Genpact India Private Limited (Successor to Genpact India) Vs DCIT (ITAT Delhi)
In the case of Genpact India Private Limited (Successor to Genpact India) vs. DCIT (ITAT Delhi), the issue concerned the disallowance of excess depreciation claimed on computer peripherals. The ITAT heard both parties’ arguments and reviewed the evidence. It determined that assets like printers and routers, along with other accessories, are integral parts of computers and cannot function independently. Therefore, they are eligible for depreciation at the rate applicable to computers. The decision cited precedents from the Hon’ble Jurisdictional High Court to support this interpretation. Consequently, Ground No. 9 of the Revenue’s appeal was dismissed based on these findings.
FULL TEXT OF THE ORDER OF ITAT DELHI
The captioned cross-appeals, preferred by the assessee as well as the Revenue, are directed against the order of learned Commissioner of Income Tax (Appeals)-4, New Delhi, dated 16.05.2016, arising out of order dated 31.03.2015, passed by the Assessing Officer u/s 143(3) of the Income-tax Act, 1961, pertaining to the assessment year 2011-12. Both the appeals are taken up together and disposed of by this common order for the sake of convenience.
2. The assessee has raised following grounds of appeal.
“1. That on facts and in law the CIT(A) erred in upholding that while computing deduction u/s 10A of the Act following receipts are to be excluded within the ambit of “export turnover” as defined in Explanation 2 (iv) to section 10A of the Income Tax Act:
(a) Freight & Telecommunication expenses Rs 6,20,38,757/-
(b) Recovery of expenses in respect of migration/ Rs 42,61,89,516/-on-the-job-training services
2. That on facts and in law the CIT(A) erred in upholding that while computing deduction u/s 10AA of the Act following receipts are to be excluded within the ambit of “export turnover” as defined in Explanation 1 (i) to section 10AA of the Income Tax Act:
(a) Freight & Telecommunication expenses Rs 3,24,95,309/-
(b) Recovery of expenses in respect of migration/ Rs 60,25,09,242/-on-the-job-training services
3. That on facts and in law the CIT(A) erred in not appreciating that recovery of expenses in respect of migration/on-the-job-training services and freight and telecommunication expenses were not included in the figure of “export turnover ” considered by the appellant while computing deduction u/s 10A and 10AA of the Act.
4. That on facts and in law the CIT(A) erred in upholding that recoveries from group companies to the extent of Rs.3,84,746/- (i.e 5% of Rs. 76 ,94,926/) are not eligible for claiming benefit of deduction u/s 10A of the Income Tax Act 1961.
5. That on facts and in law the CIT(A) erred in upholding levy of interest u / s 234B, 234C and 234D of the Income Tax Act.
6. That on facts and in law to the Commissioner of Income Tax (Appeals) (herein above referred to as “ClT(A) “\ erred in upholding the order of AO partly and not allowing complete relief as claimed.
7. That on facts and in law the order passed by Assessing Officer (herein above referred to as “AO” is void ab initio and bad in law. ”
2.1 Revenue has raised following grounds of appeal:
1. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) erred in treating income of Rs. 7,88,79,143/- & Rs. 45,71,778/- from interest on fixed deposits as eligible for deduction u/s 10A & 10AA of the I.T. Act, 1961.
2. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) erred in treating income of Rs 1,65,52,116/- & Rs. 85,65,919/- from interest on inter corporate deposits as eligible for deduction u/s 10A & 10AA of the L.T. Act 1961.
3. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) erred in treating income of Rs.5,27,296/- & Rs. 2,36,282/- from interest on employee loans as eligible for deduction u/s 10A & 10AA of the 1.T. Act 1961.
4. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) erred in treating income of Rs. 21,95,92,830/- from Foreign Exchange Gain & Forward Contract Gain as eligible for deduction u/s 10A & 10AA of the I.T. Act, 1961 ignoring the fact, that the gain is arises due to hedging activity and is not derived by the specified business activity.
5. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) erred in reducing the Freight & telecommunication charges of Rs.6,20,38,757/-and Rs. 3,24,95,309/- from total turnover also for the purpose of computation o f deduction u/s 10A & 10AA of the I.T. Act, 1961..
6. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) erred in reducing the Expenses in respect of migration / on the job training amounting to Rs. 42,61,89,516/- and Rs. 60,25,09,242/- from total turnover also for the purpose of computation of deduction u/s 10A & 10AA of the I.T. Act, 1961.
7. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) erred in allowing the 95% of cost recoveries of Rs. 76,94,926/- to be set of f against the expenses & 5% of Rs. 76,94,926/- taken as a non-10A profit.
8. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) erred in deleting the provision for customer discount of Rs.28,04,22,899/-ignoring the facts that the expenses were not crystallized during the year under consideration.
9. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) erred in deleting the disallowance of Rs. 39,89,616/- made by the AO on account of excess depreciation on computer peripherals.
10. The appellant craves leave, to add, alter or amend any ground of appeal raised above at the time of the hearing. ”
2.2. Assessee has also raised additional ground before us on 24.02.2020 stating that assessee declared and paid dividend of Rs. 5,68,34,000/- to its parent share-holders Genpact India Investments. The assessee paid dividend distribution tax (DDT) of Rs. 94,39,416/- @ 16.6087% u/s 115-O of the Income-tax Act, 1961 (hereinafter referred to as the “Act”). Genpact India Investments was a tax resident of Mauritius and was entitled to the benefits of Indo Mauritius Double Taxation Avoidance Agreement (DTAA). Under Article 10 of the said Treaty, dividends paid by a company, which is a resident of India may be taxed in India @ 5% of the gross amounts of the dividends if the beneficial owner is a company, which holds directly at least 10% of the capital of the company paying the dividends. Accordingly, the assessee submitted that the DDT paid by it u/s 115-O of the Act is in excess of the rate of 5% provided under Article 10 of the Indo Mauritius DTAA. Accordingly, the assessee by way of additional grounds seeks refund of the excess DDT paid. For the sake of convenience, the additional ground is reproduced hereunder:
“The Appellant prays that the Dividend Distribution Tax (‘DDT’) of Rs. 94,39,416 paid under section 115-0 of the Income-tax Act, 1961 (‘the Act’) at the rate o f 16.6087 percent on dividends declared and paid by the Appellant to its parent foreign shareholder Genpact India Investments, a tax resident of Mauritius, is in excess of the rate of 5 percent provided under Article 10 of the Double Taxation Avoidance Agreement between India and Mauritius.
The Appellant prays for a grant of refund of the excess DDT paid by it under section 115-0 of the Act. ”
2.3 The aforesaid additional ground, in our considered opinion, is a pure legal issue and does not require verification of any facts. Hence the same is admitted and taken up for adjudication.
