ACIT, Circle-16(1), Hyderabad V. M/s. NISC Export Services Pvt.Ltd, Hyderabad

ITA 1735/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66331 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 10-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMISHA S GUPT
• Assessee Lawyers: G KALYAN DAS
• Section: 143(3); 80HHC; 234B; 115JB; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO. 1735/HYD/2011 ASSESSMENT YEAR: 2009-10 ASSTT. COMMISSIONER OF INCOME-TAX, ... APPELLANT CIRCLE 16(3), HYDERABAD VS. NISC EXPORT SERVICE P. LTD., RESPODENT HYDERABAD. (PAN AAACN8032G) ITA NO. 1652/HYD/2011 ASSESSMENT YEAR: 2009-10 NISC EXPORT SERVICE P. LTD., APPELLANT HYDERABAD. (PAN AAACN8032G) VS. ASSTT. COMMISSIONER OF INCOME-TAX, ... RESPONDENT CIRCLE 16(3), HYDERABAD REVENUE BY : SMT. AMISHA S. GUPT ASSESSEE BY : SHRI G. KALYANDAS DATE OF HEARING : 24/08/2012 DATE OF PRONOUNCEMENT : 28/09/ 2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THE APPEAL BEING ITA NO. 1735/H/11 FILED BY THE RE VENUE AND APPEAL BEING ITA NO. 1652/H/11 FILED BY THE ASS ESSEE ARE CROSS APPEALS DIRECTED AGAINST THE ORDER OF THE CIT (A)-V, HYDERABAD DATED 19/07/2011 FOR THE ASSESSMENT YEAR 2008- 09. ITA NOS. 1735 & 1652/HYD/11 AND C.O. NO. 05/HYD/12 NISC EXPORT SERVICE P. LTD. 2 ITA NO. 1735/HYD/11 APPEAL BY THE REVENUE 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE COMPANY IS ENGAGED IN THE BUSINESS OF DESIGN AND DE VELOPMENT OF SOFTWARE PROGRAMS AND CUSTOMIZATION OF ELECTRONI C DATA BASES, IT ENABLED SERVICES FOR EXPORT. DURING THE Y EAR UNDER CONSIDERATION, THE ASSESSEE FILED ITS RETURN OF INC OME ON 30/09/2008 ADMITTING A TOTAL INCOME OF RS. 32,50,22 0/- WHILE THE ASSESSEE CLAIMED EXEMPTION TO THE EXTENT OF RS . 3,42,92,627/- U/S 10A OF THE ACT, WITH RESPECT TO D EDUCTION OF EXPENDITURE INCURRED TOWARDS INTERNET CHARGES FOR D ELIVERY OF SOFTWARE FROM EXPORT TURNOVER. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD INC URRED INTERNET CONNECTION CHARGES OF RS. 16,81,765/-. THE ASSESSING OFFICER DISALLOWED EXPENDITURE INCURRED TOWARDS INT ERNET CHARGES FOR DELIVERY OF SOFTWARE AND RECOMPUTED THE ELIGIBLE EXEMPTION U/S 10A OF THE ACT. 4. ON APPEAL BEFORE THE CIT(A), THE ASSESSEE SUBMI TTED THAT THE EXPORT TURNOVER DOES NOT INCLUDE INTERNET CHARGES. HE FURTHER STATED THAT INTERNET CHARGES ARE NOT TELECO MMUNICATION CHARGES RELYING UPON THE DECISION OF HONBLE ITAT, HYDERABAD IN THE CASE OF PATNI TELECOM PVT. LTD., 22 SOT 26 ( HYD.). THE CIT(A) HELD THAT THE EXPENDITURE INCURRED TOWARDS I NTERNET CHARGES FOR DELIVERY OF SOFTWARE SHOULD NOT EXCLUDE D FROM THE EXPORT TURNOVER FOR THE PURPOSE OF DEDUCTION U/S 10 A OF THE ACT. ITA NOS. 1735 & 1652/HYD/11 AND