Asst. Commissioner of Income Tax, Bangalore V. M/s. Cibersites India Pvt. Ltd., Bangalore

ITA 1325/BANG/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7258 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-08-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 14-07-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Revised return
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER IT(TP)A NO. 1325/BANG/2016 (ASST. YEAR 2010-11) THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 2(1)(1), BENGALURU. . APPELLANT VS. M/S CIBERSITES INDIA PVT. LTD., 5 TH FLOOR, TOWER D, IBC KNOWLEDGE PARK, 4/1, BANNERGHATA ROAD, BENGALURU. . RESPONDENT PAN AABCK2797E. APPELLANT BY : SHRI SUNIL KUMAR SINGH, CIT RESPONDENT BY : SHRI DWARKANATH EMPLOYEE OF COM PANY DATE OF HEARING : 7-11-2017 DATE OF PRONOUNCEMENT : 10-11-2017 O R D E R PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER : THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF THE CIT(A)-2, BANGALORE DATED 25.10.2016 FOR ASSESSMENT YEAR 2010-11. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE AS UND ER:- IT(TP)A NO.1325/ B/16 2 2.1 THE ASSESSEE, A COMPANY ENGAGED IN THE BUSINE SS OF PROVIDING SOFTWARE DEVELOPMENT AND ALLIED SERVICES, FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2010-11 ON 28.09.2010 DECLARING TOTAL INCOME OF RS.4,51,233/- AFTER, INTER ALIA, CLAIMING DEDUCTIO N U/S. 10A OF THE INCOME TAX ACT, 1961. THE ASSESSEE FILED A REVISED RETURN OF INCOME ON 23/11/2011 DECLARING NIL INCOME. THE CASE WAS TA KEN UP FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S. 143 (3) R.W.S 144C OF THE ACT VIDE ORDER DATED 20.3.2014 WHEREIN THE ASSE SSEES INCOME WAS DETERMINED AT RS.73,27,270/- IN VIEW OF, INTER ALI A, THE ASSESSING OFFICER (AO) DISALLOWING THE ASSESSEES EXCESS CL AIM FOR DEDUCTION U/S. 10A OF THE ACT TO THE EXTENT OF RS.73,27,270/- . ON APPEAL, THE CIT(A)-2, BANGALORE PARTLY ALLOWED THE ASSESSEES A PPEAL VIDE ORDER DATED 25.4.2016. IN DOING SO, THE LD. CIT(A) ALLOW ED THE ASSESSEES CLAIM FOR DEDUCTION U/S. 10A OF THE ACT FOLLOWING T HE DECISIONS OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V T ATA ELXSI LTD., (349 ITR 98) (KAR). 3.0 AGGRIEVED BY THE ORDER OF THE CIT(A)-2, BANGALO RE DATED 25.4.2016 FOR ASSESSMENT YEAR 2010-11, REVENUE HAS FILED THIS APPEAL, RAISING THE FOLLOWING GROUNDS:- 1) THE ORDER OF THE LD. CIT(A) IS CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND HENCE NOT SUSTAIN ABLE. 2) WHETHER THE ID. CIT(A) IS RIGHT ON THE ISSUE OF REDUCTION OF EXPENDITURE INCURRED IN FOREIGN EXCHAN GE ONLY FROM TURNOVER FOR DEDUCTION U/S IOA BY RELYING ON IT(TP)A NO.1325/ B/16 3 THE DECISION OF THE HON'BLE HIGH COURT IN THE CASE OF TATA ELXSI LTD., VS ACIT(IN 349 ITR 98), WHICH THE DEPARTMENT HAS NOT ACCEPTED AND THE SLP FILED BEFOR E THE APEX COURT IS PENDING FOR ADJUDICATION, HENCE THE O RDER MAY BE APPEALED AGAINST. 