DCIT, CHENNAI V. Helios and Matheson Information Technology Limited, CHENNAI

ITA 1668/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4537 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 14-03-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 06-06-2016
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Tax effect

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI . . . , '.. % , * BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO.1668/MDS/2016 + + /ASSESSMENT YEARS: 2007-08 THE DY. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-2(2), ROOM NO.512, 5 TH FLOOR, WANAPARTHY BLOCK, 121, M.G.ROAD, CHENNAI-600 034. VS. M/S.HELLOS AND MATHESON INFORMATION TECHNOLOGY LTD., NO.9, ADWAVE TOWERS, SOUTH BOAG ROAD, T. NAGAR, CHENNAI-600 017. [PAN: AAACE 0805 A ] ( . /APPELLANT) ( /0. /RESPONDENT) . 1 / APPELLANT BY : MR.SUPRIYO PAL, JCIT /0 . 1 /RESPONDENT BY : MR.R.VIJAYARAGHAVAN, ADV. 1 /DATE OF HEARING : 14.03.2017 1 /DATE OF PRONOUNCEMENT : 26.05.2017 / O R D E R PER D.S.SUNDER SINGH , ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 18.03.2016 OF COMMISSIONER OF INCOME TAX (APPEALS) -6, CHENNAI, IN ITA NO.94/CIT(A)-6/2013-14 FOR THE AY 2007-08 AND RAISE D THE FOLLOWING GROUNDS: ITA NO.1668/MDS/2016 :- 2 -: 1. THE, ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS CONTRARY TO THE LAW AND FACTS OF THE CASE. 2.1. THE CIT(APPEALS) ERRED IN HOLDING THAT OVERSEAS TRAVEL AND COMMUNICATION EXPENDITURE INCURRED IN FOREIGN CURRENCY ARE TO BE REDUCED FROM TOTAL TURNOVER ALSO FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S.10A OF THE ACT. 2.2. THE CIT(APPEALS) OUGHT TO HAVE APPRECIATED THE FACT ACCORDING TO EXPLANATION 2(IV) TO SEC.10A, EXPORT TURNOVER DOES NOT INCLUDE FREIGHT, TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES OR THI NGS OR COMPUTER SOFTWARE OUTSIDE INDIA OR EXPENSES IF ANY INCURRED IN FOREIGN EXCHANGE IN PRO VIDING THE TECHNICAL SERVICES OUTSIDE INDIA. 2.3. ACCORDING TO EXPLANATION 2(IV) TO SECTION 10A A N ADJUSTMENT IS CALLED FOR IN RESPECT FOR EXPORT TURNOVER ONLY. 2.4. THE CIT(APPEALS) OUGHT TO HAVE APPRECIATED THE FACT THAT IF THE ITEMS WHICH ARE TO BE EXCLUDED FROM THE EXPORT TURNOVER AS PER THE STATUT E, ARE EXCLUDED FROM THE TOTAL TURNOVER ALSO THEN THE VERY PURPOSE OF EXCLUDING THE SAID IT EMS FROM THE EXPORT TURNOVER WILL GET DEFEATED AS THE EFFECT OF EXCLUSION OF THE SAME FRO M THE TOTAL TURNOVER (DENOMINATOR) WILL NULLIFY THE EFFECT OF EXCLUSION FROM THE EXPORT TUR NOVER (NUMERATOR). 2.5. THE DECISION IN THE CASE OF M/S.SAKSOFT LTD. HA S NOT BECOME FINAL AS THE DEPARTMENT HAS FILED APPEAL BEFORE THE HONBLE HIGH COURT AND THE ISSUE IS PENDING. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (AP PEALS) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2.0 ALL THE GROUNDS OF THE APPEAL ARE RELATED TO TH E EXCLUSION OF OVERSEAS TRAVEL AND COMMUNICATION EXPENSES INCURRED IN FOREIGN CURRENCY OUTSIDE INDIA FROM TOTAL TURNOVER FOR COMPUTING THE DEDUCTION U/S 10A OF THE ACT. ACCORDING TO THE AO, THE EXPENDITURE INCUR RED IN TRAVEL AND COMMUNICATION IN FOREIGN CURRENCY REQUIRED TO BE RE DUCED FROM THE EXPORT TURNOVER FOR THE PURPOSE OF COMPUTING THE DEDUCTIO N