ACIT, CHENNAI V. M/s. ChangePond Technologies Pvt Ltd., CHENNAI

ITA 1169/CHNY/2007

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64327 (ITAT-CHENNAI)
• Duration Of Justice: 5 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 01-10-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 04-05-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAJI P JACOB IRS
• Assessee Lawyers: H PADAMCHAN D KHINCHA
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A.NO. 1169/MDS/2007 ASSESSMENT YEAR : 2003-04 THE ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-I(3), CHENNAI-34. VS. M/S. CHANGEPOND TECHNOLOGIES PVT. LTD., 7, II CRESCENT PARK ROAD, GANDHI NAGAR, ADYAR, CHENNAI 600 020. PAN AABCC 3252 G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB, IRS, ADDL. CIT RESPONDENT BY : SHRI H. PADAMCHAND KHINCH A, CA DATE OF HEARING : 1 ST OCTOBER, 2012 DATE OF PRONOUNCEMENT : 3 RD OCTOBER, 2012 O R D E R PER DR. O.K. NARAYANAN, VICE-PRESIDENT THIS APPEAL IS FILED BY THE REVENUE. THE RELEVANT ASSESSMENT YEAR IS 2003-04. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-II I AT CHENNAI ITA 1169/07 :- 2 -: DATED 14.2.2007 AND ARISES OUT OF THE ASSESSMENT CO MPLETED UNDER SEC.143(3) OF THE INCOME-TAX ACT, 1961. 2. THE FIRST GROUND RAISED BY THE REVENUE IS THAT T HE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN HO LDING THAT ESTABLISHMENT AND MAINTENANCE EXPENSES PERTAINING T O FOREIGN BRANCH ARE NOT EXCLUDIBLE FROM EXPORT TURNOVER WHIL E COMPUTING RELIEF UNDER SEC.10A. THIS ISSUE WAS CONSIDERED BY INCOME-TAX APPELLATE TRIBUNAL, CHENNAI IN ASSESSEES OWN CASE, IN THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEA R 2003-04 REPORTED IN 119 TTJ 18 (CHENNAI). IN THE SAID APPE AL, THE THIRD GROUND RAISED BY THE ASSESSEE WAS THAT THE COMMISSI ONER OF INCOME-TAX(APPEALS) HAS ERRED IN CONCLUDING THAT TH E EXPENSES INCURRED OUTSIDE INDIA ON SALARIES, TRAVELLING AND OTHER PERQUISITES IN RESPECT OF EMPLOYEES ARE INCURRED IN CONNECTION WITH PROVIDING TECHNICAL SERVICES OUTSIDE INDIA. THE FOURTH GROUN D WAS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN NO T APPRECIATING THAT THE ASSESSEE IS NOT ENGAGED IN P ROVIDING ANY TECHNICAL SERVICES OUTSIDE INDIA AND, THEREFORE, TH E QUESTION OF EXCLUSION OF EXPENSES FROM EXPORT TURNOVER DOES NOT ARISE. ITA 1169/07 :- 3 -: 3. THESE GROUNDS WERE CONSIDERED BY THE TRIBUNAL IN PARAGRAPHS 10 TO 14 OF THEIR ORDER DATED 15.2.2008. THE TRIBUNAL HELD THAT THE TECHNICAL SERVICES PROVIDED OUTSIDE I NDIA BY THE ASSESSEE WAS FOR DEVELOPMENT OF COMPUTER SOFTWARE W HICH WAS ALSO A PART OF THE REQUIREMENT OF THE ASSESSEE IN D EVELOPMENT OF SOFTWARE AS PER THE REQUIREMENTS AND SPECIFICATIONS OF THE CLIENTS. THEREFORE, THE TRIBUNAL HELD THAT THE SAID ACTIVITY OF THE ASSESSEE COMES UNDER THE DEFINITION OF ON SITE DEVELOPMENT O F COMPUTER SOFTWARE INCLUDING SERVICES FOR DEVELOPMENT OF SOFT WARE OUTSIDE INDIA AS PROVIDED IN EXPLANATION 3 TO SUB-SEC.(8) O F SEC.10A OF THE ACT. ACCORDINGLY, THE TRIBUNAL HELD THAT THE EXPEN SES INCURRED ON SALARIES, TRAVELLING AND OTHER PERQUISITES SHALL BE INCLUDED IN THE EXPORT TURNOVER OF THE ASSESSEE. 4. IN VIEW OF THE ABOVE ORDER OF THE CO-ORDINATE BE NCH IN ASSESSEES OWN CASE, WE FIND THAT THE GROUND RAISED BY THE REVENUE ON THIS ISSUE FAILS. 5. THE SECOND GROUND RAISED BY THE REVENUE IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN DI RECTING THE ASSESSING OFFICER TO RE-COMPUTE BUSINESS PROFITS AF TER SETTING OFF ITA 1169/07 :- 4 -: BROUGHT FORWARD LOSSES AND DEPRECIATION AND ALLOW D EDUCTION UNDER SEC.10A. 6. IN THE VERY SAME ORDER CITED ABOVE, THE CO-ORDIN ATE BENCH OF THE TRIBUNAL HAS ALLOWED THE DEDUCTION TO THE AS SESSEE UNDER SEC.10A WITHOUT SETTING OFF OF THE BROUGHT FORWARD LOSSES AND THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. THE A BOVE ORDER OF THE CO-ORDINATE BENCH IS IN CONFORMITY TO THE JUDGM ENT OF THE HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE O F CIT V. YOKOGAWA INDIA LTD. AND OTHERS (246 CTR 226), WHERE IN THE HONBLE KARNATAKA HIGH COURT HAS HELD THAT AS THE D EDUCTION UNDER SEC.10A HAS TO BE EXCLUDED FROM THE TOTAL INC OME OF THE ASSESSEE, THE QUESTION OF UNABSORBED BUSINESS LOSS BEING SET OFF AGAINST SUCH PROFITS AND GAINS OF THE UNDERTAKING W OULD NOT ARISE. 7. IN VIEW OF THE ABOVE POSITION AND IN THE LIGHT O F THE DECISION OF THE CO-ORDINATE BENCH, WE FIND THAT THIS GROUND IS ALSO TO BE DISMISSED. WE UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME- TAX(APPEALS) ON THIS POINT. 8. IN RESULT, THIS APPEAL FILED BY THE REVENUE IS D ISMISSED. ITA 1169/07 :- 5 -: ORDER PRONOUNCED ON WEDNESDAY, THE 3 RD OF OCTOBER, 2012 AT CHENNAI. SD/- SD/- (V.DURGA RAO) (DR.O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 3 RD OCTOBER, 2012 MPO* COPY TO: 1. ASSESSEE 2. DEPARTMENT 3. CIT 4. CIT(A) 5. DR 6. GF.