2013 (10) TMI 763 - AT - Income Tax

Interpretation of Total Turnover & Export Turnover under 10A - Held That - In the case of ITO v. Sak Soft Ltd.(2009 (3) TMI 243 - ITAT MADRAS-D), There should be uniformity in the ingredients of both the numerator and the denominator of the formula, Section 10-A is a beneficial section. It is intended to provide incentives to promote exports. If the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded in computing the export turnover as a component of total turnover in the denominator. The reason being the total turnover includes export turnover. The components of the export turnover in the numerator and the denominator cannot be different - Following decision of Commissioner of Income-tax Versus Tata Elxsi Ltd. 2011 (8) TMI 782 - KARNATAKA HIGH COURT - Decided against Revenue. Deduction u/s 10A - Whether Commissioner of Income-tax (Appeals) has erred in holding that the claim under sec.10A shall be allowed before adjusting brought forward losses and unabsorbed depreciation - Held that - Following decision of Changepond Technologies (P) Limited. Versus Assistant Commissioner Of Income-Tax 2008 (2) TMI 486 - ITAT MADRAS-A - Decided against Revenue.

Summary

Issues:
1. Whether the deduction of internet expenses from total turnover under sec.10A should be allowed.
2. Whether the claim of deduction under sec.10A should be allowed.
3. Whether the claim under sec.10A should be allowed before adjusting brought forward losses and unabsorbed depreciation.

Analysis:

1. The first issue raised by the Revenue in the appeal was regarding the deduction of internet expenses from the total turnover while calculating the deduction under sec.10A. The Commissioner of Income-tax(Appeals) allowed the appeal, relying on the Special Bench decision of the Madras Tribunal in the case of Sak Soft Ltd. and the judgment of the Hon'ble Karnataka High Court in the case of CIT v. Tata Elxsi Ltd. The Tribunal found no infirmity in the order passed by the Commissioner of Income-tax(Appeals) and dismissed this ground raised by the Revenue.

2. The second issue pertained to the claim of deduction under sec.10A. The Revenue contended that the Commissioner of Income-tax(Appeals) erred in allowing the appeal against the order of the Assessing Officer disallowing the claim of deduction. The Commissioner of Income-tax(Appeals) based the decision on the Tribunal's rulings in the assessee's own case for the assessment years 2002-03 and 2005-06. The Tribunal upheld the Commissioner's order, stating that the view taken by the Commissioner was justified.

3. The third issue raised by the Revenue concerned the timing of allowing the claim under sec.10A in relation to adjusting brought forward losses and unabsorbed depreciation. The Commissioner of Income-tax(Appeals) held that the claim under sec.10A should be allowed before adjusting the losses and depreciation. This decision was supported by references to orders of the ITAT, Chennai Benches in cases like M/s. Ford Business Services Centre P. Ltd. and M/s. Changepond Technologies (P) Ltd. The Tribunal found no error in the Commissioner's order on this issue.

In conclusion, the Tribunal dismissed the appeal filed by the Revenue, upholding the decisions of the Commissioner of Income-tax(Appeals) on all three grounds. The order was pronounced in an open court in Chennai on November 7, 2012.