Airvana Networks India Private Limited, Bangalore V. ITO, Bangalore

ITA 1149/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57530 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 24-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS JOSE
• Assessee Lawyers: MANJUNATHA SHENOY
• Keywords: Business income
• Section: 80HHC

Judgement Text

ITA.1149/BANG/2011 P AGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BEFORE SHRI N.BARATHVAJA SANKAR, VICE-PRESIDENT ITA NO.1149/BANG/2011 (ASSESSMENT YEAR: 2006-07) M/S. AIRVANA NETWORKS INDIA P. LTD., SALARPURIA SOFTZONE, BLOCK A WING B, I FLOOR, SY NO.80/1, 81/1/ & 81/2, BELLANDUR VILLAGE, VARTHUR HOBLI, OUTER RING ROAD, BANGALORE 560 037 VS. APPELLANT INCOME-TAX OFFICER, WARD 11(1), BANGALORE. RESPONDENT PAN:AAECA7568G APPELLANT BY: SHRI MANJUNATHA SHENOY, CA RESPONDENT BY : SMT. SUSAN THOMAS JOSE, JCIT DATE OF HEARING: 13-03-2012 DATE OF PRONOUNCEMENT: 13-03-2012 O R D E R THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R OF THE CIT(A)-I, BANGALORE, DATED 28-11-2008 IN THE CASE O F M/S. AIRVANA NETWORKS INDIA P. LTD., FOR THE ASSESSMENT YEAR 20 06-07. ITA.1149/BANG/2011 P AGE - 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARI NG A TOTAL INCOME OF RS.1,13,370/-. THE AO REDUCED THE TELECOM EXPENS ES FROM THE EXPORT TURNOVER, AND DETERMINED THE TAXABLE INCOME AT RS.2,63,981/-. THEREBY MAKING AN ADDITION OF RS.1,50,611/-. THE AS SESSING OFFICER WAS OF THE VIEW THAT NO CORRESPONDING ADJUSTMENT IS REQUIRED TO BE MADE TO THE TOTAL TURNOVER FOR THE PURPOSES OF THE SECTION. BEING AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE FIRST APPELLATE AUTHORITY AFTER DEAL ING WITH THE ISSUE AT LENGTH, CONFIRMED THE ADDITION MADE BY THE ASSESSIN G OFFICER. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THIS TR IBUNAL. 3. THE LEARNED CHARTERED ACCOUNTANT APPEARING FOR T HE ASSESSEE, SUBMITTED THAT THE POINT AT ISSUE IS NOW SQUARELY C OVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE CIT VS. M/S.TATA ELXSI LTD. & OTHERS (2011-TIOL-684-HC-KAR). I HAVE ALSO HEARD THE LEARNED DEPARTMENTAL REPRESENTA TIVE. 4. I HAVE HEARD THE PARTIES AND GONE THROUGH THE DE CISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M/S.TATA ELXSI LTD. & OTHERS (SUPRA) WHEREIN THE HONBLE KARNATAKA HIGH COURT H AD HELD THAT WHILE COMPUTING THE EXEMPTION U/S 10A, IF THE EXPORT TURNOVER IN ITA.1149/BANG/2011 P AGE - 3 THE NUMERATOR IS TO BE ARRIVED AT AFTER EXCLUDING C ERTAIN EXPENSES, THE SAME SHOULD ALSO BE EXCLUDED IN COMPUTING THE EXPOR T TURNOVER AS A COMPONENT OF TOTAL TURNOVER IN THE DENOMINATOR. THE RELEVANT FINDING OF THE HONBLE JURISDICTIONAL HIGH COURT READS AS F OLLOWS:- ..SECTION 10A IS ENACTED AS AN INCENTIVE TO EXP ORTERS TO ENABLE THEIR PRODUCTS TO BE COMPETITIVE IN THE G LOBAL MARKET AND CONSEQUENTLY EARN PRECIOUS FOREIGN EXCHA NGE FOR THE COUNTRY. THIS ASPECT HAS TO BE BORNE IN MI ND. WHILE COMPUTING THE CONSIDERATION RECEIVED FROM SUC H EXPORT TURNOVER, THE EXPENSES INCURRED TOWARDS FREI GHT, TELECOMMUNICATION CHARGES, OR INSURANCE ATTRIBUTABL E TO THE DELIVERY OF THE ARTICLES OR THINGS OR COMPUTER SOFT WARE OUTSIDE INDIA, OR EXPENSES IF ANY INCURRED IN FORE IGN EXCHANGE, IN PROVIDING THE TECHNICAL SERVICES OUTSI DE INDIA SHOULD NOT BE INCLUDED. HOWEVER, THE WORD TOTAL