Income Tax Officer ward-6(1)(2), Bangalore V. M/s SLK Global BPO Service private Limited , Bangalore

ITA 217/BANG/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 4745 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 24-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N O N E

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO. 21 7 /BANG/2018 ASSESSMENT YEAR : 2010 - 11 THE INCOME TAX OFFICER, WARD 6(1)(2), BANGALORE. VS. M/S. SLK GLOBAL BPO SERVICES PRIVATE LIMITED, AISHWARYA TOWERS, NO.525, 2 ND MAIN, SAMPIGE ROAD, MALLESHWARAM, BANGALORE 560 053. PAN: AABCC 5793 L APP ELL ANT RESPONDENT A PP EL LANT BY : SHRI C.H. SUNDAR RAO , CIT(DR - I )(ITAT), BENGALURU. RE SPONDENT BY : NO NE DATE OF HEARING : 21 . 0 5 .201 8 DATE OF PRONOUNCEMENT : 0 1 . 0 6 .201 8 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 28.09.2017 OF CIT(APPEALS), BENGALURU-6, BENGALURU RELATING TO ASSESSMENT YEAR 2010-11. 2. THE GROUNDS OF APPEAL OF THE REVENUE READS AS FO LLOWS: 1. THE ORDER OF THE CIT (APPEALS) IS OPPOSED TO L AW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO.217/BANG/2018 PAGE 2 OF 5 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN DIRECTING THE AO TO REDUCE EXPENSES DEDUCT ED BOTH FROM EXPORT TURNOVER AS WELL AS FROM TOTAL TURNOVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 10A, WITHOU T APPRECIATING THE FACT THAT THE STATUTE ALLOWS EXCLU SION OF SUCH EXPENDITURE ONLY FROM EXPORT TURNOVER BY WAY OF A SPECIFIC DEFINITION FOR EXPORT TURNOVER IN THE ACT. ON THE OTHER HAND, THERE IS NO SPECIFIC PROVISION IN SECTI ON 10A WARRANTING EXCLUSION OF THE ABOVE EXPENSES FROM THE TOTAL TURNOVER ALSO. 3. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE UR GED AT THE TIME OF HEARING, IT IS HUMBLY PRAYED THAT THE ORDER OF THE CIT(A) IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTO RED. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEA RING OF THE APPEAL. 3. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF PROVIDING INFORMATION TECHNOLOGY ENABLED SERVICES(ITES). IT IS NOT IN DISPUTE THAT THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION U/S.10 A OF THE INCOME TAX ACT, 1961 ON PROFITS AND GAINS AS ARE DERIVED FROM PROVIDING ITES. SEC.10A(4) PROVIDES THE METHODOLOGY OF COMPUTATION OF DEDUCTION U/S.10A OF THE ACT AND IT LAYS DOWN THAT THE PROFITS DERIVE D FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE SHALL BE THE AMOUNT WHI CH BEARS TO THE PROFITS OF THE BUSINESS OF THE UNDERTAKING, THE SAME PROPOR TION AS THE EXPORT TURNOVER IN RESPECT OF SUCH ARTICLES OR THINGS OR C OMPUTER SOFTWARE BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY TH E UNDERTAKING. EXPORT TURNOVER HAS BEEN DEFINED UNDER EXPLANATION 2 (IV) TO SEC.10A AS: 'EXPORT TURNOVER' MEANS THE CONSIDERATION IN RESPEC T OF EXPORT BY THE UNDERTAKING OF ARTICLES OR THINGS OR COMPUTER S OFTWARE 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 INSUR ANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES OR THI NGS OR COMPUTER ITA NO.217/BANG/2018 PAGE 3 OF 5 SOFTWARE OUTSIDE INDIA OR EXPENSES, IF ANY, INCURRE D IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICES OUTSID E INDIA. 4. THE AO NOTICED THAT WHILE COMPUTING EXPORT TURNO VER FOR THE PURPOSE OF DEDUCTION U/S.10A, THE ASSESSEE HAD INCLUDED A S UM OF RS.1,40,49,480 BEING TELECOMMUNICATION EXPENSES, RS.30,77,873 BEIN G INSURANCE CHARGES AND RS. 3,35,17,475 BEING FOREIGN TRAVEL AND OTHER CHARGES INCURRED IN FOREIGN CURRENCY IN ALL A SUM OF RS. 5,06,44,828/-. THE AFORESAID EXPENSES HAD BEEN INCURRED IN FOREIGN CURRENCY. THE AO THER EFORE EXCLUDED THE AFORESAID SUM FROM THE EXPORT TURNOVER WITHOUT EXCL UDING THEM FROM THE TOTAL TURNOVER. AS A RESULT, THE DEDUCTION CLAIMED U/S.10A OF THE ACT BY THE ASSESSEE WAS ALLOWED AT A LESSER SUM THAN WHAT WAS CLAIMED BY THE ASSESSEE. 5. IT WAS THE PLEA OF THE ASSESSEE IN THE APPEAL AG AINST THE ASSESSMENT ORDER BEFORE THE CIT(A) THAT AT ALL TIME S DURING THE RELEVANT PREVIOUS YEAR, IT WAS ENGAGED IN DEVELOPMENT OF COM PUTER SOFTWARE AND NOT IN RENDERING ANY TECHNICAL SERVICES. COMMUNICA TION EXPENSES WERE INCURRED NOT FOR EXPORT OF COMPUTER SOFTWARE OUTSID E INDIA AND THEREFORE THE EXCLUSION FROM EXPORT TURNOVER AS DONE BY THE AO WA S NOT CORRECT. WITHOUT PREJUDICE TO ITS CONTENTION THAT THE AFORESAID SUMS SHOULD NOT BE EXCLUDED FROM THE EXPORT TURNOVER WHILE COMPUTING DEDUCTION U/S.10A OF THE ACT. THE ASSESSEE HAS ALSO MADE AN ALTERNATE PRAYER THAT EXP ENSES THAT ARE REDUCED FROM THE EXPORT TURNOVER SHOULD ALSO BE RED UCED FROM THE TOTAL TURNOVER AND IN THIS REGARD HAS PLACED RELIANCE ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. TATA ELXSI LTD [2012] 349 ITR 98 (KARN) WHEREIN IT WAS HELD THAT WHILE COMPUTING DEDUCTION U/S.10A OF THE ACT EXPENSES THAT ARE REDUCED FROM T HE EXPORT TURNOVER SHOULD ALSO BE REDUCED FROM THE TOTAL TURNOVER. TH E CIT(A) ACCEPTED THE ALTERNATE PRAYER OF THE ASSESSEE AND DIRECTED THAT THE EXPENSES REDUCED FROM THE EXPORT TURNOVER SHOULD ALSO BE REDUCED FRO M THE TOTAL TURNOVER. AS ITA NO.217/BANG/2018 PAGE 4 OF 5 A RESULT, THE DEDUCTION AS CLAIMED BY THE ASSESSEE U/S.10A OF THE ACT STOOD ALLOWED. AGGRIEVED BY THE RELIEF ALLOWED BY THE CI T(A), THE REVENUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE HEARD THE LD. COUNSEL FOR THE ASSESSEE W HO RELIED ON THE ORDER OF THE CIT(A) AND THE LD. DR WHO RELIED ON TH E ORDER OF THE AO AND THE GROUNDS RAISED BEFORE THE TRIBUNAL BY THE REVEN UE IN THIS APPEAL. 7. TAKING INTO CONSIDERATION THE DECISION RENDERED BY THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V. TATA ELXSI LTD [2012] 349 ITR 98 (KARN) , WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) D IRECTING THE ASSESSING OFFICER TO EXCLUDE COMMUNICATION CHARGES AND TRAVELLING AND CONVEYANCE EXPENSES BOTH FROM EXPORT TURNOVER AND TOTAL TURNOVER, IS JUST AND PROPER AND CALLS FOR NO INTERFERENCE. THE ONLY GRIEVANCE OF THE REVENUE AS SUBMITTED BY THE LEARNED DR IS THAT THE DECISION OF HON'BLE HIGH COURT OF KARNATAKA IN TATA ELXSI (SUPRA) HAS NOT ATTAINED FINALITY AND A SLP BY THE DEPARTMENT IS PENDING BEFORE THE HON'BLE SUPREME COURT. WE ARE OF THE VIEW THAT AS OF TODAY, LAW DECLARED BY T HE HON'BLE HIGH COURT OF KARNATAKA WHICH IS THE JURISDICTIONAL HIGH COURT IS BINDING ON US. WE THEREFORE HOLD THAT THE ORDER OF CIT(A) DOES NOT CA LL FOR ANY INTERFERENCE AND ACCORDINGLY THE SAME IS CONFIRMED. 8. IN THE RESULT, THE APPEAL BY THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON THIS 1 ST DAY OF JUNE, 2018. SD/- SD/- ( INTURI RAMA RAO ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 1 ST JUNE, 2018. / D ESAI S MURTHY / ITA NO.217/BANG/2018 PAGE 5 OF 5 COPY TO: 1. APP ELL ANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.