2020 (4) TMI 122 - AT - Income Tax

Deduction u/s 10AA - Exclusion of expenditure incurred in foreign currency, communication and insurance cost from export turnover - Expenditure incurred in connection with rendering of services outside India - HELD THAT - CIT(A) while granting relief on alternative plea that same should be reduced from both export turnover as well as total turnover, has not adjudicated the issue, the expenditure incurred in foreign currency should not be reduced from the export turnover. Hence, this issue is remitted back to the file of ld. CIT(A) for fresh adjudication after affording due opportunity of hearing to the appellant in accordance with law. Thus, ground raised by the assessee is partly allowed for statistical purposes. Exclude expenditure incurred in foreign currency on insurance, freight and telecommunication charges from both export turnover and total turnover - HELD THAT - As decided in favour of the assessee and against the Revenue by the decision of the Hon ble Apex Court in the case of CIT vs. HCL Technologies Ltd 2018 (5) TMI 357 - SUPREME COURT . Belated remittance of Provident Fund/ ESI payments as deduction - CIT-A deleted the addition on the ground that payments are made within the due date of filing of return of income and not within the time stipulated u/s.36(1) (va) - HELD THAT - Hon ble Jurisdictional High Court in the case of CIT vs. M/s. Industrial Security Intelligence India Pvt. Ltd 2015 (7) TMI 1063 - MADRAS HIGH COURT had held that when EPF/ESI contribution are made within due date of filing the return, the same should be allowed as deduction. Therefore we do not find any reason to interfere with the order of the ld. CIT(A). Ground No.3 raised by the Revenue stands dismissed.

Issues Involved:
1. Exclusion of expenditure incurred in foreign currency from export turnover for deduction under section 10AA.
2. Addition on account of belated remittance of employees' contribution to EPF/ESI.
3. Adjustment made under section 92CA.
4. Interest on fixed deposits.
5. Disallowance of remittance of foreign tax paid.
6. Exclusion of 'Other Income' from computation of profits for deduction under section 10AA.

Detailed Analysis:

1. Exclusion of Expenditure Incurred in Foreign Currency:
The assessee challenged the decision of the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) (CIT(A)) regarding the exclusion of expenses incurred in foreign currency from export turnover for the purpose of deduction under section 10AA. The assessee argued that these expenses were not incurred in connection with rendering services outside India. The CIT(A) had directed the AO to reduce the expenditure from both export turnover and total turnover. The Tribunal remitted this issue back to the CIT(A) for fresh adjudication, noting that the CIT(A) had not adjudicated whether the expenditure should be excluded from export turnover.

2. Addition on Account of Belated Remittance of Employees' Contribution to EPF/ESI:
The CIT(A) allowed the assessee's appeal on this issue, referencing the judgment of the Jurisdictional High Court in CIT vs. Madras Radiators & Pressing and other Tribunal decisions. The Revenue's appeal against this decision was dismissed by the Tribunal, which upheld the CIT(A)'s finding that contributions made within the due date of filing the return should be allowed as deductions.

3. Adjustment Made Under Section 92CA:
The CIT(A) set aside the issue of transfer pricing adjustment to the AO for fresh consideration. The Tribunal did not provide further details on this issue, indicating that it was not a point of contention in the appeal.

4. Interest on Fixed Deposits:
The assessee challenged the CIT(A)'s decision to assess interest earned on fixed deposits as business receipts under 'income from other sources.' The Tribunal remitted this issue back to the CIT(A) for fresh adjudication, as the CIT(A) had extracted the ground of appeal but failed to adjudicate it.

5. Disallowance of Remittance of Foreign Tax Paid:
The AO disallowed the remittance of foreign tax paid, claimed during the assessment proceedings, on the grounds that the claim was not made in the return of income. The CIT(A) set aside this issue to the AO for due verification. The Tribunal did not provide further details, indicating that this issue was not a point of contention in the appeal.

6. Exclusion of 'Other Income' from Computation of Profits for Deduction Under Section 10AA:
The assessee challenged the exclusion of foreign exchange gain and other income from the profits of the undertaking for the purpose of deduction under section 10AA. The Tribunal remitted this issue back to the CIT(A) for fresh adjudication, as the CIT(A) had not adjudicated this ground of appeal.

Separate Judgments:
The Tribunal delivered a single judgment for both the assessee's and the Revenue's appeals. The assessee's appeal was partly allowed for statistical purposes, while the Revenue's appeal was dismissed.

Conclusion:
The Tribunal remitted several issues back to the CIT(A) for fresh adjudication, including the exclusion of foreign currency expenses from export turnover, the assessment of interest on fixed deposits, and the exclusion of 'Other Income' from profits for deduction under section 10AA. The Tribunal upheld the CIT(A)'s decision on the belated remittance of employees' contributions to EPF/ESI, dismissing the Revenue's appeal on this issue. The appeal filed by the assessee was partly allowed for statistical purposes, and the appeal filed by the Revenue was dismissed.

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