Goodrich Aerospace Services Private Limited, Bangalore V. DCIT, Bangalore

CO 3/BANG/2015

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 0329 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 20 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 27-03-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 06-01-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P DHIVAHAR JT
• Assessee Lawyers: K R GIRISH
• Keywords: Services rendered outside India
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER IT(TP)A NO.594/BANG/2012 ASSESSMENT YEAR : 2007-08 THE INCOME TAX OFFICER, WARD 11(2), BANGALORE. VS. M/S. GOOD RICH AEROSPACE SERVICES PVT. LTD., SY.NO.14/1 & 15/1, MARUTHI INDUSTRIAL ESTATE, PHASE-2, HOODY VILLAGE, WHITEFIELD ROAD, K.R. PURAM HOBLI, BANGALORE 560 048. PAN: AAACB 8857H APPELLANT RESPONDENT CO NO.3/BANG/2015 [IN IT(TP)A NO. 594/BANG/2012] ASSESSMENT YEAR : 2007-08 M/S. GOOD RICH AEROSPACE SERVICES PVT. LTD., BANGALORE 560 048. PAN: AAACB 8857H VS. THE INCOME TAX OFFICER, WARD 11(2), BANGALORE. CROSS OBJECTOR RESPONDENT REVENUE BY : SHRI P. DHIVAHAR, JT. CIT(DR) ASSESSEE BY : SHRI K.R. GIRISH, C.A. DATE OF HEARING : 25.03.2015 DATE OF PRONOUNCEMENT : 27.03.2015 ITA NO.594/BANG/2012 & CO NO.3/BANG/2015 PAGE 2 OF 6 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THE APPEAL IS BY THE REVENUE AND THE CROSS OBJECT ION BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(APPEALS)-I, B ANGALORE RELATING TO ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUF ACTURE, REPAIR, OVERHAUL AND MAINTENANCE SERVICES FOR AIRCRAFT SAFE TY AND EVACUATION SYSTEMS. THE MANUFACTURING ACTIVITIES ARE CARRIED OUT BY A 100% EOU DIVISION. THE PROFITS OF EOU DIVISION WERE ENTITLE D TO DEDUCTION U/S. 10B OF THE ACT. DURING THE PREVIOUS YEAR RELEVANT TO A.Y . 2007-08, THE ASSESSEE HAD SET UP A NEW BUSINESS LINE OF PROVIDING DESIGN SERVICES FOR CERTAIN COMPONENTS MANUFACTURED BY OTHER GROUP OF COMPANIES . IN THIS REGARD, THE ASSESSEE HAD SET UP A NEW UNIT INDIA DESIGN CENTRE AND REGISTERED THE SAME AS A 100% EOU UNDER STPI SCHEME. THE PROFITS OF THIS UNIT WERE ENTITLED TO CLAIMED DEDUCTION U/S. 10A OF THE ACT. 3. WHILE COMPUTING THE ELIGIBLE DEDUCTION U/S. 10A/ 10B OF THE ACT, THE ASSESSING OFFICER REDUCED FROM THE EXPORT TURNOVER THE FOLLOWING SALES:- PARTICULARS BREAK-UP AMOUNT (RS.) TELECOMMUNICATION EXPENSES POSTAGE & TELEGRAM TELEPHONE AND TRUNK CALL TELEPHONE DATA LINES TELEPHONE LOCAL/CELL 20,518 891,366 3,774,738 1,408,229 FREIGHT OUTWARDS 16,598,961 FOREIGN TRAVEL 11,888,267 ITA NO.594/BANG/2012 & CO NO.3/BANG/2015 PAGE 3 OF 6 4. ACCORDING TO THE AO, CLAUSE (IV) TO EXPLANATION 2 TO SECTION 10A DEFINES THE TERM EXPORT TURNOVER AS FOLLOWS:- EXPORT TURNOVER MEANS THE CONSIDERATION IN RESPEC T OF EXPORT BY THE UNDERTAKING OF ARTICLES OR THINGS OR COMPUTER S OFTWARE RECEIVED IN, OR BROUGHT INTO INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE IN ACCORDANCE WITH SUB-SECTION (3) , BUT DOES NOT INCLUDE (I) FREIGHT, TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES OR THINGS OR COMPUT ER SOFTWARE OUTSIDE INDIA OR (II) CLAUSE (III) OF EXPLANATION TO SECTION 10B OF THE A CT ALSO PROVIDES AN IDENTICAL DEFINITION TO THE TERM EXPOR T TURNOVER. 