Assistant Commissioner of Income Tax, Bangalore V. M/s.Reametrix India Pvt. Ltd., Bangalore

ITA 1573/BANG/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5313 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 31-08-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G R REDDY
• Section: 115JB; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI VIJAYPAL RAO, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.1573 /BANG/2016 (ASST. YEAR 2008-09) THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 5(1)(1), BENGALURU. . APPELLANT VS. M/S REAMETRIX INDIA PVT. LTD., NO.50-B, 2 ND PHASE PEENYA INDUSTRIAL AREA, PEENYA, BENGALURU. . RESPONDENT APPELLANT BY : SHRI G.R REDDY, CIT RESPONDENT BY : NONE DATE OF HEARING : 30-5-2017 DATE OF PRONOUNCEMENT : 31-5-2017 O R D E R PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) 5, BANGALORE DATED 26/5/2016 FOR THE ASSESSMENT YEAR 2008-09. ITA NO.1573/B/16 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE AS UND ER:- 2.1 THE ASSESSEE, A COMPANY ENGAGED IN THE BUSINESS OF RESEARCH AND DEVELOPMENT AND MANUFACTURE OF VARIOUS TYPES OF RE-AGENTS AND BIO-INFORMATICS, FILED ITS RETURN OF INCOME FOR ASS T. YEAR 2008-09 ON 23/9/2008 DECLARING LOSS OF (-)RS.8,59,210/- AFTER CLAIMING DEDUCTION OF RS.84,05,726/- U/S 10B OF THE INCOME-TAX ACT, 19 61 (IN SHORT THE ACT). BOOK PROFITS WERE COMPUTED U/S 115JB OF THE ACT AT RS.52,55,722/-. THE ASSESSMENT WAS COMPLETED U/S 1 43(3) OF THE ACT VIDE ORDER DATED 18/10/2010, WHEREIN THE ASSESSEES INCOME UNDER THE NORMAL PROVISIONS WERE RS.6,99,315/-. AGGRIEVED BY THIS ORDER OF ASSESSMENT FOR ASST. YEAR 2008-09 DATED 18/10/2010, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A)-5, BANGALORE WHO DISPOSED OFF THE APPEAL VIDE THE IMPUGNED ORDER DATED 2/6/2016, ALLOWING THE ASSESSEE PARTIAL RELIEF. 3.1 REVENUE, BEING AGGRIEVED BY THE ORDER OF THE CI T(A)-5, BANGALORE DATED 26/5/2016 FOR ASST. YEAR 2008-09, H AS PREFERRED THIS APPEAL RAISING THE FOLLOWING GROUNDS:- ITA NO.1573/B/16 3 1. THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-5, BANGALORE IS OPPOSED TO THE LAW AND NO T ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN LAW IN DIRECTING THE ASSESSING OFFI CER TO REDUCE THE EXPENDITURE INCURRED IN INSURANCE, TELECOMMUNICATION ETC, BOTH FROM THE EXPORT TURNOVE R AS WELL AS THE TOTAL TURNOVER FOR THE PURPOSE OF COMPU TATION OF DEDUCTION U/S. 1 OB OF THE IT ACT WITHOUT APPREC IATING THE FACT THAT THE STATUE ALLOWS EXCLUSION OF SUCH EXPENDITURE ONLY FROM THE EXPORT TURNOVER BY WAY OF SPECIFIC DEFINITION OF EXPORT TURNOVER AS ENVISAGED BY SUB-CLAUSE(4) OF EXPLANATION 2 BELOW SUB-SECTION 8 OF SECTION 10A. ON THE OTHER HAND, THERE IS NO SPECIFI C PROVISION IN SECTION 10A WARRANTING EXCLUSION OF AB OVE EXPENSES FROM TOTAL TURNOVER ALSO. PROVISIONS OF SE CTION L0B ARE ANALOGOUS TO THAT OF SECTION 10A OF THE IT ACT, 1961. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED UPON, THE ORDER OF THE CIT(A) MAY BE REVERSED AND THAT ASSESSMENT ORDER BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEN D OR DELETE ANY OTHER GROUNDS ON OR BEFORE HEARING OF TH E APPEAL. 