M/s. Bally Technologies India Pvt. Ltd., CHENNAI V. ACIT, CHENNAI

ITA 1912/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57948 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 28-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OMKARESHWAR CHIDRA
• Assessee Lawyers: R VIJAYARAGHAVAN

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI C BENCH, CHENNAI. BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER & SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A. NO. 1912/MDS/2011 ASSESSMENT YEAR: 2007-08 M/S. BALLY TECHNOLOGIES INDIA PVT. LTD., UNIT 1, 11 TH FLOOR, CREST BUILDING, INTERNATIONAL TECH PARK, CSIR ROAD, TARAMANI, CHENNAI 600113 [PAN:AACCB6575A ] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(2), CHENNAI 600 034. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R. VIJAYARAGHAVAN , ADVOCATE REVENUE BY : SHRI OMKARESHWAR CHIDRA, CIT DATE OF HEARING : 16.02.2012 DATE OF PRONOUNCEMENT : 16.02.2012 ORDER PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE DISPUTE RESOLUTION PANEL, CHENNAI DATED 19.08.2011 IN ASSESSMENT YEAR 2008-09. SHRI R. VIJAYARAGHAVAN, ADVOCATE REPRESENT ED ON BEHALF OF THE ASSESSEE AND SHRI OMKARESHWAR CHIDRA, CIT REPRESENT ED ON BEHALF OF THE REVENUE. 2. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS TAKEN 5 GROUNDS OF APPEAL AND THE SOLE ISSUE INVOLVED IS TH AT THE DRP ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER EXCLU DING THE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1912 912912 912/M/11 /M/11 /M/11 /M/11 2 TELECOMMUNICATION CHARGES AMOUNTING TO ` .27,95,811/- AND FOREIGN TRAVEL EXPENSES INCURRED IN FOREIGN CURRENCY AMOUNTING TO ` .93,45,790/- FROM THE EXPORT TURNOVER WITHOUT EXCLUDING THE SAME FROM THE TOTAL TURNOVER WHILE COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE AC T. HE ARGUED THAT THE ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY T HE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GEM PLUS J EWELLERY INDIA LTD. [2011] 330 ITR 175 (BOM.), WHEREIN IT HAS BEEN HELD THAT THE FREIGHT AND INSURANCE CHARGES DO NOT HAVE AN ELEMENT OF TURNOVE R AND THEREFORE, THE SAME HAS TO BE EXCLUDED FROM THE TOTAL TURNOVER WHE N IT IS EXCLUDED FROM THE EXPORT TURNOVER OF THE ASSESSEE. 3. THE LD. DR CONCEDED TO THE ABOVE SUBMISSIONS OF THE LD. AR OF THE ASSESSEE THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE AFORESAID DECISION. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN T HE INSTANT CASE, THE ASSESSING OFFICER, WHILE MAKING THE ASSESSMENT, COM PUTED DEDUCTION ALLOWABLE UNDER SECTION 10A TO THE ASSESSEE BY EXCL UDING THE TELECOMMUNICATION CHARGES OF ` .27,95,811/- AND EXPENSES INCURRED IN FOREIGN CURRENCY IN PROVIDING TECHNICAL SERVICES OU TSIDE INDIA ` .93,45,790/- FROM THE EXPORT TURNOVER. THE ASSESSEE BEFORE THE D RP ARGUED THAT THE TELECOMMUNICATION CHARGES AND EXPENSES INCURRED IN FOREIGN CURRENCY IN PROVIDING TECHNICAL SERVICES OUTSIDE INDIA SHOULD A LSO BE REDUCED FROM THE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1912 912912 912/M/11 /M/11 /M/11 /M/11 3 TOTAL TURNOVER OF THE ASSESSEE WHILE COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE ACT. THE SAME WAS REJECTED BY THE DRP ON THE GROUND THAT THE ASSESSEE WAS INVOLVED IN MANY OTHER CASES AND SIMIL AR REASONING WAS GIVEN BY OTHER ASSESSEES ALSO ON THE BASIS OF VARIOUS DEC ISIONS OF THE TRIBUNAL AND THE DEPARTMENT HAS NOT ACCEPTED THESE DECISIONS AND GONE IN FURTHER APPEAL. 5. THE EXPRESSION EXPORT TURNOVER HAS BEEN DEFIN ED IN CLAUSE (IV) OF EXPLANATION 2 TO SECTION 10A IS AS UNDER: ( IV ) EXPORT TURNOVER MEANS THE CONSIDERATION IN RESP ECT OF EXPORT [BY THE UNDERTAKING] OF ARTICLES OR THINGS OR COMPU TER SOFTWARE RECEIVED IN, OR BROUGHT INTO, INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE IN ACCORDANCE WITH SUB-SECTION (3) , BUT DOES NOT INCLUDE FREIGHT, TELECOMMUNICATION CHARGES OR I NSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES OR THI NGS OR COMPUTER SOFTWARE OUTSIDE INDIA OR EXPENSES, IF ANY, INCURRE D IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICES OUTSID E INDIA; 6. WE FIND THAT AS POINTED OUT BY THE LD. AR OF TH E ASSESSEE THAT THE ISSUE NOW STANDS DECIDED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GEM PLUS JEWELLERY INDIA LTD. (SUPRA), WHEREIN IT W AS HELD AS UNDER: ..THE EXPRESSION 'TOTAL TURNOVER' 'HAS NOT BEEN DEFINED AT ALL BY PARLIAMENT FOR THE PURPOSES OF SECTION L0A. HOWEVER, THE EXPRESSION 'EXPORT TURNOVER' HAS BEEN DEFINED. THE DEFINITION OF 'EXPORT TURNOVER' E XCLUDES FREIGHT AND INSURANCE. SINCE EXPORT TURNOVER HAS BEEN DEFINED BY PARLIAMEN T AND THERE IS A SPECIFIC EXCLUSION OF FREIGHT AND INSURANCE, THE EXPRESSION EXPORT TURNOVER CANNOT HAVE A DIFFERENT MEANING WHEN IT FORMS A CONSTITUENT PART OF THE TOTAL TURNOVER FOR THE PURPOSES OF THE APPLICATION OF THE FORMULA. A CONST RUCTION OF A STATUTORY PROVISION WHICH WOULD LEAD TO AN ABSURDITY MUST BE AVOIDED. M OREOVER, A RECEIPT SUCH AS FREIGHT AND INSURANCE WHICH DOES NOT HAVE ANY ELEME NT OF PROFIT CANNOT BE INCLUDED IN THE TOTAL TURNOVER. FREIGHT AND INSURANCE DO NOT HAVE AN ELEMENT OF TURNOVER. FOR THIS REASON IN ADDITION, THESE TWO ITEMS WOULD HAVE TO BE EXCLUDED FROM THE TOTAL TURNOVER PARTICULARLY IN THE ABSENCE OF A LEG ISLATIVE PRESCRIPTION TO THE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1912 912912 912/M/11 /M/11 /M/11 /M/11 4 CONTRARY. 7. FURTHER, WE FIND THAT THE HONBLE KARNATAKA HIG H COURT IN THE CASE OF CIT VS. FLOWSEARVE MICROFINISH VALVES P. LTD. [2012 ] 204 TAXMANN 133 (KAR.) (MAG.) HAS HELD THAT WHEN THE EXPENSES ARE R EDUCED FROM THE EXPORT TURNOVER FOR THE PURPOSES OF COMPUTING DEDUCTION UN DER SECTION 10A, THE SAME HAS TO BE REDUCED FROM THE TOTAL TURNOVER AS W ELL. 8. THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE QUO TED DECISIONS OF THE HONBLE BOMBAY HIGH COURT AND THE HONBLE KARNATAKA HIGH COURT, WE SET ASIDE THE ORDER OF DRP ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO COMPUTE THE DEDUCTION UNDER SECTION 10A BY REDUCING THE EXPENSES FROM THE TOTAL TURNOVER, WHICH HAS BEEN REDUCED FOR COMP UTING EXPORT TURNOVER. THUS, THE GROUNDS OF APPEAL OF THE ASSESSEE ARE ALL OWED. 9. NO OTHER POINT HAS BEEN URGED BY THE ASSESSEE E XCEPT THE ABOVE POINT. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED AT THE CLOSE OF THE HEARING IN THE PRESENCE OF THE PARTIES ON 16.02.2012. SD/ - SD/ - (GEORGE MATHAN) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER CHENNAI, DATED, THE 16.02.2012 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.