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TMI Blog2015 (11) TMI 530X X X X Extracts X X X X X X X X Extracts X X X X ..... (net) - Held that:- The assessee is permitted by RBI to keep a part of its foreign exchange earnings in foreign currency account abroad so that it can be used by the assessee for purchasing raw materials and availing other services and if not required can remit back the money to India alongwith interest. Interest is accrued as part of export turnover. It has nexus only with the export turnover and therefore it is also in the nature of export profits. This issue has been decided by the Hon’ble Delhi High Court in favour of the assessee in the case of CIT vs. Indian Toners and Developers Ltd., [2008 (12) TMI 375 - DELHI HIGH COURT] - Decoded in favour of assessee. Interest under Section 234D - Held that:- This issue is covered against the assessee by the decision of the Tribunal in the case of DDIT vs. Oracle Corporation [2012 (11) TMI 1097 - ITAT DELHI] as held Explanation 2 was added by Finance Act, 2012 with retrospective effect from 01.06.2003. By that amendment, it was clearly brought on the statute that the Section shall also apply to an Assessment Year commencing before the first date of June, 2003 if the proceedings in respect of such Assessment Year is completed after the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vi) of the Act. - Decided against assessee. - ITA Nos. 1771, 209 & 2536/Mds/2007 - - - Dated:- 30-9-2015 - BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER For The Assessee : Dr. Anitha Sumanth, Advocate For The Department : S/Shri M.N.Maurya, CIT and A.V.Sreekanth, JCIT ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER The appeals by the assessee and by the Revenue are directed against different orders of the Commissioner of Incometax( Appeals) for the assessment years 2002-03, 2003-04 and 2004-05. The assessee has also filed cross objection. Since, the issues involved in these appeals are common, they are clubbed together, heard together and disposed off by this common order for the sake of convenience. ITA No.1771/Mds/2007 AY 2002-03 (Assessee) 2. The first issue raised by the assessee is as follows: 2. Denial of exemption u/s.10A/10B in respect of provisions no longer required written back. 2.1 The learned CIT(A) has erred in holding that the link charges written back amounting to ₹ 1,09,00,000 should not be considered as part of export profits for the purposes of section 10A of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2% of exemption income treating the same as expenditure incurred in connection with earning the exempt income in the nature of dividend income from mutual funds. It is the case of the assessee that it has not incurred any expenditure towards earning such exempt income. We find that the disallowance of 2% made by the assessing authority is reasonable. At the same time, we accept the alternate contention of the assessee that the profit for the purpose of section 10A will be enhanced to the extent of the above disallowance. Therefore proportionate enhancement will be made in the amount of deduct ion available under section 10A. This issue is partly decided in favour of the assessee. 4.1. Further, the Bombay High Court in the case of CIT vs. Gem Plus Jewellery India Ltd. 330 ITR 175 has held that whenever any disallowance made while computing the income that disallowance should be part and parcel of the business profit of the assessee and the same should be considered for the purpose of deduction u/s.10A of the Act. In view of this, we are inclined to hold that the disallowance made with regard to provision is to be considered as part of business profit for the purpose of determi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght to have appreciated that restatement of balances were done in accordance with Accounting Standard 11 issued by the Institute of Chartered Accountants of India. 9. The facts of the issue are that the assessee company had credited ₹ 6,91,70,239/- as representing the net effect of the Foreign Exchange fluctuation under the head, 'Other Income' in Schedule 9 of the Account for the accounting year ended 31.3.2002. While taxing this sum as business income, the Assessing Officer had denied the benefit of exemption u/s 10A by holding that this sum cannot be said to be derived by the company from its undertaking or from the business of export of computer software. The Assessing Officer was of the view that the net gains arising on account of foreign exchange fluctuation cannot be equated with the profits and gains derived by the assessee's undertaking from the export of computer software. Further, referring to the appellate order in another case, California Software Ltd. for the assessment year 2001-02, the Assessing Officer observed that in view of the fact that the Department had appealed against that order and the matter had not reached finality, the benefit of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 89 of 2004; in the case of Discover India Tours(P) Ltd. vs. Assessing Officer, 9 SOT 665 (Del); in the case of CIT vs. Syntel Ltd. in ITA Nos.1974, 1976 1978 of 2009; in the case of Rajesh Exports Ltd. vs. ACIT in ITA No.51 of 2008, etc. Accordingly, we direct the Assessing Officer to include the gain from EEFC account as part of the profits eligible for deduction under section 10A of the Act. This issue is decided in favour of the assessee. 