CIT v Motorola India Electronics (P) Ltd. (ITA NO.447 OF 2007) (Kar HC) (dated 11.12.2013) Background: The assessee had outstanding borrowings by way of External Commercial Borrowings. The borrowings were for the business of STP undertaking. The Government had formulated a policy on pre-payment and the policy stated that approval of pre-payment would be granted only to the extent of 10% of the outstanding loan. Hence, it is required to temporarily park the funds, until the date of repayment, and also keep paying the interest on the loans. The assessee took a business decision to place these funds with various sister concerns as inter-corporate deposits. The assessee claimed that the interest income as derived from the business of export of articles or things or computer software and the same is eligible for exemption under section 10A of the Act. The AO disallowed the exemption claimed with respect to the interest income.
S. 10A
CIT v M/s Chelslind Textiles Ltd (ITA No: 361/2009 dtd 04/03/2009) – Karnataka HC Background: Assessee claimed deduction u/s 10B amounting to Rs.4,75,30,724/- on the business income of Rs.5,36,70,676. During the course of assessment proceedings, the AO allowed the deduction claimed by the assessee. The Commissioner of Income-tax observed that the AO allowed the deduction without setting-off unabsorbed depreciation amount of Rs.4,26,23,711. Therefore, the CIT in his jurisdiction under Section 263 of the Income Tax Act was of the view that the same resulted in excess deduction allowed under Section 10B of the Act and incorrect determination of loss was carried forward. Therefore, he set-aside the said order and directed the Assessing Officer to re-compute the total income after setting-off the unabsorbed depreciation. Further,the question arose as to whether an assessee incurring losses in the 10A unit has an option to opt out of the benefit under section 10A(8) and make inter-source and inter-head set-off u/s 72.
An assessee can opt out of 10A/10B exemption in the year of loss – Karnataka ...
Zavata India Pvt Ltd v ITO [IT APPEAL NO. 628 (HYD.) OF 2008 dtd 31-01-2013] Hyd ITAT Background: Assessee is in the business of rendering back office processing services in the field of health-care administration. Its services are not akin to call centre services, wherein tele-communication expenses constitute more than 24%. The assessee’s service centre is registered under the Software Technology Parks of India and provides services exclusively to Samsung Data Corporation USA (SDC US), its Associate Enterprise (AE). The SDC US markets services in USA. The revenue sharing policy was determined at the ratio of 85:15 on the gross receipts received from third parties. For the financial year 2003-04, i.e. AY 2004-05, the assessee filed return of income and claimed deduction under S.10A to the extent of Rs. 3,15,69,530.
Once TPO has accepted ALP, AO cannot say that assessee has earned more than ordinary ...
Genesys International Corpn. Ltd. v ACIT [ITA No.6903/Mum/2011 dtd 31.10.2012] Mumbai ITAT Background: Assessee has two undertakings, one located at SEEP2, Mumbai which is a SEZ unit and other located at Bangalore which is STPI unit. Both units are eligible for tax benefit under section 10A of the Act. The Finance Act, 2007 amended section 115JB with effect from 2008-09 for bringing the amount of income to which provisions of section 10A or 10B apply within the purview of MAT. Further, provisions of sub-section (6) of Section 115JB of the Act were inserted by Special Economic Zone Act, 2005 (SEZ Act) w.e.f. 10.2.2006 which provides that provisions of MAT would not apply to income from any business carried on by an entrepreneur or a developer in a unit or SEZ, as the case may be. The assessee reduced the income u/s 10A from MAT computation. The AO did not accept said contention of the assessee and held that the scope of Minimum Alternate Tax (MAT) was widened by including the income exempt u/s.10A/10B of the Income tax Act in the book profit. The AO stated that section 115JB(6) is applicable to an assessee claiming deduction under section 10AA of the Act and not an assessee claiming deduction under 10A of the Act. Ld CIT (A) after considering the submissions of assessee has confirmed the action of AO.