2018 (3) TMI 2041 - AT - Income Tax

Exclusion from export turnover for deduction u/s 10A - HELD THAT - As it is noticed that the issue is squarely covered by the decision of M/s Sak Soft Ltd 2009 (3) TMI 243 - ITAT MADRAS-D the AO is directed to reduce the help desk service charges and the travelling expenses from the export turnover as also from the total turnover for the purpose of computing the deduction u/s. 10A of the Act. Consequently, Ground of the assessee s appeal is partly allowed. Denial of deductions under section 10A of the Act in respect of voluntary disallowances u/s 43B - Whether such disallowance is penal in nature? - HELD THAT - As it is noticed that the issue is now squarely covered by the decision of M/s. Gem Plus Jewellery India Ltd 2010 (6) TMI 65 - BOMBAY HIGH COURT respectfully following the principles AO is directed to grant the assessee the benefit of deduction u/s. 10A by including voluntary disallowance made by the assessee u/s. 43B of the Act. Consequently, Ground Nos. 3 to 3.2 of the assessee s appeal stands allowed. Nature of expenses - Expenditure on purchase of Random Access Memory Cards for computer equipments - CIT (A) in upholding the action of the AO in treating the purchase of RAM in respect of the computers of the assessee as a capital expenditure - HELD THAT - As respectfully following the decision of M/s. APL India (P) Ltd 2012 (7) TMI 492 - ITAT, MUMBAI on this issue, the AO is directed to grant the assessee the benefit of the Revenue expenditure in respect of the cost incurred for the purchase of the RAM Memory Cards for the computer equipments. Consequently, Ground Nos. 4 to 4.3 of the assessee s appeal stands allowed. Interest paid on delayed remittance of taxes and provident fund - HELD THAT - As it is noticed that the issue is squarely covered by the decision of M/s. Messee Dusseldorf India (P) Ltd 2009 (12) TMI 1034 - ITAT, DELHI AO is directed to grant the assessee the benefit of deduction of the interest paid on the delayed payment of the service-tax as the same is compensatory in nature as Revenue expenditure. The disallowance made in respect of the PF Contribution stands upheld as the same has not been pressed by the assessee. Consequently, Ground Nos. 5 to 5.2 of the assessee s appeal are partly allowed. Disallowance of reimbursement of salary cost of seconded employees to GTE-OC - issue of withholding tax on the payments to GTE-OC was pending before the Authority for Advanced Rulings - HELD THAT - Though, the assessee has submitted that it has deducted TDS u/s. 192 of the Act. The dispute would also centre on, whether the TDS liable to be made u/s. 195 of the Act. These issues are now pending before the Hon ble Supreme Court on account of SLP filed both by the assessee and the AAR against the Writ Petition order of the Hon ble Jurisdictional High Court of Madras. This being so, the issues in regard to this payment made to GTE-OC are restored to the file of the AO for re-adjudication after awaiting final decision in respect of the AAR in the case of the assessee on the issue. Consequently, Ground Nos. 6.1 6.2 are partly allowed for statistical purposes.

Summary

Issues involved:
1. Exclusion of foreign currency expenditure from export turnover for deduction under section 10A of the Act.
2. Denial of deductions under section 10A in respect of voluntary disallowances under section 43B of the Act.
3. Disallowance of expenditure on purchase of Random Access Memory Cards for computer equipment.
4. Disallowance of interest expenditure on delayed remittance of taxes and provident fund.
5. Disallowance of reimbursement of salary cost of seconded employees to GTE-OC.

Analysis:
1. The appellant challenged the exclusion of foreign currency expenditure from export turnover for deduction under section 10A of the Act. The issue was resolved by referring to a decision by the Hon'ble ITAT Special Bench in a similar case. The Tribunal directed the AO to reduce the excluded expenses from both export turnover and total turnover for computing the deduction under section 10A, partially allowing the appellant's appeal.
2. The appellant contested the denial of deductions under section 10A for voluntary disallowances under section 43B of the Act. Citing a decision by the Hon'ble Bombay High Court, the Tribunal directed the AO to grant the appellant the benefit of deduction under section 10A by including the voluntary disallowances made under section 43B. This issue was allowed in favor of the appellant.
3. The appellant disputed the disallowance of expenditure on the purchase of Random Access Memory Cards for computer equipment. Referring to a decision by the Hon'ble ITAT Mumbai Benches, the Tribunal directed the AO to grant the benefit of revenue expenditure for the purchase of Memory Cards, as they were considered spare parts essential for business operations. This issue was allowed in favor of the appellant.
4. The appellant challenged the disallowance of interest expenditure on delayed remittance of taxes and provident fund. Citing a decision by the Hon'ble ITAT Delhi Bench, the Tribunal allowed the deduction of interest paid on delayed service tax payment as compensatory in nature. However, the disallowance of PF Contribution was upheld as it was not pressed by the appellant.
5. The appellant contested the disallowance of reimbursement of salary cost of seconded employees to GTE-OC. Due to pending issues related to technical services and TDS, the Tribunal restored the matter to the AO for re-adjudication after awaiting the final decision. This issue was partly allowed for statistical purposes.