ITO 8(1)(2), MUMBAI V. COMPSOFT BPO SERVICES P.LTD, MUMBAI

ITA 1857/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79366 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 08-05-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 07-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SAHU
• Assessee Lawyers: FIROZE ANDHYARUJINA; SATISH KANODIA
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUM BAI , BEFORE SHRI D. MANMOHAN, VP AND SHRI SANJAY ARORA, AM I.T.A. NO. 1857/MUM/2011 ( / ASSESSMENT YEAR: 2006-07) ITO-8(1)(2), ROOM NO. 205, 2 ND FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400 020 VS. COMPSOFT BPO SERVICES PVT. LTD. 6C2/2A, GUNDECHA ENCLAVE, KHAIRANI ROAD, SAKINAKA, ANDHERI (E), MUMBAI-400 072 ! ' ./PAN/GIR NO. AACCC 2153 K ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) !#&' / APPELLANT BY : SHRI R. K. SAHU $%!#&' / RESPONDENT BY : SHRI FIROZE ANDHYARUJINA & SHRI SATISH KANODIA ( )*&+, / DATE OF HEARING : 08.05.2014 -./&+, / DATE OF PRONOUNCEMENT : 04.07.2014 0 O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-16, MUMBAI (CIT(A) FOR SH ORT) DATED 23.12.2010, ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S .143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A. Y.) 2006-07 VIDE ORDER DATED 23.12.2008. 2. THE APPEAL RAISES TWO ISSUES, PER ITS TWO EFFECT IVE GROUNDS, WHICH WE SHALL TAKE UP IN SERIATIM. VIDE ITS GROUND NO. 1, THE REVENUE AGI TATES THE DIRECTION BY THE LD. CIT(A) TO 2 ITA NO. 1857/MUM/2011 (A.Y. 2006-07) ITO VS. COMPSOFT BPO SERVICES PVT. LTD. THE ASSESSING OFFICER (A.O.) TO RECKON THE ASSESSEE S EXPORT TURNOVER AS WELL AS TOTAL TURNOVER, I.E., IN COMPUTING THE DEDUCTION U/S.10 A OF THE ACT EXIGIBLE THERETO, BY DEDUCTING THE AMOUNT OF TELECOMMUNICATION CHARGES ( RS.20,37,006/-) AND INSURANCE EXPENSES (RS.8,119/-). IN VIEW OF THE REVENUE, THE SAME, THOUGH LIABLE TO BE REDUCED IN COMPUTING THE EXPORT TURNOVER, IN-AS-MUCH AS THE SAME IS SPECIFICALLY PROVIDED FOR IN THE DEFINITION OF THE SAID TURNOVER IN S.10A ITSELF , COULD NOT BE REDUCED IN COMPUTING THE TOTAL TURNOVER, WHICH IS NOT SIMILARLY DEFINED, S O THAT THE COMMON NOTION THEREOF WOULD PREVAIL. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE ASSESSEE, BOTH BEFORE THE AUTHORITIES BELOW AS WELL AS BEFORE US, HAS CONTENDED THAT NO CASE FOR REDUCTION OF THE IMPUGNED SUMS FROM THE EXPORT TURNOVER IS MADE OUT IN-AS-MUCH AS THE SAID EXPENSES ARE NOT ATTRIBUTABLE TO THE DELIVERY OF TH E COMPUTER SOFTWARE BEING EXPORTED OUTSIDE INDIA, I.E., AS PROVIDED PER THE DEFINITION CLAUSE OF THE PROVISION. IN ANY CASE OF THE MATTER, IF THE SAME ARE TO BE REDUCED, THEY WOU LD ALSO STAND TO BE REDUCED FOR THE PURPOSES OF TOTAL TURNOVER ON THE GROUND OF PARIT Y IN COMPUTING THE PRESCRIBED RATIO, I.E., OF THE EXPORT TURNOVER TO TOTAL TURNOVER; IT HA VING NO OTHER BUSINESS APART FROM THAT OF EXPORT OF SOFTWARE, SO THAT ITS TOTAL TURNOVER AS WELL AS THE EXPORT TURNOVER OUGHT TO BE THE SAME. RELIANCE FOR THE PURPOSE IS PLACED ON THE DECISIONS IN THE CASE OF CIT VS. GEM PLUS JEWELLERY INDIA LT. [2011] 330 ITR 175 (BOM); ITO VS. SAK SOFT LIMITED [2009] 313 ITR 353 (CHEN) (SB); AND CIT VS. DELL INTERNATIONAL SERVICES INDIA PRIVATE L IMITED AND OTHERS (IN ITA NO. 70/2009, ITA NO. 818/2009, ITA NO. 181 /2010, ITA NO. 450/2008, ITA NO. 451/2008 AND OTHERS, DATED 30 AUGUST 2011). WE FIND MUCH MERIT IN THE ASSESSEES CASE, WHICHEVE R ONE MAY LOOK AT THE PROPOSITIONS BEING ADVANCED BY IT. THE REDUCTION OF