Once the prior period income is held to be taxable, the prior period expenditure also should be allowed to be set off

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Once the prior period income is held to be taxable, the prior period expenditure also should be allowed to be set off

 

Prior period expenses adjustment against the prior period income – once the prior period income is held to be taxable, the prior period expenditure also should be allowed to be set off and the assessee is not obliged in law to indicate any direct or indirect nexus between the prior period income and prior period expenditure.

Prior period expenses adjustment against the prior period income – ITAT took the view that once the assessee offers prior period income, then the expenditure incurred under the different heads should be given set off against that income and only the net income should be added – HELD THAT:- ITAT committed no error in holding that once the prior period income is held to be taxable, the prior period expenditure also should be allowed to be set off and the assessee is not obliged in law to indicate any direct or indirect nexus between the prior period income and prior period expenditure.

TDS u/s 195 – non­-deduction of TDS while remitting such payments to the non-­residents – HELD THAT:- Where the payment is in the nature of reimbursement, there is no element of income involved, and therefore, no tax is required to be deducted at source. Having regard to the settled position, the assessee was not liable to deduct the tax at source on such payments and hence, the ITAT committed no error in answering the second question as proposed by the Revenue in favour of the assessee.

Eligible profit for deduction u/s 10B -“unrealized export turnover” is to be excluded from the “export turnover” but refrained from excluding the same from the “total turnover” – HELD THAT:- The aforesaid issue is now settled by the decisions of CIT vs. HCL Technologies Ltd [2018 (5) TMI 357 – SUPREME COURT] while computing deduction under Section 10A if the export turnover in numerator is arrived at after excluding certain expenses, the said expenses should also be excluded from the total turnover in denominator.

Benefit of exemption as contemplated u/s 10B – HELD THAT:- Dividend income, profit on sale of fixed assets, profit on sale of investments, excess provision return back, duty drawback and interest income could be said to have direct nexus with the income of the business of the undertaking. Although it may not partake the character of profit and gain from the sale of article, yet it could be termed as an income derived from the consideration realized by the export articles. In view of the definition of “income from profits and gains” incorporated in sub­section (4), the Tribunal committed no error in granting the benefit of exemption, as contemplated under Section 10B.

GUJARAT HIGH COURT

PRINCIPAL COMMISSIONER OF INCOME TAX 1 VERSUS DISHMAN PHARMACEUTICALS AND CHEMICALS LTD

R/TAX APPEAL NO. 192 of 2019

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