2016 (8) TMI 254 - AT - Income Tax

Deduction u/s. 10B - Held that - considered the decision of Hon ble High Court of Karnataka in CIT v. Yokogawa India Ltd. (2011 (8) TMI 845 - Karnataka High Court) wherein it has been held that relief u/s. 10A of the Act is to be computed prior to giving effect to carry forward and set off provisions of the Act. The Hon ble High Court in paras 10 to 20 of its judgment dealt with this issue and noticed that section 10A(1) of the Act is in pari materia with section 10B of the Act. Hence, we are convinced that the CIT(Appeals) was right in his decision and his order does not call for any interference. Accordingly, we dimiss the Revenue s appeal on this issue. Exclusion of expenses from export turnover vis- -vis total turnover for the purpose of calculating deduction u/s. 10B - Held that - CIT(Appeals) has relied upon the decision of the Hon ble jurisdictional High Court in the case of Tata Elxsi Ltd. v. ACIT 2011 (8) TMI 782 - KARNATAKA HIGH COURT and the subsequent decision in CIT & DCIT v. Motor Industries Co. Ltd. (2015 (7) TMI 876 - KARNATAKA HIGH COURT) and directed the AO to allow the assessee s claim for reducing the expenditure incurred in foreign currency not only from the export turnover, but also from the total turnover.nothing was brought on record before us to the effect that the decision of the Hon ble High Court of Karnataka has been reversed /modified by the Hon ble Supreme Court, even though it is claimed that SLP has been recommended to be filed by before the Hon ble Supreme Court. In such facts and circumstances, the Tribunal and other authorities under the jurisdiction of the Hon ble High Court of Karnataka are bound by its decision. Hence, we do not find any infirmity in the order of the CIT(Appeals)

Summary

Issues:
- Appeal against common order of CIT(Appeals) for assessment years 2007-08, 2008-09, and 2010-11.
- Deduction u/s. 10B for brought forward losses.
- Deduction of incidental expenses from export turnover.
- Appeal grounds challenging CIT(A) decisions.
- Cross Objection filed by the assessee.

Analysis:

1. The appeals were made by the revenue against the common order of the CIT(Appeals) for the assessment years 2007-08, 2008-09, and 2010-11. The assessee, a private limited company providing IT services, declared Nil income for all three years initially. The assessments under section 143(3) resulted in determining the total income as Nil for 2007-08, MAT income of &8377;1,76,79,341 for 2008-09, and &8377;9,59,428 for 2010-11.

2. The primary issue revolved around the deduction under section 10B concerning the brought forward losses. The Assessing Officer (AO) deducted the brought forward losses to restrict the deduction u/s. 10B for the respective assessment years. Additionally, for 2010-11, incidental expenses were reduced from the export turnover to calculate the deduction under section 10B.

3. The CIT(Appeals) considered the submissions and relied on precedents like the decision of the Hon'ble High Court of Karnataka in CIT v. Yokogawa India Ltd. regarding the set off of brought forward losses and unabsorbed depreciation. The CIT(A) directed the AO to calculate the deduction u/s. 10B before setting off these losses.

4. Regarding the deduction of incidental expenses, the CIT(Appeals) referred to the decision in Tata Elxsi Ltd. v. ACIT and directed the exclusion of such expenses from both export turnover and total turnover. The Revenue challenged these decisions through various grounds in the appeal.

5. The Tribunal upheld the CIT(Appeals) decisions, citing the Hon'ble High Court of Karnataka's rulings and dismissing the Revenue's appeal. The Tribunal found no infirmity in the CIT(A) order and upheld the exclusion of expenses from both turnovers. The Cross Objection by the assessee was dismissed as supportive of the CIT(Appeals) order.

In conclusion, the Tribunal dismissed both the department's appeals and the assessee's Cross Objection, affirming the decisions of the CIT(Appeals) based on legal precedents and interpretations of relevant tax provisions.