ITO, CHENNAI V. Ideal Fastener India P. Ltd., CHENNAI

ITA 2646/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90467 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 02-06-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 20-10-2014
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: VEPA KRISHNAN
• Section: 10AA; 10B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . . . , . , ! '# $ [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ] ./ I.T.A.NO.2646/MDS/2014 / ASSESSMENT YEAR : 2010-11 THE INCOME TAX OFFICER COMPANY WARD II(1) CHENNAI VS. M/S IDEAL FASTENER INDIA P. LTD C-5, PHASE II, 3 RD MAIN ROAD MEPZ-SEZ, TAMBARAM CHENNAI 600 086 [PAN AABCI 4462 Q ] ( %& / APPELLANT) ( '(%& /RESPONDENT) / APPELLANT BY : SHRI P. RADHAKRISHNAN, JCIT /RESPONDENT BY : SHRI VEPA KRISHNAN, CA / DATE OF HEARING : 02-06-2015 ! / DATE OF PRONOUNCEMENT : 12-06-2015 / O R D E R PER D. KARUNAKARA RAO, ACCOUNTANT MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)II, CHENNA I, DATED 29.5.2014, FOR ASSESSMENT YEAR 2010-11. 2. THE ONLY ISSUE THAT IS RAISED IN THE GROUNDS OF APP EAL RELATES TO THE CORRECTNESS OF THE DECISION OF THE CIT(A) IN DIRECTING THE ASSESSING OFFICER TO REDUCE CERTAIN EXPENSES FROM T HE EXPORT TURNOVER ITA NO.2646/14 :- 2 -: ALSO AS DONE IN THE CASE OF TOTAL TURNOVER FOR THE PURPOSE OF COMPUTING ALLOWABLE DEDUCTION U/S 10A OF THE ACT. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A MANUFACTURER OF ZIPPERS AND OPERATES FROM A SPECIAL ECONOMIC ZONE. WHILE COMPUTING DEDUCTION U/S 10A OF THE ACT, THE ASSESSEE EXCLUDED FREIGHT CHARGES OF ` 1,89,72,070/- AND TELECOMMUNICATION CHARGES OF ` 3,82,015/- TOTALLING TO ` 1,93,54,085/- FROM THE TOTAL TURNOVER AND INCLUDED THE SAME IN THE EXPORT TURNOVER. DURING A SSESSMENT PROCEEDINGS, THE ASSESSING OFFICER REJECTED THE AS SESSEES CLAIM AND EXCLUDED THE SAID EXPENSES IN THE TOTAL TURNOVER. 4. DURING THE FIRST APPELLATE PROCEEDINGS, THE ASSESS EE RELIED ON THE BINDING SPECIAL BENCH DECISION IN THE CASE O F ITO VS SAK SOFT LTD, 313 ITR (AT) 353, FOR THE PROPOSITION THAT THE EXPENSES INCURRED IN FOREIGN CURRENCY ON TRAVELLING, TELECOMMUNICATIO NS, INSURANCE ETC WHICH ARE EXCLUDED FROM THE EXPORT TURNOVER SHOULD ALSO BE EXCLUDED FROM THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTIN G ALLOWABLE DEDUCTION U/S 10A OF THE ACT. FOLLOWING THE SAID BINDING DECISION, THE CIT(A) GRANTED RELIEF TO THE ASSESSEE AND DIRECTED THE ASSESSING OFFICER TO EXCLUDE THE SAID CHARGES NOT ONLY FROM T HE EXPORT TURNOVER BUT ALSO FROM THE TOTAL TURNOVER FOR THE PURPOSE OF DETERMINING DEDUCTION U/S 10A OF THE ACT. CONTENTS OF PARA 4. 2.2 ARE RELEVANT. ITA NO.2646/14 :- 3 -: 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE ORD ERS OF THE ASSESSING OFFICER AND THE CIT(A), WE FIND IT RELEVA NT TO EXTRACT BELOW PARA 4.2.2 OF THE CIT(A)S ORDER: 4.2.2 I HAVE CONSIDERED THE ASSESSEE'S SUBMISSIONS CAREFULLY. THE SPECIAL BENCH OF ITAT, CHENNAI, IN TH E CASE OF ITA V. SAK SOFT LTD (313 ITR (AT) 353)(CHENNAI)( SB) AS WELL AS THE HIGH COURT OF BOMBAY, IN THE CASE OF C IT V. GEM PLUS JEWELLERY INDIA LTD (330 ITR 175)(BOM), HAV E HELD THAT THE FOREIGN CURRENCY EXPENSES ON TRAVELLING / TELECOMMUNICATIONS/INSURANCE ETC, WHICH ARE EXCLUDED FROM THE EXPORT TURNOVER, SHOULD ALSO BE EXCLUDED FR OM THE TOTAL TURNOVER FOR THE PURPOSE OF CALCULATING THE DEDUCTION U/S.10A/ 10B OF THE ACT. SINCE THE ISSUE HAS ALREADY BEEN DECIDED BY THE HON'BLE ITAT (SPECIAL BENCH) AS WELL AS BOMBAY HIGH COURT, RESPECTFULLY FOLLOWING THE SAID DECISIONS OF THE ITAT IN THE CASE OF ITA V. SAK SOFT LTD (313 ITR (AT) 353)(CHENNAI)(SB) AND HIGH COURT OF BOMBAY, IN THE CASE OF CIT V. GEM PLUS JEWELLERY INDIA LTD (330 ITR 175) (BORN), I DIRECT T HE ASSESSING OFFICER TO EXCLUDE THE FOREIGN CURRENCY EXPENSES OF FREIGHT AND TELECOMMUNICATIONS CHARGES OF RS.1,93,54,085/-, NOT ONLY FROM THE EXPORT T URNOVER BUT ALSO FROM THE TOTAL TURNOVER, FOR THE PURPOSE OF CA LCULATING THE DEDUCTION U/S 10AA OF THE ACT. THE ASSESSEE SUCCE EDS IN ITS APPEALS IN THIS REGARD. 6. IT IS A DECIDED LEGAL ISSUE THAT THE SAID FREIGHT A ND TELECOMMUNICATION CHARGES HAVE TO BE EXCLUDED FROM BOTH EXPORT TURNOVER AS WELL AS TOTAL TURNOVER FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 10A OF THE ACT. THIS PRINCIPLE OF PARITY MUST OPERATE IN SUCH SITUATIONS. THEREFORE, WE ARE OF THE OPINI ON THAT THE ISSUE RAISED BY THE REVENUE IN THE GROUNDS ARE RIGHTLY AD JUDICATED BY THE ITA NO.2646/14 :- 4 -: CIT(A) AND THEREFORE, OUR INTERFERENCE IS UNWARRANT ED. WE CONFIRM THE ORDER OF THE CIT(A). ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH OF JUNE, 2015, AT CHENNAI. SD/- SD/- ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( . ) (D. KARUNAKARA RAO) ! / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 12 TH JUNE, 2015 RD &' ()*) / COPY TO: 1 . / APPELLANT 3. +,' / CIT(A) 5. )-. / / DR 2. / RESPONDENT 4. + / CIT 6. .01 / GF