DCIT, CHENNAI V. Renault Nissan Technology & Business Centre Indai Private Limited, Kancheepuram

ITA 187/CHNY/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4986 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 12-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S RAMAKRISHNAN CIT
• Keywords: Business income; Transfer pricing; Services rendered outside India; Set aside
• Section: 143(3); 10AA; 260A; 250; 13

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH : CHENNAI , . , [BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ] !' ./I.T.A. NO.182/CHNY/2018. #$% &$ / ASSESSMENT YEAR : 2012-2013 M/S. RENAULT NISSAN TECHNOLOGY & BUSINESS CENTRE INDIA PRIVATE LTD, ASCENDAS IT PARK, MAHINDRA WORLD CITY SEZ, TP 2/1, NATHAM SUB POST OFFICER, KANCHIPURAM DIST. TAMIL NADU 603 004. VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 5(1) CHENNAI. !' ./I.T.A. NO.187/CHNY/2018. #$% &$ / ASSESSMENT YEAR : 2012-2013. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 5(1) CHENNAI. VS. M/S. RENAULT NISSAN TECHNOLOGY & BUSINESS CENTRE INDIA PRIVATE LTD, ASCENDAS IT PARK, MAHINDRA WORLD CITY SEZ, TP 2/1, NATHAM SUB POST OFFICER, KANCHIPURAM DIST. TAMIL NADU 603 004. [PAN AADCR 7253E] ( / APPELLANT) ( /RESPONDENT) ASSESSEE BY : SHRI. ASHIK SHAH, C.A. DEPARTMENT BY : SHRI. S. RAMAKRISHNAN, CIT. # ' ( ) /DATE OF HEARING : 12-02-2020 *+&% ( ) /DATE OF PRONOUNCEMENT : 14-02-2020 ITA NOS.182 & 187/2018 :- 2 -: / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER THESE ARE CROSS APPEALS FILED BY THE ASSESSEE A S WELL AS REVENUE DIRECTED AGAINST THE ORDER OF THE LD. COMMI SSIONER OF INCOME TAX (APPEALS)-3, CHENNAI (HEREINAFTER CALLED AS CI T(A)) DATED 29.09.2017 FOR THE ASSESSMENT YEAR 2012-2013. 2. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT NAMELY M/S. RENAULT NISSAN TECHNOLOG Y & BUSINESS CENTRE INDIA PRIVATE LTD,. IS A COMPANY IN CORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF ENGINEERING, DESIGNING SERVICES, INFORM ATION TECHNOLOGY SUPPORT SERVICES, BACK OFFICE ACCOUNTING SUPPORT SE RVICES, CONTRACT RESEARCH AND DEVELOPMENT SERVICES AND SOURCING SUPP ORT SERVICES FOR ITS GROUP COMPANIES. THE RETURN OF INCOME FOR THE AY 2012-13 WAS FILED ON 30.11.2012 DISCLOSING TOTAL INCOME OF E13, 00,78,070/-. