EIT Services India Private Limited , Bangalore vs. Assistant Commissioner of Income Tax Circle-2(1)(2), Bangalore

IN THE INCOME TAX APPELLATE TRIBUNAL
“C” BENCH : BANGALORE

BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT
AND SHRI B R BASKARAN, ACCOUNTANT MEMBER

ITA Nos.1555 & 1556/Bang/2017
Assessment year : 2005-06 & 2004-05

EIT Services India Pvt. Ltd.,(formerly Hewlett-Packard Global Soft Pvt. Ltd.),39/40, Electronic City,Bangalore – 560 100.PAN: AAACD 4078L
APPELLANT 

Vs.

The Assistant Commissioner of Income Tax,Circle 2(1)(2),[Erstwhile Addl.CIT, Range 11],Bangalore.
RESPONDENT

Assessee by : Shri T. Suryanarayana, Advocate
Respondent by : Shri R.K. Mishra, CIT-I(DR)(ITAT), Bengaluru.

Date of hearing : 28.10.2020
Date of Pronouncement : 03.11.2020

O R D E R

Per N.V. Vasudevan, Vice President

These are appeals by the Assessee/Assessee against two orders dated 15.2.2010 and 26.3.2009 of the CIT(Appeals)-IV, Bangalore relating to assessment years 2005-06 & 2004-05 respectively. Both these appeals arise under identical facts and circumstances and were heard together. We therefore deem it convenient to decide these appeals by this common order.

2. There is a delay in filing the appeals of 2625 days for AY 2005-06 and 2944 days for AY 2004-05. The facts and circumstances giving rise to these appeals and the reasons for the delay in filing these two appeals need to be considered together.

3. The facts and circumstances giving rise to appeal for AY 2005-06 are that the assessee which is in the business of rendering Software Development Services, filed its return of income for AY 2005-06 declaring total income of Rs.2,19,86,860/-. An order of Assessment dated 30.12.2008 under Section 143(3) of the Income-tax Act, 1961 ("the Act") was passed by the Assessing Officer (AO) computing total income at Rs.725,277,770. The three additions that were made by the AO in this order were as follows:-

(i) Expenditure on Software of Rs.95,66,521 which was claimed as revenue expenditure was disallowed and treated as capital expenditure. However depreciation @ 60% was allowed thereby the disallowance on account of treating expenditure on software as revenue expenditure was Rs.38,26,608 and this sum was added to the total income of the Assessee;

(ii) The Assessee had claimed deduction u/s.10A of the Act at Rs.134,80,27,117/-. The AO found that in applying the formula for claiming deduction u/s.10A of the Act, the Assessee had reduced telecommunication expenses incurred in foreign currency both from the Export turnover and total turnover. According to the AO, as per the definition of Export turnover, the said expenses have to be deducted only from Export turnover and total turnover.The AO accordingly recomputed deduction u/s.10A of the Act.The AO also found the Assessee had 5 units that were Software Technology Parks of India registered units that were eligible for deduction u/s.10A of the Act. One unit had incurred loss during the relevant previous year. The Assessee had claimed deduction u/s.10A of the Act on profits of the remaining 4 units without setting off the loss in one of the units. The AO computed deduction u/s.10A of the Act by reducing the loss of one of the units from the profits of the 4 units on which deduction u/s.10A of the Act was claimed. As a result of the above two adjustment the deduction u/s.10A was allowed by the AO at Rs.114,87,47,042/-.

(iii) The third Addition made by the AO was an addition of Rs.50,01,84,225/- on account of determination of Arm’s Length Price (ALP) u/s. 92 of the Act, in respect of international transactions entered into with an Associated Enterprise (AE). One of the international transaction was with an AE in United States of America (USA) and addition on account of determination of ALP and transfer pricing with the USA AE was Rs.32,54,19,721 out of the addition of Rs.50,01,84,225/-.

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