ACIT, Circle-16(3), Hyderabad V. M/s. Prithvi Information Solutions Pvt.Ltd, Hyderabad

ITA 1778/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59299 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 14-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Section: 80HHC; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE CHANDRA POOJARI, ACCOUNTANT MEMBER & SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1778/HYD/2011 ASSESSMENT YEAR 2007-08 THE ACIT, CIRCLE 16(3), HYDERABAD VS M/S PRITHVI INFORMATION SOLUTIONS P LTD., HYDERABAD (PAN AACCP5281F) APPELLANT RESPONDENT APPELLANT BY : SHRI. V. SRINIVAS RESPONDENT BY : SHRI JOSHI DATE OF HEARING : 2.2.2012 DATE OF PRONOUNCEMENT : 29.2.2012 ORDER PER ASHA VIJAYARAGHAVAN, JM . THIS APPEAL PREFERRED BY THE REVENUE IS DIRECT ED AGAINST THE ORDER PASSED BY THE CIT(A) V, HYDERABAD DATED 2.8. 2011 AND PERTAINS TO THE ASSESSMENT YEAR 2007-08. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSE SSEE COMPANY IS ENGAGED IN THE BUSINESS OF SOFT WARE DEVELOPMENT. THE RETURN OF INCOME WAS PROCESSED U/S 143(1). SUBSEQUENTLY THE AO OBSERVED THAT THE ASSESSEE HAD CLAIMED EXCESS DEDUC TION U/S 10A OF THE ACT AND HENCE ISSUED NOTICED U/S 148 OF THE ACT. THE AO FOUND THAT THE TOTAL TURNOVER OF THE ASSESSE E WAS RS.769,10,81,000/- AND THE EXPORT TURNOVER WAS RS.758,97,73,000/-. THE FOLLOWING EXPENSES WERE CL AIMED: 1) TELECOMMUNICATION CHARGES OF RS.2,28,63,336/- ITA NO.1778 OF 2011 PRITHVI INFORMATION SOLUTIONS LTD., HYD. 2 2 2) INSURANCE OF RS.1,76,77,849/- 3) ONSITE EXPENSES OF RS.641,67,58,820/- 3. ACCORDINGLY STATING THAT ALL THE AFOREMENTIONED EXPENSES WERE ATTRIBUTABLE TO THE DELIVERY OF ARTICLE OR THI NG OR COMPUTER SOFTWARE OUTSIDE INDIA OR WERE EXPENSES INCURRED IN FOREIGN EXCHANGE IN PROVIDING TECHNICAL SERVICES, THE AO DI SALLOWED THE ENTIRE EXPENDITURE I.E. REDUCED IT FROM THE EXPORT TURNOVER BEFORE RE-COMPUTING THE ALLOWABLE DEDUCTION. 4. THE CIT(A) FOLLOWED THE DECISION IN ASSESSEE OW N CASE IN ITA NO.225/H/2007 DATED 12.10.2007 AND HELD THAT TELECOMMUNICATION EXPENSES AND INSURANCE CHARGES SH OULD BE REDUCED FROM BOTH THE NUMERATOR AND DENOMINATOR I.E . FROM THE EXPORT TURNOVER AS WELL AS FROM THE TOTAL TURNOVER. 5. WITH RESPECT TO ONSITE EXPENDITURES THE CITA RE LIED ON THE DECISIONS OF PLAN ONLINE P LTD. VS. DCIT, HYD IN IT A NO.1016/H/2007 DATED 29.8.2008 AND HELD THAT ONSITE EXPENSES ARE TO BE REDUCED FROM EXPORT TURNOVER AS WELL AS F ROM TOTAL TURNOVER. 6. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US AN D HAS RAISED THE FOLLOWING GROUNDS: 1. THE CIT(A) ERRED BOTH IN FACTS AND LAW. 2. THE CIT(A) ERRED IN DIRECTING THE AO TO EXCLUDE TELECOMMUNICATION CHARGES, INSURANCE AND ONSITE EXP ENSES FROM THE EXPORT TURNOVER WHICH IS NOT CORRECT AS PE R EXPLANATION 2(IV) OF SEC.10A. 3. THE CIT(A) OUGHT TO HAVE OBSERVED THAT IF IT IS THE INTENTION OF THE LEGISLATURE TO EXTEND TO SIMILAR TREATMENT T O TOTAL ITA NO.1778 OF 2011 PRITHVI INFORMATION SOLUTIONS LTD., HYD. 3 3 TURNOVER, IT SHOULD HAVE EXPLICITLY PROVIDED TO EXC LUDE FREIGHT INSURANCE AND TELECOMMUNCITION CHARGES ATTR IBUTABLE TO THE EXPORT OF SOFTWARE EVEN FROM THE TOTAL TURNO VER AS WAS DONE IN THE CASE OF SECTION 80HHC WHEREIN THE LEGISLATURE WAS CLEAR AT EXPLANATION (BAA) TO SUB S ECTION 4C. 7. WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) AS HE HAS FOLLOWED THE ORDER OF THE TRIBUNAL, HYDERABAD BENCH WHILE ALLOWING THE ASSESSEES APPEAL. 8. RESPECTFULLY FOLLOWING THE DECISION OF THE COOR DINATE BENCH IN ASSESSEES OWN CASE IN M/S PRITHIVI INFORM ATION SOLUTIONS LTD. SECUNDERABAD VS. ITO IN ITA NO.225/H YD/2005 DATED 12.10.2007 WE HOLD THAT TELECOMMUNICATION EXP ENSES AND INSURANCE CHARGES SHOULD BE REDUCED FROM BOTH THE N UMERATOR AND DENOMINATOR IE. FROM EXPORT TURNOVER AS WELL AS FROM THE TOTAL TURNOVER. 9. WITH RESPECT TO ONSITE EXPENSES, FOLLOWING THE DECISION OF THE COORDINATE BENCH IN THE CASE OF PLANT ONLINE P LTD. VS. DCIT, WE HOLD THAT ONSITE EXPENSES ARE TO BE REDUCE D FROM EXPORT TURNOVER AS WELL AS FROM THE TOTAL TURNOVER. 10. IN THE RESULT, THE REVENUES APPEAL IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON: 29.2.2 012 SD/- SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER DATED THE 29 TH FEBRUARY, 2012 ITA NO.1778 OF 2011 PRITHVI INFORMATION SOLUTIONS LTD., HYD. 4 4 COPY FORWARDED TO: 1. THE ACIT, CIRCLE 16(3), HYDERABAD 2. M/S PRITHVI INFORMATION SOLUTIONS P LTD., 1003, A1 , 10 TH FLOOR, CYBER TOWERS, MADHAPUR, HYDERABAD 3. THE CIT(A)-V, HYDERABAD 4. THE CIT, HYDERABAD 5. THE DR, ITAT, HYDERABAD NP/