Deputy Commissioner of Income tax, Bangalore V. M/s Applied Materials India P Ltd, Bangalore

ITA 1365/BANG/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89869 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 07-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: FARHAT HUSSAIN QURESHI
• Assessee Lawyers: VISHNU BAGRI
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH B, BANGALORE BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO.1365(B)/2014 (ASSESSMENT YEAR : 2009-10) THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-11(1), BANGALORE APPELLANT VS M/S APPLIED MATERIALS INDIA PVT.LTD UNIT 5, 3 RD FLOOR, EXPLORER BUILDING, INTERNATIONAL TECH PARK, WHITFIELD, BANGALORE PAN NO.AAECA 2635C RESPONDENT REVENUE BY : SHRI FARHAT HUSSAIN QURESHI, CIT ASSESSEE BY : SHRI VISHNU BAGRI, CA DATE OF HEARING : 08-04-2015 DATE OF PRONOUNCEMENT : 17-04-2015 O R D E R PER SHRI VIJAY PAL RAO, JM: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 31-07- 2014 OF THE CIT(A), BANGALORE FOR ASSESSMENT YEAR: 2009-10. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS; 1. THE ORDER OF THE CIT(A) IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE.. ITA NO.1365(BANG)2014 2 2. THE CIT(A) ERRED IN DIRECTING THE AO T FOLLOW T HE RATIO LAID DOWN BY THE HONBLE COURT IN THE CASE OF TATA ELXSI LTD 349 ITR 98 AND EXCLUDE THE TELECOMMUNICATION CHARGE S INCURRED IN FOREIGN CURRENCY FROM THE TOTAL TURNOVE R ALSO WHILE COMPUTING THE DEDUCTION U/S 10A OF THE IT ACT AS THE DECISION OF THE HIGH COURT IN BINDING, WITHOUT APPR ECIATING THE FACT THAT THERE IS NO PROVISION IN SECTION 10A THAT SUCH EXPENSES SHOULD BE REDUCED FROM THE TOTAL TURNOVER ALSO, AS CLAUSE (IV) OF THE EXPLANATION TO SECTION 10A PROVI DES THAT SUCH EXPENSES ARE TO BE REDUCED ONLY FROM THE EXPO RT TURNOVER. 3. THE CIT(A) ERRED I NOT APPRECIATING THE FACT TH AT THE JURISDICTIONAL HIGH COURTS DECISION IN THE CASE O F TATA ELXSI LTD 349 ITR 98 HAS NOT BEEN ACCEPTED BY THE DEPARTM ENT AND AN APPEAL HAS BEEN FILED BEFORE THE HONBLE SUP REME COURT. 2. THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND IS IN THE BUSINESS OF SOFTWARE DEVELOPMENT AND ENGINEERING SERVICES. THE AO WHILE COMPLETING THE ASSESSMENT HAS REDUCED THE DEDUCTION CLAIMED U/S 10A OF THE IT ACT BY EXCLUDING THE TELECOMMUNICATION CHARG ES INCURRED IN FOREIGN CURRENCY FROM THE EXPORT TURNOVER OF THE ASSESSEE. THE ASSESSEE HAS CHALLENGED THE ACTION OF THE AO IN RESTRICTING THE DEDUCTION U/S 10A BEFORE THE CIT(A) AND CONTENDED BY TAKING A ALTERNATIVE PL EA THAT EVEN IN CASE THE TELECOMMUNICATION EXPENSES ARE REQUIRED TO BE REDUC ED FROM THE EXPORT TURNOVER FOR COMPUTING THE DEDUCTION U/S 10A OF THE ACT, THE SAID ITA NO.1365(BANG)2014 3 EXPENDITURE SHOULD ALSO BE REDUCED FROM THE TOTAL T URNOVER. IN SUPPORT OF ITS CONTENTION, THE ASSESSEE RELIED ON THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS M/ S TATA ELXSI LTD. 349 ITR 98. THE CIT(A) ACCEPTED THE CONTENTION OF THE ASS ESSEE AND DIRECTED THE AO TO EXCLUDE SUCH EXPENSES FROM EXPORT TURNOVER A S WELL AS THE TOTAL TURNOVER AND THEN RE COMPUTE THE ELIGIBLE DEDUCTION U/S 10A OF THE IT ACT. 3. BEFORE US THE LEARNED DR HAS RELIED UPON THE OR DER OF THE AO AND SUBMITTED THAT THE DEPARTMENT HAS NOT ACCEPTED THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S TATA E LXSI LTD. (SUPRA) AND HAS FILED AN APPEAL BEFORE THE HONBLE SUPREME COURT. 4. ON THE OTHER HAND, LEARNED AR OF THE ASSESSEE S UBMITTED THAT THE ISSUE IS COVERED BY THE JUDGMENT OF HONBLE JURISDI CTIONAL HIGH COURT. 5. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE MATERIAL ON RECORD, WE FIND THAT THE CIT(A) HAS ADJUDICATED THE ISSUE IN PARA-3.3 OF THE IMPUGNED ORDER AS UNDER; 3.3 I HAVE CAREFULLY CONSIDERED THE APPELLANTS SUBMISSION AND PERUSED THE ASSESSMENT ORDER. THE LAW IS NOW WELL SETTLED IN FAVOUR OF THE TAX-PAYER IN REGA RD TO THE DEDUCTION OF EXPENSES FROM EXPORT TURNOVER VIS--VI S TOTAL TURNOVER FOR PURPOSES OF CALCULATING THE DEDUCTION U/S 10B OF THE ACT. THE HONBLE HIGH COIRT OF KARNATAKA IN T ATA ELXSI LTD VS ACIT (349 ITR 98) HAS HELD THAT, WHERE CERT AIN EXPENSES ARE EXCLUDED FROM THE EXPORT TURNOVER FOR PURPOSES ITA NO.1365(BANG)2014 4 OF CALCULATING DEDUCTIONS ADMISSIBLE UNDER THE ACT, SUCH EXPENSES SHOULD ALSO BE EXCLUDED FROM THE TOTAL TU RNOVER AS THE EXPORT TURNOVER FORMS PART OF THE TOTAL TURNOVE R. RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDIC TIONAL HIGH COURT, THE AO IS DIRECTED TO RE-COMPUTE ELIGIBLE DE DUCTION U/S 10A OF THE ACT. THERE IS NO DISPUTE THAT THE ISSUE IS NOW COVERED BY THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S TATA ELXSI LTD (SUPRA). THE JUDGMENT OF THE HONBLE JURISDICTION AL HIGH COURT IN THE CASE OF M/S TATA ELXSI LTD (SUPRA) HAS NEITHER BEEN STAYED NOR HAS BEEN OVERRULED BY THE HONBLE SUPREME COURT THEREFORE, T HE SAID JUDGMENT IS BINDING ON THIS TRIBUNAL. ACCORDINGLY, WE DO NOT F IND ANY ERROR AND LEGALITY IN THE ORDER OF THE CIT(A) QUA THIS ISSUE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH APRIL, 2015. SD/- SD/- (PRAMOD KUMAR) (VIJAY PAL R AO) ACCOUNTANT MEMBER JUDICIAL MEMBER D A T E D : 17-04-2015 PLACE: BANGALORE AM* ITA NO.1365(BANG)2014 5 COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER AR, ITAT, BANGALORE