Commissioner of Income Tax-III, V. M/s. Sankhya Infotech Limited,

ITTA/18/2012

AI Insights

The case involves the Commissioner of Income Tax-III as the appellant and M/s. Sankhya Infotech Limited as the respondent. The dispute centered on the exemption claimed under Section 10A of the Income Tax Act, 1961, for the assessment year 2006-07. The assessee, engaged in software development, had received part payments for software developed for foreign clients, which were capitalized as investments in a wholly owned subsidiary in France. The Assessing Officer initially denied the exemption on the grounds that the inward remittances were not received within the prescribed six months and questioned the investment in France. The Commissioner of Income Tax (Appeals) allowed the appeal based on additional evidence provided by the assessee, which was contested by the Assessing Officer. The Tribunal partly allowed the Revenue's appeal, leading to the present appeal by the Revenue in the High Court.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 719175 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 27-01-2012
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Exemption under section 10A; Income Tax; Investment in subsidiary; Software Development; Inward Remittances
• Section: 10A(3)

Judgement Text

"THE HON’BLE THE CHIEF JUSTICE SHRI MADAN B. LOKUR AND THE HON’BLE SHRI JUSTICE SANJAY KUMAR I.T.T.A. NO.18 OF 2012 DATED:27.1.2012 Between: Commissioner of Income Tax-III IT Towers, A.C. Guadrs Hyderabad … Appellant And M/s. Sankhya Infotech Limited 1-1-39, 2nd Floor, 7th Hills Plaza SD Road, Secunderabad … Respondent THE HON’BLE THE CHIEF JUSTICE SHRI MADAN B. LOKUR AND THE HON’BLE SHRI JUSTICE SANJAY KUMAR I.T.T.A. NO.18 OF 2012 JUDGMENT: (per the Hon’ble the Chief Justice Shri Madan B. Lokur) The Revenue is aggrieved by an order dt.21.4.2011 passed by the Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad, in I.T.A. No.320/H/2010, relevant for the assessment year 2006-07. 2. The assessee is engaged in software development and it had prepared some software for parties outside the country. In respect of the work done by the assessee, it was entitled to certain payments. 3. Part payments were received and the assessee capitalized the receivables in the form of investments in a fully owned subsidiary set up by it in France in terms of the approval given by the Reserve Bank of India (RBI) 4. The Assessing Officer sought to tax the inward remittances on the ground that they were not received within the period of six months prescribed by Section 10A(3) of the Income Tax Act, 1961 (for short, ‘the Act’). The Assessing Officer was also not satisfied that the assessee had invested the receivables in a fully owned subsidiary in France. Accordingly, the Assessing Officer denied exemption to the assessee in respect of the amounts said to have been covered by Section 10A of the Act. 5. Feeling aggrieved, the assessee preferred an appeal which was taken up for consideration by the Commissioner of Income Tax (Appeals). Before the Commissioner, the assessee moved an application for leading additional evidence and that application was allowed. The additional evidence led by the assessee was to the effect that it had received inward remittances within the extended time prescribed by the RBI. The assessee also produced evidence with regard to the investments made in France. The Commissioner called for a report from the Assessing Officer in respect of the additional evidence produced by the assessee and in his report, the Assessing Officer stated that the assessee had not produced the necessary evidence in the correct form and therefore it deserved to be rejected. 6. The Commissioner accepted the view canvassed by the assessee notwithstanding the objection raised by the Assessing Officer and allowed the appeal. 7. Feeling aggrieved, the Revenue preferred an appeal which came to be partly allowed by the Tribunal by the order under challenge. 8. In our opinion, whether the inward remittances were actually received by the assessee is a question of fact. Similarly, whether the assessee invested those amounts by capitalizing the receivables in a wholly owned subsidiary is also a question of fact. Therefore, no substantial question of law arises in this appeal. 9. We may note that the Tribunal while disposing of the appeal observed that the assessee had received the inward remittances in respect of some invoices within the time prescribed by the RBI. With regard to the remaining invoices, the Tribunal noted that if the assessee received the amounts within the extended time prescribed by the RBI, then the assessee would be entitled to exemption under Section 10A of the Act, if the other conditions are met. The assessee was required to reconcile the accounts with regard to the works in progress and the investment of the receivables in the fully owned subsidiary, to avail a deduction under Section 10A of the Act. 10. We are of the view that not only does the appeal not raise any question of fact but even on merits there is no reason to interfere with the order passed by the Tribunal since liberty has been granted to the assessee to satisfy the Assessing Officer in respect of grant of deduction under Section 10A of the Act that the amounts are received within the time prescribed or the extended period prescribed by the RBI. 11. There is no merit in this appeal and it is accordingly dismissed. __________________ MADAN B. LOKUR, CJ __________________ SANJAY KUMAR, J 27-1-2012 bnr "