2015 (9) TMI 1282 - AT - Income Tax

Claim of the assessee u/s 10B - claim of the assessee was rejected by AO on the ground that the approval from the Board as required under the provisions of section 10B was not obtained - assessee made an alternative claim u/s 10A - only contention of the ld. DR is that the assessee cannot make a claim unless the same was made in the return of income - Held that - As gone through the judgment of the Apex Court in M/s Goetze (India) Ltd (2006 (3) TMI 75 - SUPREME Court) wherein held that for the purpose of making a claim, the same has to be made in the return of income. In the very same judgment, the Apex Court found that however, it will not deprive the authority of the Tribunal to entertain additional ground or alternative ground. Therefore, when the assessee is eligible for alternative claim u/s 10A, this Tribunal is of the considered opinion that the CIT(A) has rightly allowed the claim of the assessee. This Tribunal do not find any infirmity in the order of the CIT(A) on this issue. - Decided in favour of assessee. Setting off of losses of non 10B unit against profits of 10B unit - Held that - The Special Bench of this Tribunal in Scientific Atlanda Tec P. Ltd.(2010 (2) TMI 658 - ITAT, CHENNAI) found that the brought forward losses and depreciation need not be set off for computing deduction u/s 10B of the Act. - Decided in favour of assessee. Exclusion of foreign travel and communication expenses from the export turnover - Held that - It is not in dispute that the foreign travel and communication expenses were included in the total turnover. Once it was included in the total turnover, in view of the decision of Special Bench in Sak Soft Ltd. (2009 (3) TMI 243 - ITAT MADRAS-D), the same are also to be included in the export turnover. The Special Bench in Sak Soft Ltd found that the denominator and numerator shall be of the same factor. The CIT(A) has followed the decision of the Special Bench of this Tribunal, therefore, we do not find any infirmity in the order of lower authority - Decided against revenue. Disallowance u/s 14A - AO admittedly, disallowed 10% of the dividend income. However, the CIT(A) deleted the same. Asseessee submitted that 2% of the dividend income may be disallowed - Held that - The Assessing OfficerAssessing Officer is directed to disallow 2% of the dividend income as expenditure relatable to exempted income. The order of the CIT(A) is set aside and the Assessing Officer is directed to disallow only 2% instead of 10% of the dividend income. - Decided partly in favour of revenue.

Summary

Issues:
1. Claim of deduction u/s 10B of the Act.
2. Setting off of losses of non 10B unit against profits of 10B unit.
3. Exclusion of foreign travel and communication expenses from the export turnover.
4. Disallowance u/s 14A of the Act.

Claim of deduction u/s 10B of the Act:
The Revenue appealed against the CIT(A)'s order concerning the claim of the assessee u/s 10B. The Assessing Officer disallowed the claim due to the absence of a certificate from the Board of Approval. However, the CIT(A) allowed the claim based on the judgment of the Hon'ble Madras High Court. The appellant argued that the claim should have been made in the return of income, citing the Hon'ble Apex Court's decision in a similar case. The respondent contended that an alternative claim u/s 10A was made before the CIT(A), which was justified. The Tribunal upheld the CIT(A)'s decision, emphasizing that an alternative claim can be entertained even if not initially made in the return of income.

Setting off of losses of non 10B unit against profits of 10B unit:
The issue revolved around whether brought forward losses and depreciation should be set off for computing deduction u/s 10B. The Special Bench of the Tribunal ruled that such set off was not necessary. The Tribunal preferred the Special Bench's decision over a Division Bench's ruling, confirming the CIT(A)'s order allowing the deduction without the set off.

Exclusion of foreign travel and communication expenses from the export turnover:
The dispute arose from the exclusion of foreign travel and communication expenses from the export turnover. The CIT(A) directed the exclusion from total turnover as well, following a Special Bench decision. The Tribunal upheld the CIT(A)'s decision, stating that once included in total turnover, these expenses should also be part of the export turnover, aligning with the Special Bench's rationale.

Disallowance u/s 14A of the Act:
Regarding the disallowance u/s 14A, the Assessing Officer disallowed 10% of the dividend income, which was entirely deleted by the CIT(A). The appellant argued for computation under Rule 8D, while the respondent cited a judgment for disallowing only 2% of the dividend income. The Tribunal directed the Assessing Officer to disallow 2% of the dividend income, following the Hon'ble Madras High Court's decision, setting aside the CIT(A)'s order.

In conclusion, the Tribunal partly allowed one appeal and dismissed another, addressing various issues related to deduction claims, set off of losses, turnover calculations, and disallowances under different sections of the Act. The decisions were based on interpretations of relevant legal precedents and specific circumstances of each case.