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPL ETED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -5(1), CHENNAI (HEREINAFTER CALLED AO) VIDE ORDER DATED 02.05.20 16 PASSED U/S. 143(3) R.W S. 92CA(3) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) AFTER MAKING THE FOLLOWING DISALLOWANCES. ITA NOS.182 & 187/2018 :- 3 -: (I) RESTRICTING THE DISALLOWANCE U/S.10AA OF THE ACT BY REDUCING THE EXPENDITURE INCURRED IN FOREIGN CURRENCY FROM E XPORT TURNOVER. (II) ADDITION ON ACCOUNT OF BELATED REMITTANCE OF EMPLO YEES CONTRIBUTION TO EMPLOYEES PROVIDENT FUND/ESI E28,11 ,739/-. (III) ADJUSTMENT MADE U/S.92CA OF THE ACT E35,87,344/-. (IV) INTEREST ON FIXED DEPOSITS E3,69,63,622/-. (V) THE ASSESSING OFFICER ALSO DISALLOWED REMITTANC E OF FOREIGN TAX PAID OF E8,44,57,768/- CLAIMED DURING THE ASSESSMEN T PROCEEDINGS AGAINST CLAIM MADE IN THE RETURN OF INC OME OF E5,58,87,820/- ON THE GROUND THAT CLAIM WAS NOT MAD E IN THE RETURN OF INCOME BY PLACING RELIANCE ON THE DECISIO N OF HON'BLE SUPREME COURT IN THE CASE OF GEOTZE INDIA LTD VS. CIT, 284 ITR 323. 3. BEING AGGRIEVED BY ABOVE ORDER, ASSESSEE COMPANY PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO VIDE IMPUGNED ORDER HAD SET ASIDE THE ISSUE OF TRANSFER PRICING ADJUSTM ENT TO THE ASSESSING OFFICER. AS REGARDS TO THE ADDITION U/S.10AA OF THE ACT, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO REDUCE THE EXPEN DITURE INCURRED IN FOREIGN CURRENCY BOTH FROM EXPORT TURNOVER AS WELL AS TOTAL TURNOVER. WITH REGARD TO THE ADDITION ON ACCOUNT OF DELAY IN REMITTANCE OF EPF/ESI, HE ALLOWED THE GROUND OF APPEAL BY PLACING RELIANCE ON THE ITA NOS.182 & 187/2018 :- 4 -: JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN T HE CASE OF CIT VS. MADRAS RADIATORS & PRESSING, 129 TAXMANN 709, AND CO-ORDINATE BENCH DECISION OF BOMBAY AND CHENNAI TRIBUNAL IN THE CASE OF CIT VS.GHATE PATIL TRANSPORT LTD (ITA NO.1002/2012 & 10 34/2012) AND DSM SOFT PVT LTD VS. ACIT, ITA NO.11 & 12/MDS/2010. WITH REGARD TO THE CLAIM FOR FOREIGN TAX PAID THE ISSUE WAS SET ASIDE TO THE ASSESSING OFFICER FOR DUE VERIFICATION . 4. AGGRIEVED BY THAT PART OF THE LD. CIT(A) ORDER, WHI CH IS AGAINST ASSESSEE-COMPANY, THE ASSESSEE COMPANY IS IN APPEAL BEFORE US IN ITA NO.82/CHNY/2018 CHALLENGING THE DECIS ION OF LD. CIT(A) IN REDUCING THE EXPENDITURE INCURRED IN FOREIGN CURREN CY BOTH TOTAL EXPORT TURNOVER AS WELL AS TOTAL TURNOVER CONTEND ING THAT EXPENDITURE WAS NOT INCURRED IN CONNECTION WITH DELIVERY OF COM PUTER SOFTWARE OR SERVICES AND ALSO CHALLENGED THE ADDITION MADE UND ER THE HEAD INCOME FROM OTHER SOURCES IN RESPECT OF FOREIGN EXCHANGE GAIN. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL. THE GROUNDS STATED HERE ARE WITHOUT PREJUDICE TO ONE ANOTHER. 