ACIT, Bangalore V. M/s Jaipuria Silk Mills Pvt. Ltd., Bangalore

ITA 278/BANG/2012

• Counselvise Citation: 27821114 RSA 2012
• Duration Of Justice: 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 27-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A SUNDAR RAJAN JT
• Assessee Lawyers: R K GANERIWALA
• Keywords: Business income
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NOS.278 & 279/BANG/2012 ASSESSMENT YEARS : 2007-08 & 2008-09 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 11(5), BANGALORE. VS. M/S. JAIPURIA SILK MILLS PVT. LTD., 43, GUDAHATTI MAIN ROAD, NERALUR POST, ANEKAL TALUK, BANGALORE 560 007. PAN : AAACJ 9390D APPLICANT RESPONDENT APPELLANT BY : SHRI A. SUNDAR RAJAN, JT. CIT(DR) RESPONDENT BY : SHRI R.K. GANERIWALA, C.A. DATE OF HEARING : 29.10.2012 DATE OF PRONOUNCEMENT : 31.10.2012 O R D E R PER BENCH THESE ARE APPEALS BY THE REVENUE AGAINST THE CO MMON ORDER DATED 30.11.2011 OF THE CIT(APPEALS)-I, BANGALORE RELATIN G TO ASSESSMENT YEARS 2007-08 & 2008-09. ITA NOS.278 & 279/BANG/12 PAGE 2 OF 6 2. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IN THESE TWO APPEALS BY THE REVENUE IS AS TO WHETHER THE CIT(APPEALS) WAS J USTIFIED IN DIRECTING THE AO TO RECOMPUTED THE DEDUCTION ALLOWABLE U/S. 10B O F THE ACT AFTER REDUCING THE FREIGHT AND INSURANCE BOTH FROM THE EX PORT TURNOVER AND TOTAL TURNOVER. 3. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF MANUFACTURE AND EXPORT OF SILK FABRICS. THE ASSESS EE CLAIMED DEDUCTION U/S. 10B OF THE ACT. IN THE COURSE OF ASSESSMENT P ROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT FREIGHT & INSURANCE CHARGES ATTRIBUTABLE TO THE DELIVERY OF GOODS BY THE ASSESSEE WAS NOT REDUC ED FROM THE EXPORT TURNOVER. ACCORDING TO THE AO, EXPLANATION (2) BEL OW SECTION 10B(9) OF THE ACT DEFINES EXPORT TURNOVER TO MEAN, CONSIDERATION RECEIVED IN RESPECT OF EXPORT BY THE UNDERTAKING, EXCLUDING FREIGHT, TELEC OMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF ARTICLES OR THINGS OUTSIDE INDIA. THE AO THEREFORE SOUGHT TO EXCLUDE FREIGHT & INSURANCE CHARGES FROM THE EXPORT TURNOVER. THE AO ACCORDINGLY COMPUTED DEDUCTION U /S. 10B OF THE ACT AT A LESSER FIGURE THAN WHAT WAS CLAIMED BY THE ASSESSEE . 4. ON APPEAL BY THE ASSESSEE, THE LD. CIT(APPEALS) FOLLOWING THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. ADITI TECHNOLOGIES PVT. LTD., ITA NO.349/2010 DATED 30.08 .2011 , HELD AS FOLLOWS:- (I) SO 10A IS AN INCENTIVE PROVISION TO PROMOTE EXP ORTS AND THEREFORE CALLING FOR LIBERAL INTERPRETATION. (II) EXPORT TURNOVER & TOTAL TURNOVER ARE BOTH TURN OVER WHICH IS DIFFERENT FROM GROSS RECEIPTS. BECAUSE IN THE TELECOMMUNICATION CHARGES FREIGHT AND INSURANCE CHA RGES, ITA NOS.278 & 279/BANG/12 PAGE 3 OF 6 ELEMENT OF TURNOVER IS NOT PRESENT THEY ARE NOT INC LUDIBLE IN EITHER E.T. OR T.T. (III) THERE IS NO DEFINITION OF T.T. BUT E.T. IS A PART OF T.T. AND THEREFORE WHAT IS TO BE EXCLUDED FROM E.T., IS ALSO REDUCED FROM THE T.T. 5. THUS, THE CLAIM OF THE ASSESSEE AS MADE BEFORE T HE AO WAS ACCEPTED BY THE LD. CIT(A). AGGRIEVED BY THE ORDE R OF THE CIT(A), THE REVENUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 6. AT THE TIME OF HEARING OF THESE APPEALS, IT WAS ACCEPTED BY THE PARTIES THAT IN THE ASSESSEES OWN CASE FOR THE A.Y . 