Tribunal decisions.

17. Exclusion of Foreign Taxes from Export and Total Turnover:
The CIT(A) was upheld in excluding foreign taxes from export turnover and total turnover, following earlier Tribunal decisions.

18. Software Development Centre Outside India:
The issue was remitted back to the AO for necessary action, following earlier Tribunal decisions.

19. Deduction u/s 80-IB:
The CIT(A) was upheld in excluding profits from AMC and sale of monitors from the computation of deduction u/s 80-IB, following earlier Tribunal decisions.

20. Interest u/s 234B:
The levy of interest u/s 234B was upheld as mandatory, with the AO directed to give consequential relief on account of reduction in income. The charging of interest u/s 234D was also upheld, following Tribunal decisions that section 234D applies from the date it was brought into the statute.

← Previous Next →