1. THE ORDER OF THE LD. AO AND THE LD. CIT(A), TO T HE EXTENT PREJUDICIAL TO THE APPELLANT, ARE CONTRARY T O LAW, FACTS, AND CIRCUMSTANCES OF THE CASE. 2. EXCLUSION OF EXPENDITURE INCURRED IN FOREIGN CURRENCY, COMMUNICATION AND INSURANCE COST FROM EXPORT TURNOVER FOR DEDUCTION UNDER SECTION 10AA OF THE ACT ITA NOS.182 & 187/2018 :- 5 -: 2.1. THE LD. CIT(A) AND THE LD. AO HAVE ERRED IN EXCLUDING EXPENSES INCURRED IN FOREIGN CURRENCY AND COMMUNICATION AND INSURANCE COST FROM EXPORT TURNOVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTIO N UNDER SECTION 10AA OF THE ACT 2.2. THE LD. CIT(A) AND THE LD. AO HAVE ERRED IN TREATING EXPENSES INCURRED IN FOREIGN CURRENCY AND COMMUNICATION AND INSURANCE COSTS AS HAVING BEEN INCURRED IN CONNECTION WITH RENDERING SERVICES OUTS IDE INDIA WITHOUT CONSIDERING THE FACTS OF THE CASE AND NATURE OF SUCH EXPENSES. 2.3. THE LD. CIT(A) AND THE LD. AO HAVE FAILED TO APPRECIATE THAT THE EXPORT TURNOVER EARNED BY THE APPELLANT DOES NOT INCLUDE ANY RECEIPTS SEPARATELY RECOVERED TOWARDS EXPENDITURE INCURRED IN FOREIGN CURRENCY, COMMUNICATION AND INSURANCE COST 2.4. THE LD. CIT(A) AND THE LD. AO FAILED TO CONSID ER THE FAVORABLE DIRECTIONS OF THE DRP ON THE IDENTICA L ISSUE IN APPELLANTS OWN CASE FOR THE EARLIER AY 20 09- 10 2.5. THE LD. CIT(A) HAS ERRED IN NOT SEPARATELY ADJUDICATING THE ISSUE OF EXCLUSION OF COMMUNICATIO N AND INSURANCE COST FROM EXPORT TURNOVER 3. EXCLUSION OF OTHER INCOME FROM COMPUTATION OF PROFITS FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 10AA 3.1. THE LD. AO HAVE ERRED IN EXCLUDING FOREIGN EXCHANGE GAIN AND OTHER INCOME FROM PROFITS OF THE UNDERTAKING IN THE COMPUTATION OF DEDUCTION UNDER SECTION 10AA OF THE ACT BY CONCLUDING THE SAME ARE NOT PROFITS DERIVED BY THE ELIGIBLE UNDERTAKING. 3.2. THE LD. CIT(A) HAS ERRED IN NOT ADJUDICATING O N THE SAID ISSUE IN HIS ORDER PASSED UNDER SECTION 250 OF THE ACT . ITA NOS.182 & 187/2018 :- 6 -: 5. GROUND NO.1 IS GENERAL IN NATURE THEREFORE, DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 6. GROUND NO.2 CHALLENGES THE DECISION OF THE ASSE SSING OFFICER WITH REGARD TO EXCLUSION OF EXPENDITURE INCURRED I N FOREIGN CURRENCY ON COMMUNICATION AND INSURANCE FROM EXPORT TURNOVER CONTENDING THAT THESE WERE NOT INCURRED IN CONNECTION WITH RENDERIN G OF SERVICES OUTSIDE INDIA. THIS ISSUE WAS ALSO CHALLENGED BEF ORE THE LD. CIT(A) BY CONTENDING AS UNDER:- THE LD. AO, WHILE COMPUTING THE DEDUCTION UNDER SE CTION 1OAA OF THE ACT, HAD REDUCED THE ABOVEMENTIONED