2006-07 IN ITA NO.1112/BANG/2009, BY ORDER DATED 12.04.2010, THIS TRIBUNAL HAS UPHELD THE EARLIER ORDER OF THE CIT(A). THE TRIBUNAL HEL D AS FOLLOWS:- 8. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSE D THE MATERIAL PLACED ON RECORD. THE ISSUE IN QUESTION ST ANDS COVERED DIRECTLY IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR THE ASST.YEAR 2005-06 (ITA NO.406/BANG/2008 DATED 10.7.2009), WHICH IN TURN, F OLLOWED THE DECISION OF THE SPECIAL BENCH CITED SUPRA. THE RELE VANT PORTION OF THE TRIBUNAL'S ORDER IN ASSESSEE'S OWN CASE CITED S UPRA READS AS FOLLOWS:- 'WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. ON OUR CAREFUL PERUSA L OF THE FACTS AND CIRCUMSTANCES OF THE ASSESSEE'S CASE, OUR CONSIDERED OPINION IS THAT NOW THE ISSUE STANDS SET TLED BY THE SPECIAL BENCH DECISION OF THE ITAT, CHENNAI IN THE CASE OF ITO V SAK SOFT LTD. REPORTED IN 313 ITR (AT ) 353 DATED 6.3.09, THEREFORE, DOES NOT REQUIRE ANY FURTH ER DELIBERATION. THE ISSUE STANDS COVERED AS ALSO HELD BY THE LEARNED CIT(A) WHICH DOES NOT CALL FOR ANY FURT HER INTERFERENCE'. 9. THE SPECIAL BENCH OF TRIBUNAL IN THE CASE OF ITO V SAK SOFT LTD. REPORTED IN 313 ITR (AT) 353 WAS CONSIDERING A N IDENTICAL SITUATION WHEREIN IT WAS HELD AS FOLLOWS:- ITA NOS.278 & 279/BANG/12 PAGE 4 OF 6 'THE COMMON THREAD RUNNING THROUGH SECTIONS 80HHC, 80HHE AND 80HHF IS THAT THEY ARE ALL PROVISIONS GRANTING RELIEF TO THE ASSESSEES IN RESPECT OF PROFITS DERIVED FROM EXPORT. THE DIFFERENCE BETWEEN CHAPTER III IN WHICH SECTION 10B FALLS, AND CHAPTER VI-A IN WHICH THESE SECTIONS FALL, IS THAT WHILE THE FORMER EXCLUDES THE INCOME IN QUESTION TOTALLY FROM THE PURVIEW OF TOTAL INCOME AND GIVES TOTAL EXEMPTION FROM TAX, THE LATTER GIVES DEDUCTION OF A PART OF THE PROFITS AND GAINS OF THE CONCERNED BUSINESS FROM THE GROSS TOTAL INCOME. BOTH, HOWEVER, ARE CHAPTERS WHICH GIVE RELIEF TO ASSESSEES FROM TAXATION SUBJECT TO THE CONDITIONS BEING FULFILLED AND IN THAT SENSE THEY ARE OF THE SAME GENRE. THE OBJECT OF THESE SECTIONS IS TO ENCOURAGE THE EARNING OF FOREIGN EXCHANGE AND PROVIDE INCENTIVE TO PROMOTE EXPORTS. IF SOME OF THE SECTIONS SUCH AS SECTIONS 80HHE AND 80HHF PROVIDE FOR A FORMULA FOR CALCULATING THE DEDUCTION WHICH IS IDENTICAL WITH THE FORMULA PRESCRIBED BY SECTION 10B, IT WOULD BE INCONGRUOUS TO INTERPRET SECTION 10B IN A MANNER DIFFERENT FROM THOSE TWO SECTIONS MERELY BECAUSE THERE IS NO DEFINITION OF 'TOTAL TURNOVER' IN THAT SECTION. 