2013 (10) TMI 1121 - AT - Income Tax

Computation of deduction u/s 10A - deduction of communication and insurance charges from the export turnover without deducting them from total turnover while computing deduction u/s 10A of the Act Held that - Reliance has been placed upon the judgment of Hon ble Bombay High court in case of Gemplus Jewellery India Ltd., 2010 (6) TMI 65 - BOMBAY HIGH COURT - Directed the Assessing Officer to compute deduction u/s 10A of the Act by reducing the communication charges and insurance charges from export turnover as well as the total turnover. Amounts in dispute are in the nature of reimbursement, therefore to be excluded in the export turnover and total turnover for computation u/s 10A of the Income tax act Held that - When the Assessing Officer has not disputed that the amounts in dispute are in the nature of reimbursement, hence, should not form part of the export turnover for the purpose of computing deduction u/s 10A of the Act, then, the same cannot also form part of the total turnover for the said purpose - No profit element is embedded in the aforesaid amounts. Therefore, the direction of the CIT(A) to reduce the aforesaid amounts from the export turnover as well as total turnover while computing deduction u/s 10A of the Act is perfectly in order and requires no interference Decided against the assessee.

Summary

Issues:
Rectification of order by ITAT Hyderabad regarding deduction of communication and insurance charges from export turnover, reimbursement of expenses to Virtusa Corporation, USA, and non-adjudication of certain grounds in the department's appeal.

Analysis:
The judgment pertains to rectification sought by the assessee and the revenue regarding the order of the ITAT Hyderabad related to deduction of communication and insurance charges from export turnover. The assessee contended that the Tribunal had overlooked factual submissions and judicial precedents while remanding certain issues to the Assessing Officer for fresh determination. The learned AR highlighted a previous decision in the assessee's case for AY 2003-04, where it was held that communication and insurance charges should be reduced from both export turnover and total turnover for computing deduction u/s 10A of the Act. The AR argued that the Tribunal failed to consider this precedent, constituting a mistake apparent on the face of the record. The Tribunal, in line with the Supreme Court's decision in Honda Siel Power Products Ltd. case, rectified the mistake by directing the Assessing Officer to compute the deduction accordingly.

Regarding the reimbursement of expenses to Virtusa Corporation, USA, the department filed a separate MA seeking rectification as a ground raised in its appeal was not adjudicated by the Tribunal. The Tribunal acknowledged this oversight and rectified it by considering and dismissing the ground raised by the department. The issue revolved around whether the reimbursement of expenses should be reduced from export turnover while computing deduction u/s 10A of the Act. The Assessing Officer had reduced the reimbursement amount from export turnover, contending it was to escape restrictions in the Act. The CIT(A) upheld this decision, stating that the expenses should be reduced from both export turnover and total turnover, as they were in the nature of reimbursement without any profit element. The Tribunal found no infirmity in the CIT(A)'s order, citing various judicial precedents and statutory provisions. Consequently, the Tribunal dismissed the grounds raised by the department and the assessee, affirming the reduction of reimbursement expenses from both turnovers for computing deduction u/s 10A.

In conclusion, both MAs filed by the assessee and the revenue were allowed, rectifying the order passed by the Tribunal. The judgment provides a detailed analysis of the issues raised, the legal precedents cited, and the rationale behind rectifying the mistakes apparent on the face of the record.