HTC Software Development Centre P Ltd., CHENNAI V. ITO (OSD), CHENNAI

ITA 2868/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95945 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 17-07-2015
• Assessment Year: 2000-2001
• Appeal Filed On: 21-11-2014
• Court: TRIBUNAL
• Department Lawyers: DR B NISCHALJCIT
• Assessee Lawyers: K M MOHANDASSC A
• Section: 143(3); 10B; 147

Judgement Text

, SMC , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, CHENNAI . , , BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.2868 /MDS./2014 ( !' / ASSESSMENT YEAR :2000-01) M/S.HTC SOFTWARE DEVELOPMENT CENTRE P LTD SDF II PHASE, MEPZ, TAMBARAM, CHENNAI 600 045. VS. THE INCOME TAX OFFICER(OSD), COMPANY CIRCLE II(2), CHENNAI. PAN AAACH 1901 Q ( / APPELLANT ) ( / RESPONDENT ) #$ % & / APPELLANT BY : MR.K.M.MOHANDASS,C.A '(#$ % & / RESPONDENT BY : DR.B.NISCHAL,JCIT, D.R ) !* % +, / DATE OF HEARING : 17.07.2015 -' % +, /DATE OF PRONOUNCEMENT : 26.08.2015 / O R D E R PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE, AGGRIEVED B Y THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)-II, CHENN AI DATED ITA NO.2868 /MDS/2014 2 26.06.2014 IN ITA NO.836/2013-14 PASSED UNDER SEC. 143(3) READ WITH SECTION 147 & SEC. 250 OF THE ACT. 2. THE ASSESSEE HAS RAISED SEVEN ELABORATE GROUNDS IN ITS APPEAL, HOWEVER THE CRUX OF THE ISSUE IS THAT THE A SSESSEE IS AGGRIEVED BY THE ORDER OF THE LD. CIT (A), WHO HAD UPHELD THE ORDER OF THE LD. ASSESSING OFFICER BY HOLDING THAT INTERE ST RECEIVED FROM EEFC DEPOSITS ` 9,37,942/- AND BANK DEPOSITS ` 35251/- AGGREGATING TO `973193/- ARE NOT ELIGIBLE FOR DEDUCTION U/S.10B OF THE ACT SINCE THEY ARE NOT DERIVED FROM EXPORT OF THINGS/ARTICLES . 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS ACCOMPANY ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT AND EXPORTS, FILED ITS RETURN OF INCOME ON 30.11.2000 DECLARING NIL INCOME AFTER CLAIMING DEDUCTION OF ` 6.28,83,715/- U/S.10B OF THE ACT. SUBSEQUENTLY THE ASSESSMENT WAS REOPENED U/S.147 AN D THE ASSESSMENT WAS COMPLETED U/S.143(3) READ WITH SECTI ON 147 OF THE ACT ON 20/12/2007 WHEREIN THE LD. ASSESSING OFFICER ASSESSED THE INTEREST INCOME OF ` 9,73,193 BEING THE DEPOSITS IN EEFC A/C IN BANK ` 9,37,942/- AND DEPOSIT IN BANK A/C ` 35,251/- DENYING THE BENEFIT OF ITA NO.2868 /MDS/2014 3 DEDUCTION U/S. 10B OF THE ACT SINCE THE EARNING OF INTEREST INCOME HAD NO DIRECT NEXUS WITH THE EXPORT BUSINESS OF THE ASSESSEE. ON APPEAL, THE LD. CIT (A) UPHELD THE ORDER OF THE LD. ASSESSING OFFICER BY HOLDING THAT THE INTEREST FROM EEFC DEPOSITS AND BANK DEPOSITS IS NOT ELIGIBLE FOR DEDUCTION U/S.10B OF THE ACT, AS T HE INTEREST IS NOT DERIVED FROM THE EXPORT OF THINGS/ARTICLES. 4. AT THE OUTSET, LD. A.R. RELIED IN THE DECISION OF THIS TRIBUNAL IN THE CASE M/S.COGNIZANT TECHNOLOGY SOLUTIONS INDIA P VT. LTD. VS. ACIT IN ITA NOS.114 & 2100/MDS./2011 FOR THE ASSESS MENT YEARS 2005-06 & 2007-08 VIDE ORDER DATED 23RD JANUARY, 20 13 WHEREIN THE TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASSESSE E. ON THE OTHER HAND, LD.D.R PLACED RELIANCE IN THE ORDERS OF THE R EVENUE AND ALSO RELIED IN THE CASE OF PENTA MEDIA GRAPHICA LTD., VS . ACIT REPORTED IN [2013] 35 TAXMANN.COM (MADRAS). 