M/s Sasken Communication Technologies Limited, Bangalore V. DCIT, Bangalore

ITA 397/BANG/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9322 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 25-07-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 18-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; Principle of natural justice; Earning of tax free income
• Section: 10AA; 14A; 11

Judgement Text

IT(TP)A.397 & 376/BANG/2015 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A', BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI. S. JAYARAMAN, ACCOUNTANT MEMBER I.T(TP)A NO.397/BANG/2015 (ASSESSMENT YEAR : 2010-11) M/S. SASKEN COMMUNICATION TECHNOLOGIES LTD, 139/25, DOMLUR RING ROAD, DOMLUR, BENGALURU 560 071 .. APPELLANT PAN : AAECS6424R V. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 6(1)(1), BENGALURU .. RESPONDENT I.T(TP)A NO.376/BANG/2015 (ASSESSMENT YEAR : 2010-11) (BY THE REVENUE) ASSESSEE BY : SHRI. PADAM CHAND KHINCHA REVENUE BY : SMT. PRISCILLA SINGSIT, CIT -DR I HEARD ON : 25.07.2016 PRONOUNCED ON : 21.10.2016 O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER : THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE RESPECTIVELY, AGAINST THE ORDER OF THE DCIT, CIRCLE -6(1)(1), BENGALURU, DT.27.03.2004, FOR THE A. Y. 2010-11. 02. THE ASSESSEE, SASKEN COMMUNICATION TECHNOLOGIES LTD, WITH ITS HEADQUARTERS IN BENGALURU, AND OFFICES IN PUNE, CHE NNAI, HYDERABAD, CHINA, GERMANY, JAPAN, SWEDEN, UK, USA AND SOUTH KOREA, IS A PROVIDER OF IT(TP)A.397 & 376/BANG/2015 PAGE - 2 TELECOMMUNICATION SOFTWARE SERVICES AND SOLUTIONS T O NETWORK EQUIPMENT MANUFACTURERS, MOBILE TERMINAL VENDORS AND SEMICOND UCTOR COMPANIES AROUND THE WORLD. SASKEN DELIVERS END-TO-END SOLUT IONS THAT ENABLE RICHER CONTENT DELIVERY ON NEXT GENERATION NETWORKS. IT HA S RECEIVED INTEREST ON LOANS FROM ITS AES, AS PER THE DETAILS AS UNDER : NAME OF THE AE AMOUNT OF BALANCE RATE OF INTEREST INTEREST RECEIVED SASKEN MEXICO 154,01,000 4.61% 1,14,603 SASKEN INC 17,24,50,125 3.24% 20,52,720 THE ASSESSEE HAS BENCHMARKED THIS TRANSACTION AGAI NST THE LIBOR USING THE CUP METHOD. THE SIX MONTHLY US LIBOR IS TAKEN AT 0.79% AS AGAINST WHICH IT HAS RECEIVED @4.61% AND 3.24% INTEREST, R ESPECTIVELY, WHICH ARE HIGHER. HENCE, THESE TRANSACTIONS WERE CONSIDERED BY THE ASSESSEE TO BE AT ARMS LENGTH. 