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2012 (11) TMI 712 - AT - Income TaxTelecommunication Charges - reduction from the export turnover - held that - expenses excluded from export turnover should also be excluded from the total turnover - Decision in ITO Vs Saksoft Ltd 2009 (3) TMI 243 - ITAT MADRAS-D followed. - Decided in favor of assessee. Disallowance u/s 40(a) Non deduction of TDS - Held that - Legislative intent is clear that only the outstanding amount or the provision for expense (and not the amount already paid) is liable for disallowance if TDS is not deducted. Also, s. 40(a)(ia) creates a legal fiction by virtue of which even genuine and admissible expenses can be disallowed for want of TDS. Sec 40(a)(ia) can apply only to expenditure which is payable as of 31st March and does not apply to expenditure which has been already paid during the year. - Order of the CIT(A) is set aside and restore this issue to the file of the Assessing Officer to decide the same - decided in favor of assessee. Decision in M/s Merilyn Shipping Transport & Others 2012 (4) TMI 290 - ITAT VISAKHAPATNAM (SB)(Vizag) , followed.
Issues Involved:
1. Recomputation of deduction u/s.10A for exclusion of telecommunication charges from export turnover. 2. Disallowance u/s.40(a)(ia) for non-remittance of TDS into Government account. 3. Disallowance of ROC fees for increase in share capital. Issue 1: Recomputation of deduction u/s.10A for exclusion of telecommunication charges from export turnover: The appellant, engaged in internet marketing services, filed an appeal against the CIT(A)'s order for the assessment year 2006-07. The AO had deducted telecommunication charges from the export turnover, affecting the deduction claimed u/s.10A. The CIT(A) referred to precedents and held that charges incurred in convertible foreign exchange should be excluded from both export and total turnover for computing the deduction u/s.10A. Citing decisions by the Hyderabad Bench of the Tribunal, the CIT(A) recomputed the deduction, favoring the assessee. Issue 2: Disallowance u/s.40(a)(ia) for non-remittance of TDS into Government account: The appellant contested the disallowance of Rs.16,62,151 under Section 40(a)(ia) for not remitting TDS into the Government account before due dates. The AR argued that since the amounts were already paid, the provisions of Sec.40(a)(ia) should not apply, citing decisions and a CBDT Circular. The CIT(A) relied on Tribunal decisions and held that disallowance under Sec.40(a)(ia) does not apply to amounts already paid. The CIT(A) deleted the disallowance, providing relief to the appellant. Issue 3: Disallowance of ROC fees for increase in share capital: The AO disallowed 4/5th of fees paid to ROC for increasing share capital, allowing only 1/5th as deductible. The CIT(A) referred to Supreme Court and Delhi High Court judgments, concluding that the entire expenditure on ROC fees is capital in nature and not allowable. The CIT(A) held that the entire amount of Rs.1,91,853 is disallowable, including the Rs.38,370 initially allowed by the AO. The appellant's appeal was partly allowed, leading the department to file an appeal challenging the CIT(A)'s decision. The ITAT Hyderabad, after hearing both parties and reviewing the records, addressed the issues. Regarding the telecommunication charges exclusion, the ITAT upheld the CIT(A)'s decision, citing a Special Bench ruling that expenses excluded from export turnover should also be excluded from total turnover. For the disallowance under Sec.40(a)(ia), the ITAT referred to a Vizag Special Bench decision, emphasizing that the provision applies only to amounts payable, not already paid. The ITAT set aside the CIT(A)'s order on this issue for reconsideration by the AO. Ultimately, the appeal of the revenue was partly allowed for statistical purposes.
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