M/s.Wrench Solutions Pvt Ltd., Bangalore V. ITO Ward-12(2), Bangalore

ITA 1809/BANG/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7224 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 21-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKAS SURYAWANSHI ADDITIONAL
• Assessee Lawyers: D S VIVEK
• Section: 10AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-A BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER ITA NO.1809/BANG/2016 ASSESSMENT YEAR : 2010-11 M/S. WRENCH SOLUTIONS PVT. LTD., NO.76, FACILE TOWERS, VICTORIA ROAD, BENGALURU-560047. PAN : AABCCI544P VS. INCOME TAX OFFICER, WARD 12(2), BENGALURU. APPELLANT RESPONDENT ASSESSEE BY : SHRI. D. S. VIVEK, CA REVENUE BY : SHRI. VIKAS SURYAWANSHI, ADDITIONAL CIT DATE OF HEARING : 13.11.2017 DATE OF PRONOUNCEMENT : 17.11.2017 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF CIT(A), INTERALIA , ON THE FOLLOWING GROUNDS: 1. ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX APPEALS (CIT(A)), PASSED UNDER SECTION 250 OF THE A CT IN SO FAR AS IT IS AGAINST THE APPELLANT IS OPPOSED TO LAW, EQUITY, WEIGHT OF EVIDENCE, PROBABILITIES AND THE FACTS AND CIRCUMSTANCES IN THE APPELLANT'S CASE . 2. THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE OR DER OF THE ITO BY TREATING THE EXPENDITURE INCURRED IN FOREIGN CURREN CY FOR PROVIDING TECHNICAL SERVICES OUTSIDE INDIA AS ATTRIBUTABLE TO DELIVERY OF ARTICLE OR THI NG OUTSIDE INDIA AND REDUCING IT FROM TURNOVER FOR PURPOSE OF CALCULATING EXEMPTION U/S 10AA, WHICH IS BAD IN LAW. 3. THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE ER RONEOUS ADDITION MADE BY THE AO EXCLUDING THE TELECOMMUNICATION CHAR GES, INSURANCE CHARGES AND TRAVELLING EXPENSES FROM THE TURNOVER FOR PURPO SE OF CALCULATING EXEMPTION U/S 10AA WHICH IS BAD IN LAW. 4. THE LEARNED CIT (A) HAS ERRED IN DISMISSING THE BELOW ITA NO. 1809/BANG/2016 PAGE 2 OF 3 GROUNDS WITHOUT COMMENTING OR PASS A SPEAKING ORDER: A) TREATING THE SINGAPORE AND UAE BRANCH EXPENSES I NCURRED FOR SALARIES, OFFICE RENT, GUEST HOUSE RENT, LOCAL TRAV EL AND CONVEYANCE CHARGES AND BANK CHARGES AS EXPENDITURE INCURRED FO R PROVIDING TECHNICAL SERVICES AND LIMITING THE EXEMPTION U/S. 10AA. (B) TREATING THE EXPENDITURE INCURRED IN FOREIGN CU RRENCY FOR PURCHASE OF COMPUTER SOFTWARE AS EXPENDITURE INCURRED FOR PROVI DING TECHNICAL SERVICES WHEREAS THE SAME IS BUNDLED WITH THE FINAL PRODUCT AND SOLD TO THE CUSTOMERS. 5. THE LEARNED CIT(A) HAS ERRED IN DISMISSING GROUN D FOR EXCLUDING AMOUNTS DISALLOWED IN THE TAX COMPUTATION U/S 40(A) (IA) WHILE CALCULATING PROFIT OF THE COCHIN UNIT IN DETERMININ G THE EXEMPTION U/S 10AA BY TREATING THE SAME AS INFRACTUOUS STATING THAT TH ERE IS NO DISALLOWANCE MADE U/S 40(A)(IA) AMOUNTING TO RS.1,79,516/- WITHOUT UN DERSTANDING THE GROUND RAISED AND WITHOUT SEEKING FURTHER CLARIFICATION FR OM THE APPELLATE. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, DELETE OR SUBSTITUTE ANY OF THE GROUNDS URGED ABOVE. 2. THE LEARNED COUNSEL FOR THE ASSESSEE HAS INVIT ED OUR ATTENTION THAT WHILE COMPUTING THE DEDUCTION UNDER SECTION 10AA OF THE ACT, THE AO HAS REDUCED CERTAIN EXPENSES INCURRED OUT OF INDIA THOUGH TOWARDS THE EXPORT ACT IVITIES, BUT CIT(A) HAS NOT ADJUDICATED THE ISSUE OF EXCLUSION OF THESE EXPENSES FROM THE E XPORT TURNOVER. HE RATHER ADJUDICATED THE ISSUE FOLLOWING THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF TATA ELXSI LTD., 349 ITR 98 AND HELD THAT WHATEVER EXPENSES ARE REDUCED FROM T HE EXPORT TURNOVER, THE SAME SHOULD ALSO BE REDUCED FROM THE TOTAL TURNOVER . THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER INVITED OUR ATTENTION TO THE FACT THAT CLAIM OF THE ISSUES THAT THESE EXPENSES INCURRED SHOULD NOT BE REDUCED FROM THE EX PORT TURNOVER IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS BUT THE CIT(A) WITHOUT ADJU DICATING THIS ISSUE DECIDED THE ALTERNATIVE ARGUMENTS FOLLOWING THE JUDGMENT OF JUR ISDICTIONAL HIGH COURT IN THE CASE OF TATA ELXSI LTD (SUPRA). THE LEARNED COUNSEL FOR THE ASS ESSEE FURTHER CONTENDED THAT IN THE LIGHT OF THESE FACTS, THE MATTER MAY BE RESTORED BACK FOR THE ADJUDICATION ON THE GROUND RELATING TO EXCLUSION OF THE EXPENSES FROM THE EXPORT TURNOV ER. THE LEARNED DR PLACED RELIANCE UPON THE ORDER OF TH E CIT(A). 3. HAVING CAREFULLY EXAMINED THE ORDER OF THE CIT(A ) IN THE LIGHT OF RIVAL SUBMISSIONS, I FIND THAT CIT(A) HAS DECIDED THE ISSUE IN THE LIGHT OF JUDGMENT OF THE JURISDICTIONAL HIGH ITA NO. 1809/BANG/2016 PAGE 3 OF 3 COURT IN THE CASE OF TATA ELXSI (SUPRA) AND HELD TH AT WHATEVER EXPENSES ARE REDUCED FROM THE EXPORT TURNOVER, THE SAME MAY ALSO BE REDUCED F ROM THE TOTAL TURNOVER. 4. ON THE CAREFUL PERUSAL OF THE ORDER OF THE CIT(A ), THE CIT(A) HAS NOT EXAMINED THE ARGUMENT OF THE ASSESSEE FOR THE EXCLUSION OF THE I NCURRED EXPENSES FROM THE EXPORT TURNOVER. THEREFORE, I AM OF THE VIEW THAT SINCE T HE CIT HAS NOT ADJUDICATED THE ISSUE, MATTER SHOULD BE RESTORED BACK TO HIS FILE WITH A D IRECTION TO EXAMINE THE ISSUE OF EXCLUSION OF THE IMPUGNED EXPENSES I.E., TELECOMMUNICATION CH ARGES, INSURANCE CHARGES, TRAVELLING EXPENSES INCURRED IN FOREIGN CURRENCY, ETC., FROM T HE EXPORT TURNOVER. IN THE LIGHT OF THE ARGUMENTS OF THE ASSESSEE, ALL THESE EXPENSES WERE INCURRED TOWARDS THE EXPORT ACTIVITIES OF THE ASSESSEE. I ORDER ACCORDINGLY. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON NOVEMBER, 201 7. SD/- (SUNIL KUMAR YADAV) JUDICIAL MEMBER PLACE : BANGALORE DATED : 17/11/2017 /NSHYLU/* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER SR. PRIVATE SECRETARY, ITAT, BANGALORE.