Assistant Commissioner of Income-Tax, Bangalore V. M/s.Century Link Technology India Pvt. Ltd., Bangalore

ITA 2059/BANG/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5352 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 25-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY KUMAR CITIII
• Assessee Lawyers: H N KHINCHA
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH C BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.2059 /BANG/2016 (ASST. YEAR 2011-12 ) THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 2(1)(1), BENGALURU. . APPELLANT VS. M/S CENTURY LINK TECHNOLOGY INDIA PVT. LTD., SALARPURIA HALLMARK, SURVEY NO.15/3, 16, KADUBEESANAHALLI, VARTHUR HOBLI, BENGALURU. . RESPONDENT PAN : AAHCS7683M. APPELLANT BY : SHRI SANJAY KUMAR, CIT-III RESPONDENT BY : SHRI H.N KHINCHA, CA DATE OF HEARING : 15-5-2017 DATE OF PRONOUNCEMENT : 15 -5-2017 O R D E R PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) 2, BANGALORE DATED 6/9/2016 FOR THE ASSESSMENT YEAR 2011-12. ITA NO.2059/B/16 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE AS UND ER:- 2.1 THE ASSESSEE, A COMPANY ENGAGED IN THE BUSINESS OF RENDERING COMPUTER SOFTWARE DEVELOPMENT SERVICES, FILED ITS R ETURN OF INCOME FOR ASSESSMENT YEAR 2011-12 ON 29/11/2011 DECLARING INCOME OF RS.2,82,03,458/- AFTER CLAIMING DEDUCTION OF RS.41 ,58,86,300/- U/S 10A OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT ). THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT AND THE CASE WAS TA KEN UP FOR SCRUTINY. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT VIDE ORDER DATED 12/3/2005 WHEREIN THE ASSESSEES INCOME WAS DETERMINED AT RS.3,32,52,905/- AFTER INTER ALIA, RESTRICTING T HE DEDUCTION U/S 10A OF THE ACT TO RS.35,44,48,046/- 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT DATED 12/3 /2015 FOR ASSESSMENT YEAR 2011-12 THE ASSESSEE PREFERRED AN A PPEAL BEFORE THE CIT(A)-2, BANGALORE, CHALLENGING THE ASSESSING OFFI CERS ORDER IN RESTRICTING THE ASSESSEES CLAIM FOR DEDUCTION U/S 10A OF THE ACT TO RS.35,44,48,046/-. THE ASSESSEES APPEAL WAS ALLOW ED BY THE IMPUGNED ORDER DATED 6/9/2016. ITA NO.2059/B/16 3 3. REVENUE, BEING AGGRIEVED BY THE ORDER OF THE CIT (A)-2, BANGALORE DATED 6/9/2016 HAS PREFERRED THIS APPEAL RAISING THE FOLLOWING GROUNDS:- 1) THE ORDER OF THE LD. CIT(A) IS CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND HENCE NOT SUSTAIN ABLE. 2) THE CIT(A) HAS ERRED IN DIRECTING THE AO TO EXCL UDE THE EXPENDITURE INCURRED IN FOREIGN CURRENCY TOWARD S FOREIGN TRAVEL, TELECOMMUNICATION EXPENSES AND EXPA T SALARY FROM BOTH EXPORT TURNOVER AS WELL AS FROM TO TAL TURNOVER BY PLACING ITS RELIANCE ON THE CASE OF TAT A ELXSI LIMITED VS ACIT (349 FIR 98) WITHOUT APPRECIATING T HAT THERE IS NO PROVISION IN SECTION 10A THAT SUCH EXPE NSES SHOULD BE REDUCED FROM THE TOTAL TURNOVER, AS CLAUS E(IV) OF THE EXPLANATION TO SECTION 10A PROVIDES THAT SUC H EXPENSES ARE TO BE REDUCED ONLY FROM THE EXPORT TUR NOVER. 3) FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CITCA) IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. ITA NO.2059/B/16 4 4) THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE. 3.2 IN THE GROUNDS OF APPEAL RAISED (SUPRA), REVENU E CONTENDS THAT THE LD CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER (AO) TO EXCLUDE THE EXPENDITURE INCURRED IN FOREIGN CURRENC Y TOWARDS FOREIGN TRAVEL, TELECOMMUNICATION EXPENSES AND EX-PAT SALAR Y FROM BOTH EXPORT TURNOVER AS WELL AS FROM TOTAL TURNOVER, FOL LOWING THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF TATA ELXSI LTD., VS. ACIT (349 ITR 98). IT IS CONTENDED THAT IN DOI NG SO, THE LD CIT(A) DID NOT APPRECIATE THAT THERE IS NO PROVISI ON IN SEC. 10A OF THE ACT THAT MANDATES THAT SUCH EXPENSES SHOULD BE REDU CED FROM THE TOTAL TURNOVER AND THAT CLAUSE (IV) OF THE EXPLANATION TO SEC. 10A PROVIDES THAT SUCH EXPENSES ARE TO BE REDUCED ONLY FROM EXPO RT TURNOVER. 3.3 WE HAVE HEARD THE RIVAL CONTENTIONS OF THE LD D R FOR THE REVENUE AND LD AR FOR THE ASSESSEE AND HAVE PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JU DICIAL PRONOUNCEMENT CITED/RELIED ON. AS REGARDS THE ISSU E OF REDUCTION OF THE ITEMS OF EXPENDITURE INCURRED IN FOREIGN CURREN CY I.E; ON FOREIGN TRAVEL, TELECOMMUNICATION CHARGES ETC. ARE ATTRIBUT ABLE TO THE DELIVERY ITA NO.2059/B/16 5 OF SOFTWARE OUTSIDE INDIA AND IN RENDERING OF TECHN ICAL SERVICES OUTSIDE INDIA, THE JURISDICTIONAL HIGH COURT OF KAR NATAKA IN THE CASE OF TATA ELXSI LTD., VS. ACIT (349 ITR 98) HAS HELD THAT WHEN CERTAIN EXPENSES ARE EXCLUDED FROM THE EXPORT TURNOVER FOR THE PURPOSES OF CLAIMING DEDUCTION ADMISSIBLE UNDER THE ACT, LIKE U/S. 10A OF THE ACT, SUCH EXPENSES ARE ALSO TO BE EXCLUDED FROM TOT AL TURNOVER, AS EXPORT TURNOVER FORMS PART OF TOTAL TURNOVER. AS O BSERVED BY THE LD CIT(A), THE DECISION IN THE CASE OF TATA ELXSI LTD. , (SUPRA) HAS ALSO BEEN FOLLOWED BY THE HONBLE COURT IN THE CASE OF D CIT VS. MOTOR INDUSTRIES CO. LTD; (ITA NO.776/2006, 744/2007 AND 1155/2006 DATED 13/6/2014), HOLDING THAT IF ANY EXPENDITURE I S SOUGHT TO BE REDUCED FROM EXPORT TURNOVER, THEN IT SHOULD ALSO BE REDUCED FROM TOTAL TURNOVER FOR THE PURPOSES OF COMPUTING THE EL IGIBLE DEDUCTION U/S 10A OF THE ACT. IN THIS LEGAL AND FACTUAL MATRIX O F THE CASE, AS DISCUSSED ABOVE, WE FIND NO REASON/REQUIREMENT TO I NTERFERE WITH OR DEVIATE FROM THE FINDING RENDERED BY THE LD CIT(A) ON THIS ISSUE AND, THEREFORE, UPHOLD THE SAME. CONSEQUENTLY, FINDING NO MERIT IN THE GROUNDS RAISED BY REVENUE (SUPRA) WE DISMISS THE SA ME. ITA NO.2059/B/16 6 4. IN THE RESULT, REVENUES APPEAL FOR THE ASSESSME NT YEAR 2011- 12 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH MAY, 2017 . SD/- SD/- (SUNIL KUMAR YADAV) (JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE DATED : 15/5/2017 VMS COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REG ISTRAR, ITAT, BANGALORE.