Appeal details
Counselvise Citation
138121114 RSA 2011
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 3 month(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
31-03-2015
Appeal Filed By
Department
Order Result
Partly Allowed
Bench Allotted
A
Next Hearing Date
17-03-2015
Assessment Year
2002-2003
Appeal Filed On
30-12-2011
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SMT. P. MADHAVI DEVI , JUDICIAL MEMBER A ND SHRI ABRAHAM P GEORGE , ACCOUNTANT MEMBER ITA NO S . 1381 & 1382 /B ANG/2011 (ASSESSMENT YEAR S : 2002 - 03 & 2003 - 04 ) INCOME - TAX OFFICER, WARD 1 2(1), BANGALORE. VS. APPELLANT M/S.RELQ SOFTWARE PVT. LTD. NO.47/1, 9 TH CROSS, SRI KRISHNA ARCADE, 1 ST MAIN, SARAKKI INDL. AREA, J.P.NAGAR 3 RD PHASE, BANGALORE - 78. RESPONDENT PAN: AACCR9468C APPELLANT BY : SHRI P.DHIVAHAR , JCIT(DR). RESPONDENT B Y: SHRI SRIRAM SESHADRI, ADVOCATE. DATE OF HEARING : 17 /0 3 /2015 DATE OF PRONOUNCEMENT: 31 /03/2015 O R D E R PER SMT. P.MADHAVI DEVI, JM : THESE ARE APPEALS FILED BY THE REVENUE AGAINST THE IDENTICAL ORDERS OF THE CIT (A) - V, BANGALORE, DATED 20/10/2011 FOR THE ASSESSMENT YEARS 2002 - 03 AND 2003 - 04. IN BOTH THE APPEALS, THE REVENUE IS AGGRIEVED BY THE ORDER OF THE CIT(A) IN DIRECTING THE ASSESSING OFFICER (AO) (I) NOT TO SET OFF THE LOSS OF NON - STPI UNIT AGAINST PROFITS OF STPI UNIT FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 10A OF THE INCOME - TAX ACT, 1961 ITA NO S . 1381 & 1382 /BANG/201 1 M/S.RELQ SOFTWARE PVT.LTD. PAGE 2 OF 5 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT] ; AND (II) NOT TO EXCLUDE THE THAT THE EXPENSES INCURRED IN FOREIGN EXCHANGE FOR TECHNICAL SERVICES RENDERED OUTSIDE IND IA FROM THE EXPORT TURNOVER FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 10A OF THE ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE - COMPANY WHICH IS ENGAGED IN THE BUSINESS OF SOFTWARE VALIDATION, TESTING AND VERIFICATION, FILED ITS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) READ WITH SEC.147 OF THE ACT, THE AO EXAMINED THE ASSESSEE S CLAIM OF DEDUCTION U/S 10A OF THE ACT. ON PERUSAL OF THE ASSESSEE S CLAIM, THE AO OBSERVED THAT THE ASSESSEE HAS ONE STPI UNIT AND ANOTHER NON - STPI UNIT LOCATED AT BANGALORE. HE FURTHER OBSERVED THAT THE ASSESSEE HAS LOSS FROM NON - STPI UNIT AND PROFIT FROM STPI UNIT AND THE ASSESSEE HAS CLAIMED DEDUCTION U/S 10A OF THE ACT FROM PROFITS FROM STPI UNIT. HE HELD THAT LOSS FROM NON - STPI UNIT IS TO BE SET OFF AGAINST PROFITS OF THE STPI UNIT BEFORE COMPUTING DEDUCTION U/S 10A OF THE ACT. 3. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHO ALLOWED THE SAME BY FOLLOWING THE DECISION OF THE TRIB UNAL IN THE ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2004 - 05 WHEREIN, AFTER FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF YOKOGAWA INDIA LTD., IN ITA NO.356/2010, IT WAS HELD THAT PROFITS OR LOSS OF NON - STPI CANNOT ITA NO S . 