COMMISSIONER OF INCOME TAX V. GRANDA SERVICES LTD

ITA/1941/2010

AI Insights

The case involves Granda Services Ltd., a company engaged in providing back office services and claiming deductions under Section 10A of the Income Tax Act for the Assessment Year 2005-06. The company declared 'NIL' income and claimed deductions for certain receipts categorized as 'speed pay' and 'ASP expenses', which were incurred and reimbursed in foreign currency. The Assessing Officer (AO) contested that these receipts were not derived from the export of computer software, thus not eligible for Section 10A deductions. The CIT(A) initially ruled in favor of the assessee, which was contested by the Revenue before the Tribunal. The Tribunal did not make a final determination but referred the matter back to the CIT(A) for a detailed examination of the nature of the receipts. The High Court's decision dismissed the Revenue's appeal, emphasizing that the Tribunal had not conclusively decided on the matter but had sought further clarification from the CIT(A).

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 728310 (HC-DELHI)
• Appeal Type: Others
• Pronouncement Date: 21-04-2011
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: VK SABHARWAL
• Assessee Lawyers: SANJEEV SABHARWAL
• Keywords: Deduction; Foreign currency expenditure; Income Tax; Export of Computer Software; Speed Pay; ASP Expenses
• Section: 10A

Judgement Text

" ITA No.1941 of 2010 Page 1 of 4 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA No.1941 of 2010 % DECISION DELIVERED ON: APRIL 21, 2011 COMMISSIONER OF INCOME TAX . . . APPELLANT through : Mr. Sanjeev Sabharwal, Sr. Standing Counsel. VERSUS GRANDA SERVICES LTD. . . .RESPONDENT through: Mr. V.K. Sabharwal, Advocate. CORAM :- HON’BLE MR. JUSTICE A.K. SIKRI HON’BLE MR. JUSTICE M.L. MEHTA 1. Whether Reporters of Local newspapers may be allowed to see the Judgment? 2. To be referred to the Reporter or not? 3. Whether the Judgment should be reported in the Digest? A.K. SIKRI, J. (ORAL) 1. The respondent/assessee is a limited company engaged in the business of processing outsourcing unit providing back office services to its customers. The assessee qualifies for deduction under Section 10A of the Income Tax Act (hereinafter referred to as ‘the Act’), as it is a newly established undertaking in free ITA No.1941 of 2010 Page 2 of 4 trade zone because of the reason that it is engaged in the export of computer software using telecommunication channels. In the income tax return for the Assessment Year 2005-06, the assessee declared ‘NIL’ income and claimed deduction under Section 10A of the Act as a whole. The AO, during the course of scrutiny assessment, found that various expenditure has been incurred in foreign currency which included ‘speed pay’ and ‘ASP expenses’. The assessee had received payments, inter alia, on account of speed pay and ASP expenses, which were incurred by it and reimbursed to it. The AO was of the opinion that income in the form of APF fee and speed pay be termed as income attributable to the business of assessee, but is not an income ‘derived from the export’ of computer software and therefore, was not eligible for deduction under Section 10A of the Act. 2. Challenging this action on the part of the AO, the assessee approached the CIT (A). The CIT (A) allowed the appeal of the assessee. 3. Against the order of the CIT (A), the Revenue preferred the appeal before the Income Tax Appellate Tribunal (for brevity ‘the Tribunal’). The Tribunal took note of the arguments of the ITA No.1941 of 2010 Page 3 of 4 Revenue that the income in the form of convertible exchange received on account of speed pay and ASP fees was not to be included for the purpose of computing deduction under Section 10A on the plea that it was not derived from export business. On the other hand, the assessee contended that these receipts were derived from export of computer software. The Tribunal found that the CIT(A) had not decided the nature of the receipts. 4. In these circumstances, the Tribunal has referred the matter back to the CIT (A) for deciding the nature of receipts so as to find out whether the same are derived from export of computer software and then, decide its eligibility of deduction under Section 10A of the Act. 5. After going through the order of the CIT (A), the aforesaid observations of the Tribunal are correct. We do not understand the grievance of the Revenue against this order. The question proposed in the appeal is that the Tribunal was not right in allowing the benefit of deduction under Section 10A of the Act on ‘ASP expense’ and ‘speed pay’. We fail to understand how such a question arises, as the Tribunal has not given any ITA No.1941 of 2010 Page 4 of 4 findings on this aspect at all and rather has referred the matter back to the CIT (A) to decide the same. 6. Finding no merit in this appeal, we dismiss the same. (A.K. SIKRI) JUDGE (M.L. MEHTA) JUDGE APRIL 21, 2011 pmc "