Case Law Details
Brief of the case: In case of ITO VS. M/s.Testree Solutions Pvt. Ltd, ITAT Bangalore held that the export proceeds received after the expiry of the period of six months from the end of the relevant previous year was to be allowed as a deduction u/s 10A . Assessee’s claim for exemption u/s 10 was rejected on ground that it did not receive export proceeds within prescribed time. Assesse had applied to authorities convinced for extension of time. Though assessee had not filed STPI forms with its application, yet it had taken up matter for issuance of said form with appropriate authorities. Moreover, HC in similar case, held that where export proceeds are received in India, though belatedly, authority has discretion to extend time limit. Thus, assessee’s claim was to be allowed.
Facts of the case: The assessee-company, was engaged in the business of software development Services. It incurred certain expenditure on account of communication expenses and claimed exemption u/s 10A. The Assessing Officer (AO) held that the assessee-company ought to have reduced such charges from export turnover to arrive at the claim of deduction u/s 10A , as such charges incurred are, directly attributable to the delivery of computer software expenditure outside India. He, accordingly, excluded the same from the export turnover for the purpose of computation of deduction u/s 10A .
Contention of Assesse: That the assessee had made an application to its bank for extension of time and the amount was received subsequently and therefore the same has to be allowed for the purpose of deduction u/s 10A of the Act. The assessee explained that the bank is authorized to take on record an extension letter only on submission of STPI Approval Invoices (Softex Forms) and that the assessee has applied for Softex forms which were yet to be received. The assessee also submitted copies of the letter submitted for Softex forms.
Contention of Revenue: The AO observed that the assessee has not made any efforts to obtain Softex forms and therefore assessee has not fulfilled the requisite conditions and therefore the same is not allowable as deduction u/s 10A of the Act.
HELD by CIT(A): The CIT(A) has followed the decision of the jurisdictional High Court in the case of CIT vs. Tata Elxsi ITA Nos.1364&1464/Bang/2014 (349 ITR 98) to direct the AO that if any expenditure is reduced from the export turnover the same has to be reduced from the total turnover as well while computing deduction u/s 10A. Therefore, CIT (A) partly allowed assesse’s claim.
HELD by ITAT: The AO has observed that the assessee did not pursue the matter with STPI authorities, but there is no positive evidence to come to this conclusion. The Hon’ble High Court of Karnataka, in the referred case of Tyco Electronics Corporation India P.Ltd wherein it was held the object behind this provision appears to be that once sale proceeds are received in India, though late and the authority vested with the power to extend the time, exercises this discretion, the assessee should be entitled to the benefit . As recorded by the CIT(A) in his order, the assessee has received the sale proceeds by 8th of September 2011. Therefore, the competent authority i.e. the bank has allowed the assessee to realize the sale proceeds. Therefore, it was held that the export proceeds received after the expiry of the period of six months from the end of the relevant previous year is to be allowed as a deduction u/s 10A of the Act.
the grounds of appeal raised by the assessee are allowed.
