DCIT, CHENNAI V. Renault Nissan Technology & Business Centre India Pvt. Ltd., CHENNAI

ITA 1009/CHNY/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8089 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2016
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 27-09-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 22-04-2014
• Court: TRIBUNAL
• Assessee Lawyers: SRIRAM SESHADRIC A
• Section: 10AA

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI , . ! '# BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A.NO.1009/MDS./2014 / ASSESSMENT YEAR :2009-10 DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-5(1), CHENNAI 600 034. VS. M/S.RENAULT NISSAN TECHNOLOGY & BUSINESS CENTRE INDIA PVT. LTD.,TP 2/1,ASCENDAS IT PARK, MAHINDRA WORLD CITY, NATHAM SUB POST OFFICE, 603 002. [PAN AADCR 7253 E] ( $% / APPELLANT) ( &'$% /RESPONDENT) / APPELLANT BY : MR.SRINIVASA RAO CIT DR /RESPONDENT BY : MR.SRIRAM SESHADRI,C.A / DATE OF HEARING : 27 - 0 9 - 201 6 !' / DATE OF PRONOUNCEMENT : 16 - 11 - 2016 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE D IRECTION OF THE DISPUTE RESOLUTION PANEL, CHENNAI (DRP) PASS ED U/S.144C(5) R.W.S.144C(8) OF THE ACT DATED 20.12.2013 PERTAIN ING TO ASSESSMENT YEAR 2009-10. 2. THE FIRST ISSUE FOR OUR CONSIDERATION IS THAT T HE DRP ERRED IN LAW AND IN FACTS BY EXCLUDING FOREIGN EXCHANGE GAIN OF ` 15,61,130/- ITA NO. 1009/MDS./2014 :- 2 -: FROM THE PROFITS OF THE BUSINESS FOR THE COMPUTATIO N OF DEDUCTION U/S.10AA OF THE ACT. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE SOU GHT DIRECTION FROM THE DRP THAT THE AO TO BE DIRECTED TO DELETE T HE EXCLUSION OF FOREIGN EXCHANGE EXPENDITURE OF ` 26,15,72,828/-/- FROM THE EXPORT TURNOVER OF THE BUSINESS AND THEREAFTER DEDUCTION U /S.10AA OF THE ACT. THE DRP EXAMINED THE PROVISIONS OF THE SECTION 10AA (I) WHEREBY EXPORT TURNOVER MEANS THE CONSIDERATION IN RESPEC T OF EXPORT RECEIVED IN OR BROUGHT INTO INDIA BY THE ASSESSEE IN CONVERT IBLE FOREIGN EXCHANGE BUT DOES NOT INCLUDE FREIGHT, TELECOMMUNIC ATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTIC LES OR THINGS OR COMPUTER SOFTWARE OUTSIDE INDIA OR EXPENSES, IF ANY , INCURRED IN FOREIGN EXCHANGE IN RENDERING OF SERVICES (INCLUDIN G COMPUTER SOFTWARE) OUTSIDE INDIA. THE DRP CAME TO A CONCLUSI ON THAT THE EXPENSES RELATING TO TRAVEL EXPENSES PERTAINING TO ADVANCE GIVEN FOR TRAVEL AND STAY EXPENSES OF THESE EMPLOYEES, IT & T ECHNICAL SUPPORT SERVICES PERTAINING TO ALCOR IMPLEMENTATION ON BEHA LF OF THE ASSESSEE AND REIMBURSEMENT TO RGM AND MML/PROFESSIONAL AND C ONSULTATION FEES PERTAINING TO SOCIAL SECURITY CONTRIBUTION OF EMPLOYEES DEPUTED BY RGM & NML IN INDIA, INCURRED BY THE ASSESSEE ARE EI THER TO REIMBURSEMENT TO ITS AES OR AS ADVANCE TO ITS EMPLO YEES TOWARDS TRAVEL EXPENSES CANNOT BE EXCLUDED FROM EXPORT TURN OVER. THEREFORE, ITA NO. 1009/MDS./2014 :- 3 -: THE DRP DIRECTED THE AO TO DELETE THE EXCLUSION OF FOLLOWING FOREIGN EXCHANGE EXPENDITURE FROM THE EXPORT TURNOVER OF TH E BUSINESS AND THE DEDUCTION U/S.10A BE RECOMPUTED ACCORDINGLY. AGAINST THIS THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN OUR OPINION, FOREIGN CURRENCY EXPENDITUR E CANNOT BE CONSIDERED AS PART OF EXPORT TURNOVER AND AT THE SA ME TIME, IT ALSO CANNOT BE FORMED PART OF THE TOTAL TURNOVER AS HELD BY ITO VS.SAK SOFT LTD., REPORTED IN [2009] 121 TTJ 865 (ITAT[CHE N]). ACCORDINGLY, WE DIRECT THE AO