03. HOWEVER, THE TPO CONSIDERED CORPORATE BONDS ISS UED BY THE COMPANIES IN INDIA AS AGAINST THE GOVERNMENT BONDS FOR COMPARABILITY OF THE INTEREST RATE EARNED. THE TPO FURTHER RELIED UP ON THE SAFETY LEVEL OF THE CORPORATE BONDS BASED ON THE GRADING ISSUED BY CRIS IL AND CONSIDERED THE LOANS GIVEN BY THE ASSESSEE SIMILAR TO CORPORATE BO NDS FALLING WITHIN THE GRADE OF BB TO D . THE TPO WAS OF THE VIEW THAT THE RISKS IN THE LOANS GIVEN WERE TOO HIGH FOR THE COMPANY AND CONSIDERED THE SA ME TO BE IN THE GRADE IT(TP)A.397 & 376/BANG/2015 PAGE - 3 OF BB AND CORRESPONDING INTEREST RATE WAS COMPUTED @ 14.74 PERCENT AND ACCORDINGLY, RS.2,67,68,300/ WAS ADDED TO THE ASS ESSEES ALP. THE DRP CONFIRMED SAID ADDITION. 04. THEREAFTER, THE ASSESSEE FILED A RECTIFICATION PETITION DT.10.02.2014 BEFORE THE TPO SUBMITTING, INTER ALIA , THAT THE AO COMPUTED INTEREST ON LOAN ON AN AVERAGE / CLOSING BALANCE AS ON 31.03.20 10. THE LOAN TO SASKEN MEXICO WAS RECEIVED IN JUNE 2009 AND THERE WAS NO B ALANCE OUTSTANDING ON MARCH, 2010. THEREFORE, INTEREST IS REQUIRED TO BE COMPUTED ONLY FOR THE PERIOD APRIL 1, 2009 TO JUNE 11, 2009 AND ENCLOSED THE COMPUTATION IN ANNEXURE-A. IN RESPECT OF LOAN TO SASKEN INC, IT SUBMITTED THAT THE LOAN AMOUNT WAS RELEASED AT DIFFERENT POINT OF TIME DURI NG FY 2009-10. IT WAS NOT GIVEN ON THE FIRST DAY OF FINANCIAL YEAR AS ASSUMED BY THE TPO. HENCE, IT PLEADED THAT THAT THE INTEREST ON LOAN CO MPUTED BY HIM WAS ERRONEOUS AND ENCLOSED A DETAILED COMPUTATION IN ANNEXURE-A MENTIONING THE ACTUAL DATES OF LOAN DISBURSEMENTS. FURTHER, IT SUBMITTED THAT WITHOUT PREJUDICE TO ITS CONTENTION THAT THE B ENCHMARK FOR INTEREST ON USD LOANS PROVIDED TO WHOLLY OWNED FOREIGN SUBSIDIA RIES SHOULD BE LIBOR, THE INTEREST COMPUTED BY THE TPO CONSIDERING ALP AT 14.74% SHOULD BE RS. 1,00,98,044/- AS AGAINST RS. 2 ,67,68,300/- COMPUTED BY TPO AND THE NET ADJUSTMENT U/S 92CA BEING ALP INTEREST RATE @14.74% AS DETERMINED BY TPO SHOULD HAVE BEEN AT RS.79,30,721/- (1,00,98,044 MINUS 21,67,323, INTEREST RECEIVED AN D OFFERED TO TAX IN RETURN) ONLY AS PER ITS ANNEXURE A. HOWEVER, THE TP O IN HIS ORDER IT(TP)A.397 & 376/BANG/2015 PAGE - 4 U/S.92CA(5) R.W.S. 154, DT.10.03.2014 REJECTED THE PETITION STATING THAT THE CLOSING BALANCE OF LOAN WERE NOT FURNISHED / NOT AV AILABLE AT THE TIME OF PASSING THE TP ORDER AND HENCE THE ASSESSEES SUBMI SSION CANNOT BE CONSIDERED AS A MISTAKE APPARENT FROM RECORD. THE E FFECTIVE GROUNDS OF THE ASSESSEE ARE EXTRACTED AS UNDER : GROUND NO.3.1 : THE LOWER AUTHORITIES HAVE ERRED IN DETERMINING AN D MAKING ADJUSTMENT U/S.92CA OF THE ACT AMOUNTING TO RS.2,46 ,00,977/- IN RESPECT OF INTEREST EARNED ON LOAN GIVEN TO SASKEN INC AND SASKEN COMMUNICATION