Deputy Commissioner of Income Tax, Circle-6(1)(2), Bangalore V. M/s. Sterling Commerce Solutions India Pvt Ltd, Bangalore

ITA 1558/BANG/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6457 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 17-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B BALAKRISHNA CIT DR SHRI NA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI B.R BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.1558/BANG/2017 ASSESSMENT YEAR: 2008-09 THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-6(1)(2), BENGALURU. VS. M/S STERLING COMMERCE SOLUTIONS INDIA PVT. LTD., 4/1, IBC KNOWLEDGE PARK, TOWER D LEVEL, 1, BENNERGHATTA ROAD, BENGALURU-560 029. PAN AAACY 1364L APPELLANT RESPONDENT CO NO.10/BANG/2018 ASSESSMENT YEAR: 2008-09 (BY ASSESSE E) APPELLANT BY : SHRI B BALAKRISHNA, ADDL. CIT (DR) RESPONDENT BY : SHRI NAGESHWAR RAO, ADVOCATE DATE OF HEARING : 17.10.2019 DATE OF PRONOUNCEMENT : .10.2019 O R D E R PER BENCH : THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJE CTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATE D 28-02-2017 PASSED BY LD CIT(A)-6, BENGALURU AND THEY RELATE TO THE ASSESSMENT YEAR 2008-09. ITA NO.1558 /BANG/2017 CO NO.10/BANG/2018 PAGE 2 OF 6 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PLA NNING, DESIGN AND DEVELOPMENT OF COMPUTER SOFTWARE. THE ASSESSEE HAS CLAIMED DEDUCTION U/S 10A OF THE ACT SINCE AY 2003-04. THE ASSESSING OFFICER, WHILE COMPUTING DEDUCTION U/S 10A OF THE A CT, REDUCED FOLLOWING ITEMS FROM EXPORT TURNOVER ONLY: - (A) TELECOMMUNICATION EXPENSES - RS.1,22,97,064/- (B) TRAVEL EXPENSES - RS. 2,42,72,791/- (C) PROFESSIONAL SERVICES EXPENSES INCURRED IN FOREIGN CURRENCY - RS. 7,09,645/ - (D) INSURANCE EXPENSES - RS. 53,08,90 6/- (E) FOREIGN EXCHANGE LOSS - RS. 2,04,66,809/- THE ABOVE AMOUNTS WERE NOT REDUCED FROM THE TOTAL TURNOVER BY THE AO WHILE COMPUTING THE DEDUCTION U/S 10A OF THE ACT. HENCE THE ASSESSEE CHALLENGED THE ABOVE SAID METHOD OF CO MPUTATION MADE BY THE AO BY FILING APPEAL BEFORE LD CIT(A). 3. THE LD CIT(A) NOTICED THAT THE HON'BLE KARN ATAKA HIGH COURT HAS HELD IN THE CASE OF TATA ELIXI LTD (349 ITR 98) (KAR) THAT WHILE COMPUTING DEDUCTION U/S 10A OF THE ACT, IF EXPORT T URNOVER IS ARRIVED AT AFTER EXCLUDING CERTAIN EXPENDITURE, THE N SAID EXPENSES SHOULD ALSO BE EXCLUDED FROM TOTAL TURNOVER ALSO. HE FURTHER NOTICED THAT SIMILAR VIEW WAS EXPRESSED BY HON'BLE KARNATAKA HIGH COURT IN THE CASE OF DELL INTERNATIONAL SERVICES P LTD (21 TAXMAN 15)(KAR). ITA NO.1558 /BANG/2017 CO NO.10/BANG/2018 PAGE 3 OF 6 4. ACCORDINGLY, THE LD CIT(A) AGREED WITH THE CONTENTIONS OF THE ASSESSEE IN PRINCIPLE. HOWEVER, THE LD CIT(A) TOOK THE VIEW THAT THE ASSESSEE HAS NOT PROVED THE CLAIM OF FOREIGN EXCHAN GE LOSS OF RS.2,04,66,809/- BY PRODUCING DOCUMENTARY EVIDENCE TO SHOW THAT THE LOSS WAS INCURRED. ACCORDINGLY HE HELD THAT TH E DISALLOWANCE OF FOREIGN EXCHANGE LOSS MADE BY THE AO IS NOT CALLED FOR. 5. WITH REGARD TO THE REMAINING ITEMS OF EXPENS ES, THE LD CIT(A) DIRECTED THE AO TO FOLLOW THE DECISIONS RENDERED BY HON'BLE KARNATAKA HIGH COURT (REFERRED SUPRA). 