The Income Tax Appellate Tribunal (ITAT), Mumbai Bench while granting the partial relief to the Tata Sons allied the Deduction Claims.
The assessee, M/s. Tata Sons Ltd. engaged in export of software was assessed for the year under consideration under section 143(3) on 21/03/2006 wherein the returned income of Rs.10.53 Crores as filed by the assessee was assessed at Rs.858.87 Crores. The assessee is stated to be an investment company holding major investment in the equity of Tata group of companies. It has a division namely ‘Tata Consultancy Services’ which specializes in computer software as well as other consultancy divisions.
The issues raised were in respect of deduction of Overseas Taxes & DIT Relief, Foreign Dividend, Disallowance of Software expenditure, and Claim under section 10A and 80HHE.
The Coram of Mahavir Singh and Manoj Kumar Aggarwal in respect of deduction of Overseas Taxes & DIT Relief ruled that the perusal of appellate-order giving effect order, it is evident that the deduction of state and local taxes of USA / Canada amounting to Rs.38.33 Crores has already been granted to the assessee.
The ITAT said that software of Rs.80.44 Crores was purchased for-resale and it was akin to purchase of raw material for the business, so the software of Rs.80.44 Crores which was purchased for resale was akin to purchases of raw material and therefore the same was an allowable expenditure. The remaining expenditure was held to be a capital expenditure.
The tribunal noted that deduction under section 10A has been computed against 11 units having total turnover of Rs.2195.57 Crores. Total Realized export turnover amounts to Rs.2186.77 Crores after deduction of unrealized debtors for Rs.3.49 Crores. The attributable profits of Rs.590.67 Crores has been adjusted after adding back overseas taxes & software expenses disallowed but reduced by the amount of depreciation allowed on software. Finally, eligible deduction has been computed at Rs.673.23 Crores against which 90% deduction i.e. Rs.605.91 Crores would be available as deduction under section 10A to the assessee.
The ITAT ruled that making a claim under section 80HHE in one year would not preclude an assessee from claiming the benefit under section 10A in respect of the same unit in succeeding year. The purpose of sub-section (5) of Section 80HHE was to avoid double benefit but that would not mean that if for a particular assessment year the assessee wants to claim a benefit only under Section 10A of the act and not under section 80HHE, then it would be denied to the assessee.
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