TECHNOLOGIES MEXICO S. A DE CV (FOR SHORT SASKEN MEXICO). THE ENTIRE BASIS OF MAKING IMPUG NED ADJUSTMENT, INTER ALIA, BY RELYING ON INFORMATION O BTAINED FROM M/S. CRISIL LTD U/S.133(6) OF THE ACT WITHOUT GIVIN G AN OPPORTUNITY TO REBUT AND TO CROSS EXAMINE THE PARTI ES IS CONTRARY TO THE PRINCIPLES OF NATURAL JUSTICE, BAD IN LAW AN D CONSEQUENTLY THE TP ADJUSTMENT DETERMINED AMOUNTING TO RS.2,46,0 0,977/- IS TO BE DELETED IN ENTIRETY. 3.2 WITHOUT PREJUDICE, THE LEARNED AO HAS ERRED IN NOT CONSIDERING THE TRANSFER PRICING ORDER RECTIFIED UN DER SECTION 92CA(5) R.W.S 154 OF THE ACT DATED 10.3.2014 AND ER RED IN ADDING BACK RS.2,67,68,300/- (INSTEAD OF RS.2,46,00,977/-) . 05. THE LD. AR SUBMITTED THAT ITS MAIN OBJECTIONS T O THE TPOS PROPOSAL WAS THAT SASKEN WAS A DEBT-FREE COMPANY, THE LOANS PROVIDED WERE FROM INTERNAL FUNDS. SASKEN INDIA EARNS MOSTLY IN FOREIG N CURRENCY WITH 80% OF ITS SALES AND SOME OF THE DOMESTIC SALES BEING IN F OREIGN CURRENCY. AS PER THE NEWLY INTRODUCED SAFE HARBOUR RULES BY THE CBDT , THE PRESCRIBED ALP RATE IS THE BASE RATE OF SBI IF THE LOAN TO INDIAN SUBSIDIARIES OUTSIDE INDIA IS IN INDIAN CURRENCY. ALL THESE FACTS ARE ACKNOWLEDGE D BY THE TPO IN HIS IT(TP)A.397 & 376/BANG/2015 PAGE - 5 ORDER. RELYING ON THIS TRIBUNAL DECISIONS IN SAMI LABS LTD V DCIT, IT(TP)A NO 1358/ BANG/2011 DT 04.12.2015 & INDEGENE LIFE SYSTEMS P LTD V ACIT , 2015 60 TAXMANN.COM28 , HE PLEADED THAT THE IMPUG NED LOAN TO ITS AES WERE OUT OF ITS OWN FUNDS , NOT OUT OF BORROWED FU NDS, THE LOANS ARE GIVEN IN US DOLLARS, INTEREST WAS RECEIVED IN INDIAN RUPE ES AND WHEN SUCH TRANSACTIONS BETWEEN IT AND ITS AES ARE IN INTERNAT IONAL TRANSACTIONS ,THE RATIO OF THE ABOVE CASES IE THE TRANSACTION WOULD H AVE TO BE LOOKED UPON BY APPLYING COMMERCIAL PRINCIPLES IN REGARD TO INTE RNATIONAL TRANSACTION AND IN SUCH CASES THE DOMESTIC PRIME LENDING RATE WOULD NOT HAVE APPLICABILITY AND THE INTERNATIONAL RATE FIXED BEING LIBOR WOULD COME INTO PLAY. 06. WE HAVE CONSIDERED THE SUBMISSIONS. ON THE FACT S AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE REQUIRES TO BE EXAMINED BY THE TPO AFRESH IN THE LIGHT OF THE ABOV E MATERIALS AND THE RATIOS AND ACCORDINGLY REMIT THE ISSUE TO THE TPO. 07. APART FROM THE ABOVE TP ADDITION, THE A O MADE THE FOLLOWING DISALLOWANCES ON CORPORATE TAX MATTERS: I) DISALLOWANCE U/S.14A AT RS.1,28,29,387/-. II) THE ADDITION OF RS.16,43,07,085/- UNDER THE CAPTION EXCESS DEDUCTION U/S.10A /10AA IS ON ACCOUNT OF TWO FACTOR S, VIZ., EXCLUSION OF ROYALTY INCOME