SITEL INDIA LTD, MUMBAI V. DCIT RG 8(3), MUMBAI

MA 237/MUM/2022

AI Insights

M/s. Sitel India Ltd. filed a Miscellaneous Application seeking recall/rectification of an earlier Tribunal order concerning the disallowance of certain expenses and their impact on the computation of deduction under section 10A of the Income Tax Act, 1961. The Tribunal had previously remanded the issue to the Assessing Officer for de novo adjudication but did not address the specific concern raised in the additional ground about the inclusion of disallowed expenses in the deduction computation under section 10A. The Tribunal, upon reviewing the submissions and relevant case law, particularly the Supreme Court's decision in HCL Technologies Ltd., modified its earlier order to ensure that the disallowed expenses, if excluded from export turnover, should also be excluded from total turnover for the purpose of computing deduction under section 10A.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 299634 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 13-02-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 17-11-2022
• Assessment Year: 2007-2008
• Appeal Filed On: 06-09-2022
• Other Referred Cases: CIT v/s HCL Technologies Ltd., [2018] 404 ITR 719 (SC), CIT v/s Gem Plus Jewellery India Ltd., [2011] 330 ITR 175 (Bom.), PCIT v/s BMC Software India Pvt. Ltd., Income Tax Appeal no. 802/2016, judgment dated 10/12/2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 10; 40(a)(ia); 195; 254(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “J” BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER, AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER M.A. no.237/Mum./2022 IN ITA no.1777/Mum./2012 (Assessment Year : 2007–08) M/s. Sitel India Ltd. (Now know as Sitel India Pvt. Ltd.) 501, Wing–A & B1, 5th Floor Boomerang, Chandivali Farm Road Andheri (East), Mumbai 400 072 PAN – AAFCS1297M ................ Applicant (Original Appellant) v/s Dy. Commissioner of Income Tax Range–8(3), Mumbai ................Respondent (Original Respondent) Assessee by : Shri Siddhesh Chougule Revenue by : Shri Soumendu Kumar Dash Date of Hearing – 18/11/2022 Date of Order – 14/02/2023 O R D E R PER SANDEEP SINGH KARHAIL, J.M. By way of this Miscellaneous Application, filed under section 254(2) of the Income Tax Act, 1961 (“the Act”), the assessee seeks recall / rectification of the order dated 15/07/2022, passed under section 254(1) of the Act by the Co–ordinate Bench of the Tribunal in assessee’s appeal being ITA no.1777/Mum./2022, for the assessment year 2007–08 to the extent of adjudication of addition ground raised vide application dated 21/08/2019. M/s. Sitel India Ltd. M.A. no.237/Mum./2022 Page | 2 2. During the hearing, the learned Authorised Representative (“learned A.R.”) submitted that in its appeal before the Tribunal, the assessee, vide grounds no.11 and 12, had challenged the disallowance on account of communication line expenses and legal & professional expenses under section 40(a)(i) of the Act due to non–deduction of tax at source. It was further submitted that the assessee filed an application dated 21/08/2019, seeking admission of additional ground of appeal to the effect that the disallowance of communication line expenses and legal & professional expenses be considered while computing deduction under section 10A of the Act. The learned A.R. submitted that while grounds no.11 and 12, were not pressed by the assessee, therefore, these grounds were dismissed. However, the assessee prayed that the relief be granted in respect of the additional ground of appeal and deduction under section 10A of the Act be computed after considering the aforesaid expenses. The learned A.R. submitted that vide order dated 15/07/2022, the Co–ordinate Bench of the Tribunal remanded the issue arising in the additional ground of appeal to the file of the Assessing Officer for de novo adjudication and direct that the communication line expenses and legal & professional expenses be excluded from both export turnover and total turnover while computing deduction under section 10A of the Act by placing reliance upon the decision of the Hon'ble Supreme Court in CIT v/s HCL Technologies Ltd., [2018] 404 ITR 719 (SC). The learned A.R. submitted that the Co–ordinate Bench of the Tribunal, vide aforesaid order, did not adjudicate the issue raised in the additional ground of appeal and remanded the matter to the file of the Assessing Officer on an aspect which was not in controversy amongst the parties. Accordingly, the learned A.R. prayed that the order dated M/s. Sitel India Ltd. M.A. no.237/Mum./2022 Page | 3 15/07/2022, be recalled/rectified limited to the adjudication of the issue raised in the additional ground vide application dated 21/08/2019. The learned A.R. in support of its claim that the aforesaid expenses be considered while computing deduction under section 10A of the Act placed reliance on the decision of the Hon'ble Jurisdictional High Court in CIT v/s Gem Plus Jewellery India Ltd., [2011] 330 ITR 175 (Bom.). 3. On the other hand, the learned Departmental Representative (“learned D.R.”) vehemently opposed the admission of the present miscellaneous application. 4. We have considered the rival submissions and perused the material available on record. The assessee, in its appeal being ITA no.1777/Mum./2012, inter–alia, challenged the disallowance of communication line expenses & legal and professional expenses under section 40(a)(i) of the Act by raising the following grounds:– “11. The CIT (A) erred in upholding the order of the A.O. in disallowing communication line expenses and legal professional expenses amounting to Rs. 3,31,61,399/– and Rs. 1,19,27,329/- respectively under section 40(a) (i) of the Act. 12. The CIT (A) erred in not appreciating the documentary evidence on record which clearly reflect that the communication line expenses and legal professional expenses of Rs. 3,31,61,399/- and Rs. 1,19,27,329/– respectively were pure reimbursements and would not attract the provisions of section 195 of the Act and therefore could not be disallowed under section 40(a)(i) of the Act.” 5. The assessee, vide application dated 21/08/2019, sought admission of the following additional grounds of appeal:– M/s. Sitel India Ltd. M.A. no.237/Mum./2022 Page | 4 “Without prejudice to Ground no. 11 and 12, based on the facts and in the circumstances of the case and in law the Hon‟ble CITA) erred in not considering the disallowance of communication line expenses and legal and professional expenses, for computation of deduction under Section 10A of the Income-tax Act, 1961 (the Act).” 6. As is evident from the order dated 15/07/2022, passed by the Co–ordinate Bench of the Tribunal, the learned A.R. appearing for the assessee did not wish to press, inter–alia, the aforesaid grounds no.11 and 12. Accordingly, the said grounds were dismissed by the Co–ordinate Bench as “not pressed”. 7. Insofar as additional ground raised vide application dated 21/08/2019 is concerned, the Co–ordinate Bench decided the said ground by observing as under:– “22. We find that in HCL Technologies Ltd. (supra), Hon‟ble Supreme Court held that while computing deduction under section 10 A of the Act, expenses excluded from „export turnover‟ have to be excluded from „total turnover‟ also, otherwise, any other interpretation makes the formula under section 10A unworkable and absurd and, hence, such deduction shall be allowed from the „total turnover‟ in the same proportion as well. From the perusal of the record, we find that the lower authorities have not examined this issue from this perspective as is now raised before us by way of additional ground of appeal, by placing reliance upon aforesaid decision of Hon‟ble Supreme Court. In view of the above, we remand this issue to the file of Assessing Officer for de novo adjudication. We further direct that if it is found that the aforesaid expenses were excluded from the „export turnover‟ then such expenses should also be excluded from the „total turnover‟, while computing the deduction under section 10A of the Act, following the aforesaid decision of Hon‟ble Supreme Court. As a result additional ground, raised by the assessee vide application dated 21/08/2019, is allowed for statistical purpose. 8. Thus from the above, it is evident that vide additional ground of appeal the assessee challenged the order passed by the learned CIT(A) on the ground of non–consideration of disallowance of communication line expenses and legal & professional expenses for the computation of deduction under section 10A of the Act. However, on a perusal of the order dated 15/07/2022, passed by the M/s. Sitel India Ltd. M.A. no.237/Mum./2022 Page | 5 Co–ordinate Bench of the Tribunal, we find that the Co–ordinate Bench remanded the additional ground of appeal to the file of the Assessing Officer for de novo adjudication and directed that the aforesaid expenses should be excluded both from export turnover as well from the total turnover while computing the deduction under section 10A of the Act, in view of the decision of the Hon'ble Supreme Court in HCL Technologies Ltd. (supra). In our considered opinion, though the directions issued by the Co-ordinate Bench of the Tribunal are in line with the law laid down by the Hon’ble Supreme Court, however, the issue raised vide additional ground of appeal was not adjudicated, and findings were rendered on some other aspect, not in dispute amongst parties, which results in a mistake apparent from the record within the ambit of section 254(2) of the Act. We further find that the Hon'ble Jurisdictional High Court in Gem Plus Jewellery India Ltd. (supra) held that while computing the deduction under section 10A of the Act the enhanced income on account of disallowance of expenses should be taken into consideration. In another decision in PCIT v/s BMC Software India Pvt. Ltd., Income Tax Appeal no. 802/2016, judgment dated 10/12/2018, the Hon'ble Jurisdictional High Court by following the earlier decision in Gem Plus Jewellery India Ltd. (supra) held that the disallowance under section 40(a)(ia) of the Act would be added to the income of the assessee and the same will be exempted under section 10A of the Act. We find that the assessee by not pressing grounds of appeal no.11 and 12, raised in its appeal, has accepted the disallowance of communication line expenses and legal & professional expenses under section 40(a)(i) of the Act, however, vide additional ground, the assessee prayed that the said expenses should be considered for M/s. Sitel India Ltd. M.A. no.237/Mum./2022 Page | 6 computation of deduction under section 10A of the Act. Since the issue raised vide additional ground of appeal was not adjudicated by the Co–ordinate Bench, vide its order dated 15/07/2022, and instead the issue is restored to the file of the Assessing Officer for de novo adjudication on some other aspect, not in dispute, we deem it appropriate to rectify the aforesaid order dated 15/07/2022, and modify the directions as contained in Para–22 of the order. The said Para–22 is hereby substituted as under:- “22. We find that in HCL Technologies Ltd. (supra), Hon‟ble Supreme Court held that while computing deduction under section 10 A of the Act, expenses excluded from „export turnover‟ have to be excluded from „total turnover‟ also, otherwise, any other interpretation makes the formula under section 10A unworkable and absurd and, hence, such deduction shall be allowed from the „total turnover‟ in the same proportion as well. From the perusal of the record, we find that the lower authorities have not examined this issue from this perspective as is now raised before us by way of additional ground of appeal, by placing reliance upon aforesaid decision of Hon‟ble Supreme Court. In view of the above, we remand this issue to the file of Assessing Officer for de novo adjudication. We further direct that if it is found that the aforesaid expenses were excluded from the „export turnover‟ then such expenses should also be excluded from the „total turnover‟, while computing the deduction under section 10A of the Act, following the aforesaid decision of Hon‟ble Supreme Court. We further direct that the disallowance made under section 40(a)(i) of the Act be considered for computation of profit for the purpose of section 10A of the Act. As a result additional ground, raised by the assessee vide application dated 21/08/2019, is allowed for statistical purpose. (emphasis supplied) 9. In the result, the Miscellaneous Application is allowed in the terms indicated above. Order pronounced in the open Court on 14/02/2023 Sd/- B.R. BASKARAN ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 14/02/2023 M/s. Sitel India Ltd. M.A. no.237/Mum./2022 Page | 7 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Mumbai City concerned; (5) The DR, ITAT, Mumbai; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Assistant Registrar ITAT, Mumbai