EXPENDITURE FROM THE EXPORT TURNOVER BY PLACING REL IANCE ON THE DEFINITION OF EXPORT TURNOVER PROVIDED UNDER EXPLANATION 1 TO SECTION 1OAA OF THE ACT, THE EXTRA CT OF WHICH IS PROVIDED BELOW FOR YOUR GOODSELFSEASE OF REFERENCE: EXPORT TURNOVER MEANS THE CONSIDERATION IN RESPECT OF EXPORT BY THE UNDERTAKING, BEING THE UNIT OF ARTICL ES OR THINGS OR SERVICES RECEIVED IN, OR BROUGHT INTO IND IA BY THE ASSESSEE BUT DOES NOT INCLUDE FREIGHT, TELECOMMUNIC ATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY O F THE ARTICLES OR THINGS OUTSIDE INDIA OR EXPENSES, IF AN Y, INCURRED IN FOREIGN EXCHANGE IN RENDERING OF SERVICES (INCLU DING COMPUTER SOFTWARE) OUTSIDE INDIA . 2.2 OUR SUBMISSION A) EXPENDITURE INCURRED IN FOREIGN CURRENCY NOT TO BE EXCLUDED FROM EXPORT TURNOVER OUR ARGUMENTS FOR NON-EXCLUSION OF THE ABOVE SAID EXPENDITURE FROM EXPORT TURNOVER ARE SUMMARIZED BEL OW: 1. PRECEDENT IN APPELLANTS OWN CASE AT THE OUTSET, THE APPELLANT WISHES TO SUBMIT THAT THE HONBLE DISPUTE RESOLUTION PANEL (DRP) HAS IN APPELLANTS OWN CASE FOR AY 2009-10 EXAMINED IN DET AIL, TREATMENT OF SIMILAR EXPENDITURE AND VIDE DIRECTION S DATED ITA NOS.182 & 187/2018 :- 7 -: DECEMBER 20, 2013, DIRECTED THE LD. AO TO DELETE TH E EXCLUSION OF THE FOLLOWING EXPENSES FROM EXPORT TUR NOVER WHILE COMPUTING DEDUCTION UNDER SECTION 1 OAA OF TH E ACT TRAVEL EXPENSES; . INFORMATION TECHNOLOGY AND TECHNICAL SUPPORT SER VICE CHARGES: AND REIMBURSEMENTS TO RENAULT GLOBAL MANAGEMENT AND NISSAN MOTOR COMPANY LIMITED AS REGARDS PROFESSIONAL AND CONSULTANCY EXPENDITURE INCURRED IN FOREIGN CURRENCY, THE HONBLE DRP GRANT ED PARITY IN EXCLUSION OF EXPENDITURE FROM EXPORT TURNOVER WH ILE COMPUTING DEDUCTION UNDER SECTION 1OAA OF THE ACT. COPY OF THE AFOREMENTIONED DIRECTIONS OF HONBLE DR P FOR AY 2009-10 IS ENCLOSED AS ANNEXURE 6OF THIS SUBMISS ION. IN ADDITION TO THE ABOVE, THE APPELLANT PLACES THE FOLLOWING ARGUMENTS BEFORE YOUR GOODSELF 2. EXPENDITURE NOT INCURRED FOR RENDERING SERVICES OUTSIDE INDIA THE INTENTION OF THE LEGISLATION IS TO PRECLUDE THE BENEFIT OF SECTION 10AA OF THE ACT IN RESPECT OF EXPENSES INC URRED IN FOREIGN EXCHANGE IN RENDERING SERVICE OUTSIDE INDIA . THE SAME IS EVIDENT FROM THE DEFINITION OF EXPORT TURNO VER PROVIDED IN EXPLANATION 1 TO SECTION 1OAA OF THE AC T WHICH MANDATES THAT EXPENDITURE IF ANY INCURRED IN RENDIT ION OF SERVICES IN FOREIGN SOIL ALONE HAVE TO EXCLUDED FRO M EXPORT TURNOVER WHILE COMPUTING DEDUCTION UNDER SECTION I0 AP OF THE ACT. IN THE INSTANT CASE, THE