FROM PROFITS OF 10A / 1 0AA UNITS, FOR THE REASON THAT THE SAID INCOME IS NOT DERIVED FROM EXPORT OF COMPUTER SOFTWARE AND CONSEQUENTLY NOT ELIGIBLE FOR DEDUCTION U/S.10A / 10AA OF THE ACT. IT(TP)A.397 & 376/BANG/2015 PAGE - 6 EXCLUSION OF FOREIGN CURRENCY EXPENSES, ADDITIONAL TELECOMMUNICATION EXPENSES AND INSURANCE EXPENSES F ROM EXPORT TURNOVER WHILE COMPUTING DEDUCTION U/S.10A / 10AA O F THE ACT. 08. ON THE ISSUE NO 1 ,SUPRA, IE ON DISALLOWANCE U/ S.14A AT RS.1,28,29,387/-, THE AO FOUND THAT THE ASSESSEE WA S IN RECEIPT OF DIVIDEND OF RS.3,90,24,858/- WHICH IS AN EXEMPT INCOME. THE ASSESSEE ATTRIBUTED RS.1,16,773/- I.E., 23% OF SALARY AT RS.4,67,092/- PAID TO SENIOR EXECUTIVE TREASURY AS THE EXPENSES INCURRED TOWARDS EARNING T HIS INCOME. THE AO FOUND THAT ONLY DIRECT EXPENSES ON EMPLOYEES / DIRE CTORS BY WAY OF SALARIES, STAFF WELFARE, TRAVELLING, COMMUNICATION ETC., IS C ONSIDERED BY THE ASSESSEE TOWARDS DISALLOWANCE. VARIOUS OTHER EXPENSES ON CO RPORATE ESTABLISHMENT ARE LEFT OUT AS NON ALLOCABLE EXPENSES. AS AGAINST RESERVES AND SURPLUS OF RS.450.33 CRORES AT THE YEAR END, THE AO FOUND THAT RS.328.57 CRORES WAS IN INVESTMENT. SO THE AO HELD THAT THE INVESTMENT IS THE KEY FUNCTION OF THE CORPORATE OFFICE AND THE MANAGEMENT WOULD CERTA INLY DEVOTE MORE TIME TO SAFEGUARD THE EARNINGS DEPLOYED IN THESE INVESTM ENTS. SO HE CONSIDERED THAT THE ASSESSEES WORKINGS OF 2% OF CORPORATE EX PENSES IS NOT FAIR , INVOKED RULE 8D R.W.S.14A AND DISALLOWED RS.1,28,2 9,387/-. 09. ON AN APPEAL, THE DRP, INTER ALIA, FOUND THAT A SSESSEES SUBMISSION IS NOT BASED UPON ANY TANGIBLE EVIDENCE IN THE SENSE T HAT IT HAS NOT MAINTAINED ANY SEPARATE ACCOUNTS WITH REGARD TO INV ESTMENTS, THE INCOME FROM WHICH IS EXEMPT. IT MERELY DENIED TO HAVE INC URRED ANY EXPENDITURE IT(TP)A.397 & 376/BANG/2015 PAGE - 7 VIS-A-VIS INVESTMENT MADE FOR EARNING TAX-FREE DIVI DEND INCOME EVEN THOUGH NO SUCH EXEMPT INCOME IS EARNED DURING THE Y EAR. IT WOULD BE FAIR TO NOTE THAT INVESTMENT DECISIONS ARE COMPLEX IN NA TURE AND A COMPANY IS RUN BY ITS BOARD OF DIRECTORS AND THE BUSINESS AND INVESTMENTS ARE MANAGED BY KEY PERSONNEL, EXECUTIVES ETC., FOR WHIC H EXPERTS ARE OFTEN CONSULTED. THE VERY EXISTENCE OF A CORPORATE ENTIT Y AND ITS STRUCTURE REQUIRES AN ADMINISTRATIVE ESTABLISHMENT WHICH REQU IRE INCURRING OF MULTIFARIOUS EXPENSES INCLUDING ESTABLISHMENT, GENE RAL AND ADMINISTRATIVE EXPENSES. IT HELD THAT THE CASE LAWS RELIED UPON B Y THE ASSESSEE CANNOT RESCUE IT IN-AS-MUCH AS IT HAS NOT MAINTAINED ANY A CCOUNTS