U/S.10A OF THE INCOME TAX ACT (IN SHORT THE ACT) BUT NOT FROM TH E TOTAL TURNOVER. THE ASSESSEE INCURRED THE TOTAL EXPENDITURE OF RS.1,06, 66,091/- TOWARDS OVERSEAS TRAVEL, SOFTWARE DEVELOPMENT EXPENSES AND THE EMPLOYEES ACCOMMODATION EXPENSES. THE AO REQUESTED FOR THE B REAKUP OF EXPENSES RELATING TO FREIGHT, TELECOMMUNICATION AND INSURANC E ATTRIBUTABLE TO THE DELIVERY OF ARTICLES OUTSIDE INDIA BUT THE ASSESSEE HAS NOT FURNISHED THE ITA NO.1668/MDS/2016 :- 3 -: DETAILS. HENCE THE AO ESTIMATED THE 50% OF 1,06,06, 091/- MENTIONED ABOVE AS THE EXPENSES ATTRIBUTABLE TO FREIGHT, TEL ECOMMUNICATION AND INSURANCE ATTRIBUTABLE TO THE DELIVERY OF ARTICLE O UTSIDE INDIA AND ACCORDINGLY REDUCED A SUM OF RS.53,33,045/- FOR TH E AY 2007-08 FROM THE TOTAL EXPORT TURNOVER WHILE COMPUTING THE DEDUCTION U/S.10A OF THE ACT AND RECOMPUTED THE DEDUCTION ACCORDINGLY. 3.0 THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) A ND THE LD.CIT(A) ALLOWED THE ASSESSES APPEAL PLACING RELIANCE ON THE DECISION OF THE HONBLE SPECIAL BENCH IN THE CASE OF ITO V. M/S.SAKSOFT LTD . REPORTED IN 339 ITR 353. AGAINST THE ORDER OF THE LD.CIT(A), THE REVEN UE IS ON APPEAL BEFORE US. 4.0 APPEARING FOR THE REVENUE, THE LD. DR ARGUED TH AT THE TRAVEL AND COMMUNICATION EXPENDITURE INCURRED IN FOREIGN CURRE NCY REQUIRED TO BE REDUCED FROM THE TOTAL EXPORT TURNOVER FOR THE PURP OSE OF COMPUTATING THE DEDUCTION U/S.10A OF THE ACT. ACCORDING TO THE EXP LANATION TO CLAUSE-4 OF SEC.10A THE EXPORT TURNOVER DOES NOT INCLUDE THE FR EIGHT TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES OR THINGS OR COMPUTER SOFTWARE OUTSIDE IND IA OR EXPENSES IF ANY INCURRED IN FOREIGN EXCHANGE IN PROVIDING TECHNICAL SERVICES OUTSIDE INDIA. THE LD.DR FURTHER ARGUED THAT IF THE ITEMS OF EXPEN SES INCURRED OUTSIDE INDIA ARE EXCLUDED FROM THE EXPORT TURNOVER AS WELL AS THE TOTAL TURNOVER THE VERY PURPOSE OF CLAUSE (IV) OF EXPLANATION-2 TO SECTION 10A GETS ITA NO.1668/MDS/2016 :- 4 -: DEFEATED AND THE RESULTANT TAX EFFECT WOULD BE ZERO ED. THE LD. DR FURTHER STATED THAT THE DECISION OF THE HONBLE SPE CIAL BENCH IN THE CASE OF M/S.SAKSOFT LTD., IS NOT ACCEPTED BY THE DEPARTMEN T AND THE DEPARTMENT HAS FILED THE APPEAL BEFORE THE HONBLE HIGH COURT AND THE SAME IS PENDING. THE DR FAIRLY CONCEDED THAT THE ADDITION W AS MADE TO KEEP THE MATTER ALIVE. ON THE OTHER HAND, THE LD.AR RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 5.0 WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED BEFORE US. THE ISSUE IS SQUARELY COVERED BY THE DECISION HON BLE SPECIAL BENCH IN THE CASE OF M/S. SAKSOFT LTD., CITED (SUPRA) AND THE LD.CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE FOLLOWING THE ORDER OF T HE SPECIAL BENCH CITED. THEREFORE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) AND THE SAME IS UPHELD. THE APPEAL OF THE REVENUE IS D ISMISSED. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH MAY, 2017, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ' . . % ) (D.S.SUNDER SINGH) /ACCOUNTANT MEMBER /CHENNAI, 6 /DATED: 26 TH MAY, 2017. TLN ITA NO.1668/MDS/2016 :- 5 -: 1 /% 7 87 /COPY TO: 1. . /APPELLANT 4. 9 /CIT 2. /0. /RESPONDENT 5. 7 / /DR 3. 9 ( ) /CIT(A) 6. + /GF