17-01-2019, ORACLE (OFSS) BPO, Section 260A, 10A, 80A(5), HIGH COURT OF DELHI

Section - 260A, 10A, 80A(5), 43B, 40(a)(i)

Order Date - 17-01-2019

Favouring - Set Aside

Court - HIGH COURT OF DELHI

Appellant - PCIT

Respondent - ORACLE (OFSS) BPO SERVICES LTD

Justice - SANJIV KHANNA & CHANDER SHEKHAR

Citation - 119Taxpundit324

Appeal No. - ITA 593/2018

Asstt. Year - 2008-09

PER : SANJIV KHANNA, J.

This appeal filed by the Revenue under Section 260A of the IncomeTax Act, 1961 in the case of M/s.Oracle (OFSS) BPO Services Ltd. („respondent-assessee‟, for short) relates to the assessment year 2009-10 and arises out of the order of the Income-Tax Appellate Tribunal („Tribunal‟ for short) dated 31st October, 2017.

2. Present appeal was admitted vide order dated 21st May, 2018.

3. Substantial question of law as re-framed vide order dated 05th September, 2018, reads as under:

“Did the Income Tax Appellate Tribunal (ITAT) fall into error in holding that the revised computation of deduction under Section 10A of the Income Tax Act, 1961 („the Act‟) for short) was permissible having regard to Section 10A (5) and Section 80A(5) of the Act?”

4. The respondent assessee engaged in the business of providing „Processing Outsourcing Services‟, during the assessment year in question had no other business activity apart from business activities covered under Section 10A of the Act. Accordingly, in return of income filed on 29th September, 2009 it had claimed deduction of Rs.17.87 crores under Section 10A of the Act with NIL taxable income under the head of „income from business and profession‟. In order to claim deduction under Section 10A of the Act the respondent-assessee had filed Form 56F along with its return. In addition, respondent – assessee, had earned income of Rs.19.66 lakhs on fixed deposit receipts from banks, which it declared as income under the head „Other Sources‟. Accordingly, the net taxable income was Rs.19.68 lakhs.

5. During the course of the assessment proceedings, the respondentassessee had filed a revised computation of income making suo motu disallowance of Rs.2,14,50,610/- and allowance of Rs.33,25,522/- from business income as declared which it claimed was inadvertently missed out, as per the details given below:

6. Exemption under Section 10A of the Act was accordingly revised with corresponding disallowance and allowance of Rs.2,14,50,610/- and Rs.33,25,522/- respectively. Revised Form 56F was filed.

7. The Assessing Officer reduced the amount of Rs.6,13,047/- i.e. the provision for leave encashment claimed on payment basis from the disallowance of Rs.2,14,50,610/- and treated the balance amount of Rs.2,08,37,563/- as income under the head income from „Other Sources‟.

8. Assessing Officer did not allow allowance of Rs.1,01,701/- on account of provision of bonus under Section 43B of the Act, Rs.25,83,809/- as expenditure allowable under Section 40(a) (i) of the Act, as it was disallowed in the previous year; and Rs.21,607/- as profit on sale of fixed assets and Rs.5,358/- on account of foreign exchange gain on capital expenditure.

9. The Commissioner of Income Tax (Appeals) observed and held that the findings of the Assessing Officer were contradictory for he had partly accepted the revised computation by allowing expenditure of Rs.6,13,047/- towards leave encashment, but had disallowed other allowances claimed by the respondent assessee in the revised computation. Contradiction was there as the Assessing Officer had considered the revised computation only to the extent it was beneficial to the Revenue, but no deduction of allowances

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