2015 (10) TMI 1609 - AT - Income Tax

Entitlement to exemption u/s 10A - Held that - It is not disputed that the assessee had filed a letter before the bank for extension of time, and it is also not disputed that the bank cannot and did not take the said letter on record because the letter was not accompanied by Softex Forms. It is also undisputed fact that the assessee has filed necessary letters with details before the STPI authorities for issuance of Softex Forms and they were pending before the authorities. The AO has observed that the assessee did not pursue the matter with STPI authorities, but there is no positive evidence to come to this conclusion. Further, as held in case of Tyco Electronics Corporation India P.Ltd. 2012 (7) TMI 64 - KARNATAKA HIGH COURT the object behind this provision appears to be that once sale proceeds are received in India, though late and the authority vested with the power to extend the time, exercises this discretion, the assessee should be entitled to the benefit. As recorded by the CIT(A) the assessee has received the sale proceeds by 8th of September 2011. Therefore, the competent authority i.e. the bank has allowed the assessee to realize the sale proceeds. Therefore we hold that the export proceeds received after the expiry of the period of six months from the end of the relevant previous year is to be allowed as a deduction u/s 10A of the Act - Decided in favour of assessee.

Summary

Issues:
1. Deduction of communication expenses from export turnover for computing deduction u/s 10A of the Income-tax Act.
2. Receipt of export receipts after the stipulated period for deduction u/s 10A of the Act.

Analysis:

Issue 1:
The case involved cross-appeals by the assessee and the revenue against the CIT(A)'s order for the assessment year 2010-11. The Assessing Officer (AO) disallowed certain communication expenses from export turnover for computing deduction u/s 10A of the Act. The CIT(A) partly allowed the appeal, following a High Court decision, directing that if any expenditure is reduced from export turnover, it should also be reduced from total turnover for computing deduction u/s 10A. The Tribunal upheld the CIT(A)'s decision, citing the jurisdictional High Court's ruling, and rejected the revenue's appeal, stating that the issue was in favor of the assessee based on established legal precedents.

Issue 2:
Regarding the receipt of export receipts after the stipulated period, the CIT(A) upheld the disallowance, leading to the assessee's appeal. The assessee argued that the RBI, as the competent authority, had delegated powers to banks for time extensions, and the delay was due to a pending bank approval. Citing a High Court case, the Tribunal noted that the statute did not specify a time limit for extension applications and emphasized that once the sale proceeds were received in India, the benefit should be granted. The Tribunal found that the assessee had applied for an extension, and the bank had allowed the realization of sale proceeds, thus entitling the deduction u/s 10A. Consequently, the assessee's appeal was allowed, and the revenue's appeal was dismissed, aligning with the principles established in the relevant legal precedents.

In conclusion, the Tribunal's judgment favored the assessee on both issues, emphasizing adherence to legal interpretations and precedents to determine the eligibility for deductions under the Income-tax Act.