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2018 (1) TMI 539 - AT - Income TaxDisallowance u/s. 14A - Held that - The calculation u/s. 14A requires re-examination by the AO. In fact, as seen from the order, AO did not verify whether there is any direct expenditure or not. Assessee states that there is direct expenditure by way of cost of one employee at ₹ 2,30,000/-. Ld.CIT(A) without examining the issue has accepted the contention. Moreover, it is also noticed that the average of investments as stated by the AO seems to be not correct. The average of opening investment at ₹ 44,49,44,803/- and closing balance at ₹ 16,14,79,458/- results in average value of ₹ 30,32,12,130/- as against ₹ 17,17,32,670/- stated by the AO in the order. 0.5% thereon at ₹ 7,08,664/- was not correctly worked out. Therefore, without going into merits of the addition, we accept the Revenue s ground and restore the issue of entire disallowance u/s. 14A to the file of AO to be considered afresh, after giving due opportunity to assessee. Deduction claimed u/s. 80IB(8A) - Held that - In the light of the decision of the ITAT in assessee s own case for earlier years, which the Ld.CIT(A) has followed, we do not see any reason to differ from the order of the CIT(A). It is true that ITAT has stated that the claim has to be examined in each of the years and left a note of caution that the view taken therein may not apply to subsequent years, if there are change of facts. However, as seen from the approval granted, there are no change of facts and assessee is found to be eligible for deduction u/s. 80IB. In view of that, as the issue is squarely covered by the earlier decision, we uphold the order of CIT(A) and dismiss the Revenue grounds Deduction towards ESOP - Held that - Issue of allowability of ESOP expenses on the date of exercising of option by the assessee was held to be an ascertained liability and not contingent liability by the Special Bench of Bangalore Tribunal in Biocon Ltd. Vs. DCIT (2013 (8) TMI 629 - ITAT BANGALORE). The Special Bench held the said discount on ESOP was to be allowed as deduction under section 37(1) of the Act, during the years of vesting on the basis of percentage of vesting during such period, subject to upward or downward adjustment at the time of exercise of option - Decided against revenue Disallowance of communication charges while computing deduction u/s. 10A - Held that - Assessee failed to furnish the amount of internet charges or any expenditure under this head. When this was pointed out, assessee s Counsel accepted for alternate contention that whatever is excluded from the export turnover should also be excluded from the total turnover on the principles laid down by the Hon ble Bombay High Court in the case of CIT Vs. Gem Plus Jewellery India Ltd., 2010 (6) TMI 65 - BOMBAY HIGH COURT . This alternate contention is squarely covered by the above decision and also Special Bench decision of the ITAT, Chennai in the case of ITO Vs. Sak Soft Ltd. 2009 (3) TMI 243 - ITAT MADRAS-D , wherein it has been held that communication charges etc., attributable to the delivery of the computer software outside India which are to be reduced from the export turnover should be reduced from the total turnover as well, while computing the deduction u/s. 10A. Therefore, following the ratio laid down in the aforesaid cases, we direct the AO to exclude the same amount from Total Turnover as well and re-workout the disallowance u/s. 10A. Grounds are partly allowed. Disallowance of entire claim u/s. 10A - Held that - The claim u/s. 10A on the similar facts was allowed by the AO in the assessments made u/s. 143(3) for AYs. 2005-06, 2006-07 and 2008-09. Similar computation of income and copies of report in Form 56F were filed by assessee. Even in AY. 2009-10, which is also in appeal before us, the claim was allowed. Therefore prima-facie the claim of deduction u/s. 10A is allowable. However, the AO made out a new case that the remittances were for research services . The FIRC issued by the bank cannot be taken as a conclusive evidence, unless supported by actual research for which remittances are made. This aspect has not been examined by the AO at all. Moreover, the detailed explanation made before the CIT(A) has not been examined by the CIT(A). He has summarily rejected assessee s contentions stating that it does not hold water . We are of the opinion that this issue requires re-examination by the AO based on the invoices raised and corresponding amounts remitted, so that whether assessee has indeed exported software services or the amounts remitted were indeed for research services as stated in the certificate. Since the invoices are required to be examined, the issue of deduction u/s. 10A is restored to the file of AO to examine afresh and allow the claim, if assessee satisfies the provisions of Section 10A
Issues involved:
Cross-appeals by Assessee and Revenue for AYs 2009-10, 2010-11 & 2011-12 against the orders of the Commissioner of Income Tax (Appeals)-2, Hyderabad, involving common issues. Analysis: 1. Disallowance u/s. 14A: - The AO disallowed a portion of the dividend income under Section 14A. The ITAT found discrepancies in the AO's calculations and directed a re-examination, emphasizing the need for verification of direct expenditures. The matter was remanded to the AO for a fresh assessment. 2. Deduction claimed u/s. 80IB(8A): - The AO denied the deduction under Section 80IB, contending that the activities did not qualify as 'Scientific Research and Development.' The ITAT upheld the CIT(A)'s decision based on previous rulings and granted the deduction, highlighting the consistency in facts and approvals. 3. Deduction towards ESOP: - The AO disallowed ESOP deductions, following a specific case law. The CIT(A) allowed the claim, citing a Special Bench decision. The ITAT upheld the CIT(A)'s decision, considering the binding nature of the Special Bench ruling. 4. Disallowance of communication charges u/s. 10A: - The AO disallowed communication charges while computing deduction u/s. 10A. The ITAT directed the AO to exclude such charges from the Total Turnover as well, following established legal precedents, and ordered a re-calculation of the disallowance. 5. Disallowance of entire claim u/s. 10A: - The AO disallowed the entire claim u/s. 10A based on FIRC descriptions. The ITAT found inconsistencies in the AO's approach and directed a re-examination, emphasizing the need to evaluate actual invoices and remittances to determine eligibility for the deduction. The matter was remanded to the AO for a fresh assessment. In conclusion, the ITAT dismissed Revenue appeals for AYs 2010-11 and 2011-12, while partially allowing other appeals for statistical purposes. The judgments were pronounced on 10th January 2018.
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