M/s. Motif India Infotech Pvt.Ltd., Ahmedabad V. The Income Tax Officer, Ward-4(4), Ahmedabad

ITA 1645/AHD/2014

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7148 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 23-03-2020
• Assessment Year: 2005-2006
• Appeal Filed On: 26-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Keywords: Set aside
• Section: 143(3); 192

Judgement Text

, D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD ( CONVENED THROUGH VIRTUAL COURT ) BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SMT. MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NO. 1645/AHD/2014 ( ASSESSMENT YEAR : 2005-06) TTEC INDIA CUSTOMER SOLUTIONS PRIVATE LIMITED (FORMERLY KNOWN AS MOTIF INDIA INFOTECH PRIVATE LIMITED) OPP L J COLLEGE, OFF S G HIGHWAY, MAKARBA, AHMEDABAD - 382210 / VS. INCOME TAX OFFICER WARD 4(4), AHMEDABAD ./ ./ PAN/GIR NO. : AACCM1005A ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI DHINAL SHAH, A.R. / RESPONDENT BY : SHRI LALIT P. JAIN, SR.D.R. DATE OF HEARING 02/09/2020 !'# / DATE OF PRONOUNCEMENT 07/09/2020 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX ITA NO. 1645/AHD/14 [TTEC INDIA CUSTOMER SOLUTIONS PVT. LTD. VS. ITO] A.Y. 2005-06 - 2 - (APPEALS)-XXI, AHMEDABAD (CIT(A) IN SHORT), DATED 31.03.2014 ARISING IN THE ASSESSMENT ORDER DATED 29.12.2008 PA SSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3) OF THE INCOM E TAX ACT, 1961 (THE ACT) CONCERNING AY. 2005-06. 2. THE SOLITARY GROUND OF APPEAL RAISED BY THE ASS ESSEE READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT EXPORT REVENUE SUBSIDY OF RS. 1,933,024, MISCELLANEOUS INCOME OF RS.10,108 AND SUNDRY BALANC ES WRITTEN OFF OF RS. 37,630 AGGREGATING TO RS. 1,980,762 IS NOT DERI VED FROM THE BUSINESS CARRIED ON BY THE APPELLANT AND HENCE NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 10A OF THE ACT. 3. THE GRIEVANCE OF THE ASSESSEE CONCERNS ELIGIBILI TY OF DEDUCTION OF EXPORT REVENUE SUBSIDY, MISCELLANEOUS INCOME AND SUNDRY BALANCES WRITTEN OFF ETC. AGGREGATING TO RS.19.80 L AKHS FOR THE PURPOSES OF DEDUCTION UNDER SECTION 10A OF THE ACT. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS ON THE ISSUE . 5. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF EXPORT OF SOFTWARE AND SUPPORT SERVICES. IN THE COURSE OF TH E SCRUTINY ASSESSMENT OF THE RETURN FILED FOR THE AY 2005-06 I N QUESTION, THE AO NOTICED THAT THE ASSESSEE HAS INTER ALIA CLAIMED DEDUCTION TOWARDS EXPORT REVENUE SUBSIDY RS.19,33,024/-, MISC ELLANEOUS INCOME RS.10,108/- AND SUNDRY BALANCES OF RS.37,360 /- AGGREGATING TO RS.19,80,762/- UNDER S.10A OF THE ACT. THE AO T OOK THE VIEW THAT THE AFORESAID STREAMS OF INCOME ARE NOT DERIV ED FROM THE EXPORT BUSINESS PER SE CARRIED OUT BY THE ELIGIBLE UNDERTAKING BUT HAS ONLY ARISEN AS AN INCIDENTAL INCOME AND THUS IS , AT BEST, ONLY ATTRIBUTABLE TO THE EXPORT BUSINESS. THE AO THUS TOOK A VIEW