AS MANDATED IN SECTION 14A(2)(3) AND SUCH AN INACTION ON THE PART OF THE ASSESSEE CANNOT AUTOMATICALLY SHIFT THE BURDEN TO THE AO WHICH IS O THERWISE PLACED UPON THE ASSESSEE AT THE FIRST INSTANCE. IN THIS VIEW OF TH E MATTER, THE PANEL FOUND NO MERIT IN THE ARGUMENTS OF THE ASSESSEE AND HELD THAT THE PROVISIONS OF SECTION 14A ARE ATTRACTED IN THIS CASE AND THAT THE WORKING OF THE DISALLOWANCE MADE BY THE AO AS PER RULE 8D IS IN OR DER. PANEL ALSO HELD THAT THIS IS ALSO IN ACCORDANCE WITH THE CIRCULAR N O.5/2014 OF CBDT. 10. BEFORE US, THE AR PLEADED THAT THE DISALLOWANCE MADE UNDER SECTION 14A READ WITH RULE 8D(2)(III) AT RS. 1,28, 29,387/- HAS BEEN MADE WITHOUT DEMONSTRATING THE INCORRECTNESS OF THE CLAIM OF THE ASSESSEE THAT IT HAS NOT INCURRED ANY EXPENDITURE TOWARDS EARNING EXEMPT INCOME. THE SAID DISALLOWANCE IS THEREFORE B AD IN LAW. FURTHER, IT IT(TP)A.397 & 376/BANG/2015 PAGE - 8 WAS SUBMITTED THAT NO EFFORT IS REQUIRED TO RECEIVE THE DIVIDEND. POINTING OUT THE RELEVANT PORTION OF THE INCOME TAX SIMPLIFI CATION COMMITTEES REPORT ON THE DISALLOWANCE OF EXPENDITURE INCURRED IN RELATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME UNDER SECTION 14 A OF TH E ACT, THE HONBLE FINANCE MINISTERS BUDGET SPEECH RELYING ON 29.02.2016 UNDER PARA 167 WHICH READ AS UNDER : ANOTHER ISSUE WHICH HAS LED CONSIDERABLE NUMBER OF DISPUTES IS QUANTIFICATION OF DISALLOWANCE EXPENDITURE RELAT ABLE TO EXEMPT INCOME IN TERMS OF SECTION 14 A OF THE INCOM E TAX ACT, I PROPOSE TO RATIONALIZE THE FORMULA IN RULE 8 D GOVERNING SUCH QUANTIFICATION. THE SAID RULE IS BEING AMENDED TO PROVIDE DISALLOWANCE WILL BE LIMITED TO 1% OF THE AVERAGE M ONEY VALUE OF INVESTMENTS YIELDING EXEMPT INCOME , BUT NOT EXC EEDING THE ACTUAL EXPENDITURE CLAIMED. THE AR INVITED OUR ATTENTION TO THE NOTIFICATION DT 02.6.2016 ON THE AMENDMENT MADE TO THE RULE 8D. THEN HE PLEADED THA T IN ACCORDANCE WITH THE RATIO OF THE SC IN CWT V SHARVAN KUMAR SWAMP & SONS 76 TAXMAN 620 THAT THIS RULE SHOULD BE APPLIED IN ITS CASE AS IT WAS INTENDED TO IMPART UNIFORMITY AND TO AVOID VAGARIES AND DISPARITIES RE SULTING FROM APPLICATION OF DIFFERENT MODES OF VALUATION , BEING PROCEDURAL LAW AND HENCE APPLICABLE TO ALL PENDING CASES. 11. WE HAVE CONSIDERED THE SUBMISSIONS. ON THE FACT S AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE IT(TP)A.397 & 376/BANG/2015 PAGE - 9 ISSUE REQUIRES TO BE EXAMINED BY THE AO AFRESH IN T HE LIGHT OF THE ABOVE AMENDMENTS AND ACCORDINGLY REMIT THE ISSUE T O THE AO. 12. ON ISSUE NO 2, SUPRA, I.E., IN RESPECT OF THE A DDITION OF RS.16,43,07,085/- UNDER THE CAPTION EXCESS DEDUCTI ON U/S.10A /10AA, THE ASSESSEES EFFECTIVE GROUNDS ARE EXTRACTED AS UNDER : IT(TP)A.397 & 376/BANG/2015 PAGE - 10 12.1 IN THIS REGARD, THE AR SUBMITTED THAT ALTHOUGH THE DRP DIRECTED THE AO TO FOLLOW THE RATIO OF THE DECISION OF HONBLE K ARNATAKA HIGH COURT IN CIT V. TATA ELXSI LTD [349 ITR 98], IT HAD NOT GIVEN S PECIFIC DIRECTIONS IN RESPECT OF EXCLUSION OF ROYALTY INCOME FROM PROFITS OF STPI AND SEZ UNITS AND EXCLUSION OF FOREIGN CURRENCY EXPENDITURE, ADDITION AL TELECOMMUNICATION AND INSURANCE EXPENSES FROM EXPORT TURNOVER ALTHOUGH TH E ASSESSEE RAISED SUCH ISSUES BEFORE THE DRP. THE ASSESSEE FILED A P ETITION UNDER RULE 13 OF THE IT (DRP) RULES, 2009, REQUESTING THE DRP TO GIV E SPECIFIC DIRECTIONS IN RESPECT OF THE ABOVE MENTIONED OBJECTIONS. THE DRP VIDE ITS ORDER DT. 07.09.2015 , INTER ALIA, HELD ALTHOUGH THE ASSESSEE RAISED THE ABOVE ISSUES VIZ GROUNDS 7,8 &10, HOWEVER THE DRP HAS NOT ISSUED ANY DIRECTION ON SUCH ISSUES . IT HELD THAT THE RECTIFICATION UNDER RULE 13 OF DRP RULES READ WITH IT(TP)A.397 & 376/BANG/2015 PAGE - 11 SECTION 144C CAN NOT BE EQUATED WITH SECTION 154 AS THE SCOPE UNDER SECTION 154 IS ENTIRE ORDER, WHEREAS THE SUBJECT MATTER OF RECTIFICATION UNDER RULE 13 OF DRP RULES IS ONLY THE DIRECTION (S ) ISSUED WITHIN THE SPECIFIED TIME. AFTER SUCH SPECIFIED TIME , THE DRP CAN NOT ISSUE FRESH DIRECTIONS AND HELD THAT THE REQUEST FOR RECTIFICA TION IS NOT TENABLE AND ACCORDINGLY DISMISSED THE PETITION FILED BY THE ASS ESSEE UNDER RULE 13 OF THE RULES. IT IS PLEADED THAT IN THE FOLLOWING DEC ISIONS, IT HAS BEEN HELD THAT ROYALTY INCOME CONSTITUTES PROFITS OF THE BUSI NESS OF 10A UNITS AND CONSEQUENTLY ELIGIBLE FOR DEDUCTION UNDER SECTION 1 0A. (I) WIPRO LTD V DOT [2005] 96 TTJ 211 - 1TAT BANGALORE (II) CIT V WIPRO LTD - ITA 3204 OF 2005 - KARNATAKA HC - 28.2.20 12 (III) CIT V WIPRO LTD - TTA 507 OF 2002 KARNATAKA HC - 2 5.8.20 10 (IV) CIT V WIPRO LTD - ITA 503 OF 2002 - KARNATAKA HC - 1.9.20 10 (V) CIT V MOTOROLA INDIA ELECTRONICS P LTD - KARNATAKA HC 11.12.2013 AND IN THE FOLLOWING DECISIONS, IT HAS BEEN HELD TH AT EXPENSES INCURRED IN FOREIGN CURRENCY EXPENSES SHOULD NOT BE REDUCED FROM EXPORT TURNOVER WHILE COMPUTING DEDUCTION UNDER SECTION 10 A. (I) CIT V MOTOR INDUSTRIES CO LTD - KARNATAKA HC - 13.6 .20 14 (II) CIT V MPHASIS LTD - KARNATAKA HC - 1.8.2014 (III) SASKEN COMMUNICATION TECHNOLOGIES LTD V DCIT - ITAT BANGALORE - 4.3.20 15 AY 2004-05, 2006-07 & 2008-0 