'EXPORT TURNOVER' AS DEFINED IN THESE SECTIONS EXCLUDES FREIGHT, TELECOM CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE COMPUTER SOFTWARE OUTSIDE INDIA OR EXPENSES, IF ANY, INCURRED IN FOREIGN EXCHANGE IN PROVIDING TECHNICAL SERVICES OUTSIDE INDIA. THUS STATUTORILY PARITY IS MAINTAINED BETWEEN EXPORT TURNOVER AND TOTAL TURNOVER IN THESE SECTIONS. THERE IS NO REASON WHY SUCH PARITY CANNOT BE MAINTAINED BETWEEN EXPORT TURNOVER AND TOTAL TURNOVER IN SECTION 10B JUST BECAUSE 'TOTAL TURNOVER' HAS NOT BEEN DEFINED IN THAT SECTION'. 10. THE FIRST APPELLATE AUTHORITY HAS ATTEMPTED TO DISTINGUISH THE CASES CITED ON THE BASIS THAT THE WORD 'TOTAL TURNO VER' OR 'GROSS RECEIPT' AS IT APPEARS IN SECTION 44AB OF THE I T A CT, 1961, BASED ON ICAI GUIDANCE NOTE INCLUDES ALL RECEIPTS INCLUDI NG REIMBURSEMENT OF EXPENSES. THE CONTEXT IN WHICH THE WORDS 'TOTAL TURNOVER' AND 'GROSS RECEIPTS' APPEAR IN SEC TION 44AB OF THE I T ACT, 1961 IS TOTALLY DIFFERENT TO THAT OF T HIS CASE. THERE THE WORD 'TOTAL TURNOVER' IS USED TO BRING IN AMBIT OF TAX AUDIT ALL THE TRANSACTIONS OF SALES AND SERVICES. THE DEFINITION IS REPRODUCED HEREIN BELOW:- ITA NOS.278 & 279/BANG/12 PAGE 5 OF 6 'THE AGGREGATE AMOUNT FOR WHICH SALES ARE EFFECTED OR SERVICES RENDERED BY AN ENTERPRISE. THE TERM 'GROSS TURNOVER' AND 'NET TURNOVER' (OR 'GROSS SALES' AND 'NET SALES') ARE SOMETIMES USED TO DISTINGUISH THE SALES AGGREGATE BEFORE AND AFTER DEDUCTION OF RETURNS AND TRADE DISCOUNTS'. THE WORD 'TOTAL TURNOVER' IS NOT DEFINED U/S 44AB O F THE I T ACT, 1961. HENCE, THIS DEFINITION IS BEING CONSIDERED AS GUIDING DEFINITION TO DETERMINE TURNOVER FOR TAX AUDIT. THE FIRST APPELLATE AUTHORITY HAS ADOPTED THE MEANING OF WORDS STATED I N SECTION 44AB, WHICH IS WHOLLY UNNECESSARY IN THE INSTANT CA SE AND HAS CONCLUDED THAT TURNOVER AND GROSS RECEIPTS ARE SYNO NYM AND CAN BE USED INTERCHANGEABLY. THIS LINE OF ANALYSIS CAN NOT BE APPLIED IN THIS CASE BECAUSE GROSS RECEIPT IS USED FOR SERV ICES RENDERED BY BUSINESS ENTERPRISE OR FOR PROFESSIONAL INCOME AND WORD 'TURNOVER' FOR SALES EFFECTED OR FOR BUSINESS INCOME. THE ASSE SSEE'S BUSINESS IS WHOLLY OF EXPORT OF MANUFACTURED SILK FABRIC AND HENCE WORD 'GROSS RECEIPT' CANNOT BE APPLIED TO EXPORT TURNOVE R HERE. 11. FOR THE ABOVE SAID REASONS, WE REVERSE THE ORD ER OF THE AUTHORITIES BELOW AND DIRECT THE ASSESSING OFFICER TO EXCLUDE FROM THE EXPORT TURNOVER AS WELL AS FROM THE TOTAL TURNOVER A SUM OF RS.96,39,523/- AND RS.2,43,763/- BEING FREIGHT A ND INSURANCE EXPENSES RESPECTIVELY, WHILE CALCULATING DEDUCTION U/S 10B OF THE ACT. 7. IN VIEW OF THE AFORESAID DECISION OF THE TRIBUNA L, WE ARE OF THE VIEW THAT THERE IS NO MERIT IN THESE APPEALS BY THE REVE NUE. CONSEQUENTLY, THE APPEALS ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF OCTOBER, 2012. SD/- SD/- ( JASON P. BOAZ ) ( N.V.VASUDEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 31 ST OCTOBER , 2012. DS/- ITA NOS.278 & 279/BANG/12 PAGE 6 OF 6 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.