10.1 Further, the Tribunal in assessee s own case in ITA No.1090/Mds/2013 for the assessment year 2008-09 decided the issue in favour of the assessee and vide its order dated observed as under : 14. The next grievance of the Revenue is that the CIT(A) has wrongly directed the Assessing Officer not to exclude the foreign currency expenditure from the export turnover. 15. Relevant facts qua this ground are that in the course of scrutiny , the Assessing Officer noticed from the details submitted by the assessee a sum of ₹ 10,06,69,173/- and a loss of ₹ 6,14,12,438/- on exchange earners foreign currency accounts in relevant previous year which deserved to be treated as income under the head other sources out of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aised any issue regarding charging of interest u/s.234D at the time of filing the appeal. But, however, by way of filing an additional ground on 5.7.2006, the assessee has objected to the levy. 13. After hearing the parties, we are of the opinion that this issue is covered against the assessee by the decision of the Tribunal in the case of DDIT vs. Oracle Corporation in ITA No.4618/Del/2012, wherein the Tribunal vide order dated 23.11.2012 observed as under: 4. We have heard the rival contentions in the light of the material produced and precedents relied upon. The Ld. DR submitted that Explanation 2 has been inserted in Section 234D with retrospective effect from 01.06.2003. Hence, he pleaded that the said Explanation clearly provides that the Section will be applicable to all Assessment Years commencing before the first day June, 2003 and the proceedings in respect of such assessment is completed after the said date. 5. The Id. counsel of the assessee could not cogently rebut the submissions but placed reliance upon the following case laws:- i) Asstt. Commissioner of LT (OSD) vs. GTL Ltd. (MA NO.746/Mum/2009); ii) CIT vs. Sudhir S. Mehta 139 Taxman 54; a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all also apply to an Assessment Year commencing before the first date of June, 2003 if the proceedings in respect of such Assessment Year is completed after the said date. In this regard, we find that the case laws relied upon by the Ld. D R are germane. In the case of CIT vs. Kamla S. Rani 189 ITR 359 (Born), Hon'ble Bombay High Court has held that court cannot ignore retrospective amendment while considering application u/s 256 (2) and has to exercise a jurisdiction in the light of the law as it is deemed to stand on the date when the Tribunal decided the appeal. In the case of GTC Industries Ltd. vs. DCIT 105 TTJ (Mum) (TM) 1010, the ITAT, Third Member Bench had held that when a law is amended with retrospective effect, the authority when he decides any proceedings has to apply such retrospectively amended law as it were enforced at all material times. 9. Considering the above case laws and the clear provisions of the second Explanation added in Section 234D, we are of the opinion that the order of the Ld. CIT (A) is to be eversed. Accordingly, we set aside the order of the Ld. CIT (A) and decide the issue in favour of the revenue. 10. In the result, the appeal f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings i.e. where assessments in respect of such assessment year is not completed on 1/6/2003. Respectfully following the aforesaid decision of the Bombay High Court and the decision of the Tribunal, we dismiss this ground of appeal. 13.2 In the result, the appeal in ITA No.1771/Mds/2007 is partly allowed. ITA No. 1784/Mds/2007 AY 2002-03 : (Revenue) 14. The Revenue has filed the following grounds in this appeal: 2. The learned CIT(A) erred in holding that the assessee is entitled for relief u/s.10A/10B in respect of the following amount written back by the assessee: a. Provision for Employees Compensation Benefit written back - ₹ 3,6,00,000 b. Provision for travel expenses written back ₹ 94 lakhs 3. The learned CIT(A) erred in remitting the matter back to the assessing officer in respect of assessee s eligibility towards write back of provision for annual day expenses of ₹ 1,12,80,000/-. 15. After hearing both the parties, we find that similar issue has been considered by the Tribunal in assessee s own case in ITA Nos. 114, 2100 90/2011 for the assessment year 2005-06 and 2007-08 dated 23.1.2011, wherein it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l turnover. Being so, in our opinion, this issue is squarely covered in favour of the assessee by the aforesaid decisions of the Tribunal. This ground is allowed. 