5. I HAVE HEARD BOTH THE PARTIES AND CAREFULLY PER USED THE MATERIALS AVAILABLE ON RECORD AND THE DECISION OF T HE TRIBUNAL CITED BY THE LD.A.R. I FIND THAT THE DECISION OF THE TRIBUN AL RELIED BY THE LD. ITA NO.2868 /MDS/2014 4 A.R IN THE CASE M/S.COGNIZANT TECHNOLOGY SOLUTIONS INDIA PVT. LTD. VS. ACIT (SUPRA) IS SQUARELY APPLICABLE TO THE FACT S OF THE CASE OF THE ASSESSEE. THE RELEVANT PORTION OF THE TRIBUNAL ORDE R CITED SUPRA IS REPRODUCED HEREIN BELOW FOR READY REFERENCE:- 6.1. THE FIRST GROUND IS THAT THE LOWER AUTHORITIES HAVE ERRED IN EXCLUDING THE NET EXCHANGE GAIN ON EXCHANGE EARNERS FOREIGN CURRENCY (EEFC) ACCOUNT FROM PROFITS ELIGIBLE FOR DEDUCTION UNDER SECTION 10A OF THE ACT. THE ISSUE IS THAT THE ASSESSEE IS PERMITTED BY RBI TO KEEP A PART OF ITS FOREIGN EXCHANGE EARNINGS IN FOREIGN CURRENCY ACCOUNT ABROAD SO THAT IT CAN BE U SED BY THE ASSESSEE FOR PURCHASING RAW MATERIALS AND AVAILING OTHER SERVICE S AND IF NOT REQUIRED CAN REMIT BACK THE MONEY TO INDIA ALONG WITH INTEREST. INTERE ST IS ACCRUED AS PART OF EXPORT TURNOVER. IT HAS NEXUS ONLY WITH THE EXPORT TURNOVE R AND THEREFORE IT IS ALSO IN THE NATURE OF EXPORT PROFITS. THIS ISSUE HAS BEEN DECID ED BY THE HONBLE DELHI HIGH COURT IN FAVOUR OF THE ASSESSEE IN THE CASE OF CIT VS. INDIAN TONERS AND DEVELOPERS LTD., 326 ITR 435. THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE BY A SERIES OF TRIBUNAL ORDERS IN THE CASE OF M/S.RISHAB H INTERNATIONAL VS. JCIT, MUMBAI IN ITA NO.2788 & 2789 OF 2004; IN THE CASE O F DISCOVER INDIA TOURS(P) LTD. VS. ASSESSING OFFICER, 9 SOT 665 (DEL); IN THE CASE OF CIT VS. SYNTEL LTD. IN ITA NOS.1974, 1976 & 1978 OF 2009; IN THE CASE OF R AJESH EXPORTS LTD. VS. ACIT IN ITA NO.51 OF 2008, ETC. ACCORDINGLY, WE DIRECT T HE ASSESSING OFFICER TO INCLUDE THE GAIN FROM EEFC ACCOUNT AS PART OF THE PROFITS E LIGIBLE FOR DEDUCTION UNDER SECTION 1OA OF THE ACT. THIS ISSUE IS DECIDED IN FA VOUR OF THE ASSESSEE. -9-. ITA 114, 90&2100/2011 THEREFORE IT IS ALSO IN THE NATUR E OF EXPORT PROFITS. THIS ISSUE HAS BEEN DECIDED BY THE HONBLE DELHI HIGH COURT IN FAVOUR OF THE ASSESSEE IN THE CASE OF CIT VS. INDIAN TONERS AND DEVELOPERS LTD., 326 ITR 435. THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE BY A SERIES OF TR IBUNAL ORDERS IN THE CASE OF ITA NO.2868 /MDS/2014 5 M/S.RISHABH INTERNATIONAL VS. JCIT, MUMBAI IN ITA N O.2788 & 2789 OF 2004; IN THE CASE OF DISCOVER INDIA TOURS(P) LTD. VS. ASSESS ING OFFICER, 9 SOT 665 (DEL); IN THE CASE OF CIT VS. SYNTEL LTD. IN ITA NOS.1974, 19 76 & 1978 OF 2009; IN THE CASE OF RAJESH EXPORTS LTD. VS. ACIT IN ITA NO.51 OF 200 8, ETC. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO INCLUDE THE GAIN FROM EEFC ACCOUNT AS PART OF THE PROFITS ELIGIBLE FOR DEDUCTION UNDER SECTION 1OA OF THE ACT . THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. FURTHER I FIND THAT THE DECISION OF THE HONBLE JUR ISDICTIONAL MADRAS HIGH COURT IN THE CASE M/S.PENTA MEDIA GRAPHICS LTD . (SUPRA) RELIED ON BY THE LD.D.R IS NOT IDENTICAL TO THE FACTS OF THE ASSESSEES CASE BECAUSE IN THAT CASE IT WAS WITH RESPECT TO THE TRA INING FEES RECEIVED BY THE ASSESSEE FROM PERSONS WHO ARE NOT THE EMPLOY EES OF THE ASSESSEE. THEREFORE FOLLOWING THE DECISION OF THE T RIBUNAL IN THE CASE M/S.COGNIZANT TECHNOLOGY SOLUTIONS INDIA PVT. LTD. VS. ACIT CITED SUPRA, I HEREBY DIRECT THE LD. ASSESSING OFFICER TO INCLUDE THE INTEREST FROM EEFC DEPOSIT AND THE OTHER DEPOSIT IN THE BANK ACCOUNT AS PART OF THE PROFITS ELIGIBLE FOR DEDUCTION U/S.10B OF TH E ACT BECAUSE THE NATURE OF INCOME EARNED ON BOTH THE DEPOSITS ARE SI MILAR AND THE NATURE OF DEDUCTIONS IN SECTION 10A & 10B OF THE AC T IS ALSO SIMILAR THOUGH AVAILABLE TO ASSESSEES ENGAGED IN DIFFERENT FIELD. IT IS ORDERED ACCORDINGLY. ITA NO.2868 /MDS/2014 6 6. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED . ORDER PRONOUNCED ON 26 TH AUGUST, 2015 AT CHENNAI. SD/- ( . ! ' ) (A.MOHAN ALANKAMONY) ACCOUNTANT MEMBER CHENNAI, DATED THE 26 TH AUGUST, 2015. K S SUNDARAM. . % '+/ 0 10'+ /COPY TO: 1. #$ /APPELLANT 2. '(#$ /RESPONDENT 3. ) 2+ ( ) /CIT(A) 4. ) 2+ /CIT 5. 0!56 '+ 7 /DR 6. 68 9* /GF