6. THE REVENUE IS AGGRIEVED BY THE DECISION SO RENDERED BY THE LD CIT(A). THE ASSESSEE HAS FILED CROSS OBJECTION CHA LLENGING THE DECISION RENDERED BY LD CIT(A) IN NOT EXCLUDING FOR EIGN EXCHANGE LOSS FROM TOTAL TURNOVER. THE ASSESSEE HAS ALSO RA ISED ANOTHER ISSUE RELATING TO EXCLUSION OF MISCELLANEOUS INCOM E OF RS.1,77,655/- FROM THE PROFITS OF UNDERTAKING OF THE ASSESSEE WHILE COMPUTING DEDUCTION U/S 10A OF THE ACT. 7. WE SHALL FIRST TAKE UP THE APPEAL FILED BY T HE REVENUE. WE NOTICE THAT THE LD CIT(A) HAS FOLLOWED THE BINDING DECISION RENDERED BY HON'BLE KARNATAKA HIGH COURT IN THE CASE OF TATA ELIXI LTD (SUPRA) IN HOLDING THAT THE EXPENSES SHOULD BE REDU CED BOTH FROM EXPORT TURNOVER AND TOTAL TURNOVER. HENCE WE DO NO T FIND ANY REASON TO INTERFERE WITH HIS ORDER PASSED ON THIS I SSUE. ITA NO.1558 /BANG/2017 CO NO.10/BANG/2018 PAGE 4 OF 6 8. WE SHALL NOW TAKE UP THE CROSS OBJECTION FIL ED BY THE ASSESSEE. THE FIRST ISSUE RELATES TO THE CONFIRMAT ION OF THE ORDER PASSED BY THE AO ON FOREIGN EXCHANGE LOSS. WE NO TICE THAT THE ISSUE BEFORE LD CIT(A) WAS NOT RELATED TO THE GENUI NENESS OF THE CLAIM OR LACK OF DOCUMENTARY EVIDENCE IN SUPPORT OF THE SAID CLAIM. FROM THE ASSESSMENT ORDER, IT CAN BE NOTICED THAT T HE AO HAS OBSERVED AS UNDER WITH REGARD TO THIS ISSUE:- 7.6 WITH REGARD TO FOREIGN EXCHANGE LOSS OF RS.2, 04,66,809/- THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE SAME SHOULD NOT BE REDUCED FROM THE EXPORT TURNOVER. TH E ASSESSEE HAS OBJECTED TO THE SAME BUT HOWEVER HAS S TATED THAT IN THE EVENT OF THE SAME BEING REDUCED FROM EX PORT TURNOVER THE SAME SHOULD BE REDUCED FROM THE TOTAL TURNOVER ALSO. THIS AGAIN IS NOT ACCEPTABLE FOR THE REASONS MENTIONED ABOVE AND THE SAID FOREIGN EXCHANGE LOSS OF RS.2,04 ,66,809/- IS REDUCED FROM THE EXPORT TURNOVER. HENCE, THE ISSUE BEFORE LD CIT(A) WAS WHETHER THE FOREIGN EXCHANGE LOSS SHOULD BE REDUCED BOTH FROM BOTH EXPO RT TURNOVER AND TOTAL TURNOVER OR NOT?. THUS, WE NOTICE THAT THE LD CIT(A) HAS MISDIRECTED HIMSELF IN PRESUMING THAT THE ISSUE BEF ORE HIM WAS RELATED TO THE GENUINENESS OF THE CLAIM. 9. SINCE THE AO HAS REDUCED THE FOREIGN EXCHANG E LOSS FROM THE EXPORT TURNOVER, THE SAME IS REQUIRED TO BE REDUCED FROM THE TOTAL TURNOVER ALSO WHILE COMPUTING DEDUCTION U/S 10A OF THE ACT AS PER THE DECISION RENDERED BY HON'BLE KARNATAKA HIGH COU RT IN THE CASE OF TATA ELIXI LTD (SUPRA). ACCORDINGLY WE SET ASID E THE ORDER PASSED ITA NO.1558 /BANG/2017 CO NO.10/BANG/2018 PAGE 5 OF 6 BY LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO RED UCE THE FOREIGN EXCHANGE LOSS BOTH FROM EXPORT TURNOVER AND TOTAL T URNOVER, WHILE COMPUTING DEDUCTION U/S 10A OF THE ACT. 10. THE NEXT ISSUE URGED BY THE ASSESSEE RELATES TO THE EXCLUSION OF MISCELLANEOUS INCOME OF RS.1,77,655/- FROM THE I NCOME OF THE ASSESSEE WHILE COMPUTING PROFIT OF UNDERTAKING FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 10A OF THE ACT. WE NOTICE THAT THE LD CIT(A) HAS NOT ADJUDICATED THIS ISSUE, EVEN THOUGH THE ASSESSEE HAS CHALLENGED THE SAME BEFORE HIM. ACCORDINGLY, WE RE STORE THIS ISSUE TO THE FILE OF LD CIT(A). 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED AND THE CROSS OBJECTION OF THE ASSESSEE IS TREATED AS ALLOW ED. ORDER PRONOUNCED ON 23 RD OCTOBER, 2019 SD/ - (BEENA PILLAI) JUDICIAL MEMBER SD/ - (B.R BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED, OCTOBER, 2019. / VMS / COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE. ITA NO.1558 /BANG/2017 CO NO.10/BANG/2018 PAGE 6 OF 6 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DICTATION NOTE ENCLOSED DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. .. 14. DICTATION NOTE ENCLOSED