THAT SUCH INCIDENTAL INCOME IS NOT AKIN TO PROFITS DERI VED AS LAID DOWN ITA NO. 1645/AHD/14 [TTEC INDIA CUSTOMER SOLUTIONS PVT. LTD. VS. ITO] A.Y. 2005-06 - 3 - IN SECTION 10A(1) OF THE ACT AND CONSEQUENTLY SUCH EXPORT REVENUE SUBSIDY ETC. DO NOT FORM PART OF PROFITS DERIVED FR OM THE EXPORT ARTICLES OR THINGS ETC. AS CONTEMPLATED UNDER S.10A OF THE ACT. THE BENEFIT OF DEDUCTION CLAIMED BY ASSESSEE UNDER S.10 A OF THE ACT HAS THUS DENIED. 6. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) AND SUBMITTED THAT THE AO HAS MIS-DIRECTED ITSELF I N LAW AND ON FACTS IN DENYING DEDUCTION OF EXPORT REVENUE SUBSID Y AND OTHER INCOME MENTIONED EARLIER WHICH AROSE FROM THE BUSIN ESS ACTIVITY OF THE EXPORT UNDERTAKING. THE CIT(A), HOWEVER, REFUS ED TO ENTERTAIN THE CASE MADE OUT BY THE ASSESSEE. THE RELEVANT PA RA OF THE ORDER OF THE CIT(A) READS AS UNDER: 12.5 I HAVE CONSIDERED THE ASSESSMENT ORDER AND TH E SUBMISSIONS MADE BY THE APPELLANT. THE APPELLANT HAS MISC. INCO ME OF RS.10,108/-, SUNDRY BALANCE WRITTEN OFF OF RS.37,63 0/- AND EXPORT SUBSIDY OF RS.19,33,024/- AS PROFIT AND GAINS DERIV ED FROM EXPORTS AND CLAIMED EXEMPT U/S.10A. SUNDRY BALANCE WRITTEN OFF OF RS.37,630/- AND MISC. INCOME OF RS.10,108/- ARE CLE ARLY NOT IN THE NATURE OF EXPORT THE EXPORT SUBSIDY OF RS.19,33,024 /-CLAIMED IS IN FACT CASH INCENTIVE GIVEN BY GUJARAT GOVERNMENT ON THE EXPORT. THEREFORE, IT IS NOT INCOME DERIVED FROM EXPORTS BU T INCOME RECEIVED FROM GOVERNMENT. THE DEDUCTION U/S. 10A IS ALLOWABLE IN RESPECT OF PROFIT AND GAINS DERIVED BY AN UNDERTAKI NG FROM THE EXPORT OF ARTICLE OR THING OR COMPUTER SOFTWARE. TH E INCOME MENTIONED ABOVE, AT THE BEST, MAY BE ATTRIBUTABLE T O THE BUSINESS ACTIVITY OF THE UNDERTAKING BUT NOT DERIVED FROM TH E EXPORT OF ARTICLE OR THING OR COMPUTER SOFTWARE. THE APPELLAN T RELIED UPON THE DECISION OF HON'BLE GAUHATI HIGH COURT IN THE C ASE OF CIT VS. MEGHALAYA STEELS LIMITED 356 ITR 256. THE FACTS OF THIS CASE IS ENTIRELY DIFFERENT FROM THE PRESENT CASE. THE ABOVE CASE IS ON WHETHER TRANSPORT SUBSIDY, POWER SUBSIDY, INSURANCE SUBSIDY AND INTEREST SUBSIDY WHICH REDUCES THE COST OF PRODUCTI ON OF AN UNDERTAKING AND HAVE DIRECT NEXUS WITH THE PROFIT O F AN INDUSTRIAL UNDERTAKING OR ELIGIBLE FOR DEDUCTION UNDER PROVISI ONS OF SECTION 80IB/80IC. IN THE PRESENT CASE, EXPORT SUBSIDY IS I N THE NATURE OF CASH INCENTIVE AND SHOWN AS A PROFIT IN PROFIT AND LOSS ACCOUNT AND DOES NOT GO TO REDUCE THE COST EXPORT. THE FACTS OF THIS CASE IS SIMILAR TO THE CASE OF LIBERTY INDIA VS. CIT 317 IT R 218 IN WHICH THE HON'BLE SUPREME COURT HAS HELD THAT DEPB IS AN INCENTIVE AND ITA NO. 1645/AHD/14 [TTEC INDIA CUSTOMER SOLUTIONS PVT. LTD. VS. ITO] A.Y. 2005-06 - 4 - IT IS GIVEN UNDER DUTY EXEMPTION REMISSION SCHEME W HICH IS ESSENTIALLY AN EXPORT INCENTIVE. THE HON'BLE SUPREM E COURT HAS HELD THAT DEPB/DUTY DRAW BACK WERE INCENTIVES WHICH FLOW FROM THE SCHEMES FRAMED BY CENTRAL GOVERNMENT ARE FROM S ECTION 75 OF THE CUSTOM ACT, 1962, HENCE INCENTIVE PROFITS WERE NOT PROFITS DERIVED FROM THE ELIGIBLE BUSINESS U/S. 80IB. THEY BELONGED TO THE CATEGORY OF ANCILLARY PROFITS OF SUCH UNDERTAKINGS. IN VIEW OF THE ABOVE, APPELLANT IS NOT ELIGIBLE FOR DEDUCTION U/S. 10A IN RESPECT OF MISCELLANEOUS INCOME, SUNDRY BALANCE AND EXPORT SUBSIDY AMOUNTING TO RS.20,74,209/-. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS THEREFORE CONFIRMED. 7. FURTHER AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. 8. WE FIND THAT THE ISSUE IS SUBSTANTIALLY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE GUJARAT HIG H COURT IN CASE OF PRIYANKA GEMS (2014) 367 ITR 575 (GUJ) AS WELL AS HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GEM PLUS JEWELLERY INDIA LTD. (2010) 194 TAXMAN 192 (BOM.). THE ISSUE IS ALSO SIMILARLY SETTLED IN FAVOUR OF THE ASSESSEE BY LONG LINE OF J UDICIAL PRECEDENTS WHERE THE CONSISTENT VIEW HAS BEEN TAKEN THAT SUCH INCOME ARISING AS A RESULT OF BUSINESS OF EXPORT CANNOT BE DIVESTE D FROM THE EXPORT BUSINESS OF THE UNDERTAKING FOR THE PURPOSES OF SEC TION 10A/10B OF THE ACT. ONCE EXPORT IS MADE, THE PROFITS/LOSSES M AY ARISE DUE TO VARIETY OF REASONS FROM SUCH EXPORT ACTIVITY. NOTI CEABLY, SUB- SECTION (4) TO SECTION 10A OF THE ACT EXPLICITLY EX PLAINS THE TERM PROFITS DERIVED FROM THE EXPORT OF PARTICLES OR TH INGS TO MEAN AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINESS OF THE UNDERTAKING, THE SAME PROPORTION AS THE EXPORT TUR NOVER BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY TH E UNDERTAKING. THUS, WHAT IS REQUIRED TO BE DETERMINED IS PROFITS OF THE BUSINESS UNDERTAKING. IN SHORT, THE PROFITS DERIVED FROM E XPORT HAVE BEEN EQUATED WITH BUSINESS PROFITS OF THE UNDERTAKING IN VIEW OF THE STATUTORY FORMULA PROVIDED IN SECTION 10A(4) OF THE ACT. IN VIEW OF ITA NO. 1645/AHD/14 [TTEC INDIA CUSTOMER SOLUTIONS PVT. LTD. VS. ITO] A.Y. 2005-06 - 5 - THE STATUTORY FORMULA AVAILABLE FOR DETERMINATION O F QUANTUM OF DEDUCTION, THE EXPRESSION DERIVED FROM USED IN SE CTION 10A(1) FADES INTO INSIGNIFICANCE AND THE QUANTUM OF DEDUCT ION IS REQUIRED TO BE DETERMINED AS PER THE AFORESAID FORMULA PROVI DED IN SECTION 10A(4) OF THE ACT. WE THUS FIND CONSIDERABLE WEIGH T IN THE PLEA ADVANCED ON BEHALF OF THE ASSESSEE FOR ELIGIBILITY OF DEDUCTION OF THE INCIDENTAL PROFITS ALONGWITH THE EXPORT PROFITS FOR THE PURPOSES OF SECTION 10A OF THE ACT. WE THUS SET ASIDE THE ORDE R OF THE CIT(A) ON THE POINT. THE AO IS DIRECTED TO COMPUTE THE QU ANTUM OF DEDUCTION UNDER S.10A OF THE ACT IN THE LIGHT OF FO RMULA PROVIDED IN SECTION 10A(4) OF THE ACT. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. SD/- SD/- (MADHUMITA ROY) (PRADIP KUMAR K EDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 07/09/2020 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED ON 07/09/2020