S.10A : Newly established undertakings – Free Trade Zone-Reimbursement of expenses incurred in obtaining ISO certification, relating to rent satellite charges, printing, stationery corporate charges paid from sister concern is entitled to exemption.
The assessee was engaged in the business of manufacture and export of computer software. It spent a sum of ` 23,52,000 in obtaining ISO quality certification. 50 per cent of this expenditure was reimbursed by the Exim Bank. The Tribunal found that the total expenses incurred by the assessee were much higher, namely, ` 23,52,000, which sum was allowable as expenditure and, therefore, the grant being 50 per cent of the expenses incurred in obtaining the ISO quality certification would qualify for exemption under section 10A of the Income-tax Act, 1961. The assessee incurred certain expenses on behalf of its sister concern. The expenses 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 its sister concern. The Tribunal held that what was received by the assessee was by way of reimbursement of expenses and that since the expenses were debited to the profit and loss account and while computing the profits of the eligible undertaking, the profits were reduced to the extent of expenses, the amount received by way of reimbursement of expenses could not be reduced from the profits of business of the eligible industrial undertaking. The Tribunal directed the Assessing Officer not to reduce the profits of business by the amount of ` 20 lakhs received by way of corporate charges and ` 9,00,250 received by way of reimbursement recovered for use of work stations. On appeal by revenue High Court confirmed the order of Tribunal. (A. Y. 1999-2000)
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