18. The next ground is with regard to write-back of provisions no longer required do not form part of eligible profits of the business for the purposes of computing deduction u/s.10A/10B of the Act. 19. Since, we have considered similar issue in ITA No.1771/Mds/2007 in paragraphs 4 4.1 above of this order, this ground in assessee s appeal is allowed. 20. The next ground is with regard to disallowance of set-off of current year losses of the units located in Pune, Chennai Unit I and Kolkatta Unit II, while computing the taxable income. 21. The ld. AR submitted that this issue is squarely covered by the decision of the Tribunal in assessee s own case in ITA Nos.114, 2100 90/Mds/2011 dated 23.1.2013. However, we find that there is a judgment from the Delhi High Court in the case of CIT vs. KEI Industries Ltd. (373 ITR 574), wherein after considering the judgment of the Karnataka High Court in the case of CIT v. Yokogawa India Ltd. (341 ITR 385), it was held that loss suffered by the assessee in a unit entitle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d outside India in providing international half circuit. The gateway/landing station in India used in transmitting the traffic within India belong to VSNL and was used by VSNL for providing Indian end services in accordance with the contract with its customers. The Assessing Officer came to the conclusion that the payment received by the non-resident company in providing international private leased circuit was taxable as a Royalty for use or right to use commercial and scientific equipment u/s.9(1)(vi) of the Act read with explanation-2 and Article 12(3) of the Doubt Taxation Avoidance Agreement between India and Singapore. In first appeal, the order of the assessee was upheld by the CIT(Appeals). On further appeal, the Tribunal held that even if the payments were treated as non-relating to the use of equipment, they should be considered as payment for the use of the process provided by the assessee, whereby through the assured bandwidth, the customer is guaranteed the transmission of data and the voice. The fact that the bandwidth is shared with others, however, has to be seen in the light of the technology governing the operation of the process and this by itself does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28. The first issue raised by the assessee in ground Nos. 2 to 4 are as under: 2. That, the CIT(A) has erred in confirming the order of the Assessing Officer ('AO') in connection with exclusion of expenses incurred in foreign currency and telecommunication expenditure incurred in Indian currency from the export turnover with respect to the computation of deduction u/s 10B. 3. That, the CIT(A) ought to have appreciated that expenses incurred in foreign currency and telecommunication expenditure incurred in Indian currency were not included in the export turnover. Hence, the same cannot be excluded from export turnover. 4. In any event, and without prejudice to grounds 2 and 3 above, the CIT(A) ought to have noted that the expenses were not incurred for the purpose of rendering of technical services outside India, and were thus, not excludable. 29. Similar issue was considered in ITA No.209/Mds/2007 vide paragraphs 16 17 for the assessment year 2003-04. In view this, this issue is allowed. 30. The next issue in this appeal is as under: 5. That, the learned CIT(A) is not justified in disallowing the set-off of loss of the Bangalore unit agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against other taxable profits. 20. Qua this plea, we find from the case file that the CIT(A) has followed the order of the 'tribunal' dated 23.1.2013 (supra). Therefore, we maintain consistency in the impugned assessment year as well and decide same in assessee s favour. Respectfully following the aforesaid decisions of the Tribunal, we decide this issue in favour of the assessee. 34. The next ground raised by the assessee is as follows: 7. That, consequentially, the CIT(A) is not justified in holding that interest under section 234B and section 234D of the Act is chargeable. 35. As far as the issue of interest u/s.234D is concerned, the same was decided against the assessee by following the decision of the Bombay High Court in the case of CIT vs. M/s. Indian Oil Corporation Ltd. (supra), which is discussed in paragraphs 13 13.1 of this order. Accordingly, this ground of the appeal is dismissed. 36. Regarding the issue of interest u/s.234B is concerned, it is consequential and mandatory in nature and to be computed accordingly. The appeal filed by the assessee in ITA No.2536/Mds/2007 is partly allowed. 37. In the result, the appeal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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