3) WHETHER THE CIT(A) IS RIGHT ON THE ISSUE OF SET OFF OF BROUGHT FORWARD OF LOSSES(FROM NON-STPI UNIT) FOR DEDUCTION U/S 10A, SINCE THE ORDER ON WHICH THE CIT (A) HAS RELIED ON THE JUDGMENT OF HON'BLE HIGH COURT IN THE CASE OF CIT VS. YOKOGAWA INDIA LTD.,(341 ITR 385), WHICH IS NOT ACCEPTED BY THE DEPARTMENT AND THE SLP FILED ON THIS ISSUE IS PENDING BEFORE THE SUPREME C OURT. 4) FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT(A) IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 4. GROUNDS S.NOS. 1 AND 4 4.1 THESE GROUNDS BEING GENERAL IN NATURE, NO ADJUD ICATION IS CALLED FOR THEREON. 5. GROUND NO.2 DEDUCTION U/S 10A OF THE ACT 5.1 THE LD DR WAS HEARD IN SUPPORT OF THE GROUND R AISED (SUPRA) AND PLACED STRONG RELIANCE ON THE FINDINGS IN THE O RDER OF ASSESSMENT BY THE AO ON THIS ISSUE. IT(TP)A NO.1325/ B/16 4 5.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JU DICIAL PRONOUNCEMENT CITED. AS REGARDS THE ISSUE OF REDUC TION OF THE ITEMS OF EXPENDITURE INCURRED IN FOREIGN CURRENCY SUCH AS TELECOMMUNICATION CHARGES, PROFESSIONAL AND CONSULT ATION FEES, TRAVELLING AND CONVEYANCE EXPENSES ETC.; WHICH ARE ATTRIBUTABLE TO THE DELIVERY OF SOFTWARE OUTSIDE INDIA AND IN RENDERING OF TECHNICAL SERVICES OUTSIDE INDIA, THE JURISDICTIONAL HIGH COU RT OF KARNATAKA IN THE CASE OF CIT V TATA ELXSI LTD (349 ITR 98) (KAR) HAS HELD THAT WHEN CERTAIN EXPENSES ARE EXCLUDED FROM THE EXPORT TURNOVER FOR THE PURPOSES OF COMPUTING DEDUCTION ADMISSIBLE UNDER TH E ACT; LIKE U/S. 10A OF THE ACT, SUCH EXPENSES ARE ALSO TO BE EXCLUD ED FROM TOTAL TURNOVER, AS EXPORT TURNOVER IS A PART OF TOTAL TUR NOVER. THE DECISION IN THE CASE OF TATA ELXSI LTD (SUPRA) HAS ALSO BEEN FO LLOWED BY THE HONBLE COURT IN ITS ORDER IN THE CASE OF DCIT V MO TOR INDUSTRIES CO. LTD., (ITA NO. 776/2006, 744/2007 AND 1155/2006 DAT ED 13.06.2014), HOLDING THAT IF ANY EXPENDITURE IS SOUGHT TO BE REM OVED FROM EXPORT TURNOVER, THEN IT SHOULD ALSO BE REDUCED FROM TOTAL TURNOVER FOR THE PURPOSES OF COMPUTING THE ELIGIBLE DEDUCTION U/S. 1 0A OF THE ACT. IN THIS LEGAL AND FACTUAL MATRIX OF THE CASE, AS DISCU SSED ABOVE, WE FIND NO REASON TO INTERFERE WITH OR DEVIATE FROM THE FIN DING RENDERED BY THE LD. CIT(A) ON THIS ISSUE, AND THEREFORE UPHOLD THE SAME. CONSEQUENTLY, THE GROUND AT S.NO. 2 RAISED BY REVEN UE IS DISMISSED. 6. GROUND NO.3 COMPUTATION OF DEDUCTION U/S 10A OF T HE ACT IT(TP)A NO.1325/ B/16 5 6.1 THE LD DR FOR REVENUE WAS HEARD IN SUPPORT OF T HE GROUND RAISED (SUPRA) AND PLACED STRONG RELIANCE ON THE FI NDING IN THE ORDERS OF THE AO ON THIS ISSUE. 