Seventh Sense Technologies P Ltd., CHENNAI V. DCIT, CHENNAI

CO 77/CHNY/2015

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2087 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 15-03-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 02-07-2015
• Court: TRIBUNAL
• Assessee Lawyers: A V SREEKANTH
• Keywords: Services rendered outside India
• Section: 143(3); 10B

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 1173/MDS/2015 / ASSESSMENT YEAR : 20 11 - 12 & C.O. NO. 77/MDS/2015 [IN I.T.A. NO. 1173/MDS/2015 ] THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 6(1), AAYAKAR BHAVAN, NEW BLOCK, 121, M.G. ROAD, 7 TH FLOOR, CHENNAI 600 034. VS. M/S. SEVENTH SENSE TECHNOLOGIES PVT. LTD., 1 ST FLOOR, CELESTAL POINT, 45, DHAMODHARAN STREET, T. NAGAR, CHENNAI 600 017. [PAN: A A F CS9146P ] ( APPELLANT ) ( RESPONDENT /CROSS OBJECTOR ) / APPELLANT BY : SHRI A.V. SREEKANTH , JCIT / RESPONDENT BY : SHRI VIKRAM VIJAYARAGHAVAN , ADVOCATE / DATE OF HEARING : 1 5 . 0 3 .201 6 / DATE OF P RONOUNCEMENT : 31 . 0 3 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THE APPEAL PREFERRED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 15, CHENNAI DATED 27.02.2015 FOR THE ASSESSMENT YEAR 2011 - 12. THE ONLY E FFECTIVE GROUND RAISED IN THE APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO RECOMPUTE THE DEDUCTION UNDER SECTION 10A OF THE INCOME TAX ACT, 1961 I.T.A. NO . 1173 /M/ 1 5 & I.T.A. NO. 7 7/M/ 1 5 2 [ ACT IN SHORT] BY EXCLUDING THE WEB HOSTING CHARGES, TELEPHON ES AND TELEX CHARGES, FOREIGN TRAVEL EXPENSES, ONSITE AND ACCOMMODATION EXPENSES AND LOWER REALIZATION FROM THE EXPORT TURNOVER AND TOTAL TURNOVER RELYING ON THE DECISION IN THE CASE OF M/S. SAK SOFT LTD. [2009] 30 SOT 55 (CHENNAI) (SB). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXPORT OF COMPUTER SOFTWARE AND FILED ITS RETURN OF INCOME ON 30.09.2011 DECLARING BOOK PROFIT OF .5,54,13,513/ - . THE INCOME RETURNED UNDER NORMAL COMPUTATION WAS .5,54,010/ - AFTER THE DEDUCTION OF .5,49,05,280/ - EXEMPT UNDER SECTION 10A OF THE ACT. THE RETURN OF THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON20.01.2012 AND THE CASE WA S SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE ACT DATED 20.09.2012 WAS DULY SERVICE ON THE ASSESSEE. IN RESPONSE THERETO, THE AR OF THE ASSESSEE FILED THE DETAILS CALLED FOR. AFTER VERIFICATION OF DETAILS FILED BY THE ASSESSEE AND DISCUSSI ON WITH THE AR, THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 28.01.2013 BY MAKING VARIOUS ADDITIONS. 3. ON, APPEAL, AFTER CONSIDERING THE DETAILED SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) HAS HELD THAT THE PLEA OF THE ASSESSEE TO E XCLUDE THE EXPENSES FROM BOTH EXPORT TURNOVER AND TOTAL TURNOVER IS REQUIRED TO BE ACCEPTED IN VIEW OF THE DECISION OF THE SPECIAL BENCH OF ITAT, CHENNAI IN THE CASE OF ITO V. SAKSOFT LTD. 313 ITR (AT) 353. I.T.A. NO . 1173 /M/ 1 5 & I.T.A. NO. 7 7/M/ 1 5 3 4. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE MATTER IS COVERED IN FAVOUR OF THE ASSESSEE BY THE SPECIAL BENCH DECISION OF TRIBUNAL IN THE CASE OF ITO VS. M/S SAK SOFT LTD.,(2009) 313 ITR (AT) 353 (CHE NNAI)(SB). ON THE OTHER HAND, THE LD. DR DID NOT CONTROVERT THE STATEMENT OF THE LEARNED AR. 6 . WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WITH REGARDING TO THE COMPUTATION OF DEDUCTION UND ER SECTION 10A OF THE ACT, THE ASSESSING OFFICER HAS OBSERVED ON PERUSAL OF FORM 56F THAT THE EXPORT TURNOVER AND TOTAL TURNOVER ARE SHOWN BY THE ASSESSEE AT .14,45,24,775/ - AND .14,92,96,488/ - RESPECTIVELY. AFTER ANALYZING THE CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT, THE ASSESSING OFFICER EXCLUDED 50% OF WEB HOSTING CHARGES OF .80,087/ - , 50% OF TELEPHONE AND TELEX CHARGES FOR AN AMOUNT OF .4,22,371 / - FOREIGN TRAVEL EXPENSE OF .14,79,054/ - , ONSITE AND ACCOMMODATION EXPENSES OF .2,87,14,908/ - AND LOWER REALIZATION OF AN AMOUNT OF .8,06,13,671/ - TOTALING TO .11,39,10,091/ - . ON APPEAL, IN VIEW OF THE DECISION OF THE SPECIAL BENCH OF THE ITAT CHENNAI IN THE CASE OF ITO V. SAKSOFT LTD. (SUPRA) , THE LD. CIT(A) HAS HELD THE EXPENSES AS CLAIMED BY THE ASSESSEE HAS TO BE EXCLUDED THE EXPENSES FROM BOTH EXPORT TURNOVER AND TOTAL TURNOVER. WE FIND THAT IN THE CASE OF ITO VS. M/S SAK SOFT LTD. (SUPRA) , THE A SSESSEE ENGAGED IN THE I.T.A. NO . 1173 /M/ 1 5 & I.T.A. NO. 7 7/M/ 1 5 4 BUSINESS OF EXPORTING COMPUTER SOFTWARE CLAIMED DEDUCTION U/S. 10B OF THE ACT. THE A SSESSING O FFICER IN THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT REDUCED THE EXPENDITURE INCURRED IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SE RVICES OUTSIDE INDIA, FROM THE EXPORT TURNOVER WITHOUT CORRESPONDING REDUCTION FROM THE TOTAL TURNOVER, THEREBY REDUCING THE DEDUCTION CLAIMED BY THE ASSESSEE U/S. 10B OF THE ACT. IN THE LIGHT OF ABOVE FACTS, SPECIAL BENCH OF THE TRIBUNAL HELD, THUS, WE H OLD THAT FOR THE PURPOSE OF APPLYING THE FORMULA UNDER SUB - SEC.(4) OF SEC. 10B, THE FREIGHT, TELECOM CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF ARTICLES OR THINGS OR COMPUTER SOFTWARE OUTSIDE INDIA OR THE EXPENSES, IF ANY, INCURRED IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICE OUTSIDE INDIA ARE TO BE EXCLUDED BOTH FROM THE EXPORT TURNOVER AND FROM THE TOTAL TURNOVER, WHICH ARE THE NUMERATOR AND DENOMINATOR RESPECTIVELY IN THE FORMULA. THE APPEA LS FILED BY THE DEPARTMENT ARE THUS DISMISSED. ALL THOUGH, THE ORDER OF THE SPECIAL BENCH (SUPRA) WAS IN THE CONTEXT OF SECTION 10B OF THE ACT, THE RATIO LAID DOWN THEREIN APPLIES TO SECTION 10A OF THE ACT ALSO, AS THE PROVISIONS OF SECTIONS 10A AND 10B A RE IDENTICAL ON ALL MATERIAL ASPECTS. MORE PARTICULARLY, BOTH THE SECTIONS DEFINE ONLY EXPORT TURNOVER BUT NOT TOTAL TURNOVER AND SUB - SECTION (4) OF BOTH THE SECTIONS PRESCRIBE AN IDENTICAL FORMULA FOR COMPUTING THE EXPORT PROFITS. SINCE THE ABOVE FINDINGS OF THE TRIBUNAL IN THE CASE OF ITO VS. M/S SAK SOFT LTD. (SUPRA) HAS NOT BEEN EITHER MODIFIED OR REVERSED BY ANY HIGHER FORUM, THE GROUND RAISED BY THE REVENUE STANDS DISMISSED. I.T.A. NO . 1173 /M/ 1 5 & I.T.A. NO. 7 7/M/ 1 5 5 7. SINCE WE HAVE DECIDED THE APPEAL AGAINST THE REVENUE, THE CROSS OBJECTIO N FILED BY THE ASSESSEE IS MERE ACADEMIC REQUIRES NO ADJUDICATION AND DISMISSED ACCORDINGLY. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON THE 31 ST MARCH , 20 16 AT CHEN NAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 31 . 0 3 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.