LD. AO HAS NOT AP PRECIATED THIS ASPECT AND HAS PROCEEDED TO EXCLUDE EXPENDITUR E FROM EXPORT TURNOVER WHILE COMPUTING DEDUCTION UNDER SEC TION 1OAA OF THE ACT, MERELY BECAUSE IT WAS INCURRED IN FOREIGN CURRENCY. AT THIS STAGE, THE APPELLANT WISHES TO PLACE RELIAN CE ON THE RULING OF THE HONBLE BANGALORE INCOME TAX APPELLAT E TRIBUNAL (TRIBUNAL) IN THE CASE OF SUBEX LIMITED VS DCIT [68 TAXMANN.COM 233], WHEREIN IT WAS HELD THAT MERE INCURRING OF EXPENDITURE IN FOREIGN CURRENCY WOULD NOT TANTAMOUNT TO AUTOMATIC REDUCTION OF SUCH EXPENDITU RE FROM EXPORT TURNOVER WHILE COMPUTING DEDUCTION UNDER SEC TION 1OA OF THE ACT. AS MENTIONED EARLIER, THE APPELLANT RENDERED SERVIC ES OUT OF ITS SEZ UNIT LOCATED IN MAHINDRA WORLD CITY, KANCHE EPURAM CHENNAI, INDIA. THEREFORE, THE EXPENDITURE INCURR ED IN ITA NOS.182 & 187/2018 :- 8 -: FOREIGN CURRENCY IS NOT TOWARDS PROVISION OF SERVIC ES IN FOREIGN SOIL. ACCORDINGLY, THE APPELLANT HUMBLY SUB MITS THAT THE SAID EXPENDITURE NEED NOT BE EXCLUDED WHILE COM PUTING DEDUCTION UNDER SECTION 10AA OF THE ACT. THE ABOVE PRINCIPLE OF NON-EXCLUSION FROM EXPORT TU RNOVER WHERE SERVICES ARE NOT R RENDERED IN FOREIGN SOLIH AS BEEN UPHELD BY THE JURISDICTIONAL HONBLE CHENNAI INCOME TAX APPELLATE TRIBUNAL IN THE FOLLOWING RULINGS: 1. ZYLOG SYSTEMS VS ITO{2011] 7 [TR (T) 348 (CHENNA I - SPECIAL BENCH); 2. FINANCIAL SOFTWARE AND SYSTEMS P LTD V DCIT [ITA NO. 1 070/MDS2016]. HOWEVER, LD. CIT(A) WHILE GRANTING RELIEF ON ALTERN ATIVE PLEA THAT SAME SHOULD BE REDUCED FROM BOTH EXPORT TURNOVER AS WE LL AS TOTAL TURNOVER, HAS NOT ADJUDICATED THE ISSUE, THE EXPE NDITURE INCURRED IN FOREIGN CURRENCY SHOULD NOT BE REDUCED FROM THE EXP ORT TURNOVER. HENCE, THIS ISSUE IS REMITTED BACK TO THE FILE OF LD. CIT(A) FOR FRESH ADJUDICATION AFTER AFFORDING DUE OPPORTUNITY OF HEA RING TO THE APPELLANT IN ACCORDANCE WITH LAW. THUS, GROUND NO.2 RAISED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 7. GROUND NO.3 CHALLENGES THE DECISION OF LD. CIT(A) IN ASSESSING INTEREST EARNED ON FIXED DEPOSITS AS BUSINESS RECE IPTS UNDER THE HEAD INCOME FROM OTHER SOURCES. THIS ISSUE WAS CHA LLENGED BEFORE THE LD. CIT(A) IN GROUND NO.3. THOUGH THE LD. CIT(A) EXTRACTED THE GROUND OF APPEAL BUT FAILED TO ADJUDICATE THIS GROU ND OF APPEAL. THEREFORE, WE REMIT THIS ISSUE BACK TO THE FILE OF THE LD. CIT(A) FOR ITA NOS.182 & 187/2018 :- 9 -: FRESH ADJUDICATION AFTER AFFORDING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE IN ACCORDANCE WITH LAW. GROUND NO.3 RAISED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE . 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.182/CHNY/2018 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 9. NOW, WE TAKE UP REVENUE APPEAL IN ITA NO.187/CHNY/2 018 FOR ADJUDICATION. 10. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL. 1. THE ORDER OF THE LD CIT(A) IS CONTRARY TO LAW AND FACTS AND CIRCUMSTANCES OF THE CASE. 2.1 THE LD CIT(A) ERRED IN DIRECTING THE AO TO EXCL UDE EXPENDITURE INCURRED IN FOREIGN CURRENCY AND OTHER INCOME FROM THE TOTAL TURNOVER ALSO, RELYING ON THE DECISION OF THE TRIBUNAL IN ASSESSEES CASE FOR AY 2009-10, WHEREIN THE HONBLE TRIBUNAL HAD RELIED ON ITS DECISION IN THE CASE OF M/S SAK SOFT LIMITED, WHERE BY EXPENDITURE INCURRED IN FOREIGN CURRENCY CANNOT FOR M PART OF BOTH EXPORT AND TOTAL TURNOVER. 2.2 THE LD CIT(A) FAILED TO NOTE THAT AS PER EXPLAN ATION 1(I) TO SEC.10AA, EXPORT TURNOVER DOES NOT INCLUDE FREIGHT, TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF ARTICLES OR THINGS OUTSIDE INDIA OR EXPENSES, IF ANY, INCURRED IN FOREIGN EXCH ANGE IN RENDERING OF SERVICES OUTSIDE INDIA AND ACCORDIN GLY THE AO IS JUSTIFIED IN EXCLUDING THE EXPENDITURE IN CURRED IN FOREIGN CURRENCY FROM THE EXPORT TURNOVER. 2.3 THE ID CIT(A) OUGHT TO HAVE NOTED THAT AS PER EXPLANATION 1 TO SEC.10AA, THERE IS NO MANDATE GIVE N IN THE ACT TO EXCLUDE SUCH EXPENDITURE INCURRED IN FOREIGN CURRENCY FROM THE TOTAL TURNOVER. ITA NOS.182 & 187/2018 :- 10 -: 2.4 THE DECISION OF THE TRIBUNAL RELIED UPON IN THE CASE OF M/S SAK SOFT LIMITED WAS NOT ACCEPTED BY THE DEPARTMENT AND APPEAL U/S 260A HAS BEEN PREFERRED BEFORE THE HONBLE HIGH COURT. 3.1 THE LD CIT(A) ERRED IN DELETING THE DISALLOWANC E U/S 36(1)(VA) R.W.S 2(24)(X) MADE BY THE AO TO THE TUNE OF RS.28, 11,739/- ON EMPLOYEES CONTRIBUTION TOWARDS ESI/PF, ON ACCOUNT OF BELATED REMITTANCE INTO GOVERNMENT ACCOUNT, NOT CONFORMING TO THE DUE DATES AS PER RELEVANT ACTS. 3.2 THE LD CIT(A) FAILED TO NOTE THAT AS PER THE DE CISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS MADRAS RADIATORS AND PRESSING LIMITED (2003) 129 TAXMANN 709, THE EMPLOYEES CONTRIBUTION RECEIVED B Y THE EMPLOYER WOULD BE INCOME IN HIS HANDS AND THAT WOULD BE ALLOWED AS PERMISSIBLE DEDUCTION UNDER CLAUSE (VA) OF SEC.36(1) IN COMPUTING THE BUSINESS INCOME U/S 28, PROVIDED THE ASSESSEE CREDITS THE SA ME TO THE RELEVANT FUND AS PER THE DUE DATES SPECIFIED . 