DCIT, Central Circle-2(3), Hyd, Hyderabad V. Sentini Technologies Pvt.Ltd., Hyd, Hyderabad

ITA 1024/HYD/2015

• Counselvise Citation: 102422514 RSA 2015
• Duration Of Justice: 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 06-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Assessee Lawyers: SHAIK JEELANI BASHA
• Keywords: Search and seizure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT P.MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.1023/HYD/2015 : ASSESSMENT YEARS 20 10-11 ITA NO.1024/HYD/2015 : ASSESSMENT YEARS 20 11-12 DY. COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE 2(3), HYDERABAD V/S M/S. SENTINI TECHNOLOGIES PVT. LTD., HYDERABAD (PAN - AAFCS 7501 L) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.SITARAM, DR RESPONDENT BY : SHRI SHAIK JEELANI BASHA DATE OF HEARING 26.10.2015 DATE OF PRONOUNCEMENT 30.10.2015 O R D E R PER SMT. P. MADHAVI DEVI, JUDICIAL MEMBER : BOTH OF THESE ARE REVENUE APPEALS FOR ASSESSMENT YEARS 2010-11 AND 2011-12. IN BOTH OF THESE APPEALS, REV ENUE IS AGGRIEVED BY THE ORDERS OF THE CIT(A) IN ACCEPTING THE CLAIM OF THE ASSESSEE FOR EXCLUSION OF EXPENDITURE INCURRED IN FOREIGN EXCHAN GE BOTH FROM THE EXPORT TURNOVER AS WELL AS TOTAL TURNOVER WHILE COM PUTING DEDUCTION UNDER S.10A OF THE INCOME TAX ACT,1961. 2. THE GRIEVANCE OF THE REVENUE IS THAT THE CIT(A) HAS ERRONEOUSLY TREATED THE APPEAL OF THE ASSESSEE AS A COVERED ONE WITHOUT CONSIDERING THE FACTS AND MERITS OF THE CAS E. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY WHICH IS ENGAGED IN THE DEVELOPMENT AND SALE OF SOF TWARE SERVICES FILED ITS RETURN OF INCOME FOR THE RELEVANT ASSESSM ENT YEARS. THERE WAS A SEARCH AND SEIZURE OPERATION UNDER S.132 OF THE A CT, CONSEQUENT TO WHICH THE ASSESSMENT WAS COMPLETED UNDER S.143(3) R EAD WITH ITA NO.1023 & 1024/HYD/2015 M/S. SENTINI TECHNOLOGIES PVT. LTD., HYDERABAD 2 S.153A OF THE ACT. DURING THE SAID ASSESSMENT PROCE EDINGS, WHILE COMPUTING THE DEDUCTION ALLOWABLE UNDER S.10A OF TH E ACT, THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE INCURR ED IN FOREIGN EXCHANGE FOR IMPORTING SOFTWARE TOOLS WHICH WERE UT ILISED FOR THE PURPOSES OF PROVIDING TECHNICAL SERVICES OUTSIDE IN DIA. THE ASSESSEE HAD MADE A PRAYER BEFORE THE ASSESSING OFFICER THAT THE EXPENDITURE IS REVENUE IN NATURE AND IT DOES NOT FALL UNDER ANY OF THE ITEMS MENTIONED IN THE EXCLUSION PART OF THE DEFINITION O F THE EXPORT TURNOVER, AND THEREFORE, SHOULD NOT BE EXCLUDED. T HE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THE ASSESSEES CON TENTION. THE ASSESSEE ALSO MADE AN ALTERNATE PLEA THAT IF THESE EXPENSES ARE TO BE REDUCED FROM THE EXPORT TURNOVER, THEN THE SAME SHO ULD ALSO BE REDUCED FROM THE TOTAL TURNOVER AS WELL. THE ASSESS ING OFFICER DID NOT ACCEPT THIS CONTENTION ALSO AND PROCEEDED TO COMPUT E THE DEDUCTION UNDER S.10A OF THE ACT, BY EXCLUDING THE SAID EXPEN DITURE ONLY FROM THE EXPORT TURNOVER. 