6.2 PER CONTRA, THE LD AR FOR THE ASSESSEE SUBMITTE D THAT THE ASSESSEES CLAIM FOR BEING ALLOWED THE DEDUCTION CL AIMED U/S 10A OF THE ACT IS SQUARELY COVERED IN ITS FAVOUR BY THE DE CISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. YOKOGOWA INDIA LTD. (341 ITR 385). IT IS SUBMITTED THAT THE LD CIT(A), FOLLOWING THE AFORESAID DECISION, HAS RIGHTLY DIREC TED THE AO TO COMPUTE THE DEDUCTION U/S 10A OF THE ACT BEFORE SET TING OFF THE BROUGHT FORWARD BUSINESS LOSSES AND DEPRECIATION FO R THE ASST. YEAR IN QUESTION. 6.3.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. FROM A PERUSAL OF THE DETAILS ON RECORD IT IS SEEN THAT THE AO WAS OF THE VIEW THAT DEDUCTION U/S 10A OF THE ACT WAS TO BE ALLOWED ONLY ON THE INCOME COMPUT ED AFTER SETTING OFF THE BROUGHT FORWARD LOSSES AND DEPRECIATION. A CCORDINGLY, THE ASSESSEES INCOME FOR BOTH ASST. YEARS WAS, INTER A LIA, DETERMINED BY THE AO BY FIRST SETTING OFF THE BROUGHT FORWARD LOS SES/DEPRECIATION FROM THE BUSINESS INCOME FOR CALCULATING THE DEDUCT ION U/S 10A OF THE ACT. 6.3.2 WE FIND THAT THE ISSUE IN DISPUTE BEFORE US I S SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HO NBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. YOKOGAWA INDIA LT D. (2012) 341 ITR 385 (KAR). IN ITS DECISION THE HONBLE HIGH CO URT HAD HELD THAT IT(TP)A NO.1325/ B/16 6 AS THE INCOME OF SEC. 10A UNIT HAS TO BE EXCLUDED A T SOURCE ITSELF BEFORE ARRIVING AT THE GROSS TOTAL INCOME/LOSS. AS THE DEDUCTION U/S 10A OF THE ACT HAS TO BE COMPUTED FROM THE TOTAL IN COME OF THE ASSESSEE, THE BROUGHT FORWARD BUSINESS LOSS AND DEP RECIATION BEING SET OFF AGAINST SUCH PROFIT AND GAINS OF THE UNDERTAKIN G AS A WHOLE WOULD NOT ARISE. SECTION 10A OF THE ACT BEING ANALOGOUS WITH SEC. 10B OF THE ACT, THE AFORESAID DECISION OF THE HONBLE HIGH COURT WOULD EQUALLY APPLY TO THE CASE ON HAND. IN THIS VIEW OF THE MATTER AND RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN YOKOGAWA INDIA LTD. (341 ITR 385), WHICH H AS SINCE BEEN APPROVED BY THE HONBLE APEX COURT IN CIT VS. YOKOG AWA INDIA LTD., (2017) 77 TAXMANN.COM 41(SC), WE UPHOLD THE I MPUGNED ORDERS OF THE LD CIT(A) IN DIRECTING THE AO TO COMPUTE THE DEDUCTION U/S 10A OF THE ACT IN THE CASE ON HAND WITHOUT SETTING OFF THE BROUGHT FORWARD BUSINESS LOSSES AND DEPRECIATION FROM THE A SSESSEES INCOME. WE HOLD AND DIRECT ACCORDINGLY. CONSEQUENTLY, THE GROUND NO.3 RAISED BY REVENUE IS DISMISSED. 4. IN THE RESULT, THE REVENUES APPEAL FOR THE ASST . YEAR 2010-11 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH NOVEMBER, 2017 . SD/- SD/- (SUNIL KUMAR YADAV) (JASON P BO AZ) JUDICIAL MEMBER ACCOUNTANT MEMB ER BANGALORE DATED : 10/11/2017 VMS IT(TP)A NO.1325/ B/16 7 COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER SR. PRIVAT E SECRETARY, ITAT, BANGALORE