2013 (11) TMI 1784 - AT - Income Tax

Summary

Issues Involved:
1. Deduction u/s 10A for Siruseri unit.
2. Exclusion of foreign currency expenses from export turnover for deduction u/s 10A.

Summary:

Issue 1: Deduction u/s 10A for Siruseri unit
The Revenue challenged the eligibility of the Siruseri unit for deduction u/s 10A, arguing it was a split-up and reconstruction of the existing Adyar unit. The Assessing Officer (AO) contended that the entire manpower, contracts, and clientele were shifted from Adyar to Siruseri, indicating reconstruction. The Commissioner of Income Tax (Appeals) [CIT(A)] found that Siruseri unit was independently set up with new infrastructure and significant investment, and 40% of its manpower was independently recruited. The CIT(A) concluded that Siruseri unit was not a split-up but a new unit, thus eligible for deduction u/s 10A. The Tribunal upheld the CIT(A)'s decision, noting that even if Siruseri was considered part of Adyar, the entire income would still be eligible for deduction u/s 10A as both units were STPI registered.

Issue 2: Exclusion of foreign currency expenses from export turnover
The AO excluded foreign currency expenses from the export turnover for deduction u/s 10A. The CIT(A), relying on ITAT Chennai Special Bench's decision in Sak Soft Ltd. and the Karnataka High Court's decision in Tata Elxsi Ltd., held that such expenses should not be reduced from the export turnover, or if reduced, should also be deducted from the total turnover. The Tribunal upheld the CIT(A)'s decision, noting that the issue was already settled in favor of the assessee in earlier cases.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order on both issues, confirming the eligibility of the Siruseri unit for deduction u/s 10A and the proper treatment of foreign currency expenses in the computation of export turnover.