The Deputy Commissioner of Income Tax Circle-1(1)(1), Bangalore V. M/s AOL Online India Pvt Ltd , Bangalore

ITA 1255/BANG/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4214 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 17-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H KABILA J
• Assessee Lawyers: VINEET KUMAR JAIN
• Section: 143(3); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, B ENGALURU BEFORE SHRI JASON P BOAZ , ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER I TA NO. 1255 / BANG/2 0 1 8 (ASSESSMENT YEAR: 20 08 - 09 ) DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 1 (1)( 1 ), BENGA LURU. VS. APPELLANT M/S. AOL ONLINE INDIA PVT.LTD. NO.401, PRESTIGE MERDIAN II, 30, MG ROAD, BENGALURU - 560001 . PAN :AABCN 2578 G RESPONDENT APPELLANT BY : SMT. H.KABILA, JCIT(DR). RESPONDENT BY : SHRI VINEET KUMAR JAIN, CA. DATE OF HEARING : 16 /08/2018 DATE OF PRONOUNCEMENT : 1 7 /08/2018 O R D E R PER JASON P BOAZ , AM : THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 1 , BANGALORE , DT. 16/01/ 2018 FOR THE A SSESSMENT Y EAR 2008 - 09 . 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE AS UNDER : - 2.1 THE ASSESSEE, A COMPANY ENGAGED IN THE BUSINESS OF PROVIDING SOFTWARE DEVELOPMENT SERVICES AND ITES , FILED ITS ORIGINAL RETURN OF INCOME FOR ASSESSMENT YEAR 2008 - 09 ON 30/09 /2008 DECLARING TOTAL INCOME OF RS. 3,40,61,224 / - AFTER CLAIMING DEDUCTION U/S 10A OF THE INCOME - TAX ACT,1961 [FOR SHORT THE ACT ] . REVISED RETU RNS OF INCOME WERE FILED ON 17/ 10/2008 AND 23/10/2008 DECLARING THE SAME INCOME. THE CASE WAS TAKEN UP FOR SCR UTINY BY ITA NO . 1255 /BANG/20 18 PAGE 2 OF 4 ISSUE OF NOTICE UNDER SECTION 143(2) OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT'). THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DT. 07/12/2011 WHEREIN THE ASSESSEE'S INCOME WAS DETERMINED AT RS. 5,03,70,974 / - IN VIEW OF THE ASSESSING OFFICER (AO) INTER ALIA DISALLOWING THE ASSESSEE'S C LAIM FOR DEDUCTION U/S 10A OF THE ACT. ON APPEAL, THE CIT(APPEALS) 1 , BANGALORE PARTLY ALLOWED THE ASSESSEE'S APPEAL FOR STATISTICAL PURPOSES VIDE THE IMPUGNED ORDER DT. 16 /01/2018 . 3. 1 AGGRIEVED BY THE ORDER OF THE CIT(APPEALS) 1 , BENGALURU DT. 16 /01/2018 FOR ASSESSMENT YEAR 20 08 - 09 , REVENUE HAS FILED THIS APPEAL RAISING THE FOLLOWING GROUNDS : - 3.2 THE LEARNED DEPARTMENTAL REPRESENTATIVE WAS HEARD IN SUPPORT OF THE GROUN DS RAISED. 3.3 THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THERE WAS NO ERROR ON THE PART OF THE LEARNED CIT (APPEALS) - 1, IN ALLOWING THE ASSESSEE'S CLAIM FOR DEDUCTION UNDER SECTION 10A OF THE ACT BY RELYING ON THE JUDGMENT O F THE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. TATA ELXSI LTD. (349 ITR 98)(KAR) . IT WAS FURTHER SUBMITTED THAT THIS ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT V. HCL TECHNOLOGIES LTD. (2 018) 93 TAXMANN.COM 33 (SC). 3.4.1 W E H A V E H EA R D TH E R I V AL C ON T E N T I ON S A N D P E R US E D A N D ITA NO . 1255 /BANG/20 18 PAGE 3 OF 4 CA R EF ULL Y C O N S I D ER E D T H E M A T E R I A L O N RE C O R D ; IN C L U D I N G TH E J U D I C I A L P R ON O U N C E M E N T C I T E D . H E J U R I S D I C T I O N AL H I G H C O U RT O F K A R N A T A K A I N TH E C A S E O F CIT V T A T A EL X S I L T D ( 3 4 9 I T R 98 ) ( K AR) H AS H E L D T H A T W H EN CE R T A I N E X P E NS ES ARE E X C LU D ED F R O M TH E E X P O R T T U R NO V ER F O R TH E PU R P O S ES O F C O M PU TI N G D E DU C T I O N A D M ISS I BL E U N D E R T H E A C T ; L I K E U / S . 