2009 (8) TMI 1252 - AT - Income Tax

Summary

Issues Involved:
1. Deduction u/s 80IB for various incomes.
2. Determination of indirect costs for deduction u/s 80HHC.
3. Disallowance of motor car and telephone expenses.
4. Disallowance of foreign travel expenses.
5. Treatment of software expenses as capital or revenue.
6. Deduction u/s 80IB and 80HHC on the same amount of gross total income.

Summary:

1. Deduction u/s 80IB for Various Incomes:
The assessee contested the denial of deduction u/s 80IB for foreign exchange rate income, DEPB sales proceeds, duty drawback, other income, and income from trading activities. The Tribunal referred to the case of Shah Originals v. ACIT, where it was held that foreign exchange fluctuation forms an integral part of export proceeds and should be considered derived from industrial undertakings. Similarly, DEPB sales proceeds and duty drawback were deemed eligible for deduction u/s 80IB as they are integral to the pricing of goods and derived from industrial undertakings. The Tribunal allowed the appeal for these incomes but dismissed the sub-grounds for other income and income from trading activities as not pressed.

2. Determination of Indirect Costs for Deduction u/s 80HHC:
The assessee challenged the determination of total indirect costs attributable to trading exports for deduction u/s 80HHC. The Tribunal upheld the lower authorities' computation, finding no infirmity in their orders, and dismissed the appeal on this issue.

3. Disallowance of Motor Car and Telephone Expenses:
The assessee contested the disallowance of 1/7th of motor car and telephone expenses. The Tribunal found the CIT(A)'s restriction of disallowance to 1/6th reasonable but noted that the Tribunal consistently makes estimated disallowances at 1/10th. Thus, the Tribunal restricted the disallowance to 1/10th, partly allowing the appeal.

4. Disallowance of Foreign Travel Expenses:
The assessee appealed against the disallowance of foreign travel expenses. The CIT(A) had partly disallowed and partly allowed the claim, directing the AO to verify certain expenses. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the appeal on this issue.

5. Treatment of Software Expenses as Capital or Revenue:
The assessee claimed software expenses as revenue, but the AO treated them as capital expenditure, allowing depreciation. The Tribunal referred to the Special Bench decision in Amway India Enterprises v. DCIT, which laid down criteria for determining the nature of software expenses. The Tribunal set aside the issue to the AO to decide based on these guidelines, allowing the appeal for statistical purposes.

6. Deduction u/s 80IB and 80HHC on the Same Amount of Gross Total Income:
The assessee argued for deductions u/s 80IB and 80HHC on the same amount of gross total income. The Tribunal referred to the Special Bench decision in ACIT v. Rogini Garments, which held that relief under section 80IA should be deducted from the profits before computing relief under section 80HHC. The Tribunal dismissed the appeal on this issue.

Conclusion:
The appeal was partly allowed for statistical purposes, with specific issues being set aside for further examination by the AO. The Tribunal upheld the lower authorities' decisions on other contested issues.