C.O. NO. 05/HYD/12 NISC EXPORT SERVICE P. LTD. 3 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF A PPEAL: 1. THE HONBLE CIT(A) ERRED BOTH IN LAW AND ON FACT S AND CIRCUMSTANCES OF THE CASE. 2. THE CIT(A) ERRED IN NOT APPRECIATING THE FACT TH AT THE ONLY FOR THE LIMITED PURPOSE OF CALCULATING ELIGIBL E EXEMPTION U/S 10A, EXPLANATION (2) TO SECTION 10A DEFINES EXPORT TURNOVER AND ALSO DEFINES THE ITEM S TO BE EXCLUDED FROM THE TURNOVER. 3. THE CIT(A) HAS ALSO ERRED IN NOT APPRECIATING TH E FACT THAT IT WAS NEVER THE INTENTION OF THE LEGISLATURE WHILE INCORPORATING EXPLANATION (2) TO SEC 10A TO EXTEND SIMILAR TREATMENT TO BOTH EXPORT TURNOVER AND TOTAL TURN OVER. 4. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT IF IT IS THE INTENTION OF THE LEGISLATURE TO EXTENT SIMILAR TREA TMENT TO TOTAL TURNOVER, IT SHOULD HAVE EXPLICITLY PROVIDE D TO EXCLUDE FREIGHT, INSURANCE AND TELECOMMUNICATION CH ARGES ATTRIBUTABLE TO THE EXPORT OF SOFTWARE EVEN FROM TH E TOTAL TURNOVER AS WAS DONE IN THE CASE OF SECTION 80HHC WHEREIN THE LEGISLATURE WAS CLEAR AT EXPLANATION (B AA) TO SUB-CLAUSE 4C. 6. THE LEARNED DR, SMT. AMISHA S. GUPT REFERRING TO PARA 3.8 OF THE ASSESSING OFFICERS ORDER AND SUBMITTED THAT THE CIT(A) HAS CONFIRMED INCORRECT GROUND TAKEN BY THE ASSESSEE WITH RESPECT TO DEDUCTION OF INTERNET EXPENSES FROM THE EXPORT TURNOVER, AS THE ASSESSING OFFICER HIMSELF HAD GIVE N ALLOWABLE DEDUCTION U/S 10A OF THE ACT. PARA 3.8 OF THE ASSES SING OFFICERS ORDER IS EXTRACTED BELOW:- 3.8. IN THE LIGHT OF THE ABOVE, THE ADJUSTMENTS REQ UIRED TO BE MADE AND THE DEDUCTION ALLOWABLE U/S 10A ARE COMPUTED AS PER ANNEXURE-A ENCLOSED TO THIS ORDER W HICH WORKS OUT TO RS. 3,36,87,830/- AS AGAINST THE ASSES SEES CLAIM OF RS. 3,43,92,627/-. THUS THE CORRECT ALLOWA BLE DEDUCTION U/S 10A OF RS. 3,36,87,830/- IS ALLOWED A ND THE INCOME OF THE ASSESSEE IS RECOMPUTED. ITA NOS. 1735 & 1652/HYD/11 AND C.O. NO. 05/HYD/12 NISC EXPORT SERVICE P. LTD. 4 7. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE SHRI G. KALYANDAS RELIED UPON THE ORDER OF THE CIT( A). 8. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES, PERUSED THE RECORD AND GONE THROUGH THE ORDERS OF T HE AUTHORITIES BELOW. 9. WE HAVE PERUSED FROM THE GROUNDS OF APPEAL FILED BEFORE THE CIT(A) THAT THE ASSESSEE HAS OBJECTED ON THE GR OUND THAT THE EXPORT TURNOVER DOES NOT INCLUDE INTERNET CHARG ES. WHILE THE CIT(A) DID NOT AGREE WITH THE CONTENTION OF THE ASSESSEE, HE GRANTED THE CONSEQUENTIAL RELIEF AND HELD THAT I F THE AMOUNT IS TO BE EXCLUDED FROM THE EXPORT TURNOVER IT SHALL BE EXCLUDED FROM THE TOTAL TURNOVER ALSO 10. WE FIND THAT THE ISSUE IS SQUARELY COVERED BY T HE DECISION OF THE COORDINATE