3.2 IN THE GROUNDS OF APPEAL RAISED (SUPRA), REVENU E CONTENDS THAT THE LD CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER (AO) TO ITA NO.1573/B/16 4 EXCLUDE THE EXPENDITURE INCURRED IN FOREIGN CURRENC Y TOWARDS INSURANCE, TELECOMMUNICATION EXPENSES AND FREIGHT FROM BOTH EXPORT TURNOVER AS WELL AS FROM TOTAL TURNOVER WHILE COMPU TING DEDUCTION U/S 10B OF THE ACT, FOLLOWING THE DECISION OF THE HONB LE KARNATAKA HIGH COURT IN THE CASE OF TATA ELXSI LTD., VS. ACIT (349 ITR 98). IT IS CONTENDED THAT IN DOING SO, THE LD CIT(A) DID NOT APPRECIATE THAT THERE IS NO PROVISION IN SEC. 10A OF THE ACT THAT M ANDATES THAT SUCH EXPENSES SHOULD BE REDUCED FROM THE TOTAL TURNOVER AND THAT SUB CLAUSE (4) OF THE EXPLANATION 2 BELOW SUB SECTION 8 TO SEC. 10A PROVIDES THAT SUCH EXPENSES ARE TO BE REDUCED ONLY FROM EXPORT TURNOVER. IT IS SUBMITTED THAT PROVISIONS OF SEC. 10B ARE ANALOGOUS TO SEC. 10A OF THE ACT. 3.3 WE HAVE HEARD THE CONTENTIONS OF THE LD DR FOR THE REVENUE AND HAVE PERUSED AND CAREFULLY CONSIDERED THE MATE RIAL ON RECORD: AS REGARDS THE ISSUE OF REDUCTION OF THE ITEMS OF EXPE NDITURE INCURRED IN FOREIGN CURRENCY I.E; ON FREIGHT ISSUANCE AND TEL ECOMMUNICATION CHARGES, ARE ATTRIBUTABLE TO THE DELIVERY OF SOFTW ARE OUTSIDE INDIA AND IN RENDERING OF TECHNICAL SERVICES OUTSIDE INDIA, T HE JURISDICTIONAL HIGH COURT OF KARNATAKA IN THE CASE OF TATA ELXSI L TD., VS. ACIT ITA NO.1573/B/16 5 (349 ITR 98) HAS HELD THAT WHEN CERTAIN EXPENSES AR E EXCLUDED FROM THE EXPORT TURNOVER FOR THE PURPOSES OF CLAIMING D EDUCTION ADMISSIBLE UNDER THE ACT, LIKE U/S. 10A OF THE ACT, SUCH EXPE NSES ARE ALSO TO BE EXCLUDED FROM TOTAL TURNOVER, AS EXPORT TURNOVER FO RMS PART OF TOTAL TURNOVER. SECTION 10B OF THE ACT BEING ANALOGOUS, T HE AFORESAID DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CAS E OF TATA ELXSI LTD., (SUPRA) WOULD EQUALLY APPLY IN FAVOUR OF THE ASSESSEE IN THE CASE ON HAND FOR COMPUTING ELIGIBLE DEDUCTION U/ S10B O F THE ACT. AS OBSERVED BY THE LD CIT(A), THE DECISION IN THE CASE OF TATA ELXSI LTD., (SUPRA) HAS ALSO BEEN FOLLOWED BY THE HONBLE COURT IN THE CASE OF DCIT VS. MOTOR INDUSTRIES CO. LTD; (ITA NO.776/200 6, 744/2007 AND 1155/2006 DATED 13/6/2014), HOLDING THAT IF ANY EXPENDITURE IS SOUGHT TO BE REDUCED FROM EXPORT TURNOVER, THEN IT SHOULD ALSO BE REDUCED FROM TOTAL TURNOVER FOR THE PURPOSES OF COM PUTING THE ELIGIBLE DEDUCTION U/S 10A OF THE ACT. IN THIS LEGAL AND FA CTUAL MATRIX OF THE CASE, AS DISCUSSED ABOVE, WE FIND NO REASON/REQUIRE MENT TO INTERFERE WITH OR DEVIATE FROM THE FINDING RENDERED BY THE LD CIT(A) ON THIS ISSUE AND, THEREFORE, UPHOLD THE SAME. CONSEQUENTL Y, FINDING NO MERIT IN THE GROUNDS RAISED BY REVENUE (SUPRA) WE DISMISS THE SAME. ITA NO.1573/B/16 6 4. IN THE RESULT, REVENUES APPEAL FOR THE ASSESSME NT YEAR 2008- 09 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31ST MAY, 2017 . SD/- SD/- (VIJAYPAL RAO) (JASON P BO AZ) JUDICIAL MEMBER ACCOUNTANT M EMBER BANGALORE DATED : 31/5/2017 VMS COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REG ISTRAR, ITAT, BANGALORE.