FREIGHT, TELECOMMUNICATION CHARGES OR INSURANCE FROM THE AMOUNT OF TURNOVER IS, CLEARL Y, MANDATED TO BE IN RESPECT OF THAT ATTRIBUTABLE TO THE DELIVERY OF COMPUTER SOFTWARE O UTSIDE INDIA. THE SAID REDUCTION, THEREFORE, OUGHT TO BE PRECEDED BY A FINDING BY THE REVENUE THAT THE SAID CHARGES STOOD INCURRED BY THE ASSESSEE IN RELATION TO THE SAID DE LIVERY, IN THE ABSENCE OF WHICH, AS BEING 3 ITA NO. 1857/MUM/2011 (A.Y. 2006-07) ITO VS. COMPSOFT BPO SERVICES PVT. LTD. CLAIMED BY THE ASSESSEE IN THE INSTANT CASE, THE SA ID REDUCTION WOULD NOT HOLD. AGAIN, THE COMPUTATION OF TOTAL TURNOVER IS ONLY TO DETERMIN E THE RATIO OF THE EXPORT TURNOVER TO THE TOTAL TURNOVER, SO AS TO ARRIVE AT, FOR THE P URPOSE OF ITS EXCLUSION, IN THE COMPUTATION OF DEDUCTION U/S.10A, THE PROFIT ATTRIBUTABLE TO TH E DOMESTIC BUSINESS. A PARITY OF VALUATION, I.E., OF THE NUMERATOR AND THE DENOMINAT OR, IS IMPLIED IN THE SAID FORMULA. IN THE INSTANT CASE, THE ASSESSEE HAS NO DOMESTIC BUSI NESS NOR ANY EXPORTS NOT REALIZED IN CONVERTIBLE FOREIGN EXCHANGE AND WITHIN THE PRESCRI BED TIME AND, CONSEQUENTLY, THERE IS NO SCOPE FOR ANY DOMESTIC TURNOVER OR OTHER THAN EX PORT TURNOVER. ACCORDINGLY, HOWSOEVER ONE MAY VALUE THE TURNOVER, WHICH IS TO B E ON THE SAME BASIS, THE EXPORT TURNOVER AND THE TOTAL TURNOVER WOULD NECESSARIL Y HAVE TO BE THE SAME. THIS IS ALSO THE RATIO OF THE DECISIONS CITED BY THE ASSESSEE IN ITS FAVOUR. ACCORDINGLY, WE FIND NO MERIT IN THE REVENUES CASE AND, THEREFORE, DISMISS ITS GROU ND # 1. WE DECIDE ACCORDINGLY. 4. THE REVENUES SECOND GROUND RELATES TO THE DIREC TION BY THE LD. CIT(A) TO THE A.O. TO ASSESS THE FOREIGN EXCHANGE GAIN EARNED BY IT UNDER THE HEAD OF INCOME INCOME FROM OTHER SOURCES, SO THAT THE SAME WOULD STAND T O BE EXCLUDED FROM BOTH THE EXPORT TURNOVER AS WELL AS THE TOTAL TURNOVER. THE GAIN ON FOREIGN EXCHANGE REALIZED (AT RS.78,606/-) IS, AS A READING OF THE ORDERS BY THE REVENUE AUTHORITIES WOULD SHOW, ONLY IN RESPECT OF THE EXPORT AS BILLED BY IT FOR THE RELEV ANT YEAR (USD 5,97,000). THERE IS, THEREFORE, IN OUR VIEW, NO CASE FOR THE SAME BEING NOT CONSIDERED AS A PART OF THE EXPORT TURNOVER, WHICH IS TO BE RECKONED IN TERMS OF INDIA N RUPEES AND, CONSEQUENTLY, ALSO FORM PART OF THE TOTAL TURNOVER. THE TWO TURNOVERS, THER EFORE, WOULD STAND TO BE COMPUTED AT THE SAME AMOUNT. THOUGH, THUS, OUR VIEW IS AT VARIANCE WITH THAT EXPRESSED BY THE LD. CIT(A), IT WOULD BE OF NO MOMENT IN-AS-MUCH AS IT W OULD HAVE NO BEARING ON THE AMOUNT OF DEDUCTION EXIGIBLE U/S.10A OF THE ACT, WHICH IN FACT WAS ALSO THE SUBSTANCE OF THE ASSESSEES CASE BEFORE US. AS SUCH, THOUGH THE IMPU GNED ORDER WOULD STAND MODIFIED IN CONSEQUENCE TO OUR FOREGOING VIEW, I.E., TO THE SAI D EXTENT, SO THAT THE EXCHANGE GAIN EARNED WOULD STAND TO BE ASSESSED AS A PART OF THE ASSESSEES BUSINESS INCOME, IT WOULD NOT DISTURB THE DEDUCTION ALLOWABLE TO IT U/S.10A I N VIEW OF IT BEING INCLUDIBLE BOTH IN THE 4 ITA NO. 1857/MUM/2011 (A.Y. 2006-07) ITO VS. COMPSOFT BPO SERVICES PVT. LTD. EXPORT TURNOVER AND TOTAL TURNOVER, WHICH THERE FORE SHALL BE THE SAME. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . 1/+2)& 1&+3 ORDER PRONOUNCED IN THE OPEN COURT ON JULY 04, 2014 SD/- SD/- (D. MANMOHAN) (SANJAY ARORA) / VICE PRESIDENT / ACCOUNTANT MEMBER ( 4* MUMBAI; 5 DATED : 04.07.2014 )6 ROSHANI , SR. PS !' # $%&' ('% COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. ( 7+ 8 9 / THE CIT(A) 4. ( 7+ / CIT - CONCERNED 5. :);<$6+6=> ,=>/ ( 4* / DR, ITAT, MUMBAI 6.