DCIT 2(1)(2), MUMBAI V. E-CLERX SERVICES LIMITED, MUMBAI

ITA 2624/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0188 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 11-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Transfer pricing; International transaction; Revised return
• Section: 10AA; 80G

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E , MUMBAI BEFORE S HRI SHAMIM YAHYA (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 2624 /MUM/2016 ASSESSMENT YEAR: 2009 - 10 THE DCIT 2(1)(2), ROOM NO. 561, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 4000 20 VS. M/S E - CLERX SERVICES LIMITED, SONAWALA BUILDING, 29, BANK STREET, FORT, MUMBAI - 400023 PAN: AAACE7932L (APPELLANT) (RESPONDENT) REVENUE BY : SHRI V. JUSTIN ( D R) ASSESSEE BY : NONE DATE OF HEARING: 08 / 02 /201 8 DATE OF PRONOUNCEMENT: 21 / 0 2 /201 8 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST ORDER DATED 13/01/2016 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 4 , MUMBAI , FOR THE A S S ESSMENT YEAR 2009 - 10 , WHEREBY THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER PASSED U/S 143 (3) READ WITH SECTION 144C OF THE INCOME TAX ACT, 1961 (FOR SHORT THE A CT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF PROVIDING INFORMATION TECHNOLOGY ENABLED SERVICES, FILED ITS RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 4,97,51,97/ - . SUBSEQUENTLY, REVISED RETURN WAS ALSO FILED DECLARING THE TOTAL INCO ME OF RS. 5,28,28,287/ - . THE RETURN WAS PROCESSED U/S 143 (1) DETERMINING REFUND OF RS. 96,02,725/ - . SINCE, THE CASE WAS SELECTED FOR SCRUTINY, AO ISSUED NOTICE U/S 143 (2) OF THE ACT AND IN RESPONSE THEREOF THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE FI LED COPIES OF RETURN OF INCOME, STATEMENT OF INCOME, COMPANY AUDIT 2 ITA NO. 2624 / MUM/2016 ASSESSMENT YEAR: 2009 - 10 REPORT AND TAX AUDIT REPORT U/S 44AB OF THE ACT. SINCE, THE VALUE OF INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE EXCEEDING THE RATIO LIMIT, A REFERENCE WAS MADE TO THE TRANSFER PRICING OFFICER (TPO). NOTICE U/S 142 (1) OF THE ACT WAS ALSO ISSUED ON WHICH THE REPRESENTATIVE OF THE ASSESSEE FURNISHED THE DETAILS AND INFORMATION SOUGHT BY THE AO. THE COMPANY HAD CLAIMED DEDUCTION U/S 35AC AMOUNTING TO RS. 15,00,000/ - AND U/S 80G AMO UNTING TO RS. 7,55,306/ - . THE ASSESSEE HAD FURTHER CLAIMED EXEMPTION U/S 10A AMOUNTING TO RS. 47, 61,81,134/ - FOR SOFTWARE TECHNOLOGY PARK AT MUMBAI UNIT AND U/S 10AA AMOUNTING TO RS. 11,40,31,930/ - FOR SPECIAL ECONOMIC ZONE (SEZ) UNIT, PUNE. THE AO WORKED OUT THE EXEMPTION U/S 10A TO RS. 40,21,80,637/ - AFTER DISALLOWING INSURANCE EXPENSES, TELEPHONE INTERNATIONAL CHARGES AND TECHNICAL FEE IN FOREIGN CURRENCY. ACCORDINGLY , THE AO RESTRICTED THE EXEMPTION U/S 10A TO RS. 40,21,80,637/ - AS AGAINST THE CLAIM OF THE ASSESSEE OF RS. 47,61,81,134/ - . 3. IN THE FIRST APPEAL, THE LD. CIT (A) FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT PASSED IN THE ASSESSEES OWN CASE FOR THE A.YS. 2005 - 06 AND 2007 - 08 ALLOWED THIS GROUND OF APPEAL OF THE ASSESSEE AND DIRE CTED THE AO TO ALLOW THE RELIEF CLAIMED U/S 10A OF THE ACT AS CLAIMED IN THE RETURN OF INCOME. 4 . AGGRIEVED BY THE ORDER OF LD. CIT (APPEAL S ), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING EFFECTIVE GROUND S : - 1. THE ORDER OF T HE CIT (A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN HOLDING THAT INSURANCE CHARGES, INTERNET CHARGES AND TELECOMMUNICATION/TELEPHONE CHARGES SHALL BE REDUCED FROM TOTA L TURNOVER WHILE WORKING OUT THE AMOUNT ELIGIBLE FOR EXEMPTION U/S 10A WITHOUT APPRECIATING THAT NO PROVISION FOR DEDUCTION OF SUCH EXPENSES FROM TOTAL TURNOVER IS PROVIDED U/S 10A OF THE I.T. ACT, 1961. 3 ITA NO. 2624 / MUM/2016 ASSESSMENT YEAR: 2009 - 10 3. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) FAILED TO APPRECIATE THAT UNDER THE PROVISION OF SEC. 10A OF THE I.T. ACT, 1961, IT IS THE EXPORT TURNOVER ONLY AND NOT THE TOTAL TURNOVER OF THE BUSINESS WHICH IS TO BE REDUCED BY THE EXPENSES INCURRED ON ACCOUNT OF THAT INSURANCE CHARGES, INTERNET CHARGE AND TELECOMMUNICATION/TELEPHONE CHARGES. 5. THIS CASE WAS FIXED FOR HEARING ON 08.02.2018. WHEN THE CASE WAS CALLED FOR HEARING, NONE APPEARED ON BEHALF OF THE RESPONDENT/ASSESSEE. EVEN NO APPLICATION FOR ADJOURNMENT WAS RECEIVE D. ACCORDINGLY, WE DECIDED TO DISPOSE OF THE APPEAL ON THE BASIS OF MATERIAL ON RECORD AFTER HEARING THE DEPARTMENTAL REPRESENTATIVE (DR). 6. T HE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT THE ORDER OF THE LD. CIT (A) IS NOT IN ACCORDANCE WITH TH E LAW AND BASED ON THE EVIDENCE AS THE LD. CIT (A) HAS ERRED IN HOLDING THAT INSURANCE CHARGES, INTERNET CHARGES AND TELECOMMUNICATION/TELEPHONE CHARGES ARE REQUIRED TO BE REDUCED FROM TOTAL TURNOVER WHILE WORKING OUT THE CLAIM FOR EXEMPTION U/S 10A. THE LD. DR FURTHER SUBMITTED THAT UNDER THE PROVISIONS OF SECTION 10A OF THE ACT, IT IS THE EXPORT TURNOVER ONLY AND NOT THE TOTAL TURNOVER OF THE BUSINESS, WHICH IS TO BE REDUCED BY THE EXPENSES INCURRED ON INSURANCE, INTERNET AND TELECOMMUNICATION CHARGES, THEREFORE, THE IMPUGNED ORDER IS LIABLE TO BE SET ASIDE. 7 . WE FURTHER NOTICE THAT THE LD. CIT (A) HAS DECIDED THE GROUNDS IN THIS CASE BY FOLLOWING THE DECISION OF ITAT IN THE ASSESSEES OWN CASE FOR THE A.Y. 2007 - 08. THE OPERATIVE PART OF THE ORDER READ S AS UNDER: 3.3 IT IS SEEN THAT IDENTICAL ISSUE WAS INVOLVED IN THE CASE OF THE APPELLANT FOR THE A.Y. 2007 - 08. MY LEARNED PREDECESSOR CIT (A) - 4, MUMBAI VIDE HIS ORDER DATED 27.8.2012 HAD ALLOWED THE APPEAL. IN DOING SO, HE HAS FOLLOWED THE APPELLATE O RDER DATED 22.6.2010 FOR THE A.Y. 2005 - 06, FOR BOTH THESE ASSESSMENT YEARS, THE DEPARTMENTAL APPEALS FILED BEFORE HON. ITAT AND HON. BOMBAY HIGH COURT HAVE BEEN DISMISSED. THUS, THE ISSUE INVOLVED IS SQUARELY COVERED BY THE 4 ITA NO. 2624 / MUM/2016 ASSESSMENT YEAR: 2009 - 10 DECISION OF THE HON. BOMBAY HIGH COURT IN THE APPELLANTS OWN CASE. RESPECTFULLY FOLLOWING THESE ORDERS, THE APPEAL FILED BY THE APPELLANT ON THIS GROUND IS TO BE ALLOWED. 8 . WE NOTICE THAT THE IDENTICAL ISSUE S PERTAINING TO THE A.Y. 2007 - 08 IN ASSESSEES OWN CASE WAS DEALT WITH BY THE THEN CIT (A) AND THE LD. CIT (A) HAD ALLOWED THE SAID GROUND BY FOLLOWING THE EARLIER ORDERS . THE ORDER OF THE LD. CIT (A) WAS CHALLENGED BEFORE THE ITAT. THE ITAT DISMISSED THE REVENUES APPEAL AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE REVENUE CARRIED THE MATTER TO THE HONBLE BOMBAY HIGH COURT AND THE HONBLE HIGH COURT ALSO DISMISSED THE REVENUES APPEAL. HENCE, THE ISSUES INVOLVED IN THIS APPEAL ARE SQUARELY COVERED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT PASSED IN THE ASSE SSEES OWN CASE. SINCE, THE ISSUES RAISED BY THE DEPARTMENT HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE HONBLE HIGH COURT IN THE ASSESSEES OWN CASE FOR THE EARLIER YEARS, WE FIND NO MERIT IN THE APPEAL OF THE REVENUE. HENCE, WE UPHOLD THE DECISION OF THE LD. CIT(A) AND DISMISS THE APPEAL OF THE REVENUE . 9 . WE FURTHER NOTICE THAT THERE IS AN INORDINATE DELAY OF 1022 DAYS IN FILING THE PRESENT APPEAL AND THE APPELLANT/REVENUE HAS NOT FILED ANY APPLICATION FOR CONDONATION OF DELAY. IN THE RESULT, APPEAL FILED BY THE REVENUE FOR A SSESSMENT YEAR 2009 - 20 10 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST FEBRUARY , 2018 . SD/ - SD/ - ( SHAMIM YAHYA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 21 / 02 / 201 8 ALINDRA, PS 5 ITA NO. 2624 / MUM/2016 ASSESSMENT YEAR: 2009 - 10 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLAN T 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI