Delhi High Court
The Commissioner Of Income Tax-V vs Perot Systems Tsi (India) Ltd. on 23 September, 2010
Author: A.K.Sikri
UNREPORTED
I-37
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA 402/2008
THE COMMISSIONER OF INCOME TAX-V ..... Appellant
Through: Ms. Suruchi Aggarwal and
Mr. Chandramani Bharadwaj, Advocates
versus
PEROT SYSTEMS TSI (INDIA) LTD. ..... Respondent
Through: Mr. Ajay Vohra and Ms. Kavita Jha,
Advocates
% DATE OF DECISION: September 23, 2010
CORAM:
HON'BLE MR. JUSTICE A.K. SIKRI
HON'BLE MS. JUSTICE REVA KHETRAPAL
1. Whether reporters of local papers may be allowed
to see the judgment?
2. To be referred to the Reporter or not?
3. Whether judgment should be reported in Digest?
A.K. SIKRI, J. (ORAL)
1. 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 ` 11.76 lakhs received by the assessee as
reimbursement of expenses incurred in obtaining ISO
certification.
(ii) Reimbursement of ` 9,00,215/- relating to rent satellite
charges, printing, stationery, etc. from HCL Technologies
Ltd.
(iii) Corporate charges amounting to ` 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 ` 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% of this amount was reimbursed
by the EXIM Bank, which amounted to ` 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, ` 23,52,000/-,
which was allowable as expenditure and, therefore, the aforesaid grant
being 50% 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 manner:-
"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 AO is, therefore, directed not to
reduce the profits of business by the amount of `
20 lacs received by way of corporate charges and
` 9,00,250/- received by way of reimbursement
recovered for use of work stations. Accordingly,
Ground Nos. 6, 9 & 10 are ruled in favour of
assessee."
4. Another issue relates to lease rent payment of ` 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.
A.K. SIKRI, J.
REVA KHETRAPAL, J.
SEPTEMBER 23, 2010
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