Dy. Commissioner of Income Tax, Circle-1(2), Hyderabad V. Cognizant Technology Services Private Limited, Chennai

ITA 1458/Hyd/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2564 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 14-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P V SUBBA RAJU
• Assessee Lawyers: ABHIROOP BHARGAV
• Section: 10AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B BENCH: HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ITA. NO. 1458 /HYD/201 7 ASSESSMENT YEAR: 2012 - 2013 DY. COMMISSIONER OF INCOME TAX, CIRCLE1(2), HYDERABAD. VS. COGNIZANT TECHNOLOGY SERVICES PRIVATE LIMITED, 6 TH FLOOR, NEW NO.165, OLD NO.110, MEMON ETERNITY BUILDING, ST. MARYS ROAD, ALWARPET, CHENNAI 600 018. PAN: AADCR 0712 J (APPELLANT) (RESPONDENT) FOR ASSESSEE: SHRI ABHIROOP BHARGAV FOR REVENUE : S HRI P.V. SUBBARAJU, DR DATE OF HEARING : 31.01.2018 DATE OF PRONOUNCEMENT : 31.01.2018 ORDER PER D. MANMOHAN , VP. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY LD. CIT(A) - 1, HYDERABAD AND IT PERTAINS TO THE A.Y. 2012 - 2013. THE ONLY GROUND URGED BY THE REVENUE READS AS UNDER: THE LD. CIT(A) ERRED IN NOT UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN REDUCING THE TOTAL COMMUNICATION EXPENSES FROM EXPORT TURNOVER WHILE CALCULATING THE DEDUCTION U/S 10AA. 2. AS NOTICED FROM THE ORDER PASSED BY THE LD. CIT(A), THE ASSESSEE - COMPANY DEBITED AN AMOUNT OF RS. 20,61,988/ - TOWARDS COMMUNICATION EXPENDITURE. THE A.O. WAS OF THE OPINION THAT THIS EXPENDITURE WAS ATTRIBUTABLE TO THE DELIVERY OF SOFTWARE OUTSIDE INDIA, WITHOUT WHICH IT WOULD NOT BE POSSIBLE TO EXPORT THE SOFTWARE . THE A.O. 2 HAD THEREFORE TAKEN AID OF SECTION 10AA OF THE ACT TO HOLD THAT THE COMMUNICATION CHARGES ATTRIBUTABLE TO THE EXPORT PROCEEDS HAVE TO BE EXCLUDED FOR ARRIV ING AT THE CORRECT EXPORT TURNOVER. IN THIS REGARD , HE FURTHER OBSERVED THAT THE COMMUNICATION EXPENDITURE IS NOTHING BUT BAND WIDTH CHARGES FOR EXPORTING THE SOFTWARE. 3. ASSESSEE CHALLENGED THE VIEW TAKEN BY THE ASSESSING OFFICER, BY CONTENDING BEFORE THE LD. CIT(A), ON THE GROUND THAT THE INTENTION OF LEGISLATURE IS TO DETERMINE THE EXPORT CONSIDERATION IN WHICH EVENT SPECIFIED EXPENDITURE SHOULD NOT BE REDUCED FROM THE ACTUAL PROCEEDS MERELY BECAUSE IT WAS INCURRED. IT WAS FURTHER CONTENDED THAT TO EX CLUDE WHAT IS NOT INCLUDED WOULD TANTAMOUNT TO REDUCTION OF THE LEGITIMATE SCOPE OF THE COMPONENT OF DEDUCTION. IT WAS ALSO SUBMITTED THAT THE COMPANY HAS NOT RECOVERED COMMUNICATION EXPENSES AND HENCE THE COMMUNICATION EXPENDITURE SHOULD NEITHER BE REDUC ED FROM EXPORT TURNOVER NO R FROM TOTAL TURNOVER FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 10AA OF THE ACT. RELIANCE WAS PLACED UPON THE FOLLOWING DECISIONS OF THE TRIBUNAL: - (A) PATNI TELECOM (P) LTD VS. ITO [22 SOT 26 (28)]; (B) ACIT VS. HEWELLET PACKARD GLOBA L SOFT LTD (ITA NO.333/BANG/08); (C) DCIT VS. SOFTSOL INDIA LTD (22 SOT 271 (HYD) 2008); (D) WILLIS PROCEEDING SERVICES (INDIA) PVT. LTD., VS. ACIT (2010 - TIOL - 576 - ITAT - MUM) (MUMBAI ITAT); (E) ACIT VS. ADP (P) LTD (19 DTR 238 (HYDERABAD ITAT) AND (F) INFOTECH ENTERPRISE LTD VS. AD. CIT (63 SOT 23 (HYDERABAD ITAT) 4. IN THE ALTERNATIVE, IT WAS CONTENDED THAT IF THE SAME HAS TO BE EXCLUDED FOR ARRIVING AT THE CORRECT EXPORT TURNOVER, THE SAME LOGIC HAS TO BE APPLIED TO ARRIVE AT EXPORT TURNOVER AND TOTAL TURNOVER. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE RELIED UPON THE FOLLOWING DECISIONS: - (A) ITA NO.757/HYD/06, DATED 29.02.2008 IN THE CASE OF ITO VS. VIRTUSA INDIA LTD., AND 3 (B) MADRAS SPECIAL BENCH DECISION IN THE CASE OF ITO VS. SAK SOFT LTD 3/3 ITR 353 (AT). 5. LD. CIT (A) ACCEPTED THE ALTERNATIVE SUBMISSION OF THE ASSESSEE AND DIRECTED THE A.O ACCORDINGLY. 6. AGGRIEVED, REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 7. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE AND ALSO CAREFULLY PERUSED THE CASE LAW RELIED UPON BY THE LD COUNSEL FOR THE ASSESSEE. APART FROM THE SPECIAL BENCH DECISION OF THE ITAT MADRAS, THERE ARE DECISIONS OF THE ITAT HYDERABAD BENCH IN THE ASSESSEES OWN CASE FOR THE EARLIER YEARS WHEREIN THE BENCH HAD TAKEN A CONSISTENT VIEW THAT THE COMMUNIC ATION CHARGES SHOULD BE REDUCED BOTH FROM THE EXPORT TURNOVER AS WELL AS FROM THE TOTAL TURNOVER WHILE COMPUTING THE DEDUCTION U/S 10AA OF THE ACT. CONSISTENT WITH THE VIEW TAKEN THEREIN, WE HOLD THAT THE ORDER PASSED BY THE LD. CIT(A) DOES NOT CALL FOR A NY INTERFERENCE. AS PRONOUNCED IN THE OPEN COURT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. S D / - S D / - (D.S. SUNDER SINGH) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT HYDERABAD, DATED: 31 ST JANUARY, 2018. OKK, SR.PS COPY TO 1. COGNIZANT TECHNOLOGY SERVICES PRIVATE LIMITED, 6 TH FLOOR, NEW NO.165, OLD NO.110, MEMON ETERNITY BUILDING, ST. MARYS ROAD, ALWARPET, CHENNAI 600 018. 2. DCIT, CIRCLE - 1(2), B - BLOCK, 7 TH FLOOR, IT TOWERS, A.C. GUARDS, MASAB TANK, HYDERABAD. 3. CIT (A) - 1, HYDERABAD. 4. PR. COMMISSIONER OF INCOME TAX - 1, HYDERABAD. 5. DR, ITAT, HYDERABAD. 6. GUARD FILE