TU RNOVER IS NOT DEFINED FOR THE PURPOSE OF THIS SECTION. IT IS BECAUSE OF THIS OMISSION TO DEFINE TOTAL TURNOVER, THE WORD TOTAL TURNOVER FALLS FOR INTERPRETATION BY THIS COURT; ..IN SECTION 10A, NOT ONLY THE WORD TOTAL TURNOV ER IS NOT DEFINED, THERE IS NO CLUE REGARDING WHAT IS TO BE EXCLUDED WHILE ARRIVING AT THE TOTAL TURNOVER. HOW EVER, WHILE INTERPRETING THE PROVISIONS OF SECTION 80HHC, THE COURTS HAVE LAID DOWN VARIOUS PRINCIPLES, WHICH ARE INDEPENDENT OF THE STATUTORY PROVISIONS. THERE SHO ULD BE UNIFORMITY IN THE INGREDIENTS OF BOTH THE NUMERATOR AND THE DENOMINATOR OF THE FORMULA, SINCE OTHERWISE IT WOUL D ITA.1149/BANG/2011 P AGE - 4 PRODUCE ANOMALIES OR ABSURD RESULTS. SECTION 10A I S A BENEFICIAL SECTION WHICH INTENDS TO PROVIDE INCENTI VES TO PROMOTE EXPORTS. IN THE CASE OF COMBINED BUSINESS OF AN ASSESSEE, HAVING EXPORT BUSINESS AND DOMESTIC BUSIN ESS, THE LEGISLATURE INTENDED TO HAVE A FORMULA TO ASCERTAIN THE PROFITS FROM EXPORT BUSINESS BY APPORTIONING THE TO TAL PROFITS OF THE BUSINESS ON THE BASIS OF TURNOVERS. APPORTIONMENT OF PROFITS ON THE BASIS OF TURNOVER W AS ACCEPTED AS A METHOD OF ARRIVING AT EXPORT PROFITS. IN THE CASE OF SECTION 80HHC, THE EXPORT PROFIT IS TO BE D ERIVED FROM THE TOTAL BUSINESS INCOME OF THE ASSESSEE, WHE REAS IN SECTION 10-A, THE EXPORT PROFIT IS TO BE DERIVED FR OM THE TOTAL BUSINESS OF THE UNDERTAKING. EVEN IN THE CASE OF B USINESS OF AN UNDERTAKING, IT MAY INCLUDE EXPORT BUSINESS AND DOMESTIC BUSINESS, IN OTHER WORDS, EXPORT TURNOVER AND DOMES TIC TURNOVER. TO THE EXTENT OF EXPORT TURNOVER, THERE WOULD BE A COMMONALITY BETWEEN THE NUMERATOR AND THE DENOMINAT OR OF THE FORMULA. IF THE EXPORT TURNOVER IN THE NUMERAT OR IS TO BE ARRIVED AT AFTER EXCLUDING CERTAIN EXPENSES, THE SA ME SHOULD ALSO BE EXCLUDED IN COMPUTING THE EXPORT TURNOVER A S A COMPONENT OF TOTAL TURNOVER IN THE DENOMINAT OR. THE REASON BEING THE TOTAL TURNOVER INCLUDES EXPORT TUR NOVER. THE COMPONENTS OF THE EXPORT TURNOVER IN THE NUMERA TOR AND THE DENOMINATOR CANNOT BE DIFFERENT. THEREFORE, TH OUGH THERE IS NO DEFINITION OF THE TERM TOTAL TURNOVER IN SECTION 10A, THERE IS NOTHING IN THE SAID SECTION TO MANDAT E THAT, WHAT IS EXCLUDED FROM THE NUMERATOR THAT IS EXPORT TURNOVER WOULD NEVERTHELESS FORM PART OF THE DENOMINATOR. WHEN THE STATUTE PRESCRIBED A FORMULA AND IN THE SAID FO RMULA, ITA.1149/BANG/2011 P AGE - 5 EXPORT TURNOVER IS DEFINED, AND WHEN THE TOTAL T URNOVER INCLUDES EXPORT TURNOVER, THE VERY SAME MEANING GI VEN TO THE EXPORT TURNOVER BY THE LEGISLATURE IS TO BE ADO PTED WHILE UNDERSTANDING THE MEANING OF THE TOTAL TURNOVER, WH EN THE TOTAL TURNOVER INCLUDES EXPORT TURNOVER. IF WHAT I S EXCLUDED IN COMPUTING THE EXPORT TURNOVER IS INCLUDED WHILE ARRIVING AT THE TOTAL TURNOVER, WHEN THE EXPORT TURNOVER IS A COMPONENT OF TOTAL TURNOVER, SUCH AN INTERPRETATION WOULD RUN COUNTER TO THE LEGISLATIVE INTENT AND IMPERMISS IBLE. THUS, THERE IS NO ERROR COMMITTED BY THE TRIBUNAL I N FOLLOWING THE JUDGMENTS RENDERED IN THE CONTEXT OF SECTION 80HHC IN INTERPRETING SECTION 10A WHEN THE PRINCIPL E UNDERLYING BOTH THESE PROVISIONS IS ONE AND SAME. 5. RESPECTFULLY FOLLOWING THE SAME, I ALLOW THE APP EAL OF THE ASSESSEE. ORDER PRONOUNCED IN THE OPEN COURT ON 13TH MARCH, 2012. SD/- (N. BARATHVAJA SANKAR) VICE- PRESIDENT