4. AGGRIEVED, THE ASSESSEE PREFERRED APPEALS BEFO RE THE CIT(A) AGAINST THE EXCLUSION FROM THE EXPORT TURNOV ER AND ALSO MADE AN ALTERNATIVE PLEA THAT IF EXCLUDED FROM THE EXPOR T TURNOVER, THE SAME SHALL ALSO BE EXCLUDED FROM THE TOTAL TURNOVER. TH E CIT(A) ACCEPTED THE ALTERNATE CONTENTION AND GAVE RELIEF BY EXCLUD ING THE EXPENDITURE BOTH FROM THE EXPORT AS WELL AS TOTAL TURNOVER FOR THE PURPOSE OF GRANTING DEDUCTION UNDER S.10A. 5. AGAINST THIS FINDING OF THE CIT(A), REVENUE IS IN APPEAL BEFORE US. 6. WHILE THE LEARNED DEPARTMENTAL REPRESENTATIVE S UPPORTED THE ORDERS OF THE ASSESSING OFFICER, THE LEARNED CO UNSEL FOR THE ASSESSEE SUBMITTED THAT THE VERY SAME ISSUE HAD ARI SEN IN ASSESSEES ITA NO.1023 & 1024/HYD/2015 M/S. SENTINI TECHNOLOGIES PVT. LTD., HYDERABAD 3 OWN CASE FOR THE ASSESSMENT YEAR 2004-05 TO 2009-10 AND THE ISSUE HAS TRAVELLED UPTO ITAT, WHEREIN THE ITAT BY FOLLOW ING THE DECISION OF THE SPECIAL BENCH IN THE CASE OF ITO V/S. SAK SOFT LTD. (313 ITR (AT) 353) HAS ALLOWED THE ALTERNATE PLEA OF THE ASSESSEE FOR EXCLUDING THE ITEMS OF EXPENDITURE EXCLUDED FROM EXPORT TURNOVER, FROM THE TOTAL TURNOVER AS WELL. COPIES OF THE ORDERS OF THE TRIB UNAL ARE FILED BEFORE US. 7. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE ISSUE INVOLVED IN THESE AP PEALS OF THE REVENUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIO N OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT V/S. TATA ELXSI LTD., (349 ITR 98) , WHEREIN IT WAS HELD THAT WHERE ANY EXPENDITURE IS EXCLUDED FROM EXPORT TURNOVER, THEN IT SHOULD ALSO BE EXCLUDED FR OM TOTAL TURNOVER AS WELL FOR COMPUTATION OF DEDUCTION UNDER S.10A OF TH E ACT. IN VIEW OF THE SAME, WE DO NOT FIND ANY REASON TO INTERFERE WI TH THE ORDERS OF THE CIT(A) FOR BOTH THE YEARS. WE ACCORDINGLY UPHOLD T HE SAME, REJECTING THE GROUNDS OF THE REVENUE IN THESE APPEALS. 8. IN THE RESULT, REVENUES APPEALS ARE DISMISSED. PRONOUNCED IN THE COURT ON 30 TH OCTOBER, 2015 SD/- SD/- ( B.RAMAKOTAIAH ) (P.MADHAVI DEVI) ACCOUNTANT MEMBER. JUDICIAL MEMBER DT/- 30 TH OCTOBER , 2015 ITA NO.1023 & 1024/HYD/2015 M/S. SENTINI TECHNOLOGIES PVT. LTD., HYDERABAD 4 COPY FORWARDED TO: 1. M/S. SENTINI TECHNOLOGIES PVT. LTD., PLOT NO.1229, ROAD NO.60, JUBILEE HILLS, HYDERABAD 2. DY. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE 2( 3), HYDERABAD 3. COMMISSIONER OF INCOME - TAX(APPEALS) 12 , HYDERABAD 4. PRINCIPAL COMMISSIONER OF INCOME-TAX (CENTRAL), HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S.