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2017 (9) TMI 1095 - AT - Income TaxDeduction u/s 10A - reducing the link charges from the export turnover by the virtue of clause (iv) of Explanation 2 of Section 10A without making the similar adjustment from the total turnover - providing Business Process Outsourcing (BPO) services and export of ITES - Held that - Identical issue in favour of the assessee by following the decision rendered by ITAT, Delhi Bench in case of DCIT vs. Binary Sematics 2007 (3) TMI 306 - ITAT DELHI-D wherein it is held that, the total turnover in the denominator and export turnover in the numerator have to be read in the same manner and directed the AO to exclude these items from the total turnover also while computing the deduction u/s 10A of the Act. Since this issue has already attained finality the link charges from the export turnover are to be reduced while making similar adjustment from the total turnover as well as export turnover. So, following the decision rendered by the coordinate Bench in the assessee s own case for AY 2004-05 Depreciation of networking equipments / computer peripherals, covered under the Computers - 60% OR 25% - Held that - Following the decision rendered by Hon ble jurisdictional High Court in case of CIT vs. BSES Rajdhani Powers Ltd.(2010 (8) TMI 58 - DELHI HIGH COURT) we are of the considered view that the assessee is entitled for depreciation of computer / integral equipments @ 60% as against 25% allowed by the AO. Depreciation on electrical installation - @ 25% applicable on the plant and machinery - AO allowed the depreciation @ 15% on the electrical installation used for more than 180 days and @ 7.5% for the installation used less than 180 days - Held that - Hon ble Supreme Court in case cited as CIT vs. Taj Mahal Hotel (1971 (8) TMI 2 - SUPREME Court) and Anand Theatres (2000 (5) TMI 4 - SUPREME Court) held that electrical installations are to be regarded as plant and machinery for the purposes of depreciation in the scheme of section 32 of the Act. So, when electrical installations are treated as plant the depreciation has to be allowed @ 25% as per provisions contained u/s 32 of the Act. Deduction u/s 10A is required to be taken before setting off brought forward losses and unabsorbed depreciation. See CIT vs. Yogokawa India Ltd. 2011 (8) TMI 845 - Karnataka High Court
Issues Involved:
1. Completion of assessment under Section 143(3) read with Section 144C(13) at an income of ?3,29,10,533. 2. Reduction of link charges from "export turnover" without similar adjustment from "total turnover". 3. Disallowance of depreciation on networking equipment/computer peripherals. 4. Disallowance of depreciation on electrical installation. 5. Computation of deduction under Section 10A after setting off brought forward losses and unabsorbed depreciation. 6. Charging of interest under Sections 234B and 234C. Detailed Analysis: GROUND NO.1: - This ground is general in nature and does not require adjudication. GROUND NO.2 & 2.1: - The AO reduced link charges amounting to ?15,89,95,369 from the export turnover under clause (iv) of Explanation 2 of Section 10A without making a similar adjustment from the total turnover. This was despite the fact that the issue had been previously decided in favor of the assessee for AY 2004-05 by the ITAT and upheld by the Delhi High Court. - The Tribunal followed its earlier decision in the assessee's own case for AY 2004-05, which mandated that the total turnover and export turnover should be treated similarly. Therefore, the link charges should also be reduced from the total turnover. - The Tribunal determined grounds no.2 & 2.1 in favor of the assessee. GROUNDS NO.3 & 3.1: - The AO allowed depreciation on certain networking equipment/computer peripherals at 25% by treating them as plant and machinery instead of the 60% claimed by the assessee. - The Tribunal relied on the Delhi High Court's judgment in CIT vs. BSES Rajdhani Powers Ltd., which allowed 60% depreciation on computer accessories and peripherals, considering them integral parts of the computer system. - The Tribunal decided grounds no.3 & 3.1 in favor of the assessee, allowing 60% depreciation on the said items. GROUND NO.4: - The AO allowed depreciation on electrical installations at 15% instead of 25% claimed by the assessee. - The Tribunal referred to the Gujarat High Court's decision in CIT vs. Express Resorts & Hotels Ltd., which treated electrical installations as plant and machinery, thus qualifying for 25% depreciation. - The Tribunal decided ground no.4 in favor of the assessee, allowing 25% depreciation on electrical installations. GROUNDS NO.5, 5.1 & 5.2: - The AO computed the deduction under Section 10A after setting off brought forward losses and unabsorbed depreciation. - The Tribunal referred to the Supreme Court's judgments in CIT vs. Yogokawa India Ltd. and CIT vs. JP Morgan Services India Pvt. Ltd., which clarified that deduction under Section 10A should be computed before setting off brought forward losses and unabsorbed depreciation. - The Tribunal directed the AO to compute the deduction under Section 10A accordingly and decided grounds no.5, 5.1 & 5.2 in favor of the assessee. GROUND NO.6: - This ground was deemed consequential and required no separate adjudication. Conclusion: - The appeal of the assessee was allowed, and the order was pronounced in open court on August 16, 2017.
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