Advocate Akhilesh Kumar Sah

For the purposes of section 10A, total turnover is sum of export turnover as well as domestic turnover

Section 10A of the Income Tax Act, 1961 (‘the Act’ for short) deals with special provision in respect of newly established undertakings in free trade zone, etc. As per the provisions of section 10A of the Income Tax Act, 1961, the profits derived from export of articles or things or computer software shall be the amount which bears to the profits of the business of the undertaking , the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking.

The formula for computation of the deduction under Section 10A of the Act would be as follows:

Export Profit

In G.E India Exports Pvt. Ltd. vs. DCIT [IT(TP)A No.840//Bang/2013 and IT(TP)A No.1042//Bang/2013, decided on 28.04.2017], the case of the Revenue was that the telecommunication expenses should be excluded from the export turnover but should not be excluded from total turnover.

The learned Members of the ITAT, Bangalore observed that the judgment of Hon’ble Karnataka High Court rendered in the case of CIT vs. Tata Elxsi [2012] 349 ITR 98, supports the case of the assessee because in this case, it was held by Hon’ble Karnataka High Court that the total turnover is sum of the total of export turnover and domestic turnover and, therefore, if an amount is excluded from export turnover, the total turnover is also reduced by the same amount as a consequences of deduction from export turnover.

In this view of the matter, we find no infirmity in the order of the learned CIT(A) on this issue. Regarding the contention of the Revenue that the Revenue has not accepted the judgment of Hon’ble Karnataka High Court and has filed appeal before the Hon’ble Apex Court, we would like to observe that it is not the case of the Revenue that the judgment of Hon’ble Karnataka High Court has been stayed by Hon’ble Apex Court, and therefore, the judgment is valid and we are bound to follow the same.

Allowing of claim of donation to political parties which was not claimed as a deduction in original or revised return

In CIT vs. Britannia Industries Ltd [(2017) 396 ITR 677 (Cal)], question raised before Calcutta High Court was whether in the facts and in the circumstances of the case the Learned Income Tax, Appellate Tribunal erred in law in allowing the deduction under section 80GGB in respect of donation made by the assessee to the political parties.

The facts in brief relevant for the purpose of the appeal were that the assessee made donation to political parties. In the return filed by the assessee this was not claimed as a deduction. The assessment was accordingly made. The assessee preferred an appeal before the CIT(A) who gave following finding:

“……….Examination of the breakup of expenses in schedule-3 of the Audited Accounts as well as in Annexure-III with regard to miscellaneous expenses reveal that the appellant made total contribution as donation during the year at Rs.2,25,72,928/- which includes Rs. 834136/- as employees’ contributions. Out of total donation of Rs.2,16,65,864/- (excluding employees’ contribution) made by the appellant, it has added back on its own to the income disclosed in the return filed on 31.10.2005 and claimed deduction u/s 80G Chapter-VIA only for Rs.45,82,932/- i.e. 50% of the contribution made by it to Tsuanami Relief Fund. Therefore, the claim of the appellant that the assessing officer has not allowed deduction of political contribution u/s 80GGB of the IT Act, 1961 is found to be factually incorrect. In fact, the appellant on its own disallowed the contribution in the return of income and neither claimed as a deduction under Chapter-VIA of the IT Act in its return nor claimed by filing a revised return nor made a claim before the A.O. during the course of assessment proceedings. In view of the above and respectfully following the decision of the Hon’ble Supreme Court in the case of Goetze (India) Ltd. Vs. CIT reported in 284 ITR 323, I am of the opinion that the appellant is not entitled to get deduction u/s80GGB claimed at this stage. Therefore this ground of the appeal is dismissed.”

Aggrieved by the order of CIT (A), the assessee preferred an appeal before the Tribunal which held as follows:

“7. We have considered the rival submissions. It is noticed that the Hon’ble Supreme Court in the case of Goetze (India) Ltd. (refer to supra) has held that the appellate authority being the tribunal did have the powers to direct the Assessing Officer to accept the claim of assessee, though the same has not been made in the original return nor has been claimed in the revised return. In the circumstances, respectfully following the ratio laid down by the Hon’ble Supreme Court in the case of Gotze (India) Ltd. (refer to supra), the Assessing Officer is directed to grant the assessee’s claim of deduction u/s 80GGB of the donations made by the assessee to political parties in respect of Rs.45 lakhs given to Congress party and Rs.80 lakhs given to BJP.”

On appeal before High Court, the learned Judges of the Calcutta High Court considering the rival submissions, observed that there is no conflict between the Addl. CIT, Gujarat vs. Gurjargravures Private Ltd. [(1978) 111 ITR 1] and Goetze (India) Ltd. vs. CIT (2006) 284 ITR 326 (SC). In the former a claim for exemption was for the first time put up before the Appellate Assistant Commissioner who rejected the claim as not made before the I.T.O. This rejection was set aside by the Tribunal with direction upon the Appellate Assistant Commissioner to entertain the question of relief under section 84, claimed by the assessee in that case. The Supreme Court held that it was not competent for the Tribunal to have done so. The distinction between the two authorities eliminating any conflict is that in Gurjargravures Private Ltd. (supra) the competence of the Tribunal to direct the Appellate Assistant Commissioner to entertain a claim not made before the I.T.O was found to be lacking. In Goetze (India) Ltd. (supra) the Supreme Court held that the assessing Authority’s power was limited but not that of the Tribunal in the context of dealing with a claim of the assessee therein not put forward before the Assessing Officer. In Gurjargravures Private Ltd. (supra) the Tribunal itself did not consider to allow the claim for relief.

The learned Judges of the Calcutta High Court decided in favour of the assessee.

(Republished with Amendments)

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December 2020