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TMI Blog2013 (2) TMI 263X X X X Extracts X X X X X X X X Extracts X X X X ..... e CIT(A), thus no infirmity in the action of the CIT(A) in granting deduction under S.10A - AO cannot disturb the exemption under S.10A in the middle of the period, having granted the same in the earlier years, unless he has material to show that the assessee has violated any of the provisions of S.10A - in favour of assessee. Disallowance of US branch expenditure - assessee furnished the additional evidence as per Rule 46A(1)- Held that:- Effective opportunity of hearing has been granted by the CIT(A) to the AO,the Revenue has not placed any material to suggest that the CIT(A) has not given reasonable opportunity of hearing to the assessing officer. In the circumstances, the order of the CIT(A) is upheld that the expenses incurred by the assessee in foreign branch is for the purposes of business only and has to be treated as expended for the purposes of business. Further that enhanced income, if any, on account of any disallowance, is construed as income from exports only, consequently boosting the income eligible for exemption under S.10A. Even on that count also, the claim of be assessee has to be allowed. Expenditure claimed towards product development expenditure - Allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1st March of every year and cannot be invoked to disallow the amounts which have already been paid during the previous year, without deducting tax at Source. I therefore, agree with the view taken by Shri Mahavair Singh, JM and answer the question accordingly. The matter may now be placed before the Division Bench for passing appropriate orders, in the above listed cases, in the light of the majority view of the Members consisting of the Special Bench. In view of the above order of the Tribunal, we hold that the provisions of S.40a(ia) are applicable only in respect of the expenditure which remains payable as on 31st of the March of the relevant previous year, and such disallowance cannot be made in respect of the expenditure which has already been paid during the relevant previous year, though without deducting tax at source. We therefore, set aside the impugned order of the CIT(A) and direct the assessing officer to allow the impugned expenditure to the extent already paid during the relevant previous year and accordingly restrict the disallowance only to the amount remaining outstanding as at the end of the relevant previous year. 5. In the result, assessee s appeal is part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under S.10A. Accordingly, we uphold the impugned order of the CIT(A) and reject the grounds of the Revenue on this issue. 10. The next grievance of the Revenue in this appeal is with regard to disallowance of US branch expenditure to the tune of Rs.11,96,91,582. 11. Before the assessing officer, who disallowed the expenditure in question, the assessee has not furnished the details of the expenditure incurred in respect of US Branch. However, the assessee furnished the details of such expenditure incurred on on-sight development of software and pleaded before the CIT(A) that the same has to be considered as deemed export and should to be excluded from the export of software. The assessee has also filed before the CIT(A), the income tax return in respect of the US branch and claimed that the expenditure in question should be allowed as per Explanation 3 of S.10A of the Act. The said explanation relied upon by the assessee before the CIT(A) reads as follows- For the removal of doubts, it is hereby declared that the profit and gains derived from on site development of the computer software (including services for development of software) outside India shall be deemed to be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbent upon him to arrive at a positive finding as to which of these two additions to the declared income were really called for. We see no merit in the contention of the Ld. CIT(A) that as the amounts had been alleged by the assessee as the sale proceeds of fixed assets, the AO was precluded from applying the provisions of Section 68 of the Act. For arriving at that view it was first necessary to come to the conclusion that there was indeed sale of plant and machinery to M/s A.S. Engineering Works as alleged by the assessee. The Ld. CIT(A) has not addressed himself to that issue at all. We, therefore, consider it necessary to restore this issue to the file of the Ld. CIT(A) for decision afresh in the light of the observations made by us in this order. Let it be clearly understood that for this purpose the CIT(A) would consider on merits as to which one of the two additions i.e., Rs. 20 lakhs or Rs. 11,00,562A should be retained. He should arrive at specific findings of fact as to whether or not the assessee sold plant and machinery to M/s A.S. Engineering Works, Khatoli as claimed by the assessee. 14. On the other hand, the learned authorised representative for the assessee subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construed as income from exports only, consequently boosting the income eligible for exemption under S.10A of the Act. Even on that count also, the claim of be assessee has to be allowed. 16. The next ground is with regard to allowance of expenditure claimed by the assessee towards product development expenditure as expenditure is not allowable for amortization. 17. The assessee has debited an amount of Rs.63,91,878, being expenditure towards product development and the same was written off. As the details of the expenditure were not a furnished by the assessee, the assessing officer disallowed the same. On appeal, the CIT(A) allowed the same observing that the assessee has developed supply chain management software and the expenditure incurred on such product development is written off at the rate of 10% every year, as it is a continuing process. The assessee has been following this system year after year and the same was allowed by the CIT(A). Against the relief granted by the CIT(A), Revenue is in appeal before us. 18. We heard both the parties and perused the materials on record. As seen from the order of the CIT(A), this expenditure has been incurred by the assessee yea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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