1381 & 1382 /BANG/201 1 M/S.RELQ SOFTWARE PVT.LTD. PAGE 3 OF 5 BE SET OFF A GAINST PROFITS OF THE STPI UNIT. AGAINST THE RELIEF GIVEN BY THE CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 4. AFTER HEARING BOTH THE PARTIES AND AFTER GOING THROUGH THE RECORDS AND ALSO THE JUDICIAL PRECEDENTS RELIED UPON BY BOTH THE PARTIES, WE FIND THAT THE ASSESSEE S OWN CASE HAD COME UP BEFORE THE HON BLE HIGH COURT IN ITA NO.892/2008 AND BY ORDER DATED 25/07/2014, THE HON BLE HIGH COURT HAS HELD THAT CARRIED FORWARD LOSS OR UNABSORBED DEPRECIATION OF NON - STPI UNIT CANNOT BE SET OFF AGAINST THE INCOME OF THE STPI UNIT FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 10A OF THE ACT. THEREFORE, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) ON THIS ISSUE. 5. AS REGARDS THE SECOND ISSUE I.E. EXCLUSION OF THE EXPENDITURE INCURR ED BY THE ASSESSEE IN FOREIGN EXCHANGE OUTSIDE INDIA, THE AO OBSERVED THAT THE EXPENDITURE INCURRED IN FOREIGN EXCHANGE BY THE ASSESSEE PERTAINS TO PAYMENTS MADE TO ENGINEERS WORKING ON - SITE, WHO ARE ENGAGED IN MAKING OF COMPUTER SOFTWARE . THE AO HELD THA T THE SERVICES RENDERED BY THE ASSESSEE ARE TECHNICAL SERVICES AND THEREFORE THESE EXPENSES INCURRED IN FOREIGN CURRENCY FOR RENDERING TECHNICAL SERVICES OUTSIDE INDIA RE TO BE EXCLUDED FROM THE EXPORT TURNOVER WHILE RECKONING PROFITS U/S 10A OF THE ACT. 6. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHO ALLOWED THE SAME BY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE ASSESSEE S OWN CASE AND DIRECTED THE AO TO ITA NO S . 1381 & 1382 /BANG/201 1 M/S.RELQ SOFTWARE PVT.LTD. PAGE 4 OF 5 EXCLUDE COMMUNICATION CHARGES OF RS.4,59,941/ - ONLY AS SPECIFIED BY T HE TRIBUNAL. AGGRIEVED BY THE RELIEF GIVEN BY THE CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 7. UPON HEARING BOTH THE PARTIES AND UPON CONSIDERING THE DECISION OF THE HON BLE KARNATAKA HIGH COURT IN ASSESSEE S OWN CASE FOR THE EARLIER ASSESSME NT YEAR, WE FIND THAT THE HON BLE HIGH COURT HAD REMANDED THE ISSUE TO THE FILE OF THE AO TO DECIDE WHETHER THE SAID TECHNICAL SERVICES RENDERED WERE IN CONNECTION WITH EXPORT OF COMPUTER SOFTWARE OR IT IS A CASE OF EXCLUSIVE LY RENDERING TECHNICAL SERVICES AND BASED ON SUCH FACTUAL FINDING , TO COMPUTE THE LIABILITY OF TAX OR EXEMPTION. IT IS THE CASE OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT FOR THE RELEVANT ASSESSMENT YEAR, FACTS ARE ON RECORD AND THEREFORE THERE WAS NO NEED FOR ANY FRESH REMAND TO THE AO. 8. HAVING REGARD TO THE RIVAL CONTENTIONS AND ALSO THE MATERIAL ON RECORD, IT IS INDEED STATED IN THE ASSESSMENT ORDER BY THE AO THAT THE EXPENDITURE INCURRED IN FOREIGN CURRENCY IS TOWARDS PAYMENT TO ENGINEE RS SENT ABROAD FOR SOFTWARE DEV ELOPMENT. IT IS NOT CLEAR AS TO WHETHER IT RELATES TO COMPUTER SOFTWARE EXPORTED BY THE ASSESSEE . IN VIEW OF THE SAME, WE DEEM IT FIT AND PROPER TO REMAND THE ISSUE TO THE FILE OF THE AO FOR RE - EXAMINATION OF FACTS AND IF IT IS FOUND THAT DEVELOPMENT OF COMPUTER SOFTWARE IS PURSUANT TO THE EXPORT OF COMPUTER SOFTWARE BEING CARRIED OUT BY THE ASSESSEE, THEN THE SAID ITA NO S . 1381 & 1382 /BANG/201 1 M/S.RELQ SOFTWARE PVT.LTD. PAGE 5 OF 5 EXPENDITURE SHALL NOT BE EXCLUDED FROM THE EXPORT TURNOVER. THE GROUND OF APPEAL NO.3 IN BOTH THE ASSESSMENT YEARS IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, BOTH THE REVENUE S APPEALS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 31 ST MARC H , 2015. SD/ - SD/ - (ABRA HAM P GEORGE) (SMT. P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER EKSRINIVASULU COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE T RIBUNAL BANGALORE
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