3.3 THE LD CIT(A) OUGHT TO HAVE NOTED THAT AS PER T HE DECISION OF THE HONBLE GUJARATH HIGH COURT IN THE CASE OF CIT II VS GUJARATH STATE ROAD TRANSPORT CORPORATION, AS PER THE DEFINITION OF INCOME AS P ER SEC.2(24)(X), ANY SUM RECEIVED BY THE ASSESSEE FROM HIS EMPLOYEES AS CONTRIBUTION TO ANY PF OR SUPERANNUATION FUND ETC., AS PER THE RELEVANT ACTS, IS TO BE TREATED AS INCOME AND THE EMPLOYER-ASSESSEE I S ELIGIBLE TO CLAIM DEDUCTION OF SUCH AMOUNT AS PER EXPLANATION TO SEC.36(L)(V) ONLY WHEN THE SAME IS CREDITED INTO THE RELEVANT FUND WITHIN THE DUE DATE S SPECIFIED UNDER THOSE ACTS. 3.4 THE LD CIT(A) FAILED TO NOTE THAT IN THE CASE O F M/S GUJARATH STATE ROJ TRANSPORT CORPORATION, THE HONB LE GUJARATH HIGH COURT HAS CLEARLY DISCUSSED THAT THE HON THILE APEX COURT IN THE CASE OF ALOM EXTRUSIONS LIMITED, NEVER HAD THE OCCASION TO CONSIDER THE DEDUCTION U/S 36(1)(VA) WITH RESPECT TO EMPLOYEES CONTRIBUTION AND THE ONLY CONTROVERSY BEFORE THE SUPREME COURT WAS WITH RESPECT TO THE AMENDMENT (DELETION) OF SECOND PROVISO TO SEC.43B OPERATIVE W .E.F 1.4.2004 OR WHETHER IT OPERATES RETROSPECTIVELY W.E .F 1.4.1988? ITA NOS.182 & 187/2018 :- 11 -: 3.5 THE LD CIT(A) FAILED TO NOTE THAT THE BOARD ITS ELF HAS DIFFERENTIATED BETWEEN EMPLOYERS CONTRIBUTION AND EMPLOYEES CONTRIBUTION TO FUNDS, VIDE BOARDS CIRC ULAR NO. 22/20 15 DATED 17-12-2015, WHEREIN IT HAS BEEN CLARIFIED THAT THE HONBLE APEX COURTS DECISION IN THE CASE OF CIT VS ALOM EXTRUSION LIMITED, HAS BEEN ACCEPTED WITH REGARD TO EMPLOYERS CONTRIBUTION ONL Y AND DOES NOT APPLY ,TO THE CLAIM OF DEDUCTION UNDER EMPLOYEES CONTRIBUTION. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 11. GROUNDS OF APPEAL NO.1 & 4 ARE GENERAL IN NATURE T HEREFORE, DOES NOT REQUIRE ANY NO SPECIFIC ADJUDICATION. 12. GROUND NO.2 CHALLENGES THE DECISION OF LD. CIT(A) I N DIRECTING THE ASSESSING OFFICER TO EXCLUDE EXPENDITURE INCURR ED IN FOREIGN CURRENCY ON INSURANCE, FREIGHT AND TELECOMMUNI CATION CHARGES FROM BOTH EXPORT TURNOVER AND TOTAL TURNOVER. THE ISSUE IS NO LONGER RES INTEGRA, AND HAS BEEN DECIDED IN FAVOUR OF THE ASSE SSEE AND AGAINST THE REVENUE BY THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. HCL TECHNOLOGIES LTD, (2018) 404 ITR 719 , WHEREIN AT PARA 19 TO 21, IT HAS BEEN HELD AS UNDER:- 19. IN THE INSTANT CASE, IF THE DEDUCTIONS ON FRE IGHT, TELECOMMUNICATION AND INSURANCE ATTRIBUTABLE TO THE DELIVERY OF COMPUTER SOFTWARE UNDER SECTION 10A OF THE INCOME-TAX ACT ARE ALLOWED ONLY IN EXPORT TURNOVER BUT NOT FROM THE TOTAL TURNOVER THEN, IT WOULD GIVE RIS E TO ITA NOS.182 & 187/2018 :- 12 -: INADVERTENT, UNLAWFUL, MEANINGLESS AND ILLOGICAL RE SULT WHICH WOULD CAUSE GRAVE INJUSTICE TO THE RESPONDENT WHICH COULD HAVE NEVER BEEN THE INTENTION OF THE LEGISLATURE. 