BENCH IN THE CASE OF PATNI COMPUT ERS LTD. (SUPRA) AND ALSO SPECIAL BENCH OF THE CHENNAI TRIBU NAL IN THE CASE OF ITO VS SAKSOFT LTD (313 ITR AT 353) WHEREI N IT WAS HELD THAT EXPENSES EXCLUDED FROM EXPORT TURNOVER SHOULD ALSO BE EXCLUDED FROM THE TOTAL TURNOVER . THE HONBLE KARNATAKA HIGH COURT HAS ALSO TAKEN SIMILAR VIEW IN THE CASE OF CIT VS. TATA ELXSI LTD. & OTHERS, 247 CTR 334 (KAR.). RESPE CTFULLY FOLLOWING THE SAID DECISION CITED SUPRA THE ISSUE I S DECIDED IN FAVOUR OF THE ASSESSEE AND GROUNDS OF APPEAL OF THE REVENUE IN THIS REGARD ARE DISMISSED. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ITA NOS. 1735 & 1652/HYD/11 AND C.O. NO. 05/HYD/12 NISC EXPORT SERVICE P. LTD. 5 ITA NO. 1652/HYD/11 APPEAL BY THE ASSESSEE 12. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL:- 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO L AW AND THE FACTS. 2. THE LEARNED CIT(A) ERRED IN UPHOLDING THE ORDERS OF THE ASSESSING OFFICER FOR LEVY OF INTEREST OF RS. 14,03 ,082/- U/S 244B AND RS. 35,615/- U/S 234C OF THE ACT. 3. THE LEARNED CIT(A) ERRED IN NOT FOLLOWING THE DE CISION OF THE SUPREME COURT IN THE CASE OF CIT VS. KWALITY BISCUITS LTD. 284 ITR 434 WHILE UPHOLDING THE LEVY OF INTEREST U/S 234B & CIT (A) OF THE ACT FOR FAILURE TO PAY ADVANCE TAX AGAINST TAX COMPUTED U/S 115JB. 4. THE LEARNED CIT(A) ERRED IN SUSTAINING THE ORDER OF THE ASSESSING OFFICER IN THIS REGARD BY FOLLOWING THE D ECISIONS OF HIGH COURTS IGNORING THE DECISION OF THE SUPREME COURT RELIED UPON BY THE APPELLANT. 5. THE LEARNED CIT(A) FURTHER FAILED TO NOTE THAT B OOK PROFITS ARE DETERMINED AFTER THE END OF THE RELEVAN T FY PURSUANT TO COMPANIES ACT AND THEREFORE PAYMENT OF ADVANCE TAX IN RESPECT OF TAX LIABILITY U/S 115JB O F THE ACT IS NOT CONTEMPLATED UNDER LAW AND HENCE LEVY OF INTEREST U/S 234B&CIT (A) IS BAD IN LAW. 6. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED, INTEREST LEVIED U/S 234B & 234C OF THE ACT BE CANCE LLED AND OBLIGED. 13. THE ASSESSING OFFICER HAD LEVIED INTEREST U/S 2 34B & 234C ON THE BASIS OF INCOME COMPUTED U/S 115JB OF THE AC T. 14. ON APPEAL BEFORE THE CIT(A), THE ASSESSEE RELIE D ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF KWALITY BISCUITS VS. CIT, 243 ITR 519(KAR.). THE CI T(A) RELYING ON VARIOUS CASE LAWS INCLUDING THE DECISION IN THE CASE OF CIT VS. KOTAK MAHINDRA FINANCE LTD., 265 ITR 119 (BOM.) HELD THAT ITA NOS. 1735 & 1652/HYD/11 AND C.O. NO. 05/HYD/12 NISC EXPORT SERVICE P. LTD. 6 THE ASSESSING OFFICER IS RIGHT IN CHARGING INTEREST U/S 234B AND 234C OF THE ACT. 15. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSES SEE IS IN APPEAL BEFORE US. 16. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES , PERUSED THE RECORD AND GONE THROUGH THE ORDERS OF T HE AUTHORITIES BELOW. WE FIND THAT THE ISSUE IS NO MOR E RES-INTEGRA IN VIEW OF THE DECISION OF THE APEX COURT IN THE CA SE OF JOINT CIT V. ROLTA INDIA LTD., 330 ITR 470, WHEREIN THE APEX COURT HELD AS UNDER:- IT IS CLEAR FROM READING SECTIONS 115JA AND 115JB O F THE INCOME-TAX ACT, 1961, THAT THE QUESTION WHETHER A COMPANY WHICH IS LIABLE TO PAY TAX UNDER EITHER PRO VISION DOES NOT ASSUME IMPORTANCE BECAUSE SPECIFIC PROVISI ON IS MADE IN THE SECTION SAYING THAT ALL OTHER PROVISION S OF THE ACT SHALL APPLY TO A MAT COMPANY (SECTION 115JA(4) AND SECTION 115JB(5). SIMILARLY, AMENDMENTS HAVE BEEN M ADE IN THE RELEVANT FINANCE ACTS PROVIDING FOR PAYMENT OF ADVANCE TAX UNDER SECTIONS 115JA AND 115JB. SECTION 234B IS CLEAR THAT IT APPLIES TO ALL COMPANIES. THE PREREQUISITE CONDITION FOR APPLICABILITY OF SECTION 234B IS THAT THE ASSESSEE IS LIABLE TO PAY TAX UNDER SECTIO N 208 AND THE EXPRESSION ASSESSED TAX IS DEFINED TO MEA N THE TAX ON THE TOTAL INCOME DETERMINED U/S 143(1) OR UN DER SECTION 143(3) AS REDUCED BY THE AMOUNT OF TAX DEDU CTED OR COLLECTED AT SOURCE. THUS, THERE IS NO EXCLUSION OF SECTION 115J/115JA IN THE LEVY OF INTEREST UNDER SE CTION 234B. THE EXPRESSION ASSESSED TAX IS DEFINED TO M EAN THE TAX ASSESSED ON REGULAR ASSESSMENT WHICH MEANS THE TAX DETERMINED ON THE APPLICATION OF SECTION 115J/1 15JA IN THE REGULAR ASSESSMENT. INTEREST U/S 234B IS PAYABLE ON FAILURE TO PAY ADVA NCE TAX IN RESPECT OF TAX PAYABLE U/S 115JA. ITA NOS. 1735 & 1652/HYD/11 AND C.O. NO. 05/HYD/12 NISC EXPORT SERVICE P. LTD. 7 17. IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE S UPREME COURT IN THE CASE OF JCIT VS. ROLTA INDIA LTD. (SUP RA), WE UPHOLD THE ORDER OF THE CIT(A) IN CONFIRMING THE OR DER OF THE AO IN CHARGING INTEREST U/S 234 B & 234C OF THE ACT , ON THE BASIS OF INCOME COMPUTED U/S 115JB OF THE ACT. ACCO RDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ON THIS ISSUE AR E DISMISSED. 18. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. 19. TO SUM UP, THE APPEAL OF THE REVENUE AND APPEAL OF THE ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 28/09/2012. SD/- SD/- ( CHANDRA POOJARI) (ASHAVIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED:28 TH SEPTEMBER, 2012. KV COPY TO:- 1) ACIT, CIRCLE 16(3), 6 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD 2) NISC EXPORT SERVICE P. LTD., PLOT NO. 95/1, PHASE- II, IDA, CHERLAPALLY, HYDERABAD. 3) THE CIT (A)-V, HYDERABAD 4) CIT-IV, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM ITA NOS. 1735 & 1652/HYD/11 AND C.O. NO. 05/HYD/12 NISC EXPORT SERVICE P. LTD. 8 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER