Commissioner of Income Tax vs Granda Services Ltd.

A.K. Sikri, J.—The Respondent/Assesses is a limited company engaged in the business of processing outsourcing unit providing back office services to its customers. The Assesses qualifies for deduction u/s 10A of the Income Tax Act (hereinafter referred to as ''the Act''), as it is a newly established undertaking in free trade zone because of the reason that it is engaged in the export of computer software using telecommunication channels. In the income tax return for the Assessment Year 2005-06, the Assesses declared ''NIL'' income and claimed deduction u/s 10A of the Act as a whole. The AO, during the course of scrutiny assessment, found that various expenditure has been incurred in foreign currency which included ''speed pay'' and ''ASP expenses''. The Assesses had received payments, inter alia, on account of speed pay and ASP expenses, which were incurred by it and reimbursed to it. The AO was of the opinion that income in the form of APF fee and speed pay be termed as income attributable to the business of Assesses, but is not an income ''derived from the export'' of computer software and therefore, was not eligible for deduction u/s 10A of the Act.

Challenging this action on the part of the AO, the Assesses approached the CIT (A). The CIT (A) allowed the appeal of the Assesses.

Against the order of the CIT (A), the Revenue preferred the appeal before the Income Tax Appellate Tribunal (for brevity ''the Tribunal''). The Tribunal took note of the arguments of the Revenue that the income in the form of convertible exchange received on account of speed pay and ASP fees was not to be included for the purpose of computing deduction u/s 10A on the plea that it was not derived from export business. On the other hand, the Assesses contended that these receipts were derived from export of computer software. The Tribunal found that the CIT(A) had not decided the nature of the receipts.

In these circumstances, the Tribunal has referred the matter back to the CIT (A) for deciding the nature of receipts so as to find out whether the same are derived from export of computer software and then, decide its eligibility of deduction u/s 10A of the Act.

After going through the order of the CIT (A), the aforesaid observations of the Tribunal are correct. We do not understand the grievance of the Revenue against this order. The question proposed in the appeal is that the Tribunal was not right in allowing the benefit of deduction u/s 10A of the Act on ''ASP expense'' and ''speed pay''. We fail to understand how such a question arises, as the Tribunal has not given any findings on this aspect at all and rather has referred the matter back to the CIT (A) to decide the same.

Finding no merit in this appeal, we dismiss the same.