20. EVEN IN COMMON PARLANCE, WHEN THE OBJECT OF THE FORMULA IS TO ARRIVE AT THE PROFIT FROM EXPORT BUSI NESS, EXPENSES EXCLUDED FROM EXPORT TURNOVER HAVE TO BE EXCLUDED FROM THE TOTAL TURNOVER ALSO. OTHERWISE, A NY OTHER INTERPRETATION MAKES THE FORMULA UNWORKABLE A ND ABSURD. HENCE, WE ARE SATISFIED THAT SUCH DEDUCTION SHALL BE ALLOWED FROM THE TOTAL TURNOVER IN SAME PROPORTI ON AS WELL. 21. ON THE ISSUE OF EXPENSES ON TECHNICAL SERVICES PROVIDED OUTSIDE, WE HAVE TO FOLLOW THE SAME PRINCI PLE OF INTERPRETATION AS FOLLOWED IN THE CASE OF EXPENSES OF FREIGHT, TELECOMMUNICATION ETC., OTHERWISE THE FORM ULA OF CALCULATION WOULD BE FUTILE. HENCE, IN THE SAME WAY , EXPENSES INCURRED IN FOREIGN EXCHANGE FOR PROVIDING THE TECHNICAL SERVICES OUTSIDE SHALL BE ALLOWED TO EXCL UDE FROM THE TOTAL TURNOVER. RESPECTFULLY FOLLOWING THE ABOVE DECISION, WE DISMI SS GROUND NO.2 RAISED BY THE REVENUE. 13. GROUND NO.3 CHALLENGES THE DECISION OF THE LD. CIT (A) IN ALLOWING BELATED REMITTANCE OF PROVIDENT FUND/ ESI PAYMENTS AS DEDUCTION. THE LD. COMMISSIONER OF INCOME TAX (APP EALS) DELETED THE ADDITION ON THE GROUND THAT PAYMENTS ARE MADE WITH IN THE DUE DATE OF FILING OF RETURN OF INCOME AND NOT WITHIN THE TI ME STIPULATED U/S.36(1) (VA) OF THE ACT. THE HONBLE JURISDICTION AL HIGH COURT IN THE CASE OF CIT VS. M/S. INDUSTRIAL SECURITY &INTELLIGENCE INDI A PVT. LTD IN TC NOS.585 & 586 OF 2015, DATED 24.07.2015, HAD HELD THAT WHEN ITA NOS.182 & 187/2018 :- 13 -: EPF/ESI CONTRIBUTION ARE MADE WITHIN DUE DATE OF FI LING THE RETURN, THE SAME SHOULD BE ALLOWED AS DEDUCTION. THEREFORE WE D O NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A ). GROUND NO.3 RAISED BY THE REVENUE STANDS DISMISSED. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.18/CHNY/2018 STANDS DISMISSED. 15. TO SUMMARIZE THE RESULTS, THE APPEAL FILED BY THE A SSESSEE IN ITA NO.182/CHNY/2018 2018 IS PARTLY ALLOWED FOR STA TISTICAL PURPOSES WHEREAS THE APPEAL FILED BY THE REVENUE IN ITA NO. 187/CHNY/2018 STANDS DISMISSED. ORDER PRONOUNCED ON 14TH DAY OF FEBRUARY, 2020, AT CHENNAI. SD/- SD/- ( . ) (DUVVURU RL REDDY) ! '# /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER , #' / CHENNAI -# / DATED:14TH FEBRUARY, 2020. KV . ( /)0 1' !2 1&) / COPY TO: 1 . !' 34 / APPELLANT 3. 5) (!' ) / CIT(A) 5. 1 89 /)#: / DR 2. /;34 / RESPONDENT 4. 5) / CIT 6. 9$ <' / GF