NOT TO INCLUDE THE SAME IN EXPORT TURNOVER AS WELL AS TOTAL TURNOVER WHILE COMPUTING DEDUCTION U/S.10A OF THE ACT. ACCORDINGLY, THIS GROUND OF REVENUE IS REMITTED BAC K TO THE FILE OF AO TO RECONSIDER THE SAME IN THE LIGHT OF THE ABOVE OR DER OF THE TRIBUNAL AFTER GIVING AN OPPORTUNITY OF HEARING TO THE ASSES SEE. 5. THE NEXT ISSUE FOR OUR CONSIDERATION IS THAT THE DRP ERRED IN DIRECTING THE AO TO INCLUDE FOREX GAIN FROM PRO FITS OF THE BUSINESS FOR COMPUTING DEDUCTION U/S.10AA OF THE ACT BASED O N THE DECISION OF THE ITAT CHENNAI IN CHANGEPOD TECH PVT LTD IN 118 T TJ 18(2008). PARTICULARS AMOUNT (INR ` ) TRAVEL EXPENSES 41,199,254 IT & TECHNICAL SUPPORT SERVICES 115,521,78 2 REIMBURSEMENT TO RENAULT GLOBAL MANAGEMENT 69,851,671 REIMBURSEMENT TO NISSAN MOTOR COMPANY LTD. 29,635,976 ITA NO. 1009/MDS./2014 :- 4 -: 6. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE WE NT IN BEFORE DRP FOR SEEKING DIRECTIONS THAT FOREIGN EXCHANGE GA IN NOT TO BE EXCLUDED FROM THE BUSINESS PROFIT OF ASSESSEE WHILE COMPUTING DEDUCTION U/S.10A OF THE ACT. THE DRP OBSERVED THAT THE FOREIGN EXCHANGE GAIN IS ON ACCOUNT OF EXPORT A CTIVITIES RENDERED BY THE ASSESSEE AND THE INVOICES FOR THE SERVICES A RE RENDERED TO ITS GROUP COMPANIES ARE RAISED IN FOREIGN CURRENCY. TH E FOREIGN EXCHANGE GAIN IS ON ACCOUNT OF DEVALUATION IN THE CURRENCY I .E INR BETWEEN THE DATE OF RAISING THE INVOICE AND THE DATE OF ACTUAL PAYMENT. THE GAIN WAS ON ACCOUNT OF DIFFERENCE IN THE FOREIGN EXCHANG E RATE I.E. DATE OF MAKING THE PAYMENT BY THE CUSTOMERS VIS--VIS DATE OF RAISING INVOICE. THE ASSESSEE CLAIMED FOREIGN EXCHANGE GAIN WOULD FO RM PART OF THE EXPORT TURNOVER FOR CLAIMING DEDUCTION U/S.10A AS T HE FOREIGN EXCHANGE GAIN IS ON ACCOUNT OF EXPORT ACTIVITIES RE NDERED BY THE ASSESSEE AND PLACED RELIANCE IN THE DECISION OF SUP REME COURT IN AMBAL IMPEX (2006) 282 ITR 144 AND PENTASOFT TECHNO LOGIES IN (2012) 347 ITR 578 AND ALSO DECISION OF CHENNAI TRI BUNAL IN THE CASE OF CHANGEPOD TECH PVT LTD IN 118 TTJ 18(2008). THE DRP, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND CAS E LAWS, REACHED TO THE CONCLUSION THAT THE FOREIGN EXCHANGE GAIN IS PU RELY DUE TO DELAYED REALIZATION OF EXPORT PROCEEDS AND FOLLOWING THE DE CISION OF TRIBUNAL CITED SUPRA, DIRECTED THAT LD. ASSESSING OFFICER TO INCLUDE THE FOREIGN ITA NO. 1009/MDS./2014 :- 5 -: EXCHANGE GAIN OF ` 15,61,130/- TO THE PROFITS OF THE BUSINESS AND THE DEDUCTION U/S.10A BE RECOMPUTED ACCORDINGLY. AGAINS T THIS, THE REVENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THIS ISSUE CAME FOR CONSIDERATION BEFORE TH E JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. PENTASOFT TECHNOGIES L TD. IN (2012) 347 ITR 578 WHEREIN HELD THAT GAIN DUE TO FLUCTUATION I N FOREIGN EXCHANGE RATE DIRECTLY RELATED TO EXPORT SALES COULD NOT BE TREATED AS OTHER THAN PART OF PROFIT FROM EXPORT OF THE ASSESSEE. ACCORDI NGLY, WE DO NOT FIND ANY INFIRMITY IN THE DIRECTION OF THE DRP AND THE S AME IS CONFIRMED. HENCE, THIS GROUND RAISED BY THE REVENUE IS DISMISS ED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON WEDNESDAY 16 TH NOVEMBER, 2016, AT CHENNAI. SD/ - SD/ - ( . ) ( G.PAVAN KUMAR ) ! / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 16 TH NOVEMBER, 2016 K S SUNDARAM &'(()*( +* / COPY TO: ( 1 . / APPELLANT 3. ( ,(- . / CIT(A) 5. */0 (1 / DR ITA NO. 1009/MDS./2014 :- 6 -: 2. / RESPONDENT 4. ( , / CIT 6. 02(3 / GF