High Court Of Delhi
CIT-V vs. Perot Systems TSI (India) Ltd.
Assessment Year : 1999-2000
Section : 10A
A.K. Sikri And Ms. Reva Khetrapal, JJ.
IT Appeal No. 402 Of 2008
September 23, 2010
JUDGMENT
A.K. Sikri, J. – Admittedly respondent-assessee is engaged in the business of manufacture and export of computer software. It operates through the STP units located at Noida, Gurgaon and Chennai. In the income-tax return filed for the assessment year 1999-2000, it had claimed certain incomes as exempt from tax under section 10A of the Income-tax Act. These included interest income from deployed or borrowed funds, interest income from bank deposits made in connection with software business and interest from security deposits made in connection with software business. The Assessing Officer disallowed the claim of exemption in respect of these incomes on the ground that they were not directly derived from the export business. This decision of the Assessing Officer rejecting the claim of exemption in respect of aforesaid incomes has been maintained till the level of Tribunal and insofar as that part is concerned, the assessee has accepted the same.
2. The dispute is regarding three items of incomes in respect of which exemption was sought under section 10A of the Act, which was disallowed by the Assessing Officer but the Income-tax Appellate Tribunal has allowed the same. These are as under :—
(i) Amount of Rs. 11.76 lakhs received by the assessee as reimbursement of expenses incurred in obtaining ISO certification.
(ii) Reimbursement of Rs. 9,00,215 relating to rent satellite charges, printing, stationery, etc., from HCL Technologies Ltd.
(iii) Corporate charges amounting to Rs. 20 lakhs earned from the sister concern, i.e., HCL Technologies Ltd.
3. Insofar as first item is concerned, the admitted facts are that the assessee had spent a sum of Rs. 23,52,000 in obtaining ISO quality certification. It was the case of the assessee that ISO certification was a critical factor for export activities. 50 per cent of this amount was reimbursed by the EXIM Bank, which amounted to Rs. 11,76,000. It was in this backdrop that the assessee had claimed exemption of the receipt of the aforesaid amount under section 10A of the Act. The Tribunal found, on the basis of aforesaid facts, and rightly so, that the total expenses incurred by the assessee were much higher, namely, Rs. 23,52,000, which was allowable as expenditure and, therefore, the aforesaid grant being 50 per cent of the expenses incurred in obtaining ISO quality certification would qualify for exemption under section 10A of the Act. Similar is the position in respect of other two claims which are dealt with by the ITAT in the following partner :—
“7. We have considered rival submissions. The assessee-company, part of HCL Group of Company, incurred certain expenses on behalf of HCL Technologies Ltd. The same were reimbursed in the form of corporate charges. Similarly, the assessee was also reimbursed for the use of work stations belonging to the assessee for and on behalf of HCL Technologies Ltd. Thus, what is received by assessee is by way of reimbursement of expenses. This implies that such receipt will be given to reduce the expenses incurred. Since the expenses are debited to profit and loss account and while computing profits of eligible undertaking, profits were reduced to the extent of expenses. The amount received by way of reimbursement of expenses cannot be reduced from the profits of business of eligible industrial undertaking. The Assessing Officer is, therefore, directed not to reduce the profits of business by the amount of Rs. 20 lakhs received by way of corporate charges and Rs. 9,00,250 received by way of reimbursement recovered for use of work stations. Accordingly, Ground Nos. 6, 9 and 10 are ruled in favour of assessee.”
4. Another issue relates to lease rent payment of Rs. 2,04,400 to Noida authorities. The dispute was as to whether it is to be treated as revenue expenditure or capital expenditure. The Assessing Officer had disallowed the same treating it as capital expenditure. Reversing this decision, ITAT has allowed it as revenue expenditure in the following manner :—
“11. We have considered rival submissions. As rightly contended by counsel for the appellant, the amount paid is not for acquiring any leasehold right by way of annual lease rent. Thus, the amount is regarding payment for continuing to enjoy leasehold rights. In such situation, the assessee do not acquire any new capital asset but merely maintains capital asset already acquired. Thus, the expenditure assumes the character of revenue in nature and not capital expenditure. We accordingly hold that the expenditure being revenue in nature are allowable as such.”
5. We are, therefore, of the opinion that no substantial question of law arises. Dismissed.
[Citation : 349 ITR 563]
