2021 (5) TMI 509 - AT - Income Tax

Computation of deduction u/s 10A - authorities below upheld exclusion of other income, while computing deduction - HELD THAT - As perused the order relied by the CIT.DR, she placed specific reference wherein interest income earned on fixed deposits made for obtaining credit facility was considered by assessee to be eligible for deduction under section 10A of the Act. This Tribunal while considering the issue upheld the computation of 10A deduction made by assessee, wherein such income was included as eligible for deduction under section 10A. We note that this view nowhere assist the revenue. In any event this issue needs to be remanded to the Ld.AO for due verification of evidences filed by assessee. We therefore direct the Ld.AO to verify the details filed by assessee and to consider the claim in accordance with law. Neeedless to say that proper opportunity of being heard should be granted to assessee in accordance with law. Foreign exchange gain as excluded from the export turnover but not from the total turnover for the purposes of 10A deduction - HELD THAT - Admittedly this issue now is stands squarely settled by the decision of Hon ble Supreme Court in case of HCL Technologies Ltd. 2018 (5) TMI 357 - SUPREME COURT - as been submitted that foreign exchange gain is excluded from export turnover, should also be excluded from the total turnover for computing deduction under section 10A of the Act. We accordingly direct the Ld. AO to compute the deduction is in accordance with the ratio laid down by Hon ble Supreme Court in case of HCL Technologies Ltd. (supra). Neeedless to say that proper opportunity of being heard should be granted to assessee in accordance with law. Adjustment of unbilled revenue - AR submitted that Ld.AO reduced the said sum towards unrealised export sales from export turnover for computing 10 A deduction, but did not reduce the same from total turnover - On the objections being raised before the DRP, the DRP directed the Ld. AO to verify the same - HELD THAT - We note that the Ld.AO failed to follow the directions of DRP and therefore, this issue needs to be remanded to the file of Ld.AO. The Ld.AO shall verify the details filed and consider the claim of assessee in accordance with law

Summary

Issues involved:
Corporate tax issues not adjudicated in the previous order dated 11/12/2017 by the Tribunal.

Issue 1: Corporate Tax - Other Income not considered for Section 10A deduction
The appeal raised concerns about the exclusion of other income from the eligible business profits while computing Section 10A deduction. The Assessee argued that all income and expenses are closely related to the business and should be considered for deduction. The Assessee provided additional evidence to support their claim, including details of various types of other income. The Assessee relied on a Karnataka High Court decision emphasizing that other income is eligible for deduction under Section 10A. The Revenue, however, argued that there is no nexus between other income and business income based on the Assessee's own case for the assessment year 2006-07. The Tribunal directed the Assessing Officer (AO) to verify the details filed by the Assessee and consider the claim in accordance with the law. The ground raised by the Assessee was allowed for statistical purposes.

Issue 2: Adjustment of Foreign Exchange Gain
The Assessee raised concerns about the exclusion of foreign exchange gain from export turnover but not from the total turnover for computing Section 10A deduction. The Tribunal referred to a Supreme Court decision which settled this issue, directing the AO to compute the deduction in line with the Supreme Court's ruling. The ground raised by the Assessee was allowed for statistical purposes.

Issue 3: Adjustment of Unbilled Revenue
The Assessee contested the adjustment of unbilled revenue from the export turnover for computing Section 10A deduction without a corresponding reduction from the total turnover. The Assessee argued that the unbilled revenue represents work done pending client approval and acceptance. The Tribunal noted that the AO failed to follow the directions of the Dispute Resolution Panel (DRP) and remanded the issue to the AO for verification and consideration in accordance with the law. The ground raised by the Assessee was allowed for statistical purposes.

In conclusion, the Tribunal allowed the Assessee's appeal on the corporate tax issues adjudicated, directing the AO to verify and consider the claims in accordance with the law. The appeal was allowed for statistical purposes, and the order was pronounced on 7th April 2021.