9 (IV) CIT V KSHEMA TECHNOLOGIES LTD - KARNATAKA HC - ITA NO. 703/2009 - 8.1.2016. IT(TP)A.397 & 376/BANG/2015 PAGE - 12 13. WE HAVE CONSIDERED THE ABOVE SUBMISSIONS. ON TH E FACTS AND CIRCUMSTANCES OF THE CASE, IT IS CLEAR THAT NEITHER THE AO HAS EXAMINED THESE ISSUES PROPERLY NOR THEY RECEIVED D UE ATTENTION AT THE HANDS OF THE DRP. IN VIEW OF THAT WE ARE OF THE CONSIDERED VIEW THAT THE ABOVE ISSUES ARE REQUIRED TO BE ADJUDICATE D BY THE AO AFRESH IN THE LIGHT OF THE ABOVE RATIO AND IF THE FACTS AR E SIMILAR TO APPLY THE ABOVE RATIOS ACCORDINGLY AND HENCE THESE ISSUES ARE ALSO REMITTED TO THE AO . 14. THE NEXT ISSUE IS ON SHORT CREDIT OF TDS. IN T HIS REGARD ASSESSEE SUBMITTED THAT SINCE THE AO HAS NOT ALLOWE D TDS CREDIT TO THE EXTENT OF RS.14,08,748/- (RS.15,56,38,180/- AS CLAIMED IN THE RETURN OF INCOME MINUS RS.15,42,29,432/- AS ALLOWED IN THE FINAL ASSESSMENT ORDER), TDS CREDIT SHOULD BE FULLY ALLOW ED AS CLAIMED IN THE RETURN OF INCOME. 14.1 WE FIND THAT THE DRP HAS DIRECTED THE AO TO VE RIFY THE CREDIT FROM THE RECORD, VIS--VIS, THE CLAIM MADE BY THE A SSESSEE AND GIVE CREDIT TO IT ACCORDINGLY. WE DIRECT THE AO TO GIVE CREDIT TO THE AMOUNT CLAIMED BY THE ASSESSEE. IT(TP)A.397 & 376/BANG/2015 PAGE - 13 15. IN THE NEXT GROUND, THE ASSESSEE HAS CHALLENGED THE LEVY OF INTEREST U/S.234B OF THE ACT, WHICH IS ONLY CONSEQU ENTIAL. AO IS DIRECTED TO GIVE CONSEQUENTIAL RELIEF TO THE ASSESS EE. IT(TP)A.NO.376/BANG/2015 : REVENUES APPEAL : 16. THE GROUNDS OF APPEAL TAKEN BY THE REVENUE ARE AS UNDER : 16.1 WE FIND THAT THE DRP HAD FOLLOWED THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF TATA ELXSI LTD V. CIT [349 ITR 98], IN DIRECTING EXCLUSION OF ITEMS DEDUCTED FROM EXPORT T URNOVER FROM TOTAL TURNOVER ALSO FOR WORKING OUT THE DEDUCTION U/S.10A OF THE ACT. JUST FOR THE IT(TP)A.397 & 376/BANG/2015 PAGE - 14 REASON THAT APPEAL HAS BEEN FILED BY THE REVENUE AG AINST THE JUDGMENT OF JURISDICTIONAL HIGH COURT WOULD NOT BE A REASON NOT TO FOLLOW THE JURISDICTIONAL HIGH COURTS JUDGMENT. WE DO NOT FI ND ANY LACUNAE IN THE ORDER OF THE DRP .IN THE RESULT, APPEAL OF THE REVE NUE STANDS DISMISSED. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES AND THE APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 21ST DAY OF O CTOBER, 2016. SD/- SD/- (SMT. ASHA VIJAYARAGHAVAN) (S. JA YARAMAN) JUDICIAL MEMBER ACCOU NTANT MEMBER MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME TAX 4. THE COMMISSIONER OF INCOME TAX (A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR