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TMI Blog2019 (12) TMI 986X X X X Extracts X X X X X X X X Extracts X X X X ..... loans to subsidiary company - deemed income under section 41(1) - HELD THAT:- Regarding the first aspect of interest amounting to 27.80 lakhs, we restore the matter back to the file of the AO for fresh decision, after examining the factual aspect as to whether the loan given to subsidiary is a loan given in ordinary course of business or not. We do so by following the judgment of Hon ble Karnataka High Court rendered in the case of CIT Vs. Hewlette Packard Global Ltd., . [ 2017 (11) TMI 205 - KARNATAKA HIGH COURT] with observation that incidental activity of parking of surplus funds with the banks or advancing of staff loans by such special category of assessee covered under sections 10A or 10B of the IT Act is integral part of their export business activity but the factual aspect noted by Hon ble Karnataka High Court was this that parking of surplus funds with the bank or advancing of staff loans was in ordinary course of business of the assessee in that case. On this aspect, there is no finding of any of the authorities below in the present case as to whether the loan given to subsidiary company and staff advances were given by the assessee in ordinary course of business or not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n brought on record and hence, on this issue also, we find no reason to interfere in the order of the CIT(A). X X X X Extracts X X X X X X X X Extracts X X X X ..... d directed the AO to allow the same. Learned CIT(A) has followed this Tribunal's order and decided the issue in favour of the assessee. In view of this, we find no reason to interfere in the order of the CIT(A) on this issue. 5. In the result, appeal of the Revenue is dismissed. 6. Now we take up the appeal of the assessee. Grounds raised by the assessee are as under: General Ground 1. The learned CIT(A) 6, Bangalore has erred in passing the order in the manner passed by her. The order passed to the extent prejudicial to the appellant is bad in law and liable to be quashed. Exclusions from profits of 10A unit 2. The learned assessing officer has erred in excluding (a) interest on loans to subsidiary company amounting to ₹ 27,80,000/-; (b) deemed income under section 41(1) amounting to ₹ 1,07,62,841/- from profits of the business of the undertaking in the process of computation of deduction under section 10A and the learned CIT(A) has erred in confirming the action of the learned AO. Amount wrongly reduced from export turnover under the caption 'sale proceeds received in kind' 3. The learned assessing officer has erred in reducing a sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) has erred in confirming the action of the ld. AO. Levy of interest under section 234B and 234D 9. The learned assessing officer has erred in levying interest under section 234B and 234D of the Act amounting to ₹ 60,31,872/- and ₹ 5,83,548/- respectively. On facts and in the circumstances of the case and law applicable, interest under section 234B and 234D is not leviable. The appellant denies its liability to pay interest under section 234B and 234D. Prayer 10. In view of the above and other grounds to be adduced at the time of hearing, the appellant prays that the order passed by the learned assessing officer under section 143(3) be quashed or in the alternative the additions/disallowances/variation to income returned and tax payable as sustained by the Id. CIT(A) be deleted. 7. In course of hearing, it was submitted by learned AR of the assessee that ground No.1 is general and regarding ground No.2, reliance was placed on the judgment of the Hon'ble Karnataka High Court rendered in the case of CIT Vs. Hewlett Packard Global Ltd., as reported in 403 ITR 453, copy available on pages 570 to 584 of the Paper Book. Our attention was drawn to para Nos.31 and 37 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt and therefore has not allowed the assessee from claiming exemption on imported software. It was also disallowed on the ground that the payments made or account of software import for in house utilization are in the nature of royalty. On these grounds the assessee had not deducted TDS. Therefore, the assessing officer disallowed the expenditure. The assessed had claimed warranty expenses as deduction. The same was also disallowed on the ground that it was only a provision to be treated as a contingent liability. The assessee had claimed a sum of ₹ 2,36,04,319 as deduction on excise duty under Section 43B of the Act. It was also rejected on the ground that the working made by the assessee is not correct. When the assessing officer allowed reduction under Section 10-A he excluded certain receipts/income not related to 10- A activity arid has also allocated certain expenses not allocated to 10-A units as under liquidated damages recovered from suppliers, write back of credit balances in customer account scrap sales of newspapers, battery and expenses like corporate headquarters while computing deduction. The assessment came to be completed by the order dated 28-3-2001. Aggriev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to whether the loan given to subsidiary is a loan given in ordinary course of business or not. We do so by following the judgment of Hon'ble Karnataka High Court rendered in the case of CIT Vs. Hewlette Packard Global Ltd., (supra). We have noted that in para No. 37 of this judgment, relief was allowed by the Hon'ble Karnataka High Court with this observation that incidental activity of parking of surplus funds with the banks or advancing of staff loans by such special category of assessee covered under sections 10A or 10B of the IT Act is integral part of their export business activity but the factual aspect noted by Hon'ble Karnataka High Court was this that parking of surplus funds with the bank or advancing of staff loans was in ordinary course of business of the assessee in that case. On this aspect, there is no finding of any of the authorities below in the present case as to whether the loan given to subsidiary company and staff advances were given by the assessee in ordinary course of business or not and hence, the AO has to examine this factual aspect and if it is found that such loan and staff advances are given by the assessee in ordinary course of business, then on re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the customers have agreed to settle consideration in respect of services rendered by assessee by transferring certain software programs along with annual maintenance services which amounted to ₹ 157.14 lakhs. Similar note is there in the audited account for the present year also and hence, the confusion has arisen as to whether this sale transaction of ₹ 157.14 lakhs is pertaining to Assessment Year 2004-05 or the present year or similar transaction is there in both years. Hence, we feel it proper to restore this matter to the file of the CIT(A) for fresh decision after examining the facts in this regard carefully and after providing reasonable opportunity of being heard to both sides and he should decide this issue by way of a speaking and reasoned order and accordingly, ground No.3 is allowed for statistical purposes. 15. Regarding ground No.4, it was submitted by learned AR of the assessee that on page No.168 of the Paper Book is a detail regarding realisation of export proceeds in respect of invoice Nos.1299 and 1226/2004-05. He pointed out that as per these details, invoice No.1299 for ₹ 131.22 lakhs was realised on 19.01.2007 and the second invoice of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his file for fresh decision. The learned DR supported the order of the CIT(A) but since this issue was not decided by the learned CIT(A), we restore this matter back to his file for decision in this aspect. Accordingly ground Nos.5 and 6 are allowed for statistical purposes. 18. Regarding ground No.7, it was submitted by learned AR of the assessee that similar issue was there before CIT(A) in Assessment Year 2004-05 and the order of the CIT(A) for Assessment Year 2004-05 is available on pages 545 to 565 of the Paper Book and in particular, our attention was drawn to page 554 of the Paper Book and it was pointed out that in that year, AO disallowed brokerage charges claimed which was paid towards procuring residences to the employees and pointed out that in para 7.1 of the his order for Assessment Year 2004-05, it was noted by the learned CIT(A) that the amount of ₹ 19.07 lakhs was considered by the AO mistakenly as brokerage when the actual brokerage paid was only ₹ 420,632/-. He submitted that since in Assessment Year 2004-05, the brokerage was allowed by the CIT(A) and since no appeal was filed by the Revenue before the Tribunal against this order of CIT(A), in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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