DCIT- Circle 6(1)(2), Bangalore V. M/s. Synova Innovative Technologies Pvt Ltd., Bangalore

ITA 1876/BANG/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9249 (ITAT-BANGALORE)
• Duration Of Justice: 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 04-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S PRAVEENA
• Assessee Lawyers: G VAIDEHI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC - B BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER ITA NO.1876/BANG/2016 ASSESSMENT YEAR : 2007-08 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 6(1)(2), BANGALORE. VS. M/S. SYNOVA INNOVATIVE TECHNOLOGIES PVT. LTD., SY.NO.7(P) & 93(P), ELECTRONIC CITY PHASE II, INDUSTRIAL AREA, BEGUR HOBLI, BANGALORE 560 100. PAN: AAFCS 4915A APPELLANT RESPONDENT APPELLANT BY : MS. S. PRAVEENA, ADDL. CIT(DR) RESPONDENT BY : MS. G. VAIDEHI, CA DATE OF HEARING : 30.11.2016 DATE OF PRONOUNCEMENT : 2.12.2016 O R D E R THIS APPEAL AT INSTANCE OF DEPARTMENT IS DIRECTED AGAINST CIT (A) ORDER DT 16.08.2016. THE RELEVANT ASSESSMENT YEAR I S 2007-2008. 2. THE EFFECTIVE GROUNDS RAISED READ AS FOLLOWS :- ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN CITING THE RATIO LAID DOWN BY THE HONBLE HIGH COUR T IN THE CASE OF CIT VS YOKOGAWA LTD. REPORTED IN 246 ITR 226 AND DIRECT ING THE ASSESSING OFFICER TO RE-COMPUTE THE BENEFIT ALLOWABLE U/S 10A WITHOUT SETTING OFF LOSS OF STPI UNITS AGAINST THE PROFIT OF STPI UNITS , WITHOUT APPRECIATING THE JUDICIAL PRECEDENCE IN THE CASE OF HIMATSINGKE SEIDE LTD. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN CITING THE RATIO LAID DOWN BY THE HONBLE HIGH COUR T IN THE OF CIT VS ITA NO. 1876/BANG/2016 PAGE 2 OF 4 TATA ELXSI LTD. REPORTED IN 349 ITR 98 AND DIRECTIN G THE AO TO REDUCE EXPENSES INCURRED IN FOREIGN COUNTRY, BOTH FROM EXP ORT TURNOVER AS WELL AS FROM TOTAL TURNOVER FOR THE PURPOSE OF COMP UTATION OF DEDUCTION U/S 10A, WITHOUT APPRECIATION THE FACT TH AT THE STATUE ALLOWS EXCLUSION OF SUCH EXPENDITURE ONLY FROM EXPORT TURN OVER BY WAY OF A SPECIFIC DEFINITION FOR EXPORT TURNOVER IN THE ACT. ON THE OTHER HAND, THERE IS NO SPECIFIC PROVISION IN SECTION 10A WARRA NTING EXCLUSION OF THE ABOVE EXPENSES FROM THE TOTAL TURNOVER ALSO. 3. BRIEFLY STATED THE FACTS OF THE CASE IS AS FOLLO WS: ASSESSEE IS COMPANY DERIVING INCOME FROM SOFTWARE D EVELOPMENT AND IT ENABLE SERVICES. THE RETURN OF INCOME WAS FILLED ON 31.10.2007 DECLARING NIL AFTER CLAIMING DEDUCTION U/S 10A OF IT ACT AM OUNTING TO RS1,40,70,094/-. THE ASSESSMENT WAS TAKEN UP FOR SC RUTINY BY ISSUANCE OF NOTICE U/S 143(2) OF THE ACT AND ASSESSMENT U/S 143 (3) WAS COMPLETED VIDE ORDER DT 30.11.2009. THE AO RECOMPUTED THE DEDUCTIO N U/S 10A BY EXCLUDING FROM EXPORT TURNOVER CERTAIN EXPENSES WIT HOUT EXCLUDING FROM THE TOTAL TURNOVER. THE EXPENSES EXCLUDED FROM THE EXPORT TURNOVER ARE AS FOLLOWS:- TELE COMMUNICATION EXPENSES RS. 11,93,098/- INSURANCE RS. 1,39,271/- EXPENDITURE IN FOREIGN CURRENCY RS. 1,66,651/- 3.1 THE AO FURTHER ADJUSTED THE LOSS OF NON-10A UN IT AGAINST PROFIT OF THE UNIT BEFORE COMPUTING DEDUCTION U/S 10A OF THE ACT. CONSEQUENT TO THE RE- COMPUTATION OF DEDUCTION AND SETTING OFF THE LOSSES OF NON-10A, THAT THE DEDUCTION U/S 10A WAS REDUCED BY AO TO RS.27,23,991 (CLAIMED BY ASSESSEE AT RS.1,40,70,094). ITA NO. 1876/BANG/2016 PAGE 3 OF 4 4. AGGRIEVED, THE ASSESSEE PREFERRED ON APPEAL TO T HE FIRST APPELLATE AUTHORITY. THE CIT(A) ALLOWED THE APPEAL OF THE AS SESSEE. THE CIT(A) FOLLOWED THE JUDGMENTS OF THE HONBLE JURISDICTIONA L HIGH COURT IN THE CASE OF CIT VS. YOKOGAWA INDIA LTD. (341 ITR 385) AND CI T VS. TATA ELXSI (349 ITR 98). 5. AGGRIEVED, THE REVENUE HAS FILED THE PRESENT AP PEAL BEFORE THE TRIBUNAL, THE LEARNED DR RELIED ON THE GROUNDS RAIS ED. THE LEARNED AR SUBMITTED THAT THE ISSUES RAISED ARE COVERED IN FAV OUR OF ASSESSEE BY JURISDICTIONAL HIGH COURT JUDGMENTS, WHICH HAS BEEN RELIED ON BY THE CIT (A). 6. I HAVE HEARD RIVAL SUBMISSION AND PERUSED THE MA TERIAL ON RECORD. THE HONBLE JURISDICTION HIGH COURT CIT VS. YOKOGAW A INDIA LTD. (SUPRA) HAS HELD THAT THE DEDUCTION U/S 10A OF STPI UNIT IS TO BE COMPUTED ON A STAND ALONE BASIS. IN OTHER WORDS, THE LOSSES OF N ON 10A UNITS ARE TO BE IGNORED, WHILE COMPUTING DEDUCTION FOR UNITS LIABLE FOR 10A DEDUCTIONS. FURTHER HONBLE HIGH COURT IN THE CASE OF CIT VS. T ATA ELXSI (SUPRA) HAS HELD THAT EXPENDITURE EXCLUDED FROM EXPORT TURNOVER , HAS TO BE EXCLUDED ALSO FROM THE TOTAL TURNOVER, WHILE COMPUTING THE D EDUCTION U/S 10A OF THE ACT. IN THE VIEW OF ABOVE, TWO JUDGMENT OF THE HON BLE HIGH COURT, I HOLD CIT(A) IS JUSTIFIED IN ALLOWING THE APPEAL OF THE A SSESSEE. IT IS ORDERED ACCORDINGLY. ITA NO. 1876/BANG/2016 PAGE 4 OF 4 7. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 2 ND DAY OF DECEMBER, 2016. SD/- (GEORGE GEORGE K. ) JUDICIAL MEMBER BANGALORE, DATED, THE 2 ND DECEMBER, 2016. /N S/ COPY TO: 1. APPELLANT 2. RESPONDENTS 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.