5. ACCORDING TO THE AO, IN VIEW OF THE AFORESAID DE FINITION OF EXPORT TURNOVER, TELECOMMUNICATION EXPENSES, FREIGHT OUTWA RDS AND FOREIGN TRAVEL EXPENSES HAD TO BE EXCLUDED FROM THE EXPORT TURNOVE R FOR THE PURPOSE OF COMPUTING DEDUCTION U/S. 10A/10B OF THE ACT. THE P LEA OF THE ASSESSEE BEFORE THE AO WAS THAT TELECOMMUNICATION AND FREIGH T EXPENSES INCURRED BY THE ASSESSEE DID NOT FORM PART OF ITS EXPORT TU RNOVER. THE ENTIRE EXPORT TURNOVER ACCOUNTED FOR BY THE ASSESSEE DURING FY 20 06-07 REPRESENTED CONSIDERATION FOR EXPORT OF SERVICES/ARTICLES TO GO ODRICH ENTITIES OUTSIDE INDIA. THESE EXPENSES INCURRED BY GOODRICH INDIA WE RE NOT SEPARATELY CHARGED-BACK TO GOODRICH ENTITIES. SAMPLE COPY OF T HE INVOICES EVIDENCING THE ABOVE WERE ALSO FURNISHED. ITA NO.594/BANG/2012 & CO NO.3/BANG/2015 PAGE 4 OF 6 6. WITHOUT PREJUDICE TO THE ABOVE, THE ASSESSEE ALS O SUBMITTED THAT IF THE AFORESAID EXPENDITURE IS EXCLUDED FROM THE EXPO RT TURNOVER, THEY SHOULD ALSO BE REDUCED FROM THE TOTAL TURNOVER FOR THE PUR POSE OF COMPUTING DEDUCTION U/S. 10A/10B OF THE ACT. 7. THE AO DID NOT AGREE WITH THE AFORESAID SUBMISSI ONS ON BEHALF OF THE ASSESSEE AND EXCLUDED THE AFORESAID EXPENSES FR OM THE EXPORT TURNOVER ALONE. 8. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) DIRE CTED THE AO TO EXCLUDE THE EXPENSES IN QUESTION BOTH FROM THE EXPO RT TURNOVER AS WELL AS TOTAL TURNOVER. IN DOING SO, THE CIT(APPEALS) RELI ED ON THE DECISION OF THE HONBLE HIGH COURT OF KARNATAKA IN CIT V. TATA ELXSI LTD., 349 ITR 98 (KARN) . 9. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS), THE REVENUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 10. IN THE CROSS OBJECTION, THE ASSESSEE APART FRO M SUPPORTING THE ORDER OF THE CIT(APPEALS), HAS ALSO CONTENDED THAT THE TELECOMMUNICATION EXPENSES WERE NOT ATTRIBUTABLE TO THE DELIVERY OF C OMPUTER SOFTWARE OUTSIDE INDIA AND THAT THE TRAVEL AND FREIGHT EXPENSES WERE NOT INCURRED FOR RENDERING ANY TECHNICAL SERVICES OUTSIDE INDIA AND THEREFORE, OUGHT NOT TO HAVE BEEN EXCLUDED FROM THE EXPORT TURNOVER. ITA NO.594/BANG/2012 & CO NO.3/BANG/2015 PAGE 5 OF 6 11. WE HAVE HEARD THE RIVAL SUBMISSIONS. AS FAR AS THE APPEAL OF THE REVENUE IS CONCERNED, THE ONLY GRIEVANCE OF THE REV ENUE IS THAT THE DECISION OF HON'BLE HIGH COURT OF KARNATAKA IN TATA ELXSI (SUPRA) HAS NOT ATTAINED FINALITY AND A SLP BY THE DEPARTMENT IS PE NDING BEFORE THE HON'BLE SUPREME COURT. WE ARE OF THE VIEW THAT AS OF TODAY , LAW DECLARED BY THE HON'BLE HIGH COURT OF KARNATAKA WHICH IS THE JURISD ICTIONAL HIGH COURT IS BINDING ON US. WE THEREFORE HOLD THAT THE ORDER OF CIT(A) DOES NOT CALL FOR ANY INTERFERENCE AND ACCORDINGLY THE SAME IS CONFIR MED. 12. AS FAR AS THE CROSS OBJECTION OF THE ASSESSEE I S CONCERNED, WE ARE OF THE VIEW THAT NO ADJUDICATION ON THE GROUNDS RAI SED IN THE CO IS NECESSARY AT THIS STAGE. THE QUESTION IS THEREFORE LEFT OPEN FOR ADJUDICATION, IF AND WHEN THE ISSUE RAISED BY THE A SSESSEE IN THE CO REQUIRES ADJUDICATION. 13. IN THE RESULT, THE APPEAL BY THE REVENUE AS WEL L AS THE CO BY THE ASSESSEE IS DISMISSED . PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF MARCH , 2015 . SD/- SD/- ( ABRAHAM P. GEORGE ) ( N.V. VASU DEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 27 TH MARCH , 2015 . /D S/ ITA NO.594/BANG/2012 & CO NO.3/BANG/2015 PAGE 6 OF 6 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR/ SENIOR PRIVATE SECRETARY ITAT, BANGALORE.