Assistant Commissioner of Income-tax, Bangalore V. M/s Indegene Life Systems Pvt.Ltd., Bangalore

ITA 1659/BANG/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0006 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 16-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PADMA MEENAKSHI JT BENGALURU
• Assessee Lawyers: HIMADRI DHING

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AB BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO. 1659/BANG/2016 ASSESSMENT YEAR : 2011 - 12 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 3(1)(1), BANGALORE. VS. M/S. INDEGENE LIFE SYSTEMS PVT. LTD., 4 TH FLOOR, PINE VALLEY, EMBASSY GOLF LINK BUSINESS PARK, OFF INTERMEDIATE RING ROAD, BANGALORE 560 071. PAN: AAACI 4552N APP ELL ANT RESPONDENT A PP EL LANT BY : SMT. PADMAMEENAKSHI , JT.CIT(DR)(ITAT), BENGALURU. RE SPONDENT BY : MISS HIMADRI DHING, CA DATE OF HEARING : 16 . 0 7 .201 8 DATE OF PRONOUNCEMENT : 14 . 0 9 .201 8 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDE R DATED 20.06.2016 OF CIT(APPEALS)-3, BENGALURU RELATING TO ASSESSMENT YEAR 2011-12. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF DEVELOPING SOFTWARE. IT IS NOT IN DISPUTE THAT THE ASSESSEE W AS ENTITLED TO CLAIM DEDUCTION U/S.10A OF THE INCOME TAX ACT, 1961 ON PR OFITS AND GAINS AS ARE DERIVED FROM THE EXPORT OF COMPUTER SOFTWARE. SEC. 10A(4) PROVIDES THE METHODOLOGY OF COMPUTATION OF DEDUCTION U/S.10A OF THE ACT AND IT LAYS ITA NO. 1659/BANG/2016 PAGE 2 OF 4 DOWN THAT THE PROFITS DERIVED FROM EXPORT OF ARTICL ES OR THINGS OR COMPUTER SOFTWARE SHALL BE THE AMOUNT WHICH BEARS TO THE PRO FITS OF THE BUSINESS OF THE UNDERTAKING, THE SAME PROPORTION AS THE EXPORT TURNOVER IN RESPECT OF SUCH ARTICLES OR THINGS OR COMPUTER SOFTWARE BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE UNDERTAKING. EXPORT TURNOVER HAS BEEN DEFINED UNDER EXPLANATION 2 (IV) TO SEC.10A AS: 'EXPORT TURNOVER' MEANS THE CONSIDERATION IN RESPEC T OF EXPORT BY THE UNDERTAKING OF ARTICLES OR THINGS OR COMPUTER S OFTWARE RECEIVED IN, OR BROUGHT INTO, INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE IN ACCORDANCE WITH SUB-SECTION (3) , BUT DOES NOT INCLUDE FREIGHT, TELECOMMUNICATION CHARGES OR INSUR ANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES OR THI NGS OR COMPUTER SOFTWARE OUTSIDE INDIA OR EXPENSES, IF ANY, INCURRE D IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICES OUTSID E INDIA. 3. THE AO NOTICED THAT WHILE COMPUTING EXPORT TURNO VER FOR THE PURPOSE OF DEDUCTION U/S.10A, THE ASSESSEE HAD INCLUDED A S UM OF RS.1,13,70,512/- BEING COMMUNICATION EXPENSES AND OTHER EXPENDITURE INCURRED. BOTH THE AFORESAID EXPENSES HAD BEEN INCURRED IN FOREIGN CUR RENCY. THE AO THEREFORE EXCLUDED THE AFORESAID SUM FROM THE EXPOR T TURNOVER WITHOUT EXCLUDING THEM FROM THE TOTAL TURNOVER. AS A RESUL T, THE DEDUCTION CLAIMED U/S.10A OF THE ACT BY THE ASSESSEE WAS ALLOWED AT A LESSER SUM THAN WHAT WAS CLAIMED BY THE ASSESSEE. 4. IT WAS THE PLEA OF THE ASSESSEE IN THE APPEAL AG AINST THE ASSESSMENT ORDER BEFORE THE CIT(A) THAT AT ALL TIME S DURING THE RELEVANT PREVIOUS YEAR, IT WAS ENGAGED IN DEVELOPMENT OF COM PUTER SOFTWARE AND NOT IN RENDERING ANY TECHNICAL SERVICES. COMMUNICA TION EXPENSES WERE INCURRED NOT FOR EXPORT OF COMPUTER SOFTWARE OUTSID E INDIA AND THEREFORE THE EXCLUSION FROM EXPORT TURNOVER AS DONE BY THE AO WA S NOT CORRECT. WITHOUT PREJUDICE TO ITS CONTENTION THAT THE AFORESAID SUMS SHOULD NOT BE EXCLUDED FROM THE EXPORT TURNOVER WHILE COMPUTING DEDUCTION U/S.10A OF THE ACT, THE ITA NO. 1659/BANG/2016 PAGE 3 OF 4 ASSESSEE HAS ALSO MADE AN ALTERNATE PRAYER THAT EXP ENSES THAT ARE REDUCED FROM THE EXPORT TURNOVER SHOULD ALSO BE RED UCED FROM THE TOTAL TURNOVER AND IN THIS REGARD HAS PLACED RELIANCE ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. TATA ELXSI LTD [2012] 349 ITR 98 (KARN) WHEREIN IT WAS HELD THAT WHILE COMPUTING DEDUCTION U/S.10A OF THE ACT EXPENSES THAT ARE REDUCED FROM T HE EXPORT TURNOVER SHOULD ALSO BE REDUCED FROM THE TOTAL TURNOVER. TH E CIT(A) ACCEPTED THE ALTERNATE PRAYER OF THE ASSESSEE AND DIRECTED THAT THE EXPENSES REDUCED FROM THE EXPORT TURNOVER SHOULD ALSO BE REDUCED FRO M THE TOTAL TURNOVER. AS A RESULT, THE DEDUCTION AS CLAIMED BY THE ASSESSEE U/S.10A OF THE ACT STOOD ALLOWED. AGGRIEVED BY THE RELIEF ALLOWED BY THE CI T(A), THE REVENUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE LD. COUNSEL FOR THE ASSESSEE W HO RELIED ON THE ORDER OF THE CIT(A) AND THE LD. DR WHO RELIED ON TH E ORDER OF THE CIT(A). 6. TAKING INTO CONSIDERATION THE DECISION RENDERED BY THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V. TATA ELXSI LTD [2012] 349 ITR 98 (KARN) , WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) D IRECTING THE ASSESSING OFFICER TO EXCLUDE COMMUNICATION CHARGES AND TRAVELLING AND CONVEYANCE EXPENSES BOTH FROM EXPORT TURNOVER AND TOTAL TURNOVER, IS JUST AND PROPER AND CALLS FOR NO INTERFERENCE. THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE DECISION OF HON'BLE HIGH COURT OF KARNATAKA IN TATA ELXSI (SUPRA) HAS NOT ATTAINED FINALITY AND A SLP BY THE DEPARTM ENT IS PENDING BEFORE THE HON'BLE SUPREME COURT. WE ARE O F THE VIEW THAT AS OF TODAY, LAW DECLARED BY THE HON'BLE HIGH COURT OF KA RNATAKA WHICH IS THE JURISDICTIONAL HIGH COURT IS BINDING ON US. MOREOV ER, THE ORDER OF THE HONBLE KARNATAKA HIGH COURT HAS BEEN UPHELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT V. HCL TECHNOLOGIES LTD. IN CIVIL APPEAL NO.848 9- 98490 OF 2013 & ORS. DATED 24.04.2018 . WE THEREFORE HOLD THAT THE ORDER ITA NO. 1659/BANG/2016 PAGE 4 OF 4 OF CIT(A) DOES NOT CALL FOR ANY INTERFERENCE AND AC CORDINGLY THE SAME IS CONFIRMED. 7. IN THE RESULT, THE APPEAL BY THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON THIS 14 TH DAY OF SEPTEMBER, 2018. SD/- SD/- ( INTURI RAMA RAO ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 14 TH SEPTEMBER, 2018. / D ESAI S MURTHY / COPY TO: 1. AP P ELL ANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.