10 A O F T H E A C T , S U C H E X P E N S ES ARE A L S O T O B E E X C L U D ED F R O M TO T AL TU R N O V ER, A S E X P O RT TU R N O V ER I S A P A R T O F T O T AL T U R NO V ER. T H E D EC I S IO N I N TH E C A S E O F T A T A EL X S I LT D ( S U P R A ) H AS A L S O B E E N F O LL O W ED B Y T H E H ON B L E C O U RT I N IT S O R D ER I N T H E C A S E O F D CIT V M O T O R I ND U ST R I E S C O . L TD ., (I T A N O . 7 7 6 /2 0 0 6 , 7 4 4/ 2 00 7 A N D 1 1 55 / 20 0 6 D A T ED 13 . 0 6 . 2 0 1 4 ), H OL D I N G T H AT I F A N Y E X P E N D IT U RE I S S O UG H T T O B E RE M OV ED F R O M E X PO R T TU R N O V ER, TH E N I T S HO U L D A L S O B E R E D U C E D FR O M TO T AL T U R N O V ER F O R T H E PU R P O S ES O F C O M PU TI N G TH E E L I G I B L E D E D U C T I O N U / S . 1 0 A O F T H E A C T . THIS ISSUE IS NO LONGER RES INTEGRA, AND HAS BE EN DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST REVENUE BY THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT V. HCL TECHNOLOGIES LTD. (2018) 93 TAXMANN.COM 33 (SC); WHEREIN AT PARAS 19 TO 21 , IT HAS BEEN HELD AS UNDER : - 19. IN THE INSTANT CASE , IF THE DEDUCTIONS ON FREIGHT, TELECOMMUNICATION AND INSURANCE ATTRIBUTABLE TO THE DELIVERY OF COMPUTER SOFTWARE UNDER SECTION10A OF THE IT ACT ARE ALLOWED ONLY IN EXPORT TURNOVER BUT NOT FROM THE TOTAL TURNOVER THEN, IT WOULD GIVE RISE TO INADVERTENT, UN LAWFUL, MEANINGLESS AND ILLOGICAL RESULT WHICH WOULD CAUSE GRAVE INJUSTICE TO THE RESPONDENT WHICH COULD HAVE NEVER BEEN THE INTENTION OF THE LEGISLATURE. 20. EVEN IN COMMON PARLANCE, WHEN THE OBJECT OF THE FORMULA IS TO ARRIVE AT THE PROFIT FROM EXPORT B USINESS, EXPENSES EXCLUDED FROM EXPORT TURNOVER HAVE TO BE EXCLUDED FROM TOTAL TURNOVER ALSO. OTHERWISE, ANY OTHER INTERPRETATION MAKES THE FORMULA UNWORKABLE AND ABSURD. HENCE, WE ARE SATISFIED THAT SUCH DEDUCTION SHALL BE ALLOWED FROM THE TOTAL TURNOVER IN SAME PROPORTION AS WELL. 21. ON THE ISSUE OF EXPENSES ON TECHNICAL SERVICES PROVIDED OUTSIDE, WE HAVE TO FOLLOW THE SAME PRINCIPLE OF INTERPRETATION AS FOLLOWED IN THE CASE OF EXPENSES OF FREIGHT, TELECOMMUNICATION ITA NO . 1255 /BANG/20 18 PAGE 4 OF 4 ETC., OTHERWISE THE FORMULA OF CALCUL ATION WOULD BE FUTILE. HENCE, IN THE SAME WAY, EXPENSES INCURRED IN FOREIGN EXCHANGE FOR PROVIDING THE TECHNICAL SERVICES OUTSIDE SHALL BE ALLOWED TO EXCLUDE FROM THE TOTAL TURNOVER. 3.4.2 IN T H I S L E G A L A N D F A C T U A L M A T R I X O F T H E CA S E, A S D I S C U S S ED A B O V E, RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT VS. HCL TECHNOLOGIES LTD. (SUPRA), WE DIRECT THE AO TO ALLOW ASSESSEE'S CLAIM FOR DEDUCTION UNDER SECTION 10A OF THE ACT. C O NS E Q U E N T L Y , TH E G R O UN D S R A IS E D B Y RE V E N U E A R E D I S M ISS E D . 4. IN THE RESULT, REVENUE S APPEAL FOR ASSESSMENT YEAR 20 08 - 09 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 7 TH AUGUST, 2018 S D/ - SD/ - ( LALIET KUMAR ) ( JASON P BOAZ ) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE : BENGALU RU. D A T E D : 1 7 / 0 8 /201 8 SRINIVASULU, SPS COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME - TAX APPELLATE TRIBUNAL BANGALORE