Deduction u/s 80HHE is allowed against gross total income

DCIT Vs Zensar Technologies Ltd (ITAT Mumbai)

ITAT Mumbai held that deduction under section 80HHE of the Income Tax Act is allowed against the gross total income.

Facts- The return was selected for scrutiny and the notice u/s. 143(2) was served on the assessee. Since the assessee had international transaction, a reference was made to the Transfer Pricing Officer (TPO). The TPO made a Transfer Pricing Adjustment of Rs,22,88,380/-, towards salary cost of employees who are seconded to the US Associated Enterprise (AE).

AO while passing the assessment order made disallowance towards Non compete Fee of Rs.43,90,000/- and Employee Stock Options of Rs. 22,08,491 besides the above transfer pricing adjustment. The AO also treated a sum of Rs.1,48,43,768/- as income from other sources as against the treatement of interest and rental income as business income by the assessee. AO also made an addition towards excess exemption claimed u/s.10A due to difference in depreciation between book depreciation and depreciation u/s.32 of the Act for Rs.1,61,18,819/-. AO further denied the deduction claimed under section 80HHE by the Assessee while concluding the assessment u/s. 143(3).

The Assessee preferred appeal before the CIT(A). CIT(A) gave relief to the assessee except for treatment of rent and interest ‘Income as income from other sources’ by Assessing Officer as against the treatment of the same as business income by the Assessee. With regard to the transfer pricing adjustment, the Ld.CIT(A) gave partial relief to the Assessee and upheld the addition for Rs.8,18,782/-. Aggrieved by the order of the Ld.CIT(A), the Revenue is in appeal before the ITAT.

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