DCIT, Circle-17(2), Hyd, Hyderabad V. Xilinx India Technology Services P. Ltd., Hyd, Hyderabad

ITA 288/HYD/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6481 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 11-03-2016
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Assessee Lawyers: SURYA KIRAN
• Keywords: Sale consideration of property below Jantri Value
• Section: 143(3); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SHRI J. SUDHAKARA REDDY, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER I.T.A. NO. 288/HYD/2016 ASSESSMENT YEAR: 2009-10 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-17(2), HYDERABAD VS M/S. XILINX INDIA TECHNOLOGY SERVICES PVT. LTD., HYDERABAD [PAN: AAACX0450C] (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI M. SITARAM, DR FOR ASSESSEE : SHRI SISTLA VENKATESWARLU & SHRI SURYA KIRAN MOTAMARRI, ARS DATE OF HEARING : 13-06-2016 DATE OF PRONOUNCEMENT : 15-06-2016 O R D E R PER J. SUDHAKARA REDDY, A.M. : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGA INST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-5, HYDERABAD, DATED 31-12-2015 FOR THE AY. 2009-10. 2. AFTER HEARING THE RIVAL CONTENTIONS, WE FIND THAT SIM ILAR ISSUE HAS COME UP BEFORE THE HYDERABAD BENCH OF THE T RIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 1813/HYD/2012 FOR TH E AY. 2008- 09 AND THAT THE ISSUES HAVE BEEN ADJUDICATED IN FAVOUR OF THE ASSESSEE. WE DISPOSE-OFF THE CASE GROUND-WISE. I.T.A. NO. 288/HYD/2016 M/S. XILINX INDIA TECHNOLOGY SERVICES PVT. LTD., :- 2 -: GROUND NO.1: THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO REDUCE THE COMMUNICATION EXPENSES OF RS. 22 ,17,592/- BOTH FROM EXPORT TURN OVER AS WELL AS TOTAL TURNOVER THO UGH SUCH AN ADJUSTMENT IS NOT CONTEMPLATED UNDER SECTION 10A OF TH E ACT. THE LD. CIT(A) AT PAGE NO. 7 PARA 6.3 AND 6.4 HELD A S FOLLOWS: 6.3 SINCE THE STATUTE CLEARLY DEFINES THE EXPORT TURNOVER FOR THE PURPOSE OF EXEMPTION U/S. 10A, IT HAS TO BE FOLLOWE D STRICTLY. THE COMMUNICATION EXPENSES AMOUNTING TO RS. 22,17,592/- WHICH IS DEBITED TO THE PROFIT & LOSS A/ C IS TO BE REDUCED FROM THE EXPORT TURNOVER. IN THIS RESPECT, THE ACTION OF THE ASSESSING OFFICER IS JUS TIFIED. HENCE, GROUND NOS. 3.1 AND 3.2 ARE DISMISSED. 6.4 AT THE SAME TIME, THE HON'BLE MUMBAI HIGH COUR T IN THE CASE OF GEM PLUS JEWELLERY INDIA LTD. (SUPRA), HELD THAT SI NCE THE EXPORT TURNOVER FORMS A PART OF THE TOTAL TURNOVER, IF AN ITEM IS E XCLUDED FROM THE EXPORT TURNOVER, THE SAME SHOULD ALSO BE REDUCED FROM THE TOTAL TURNOVER TO MAINTAIN PARITY BETWEEN NUMERATOR AND DENOMINATOR W HILE CALCULATING DEDUCTION U/S 10A OF THE ACT. IN THE CASE OF SAK SO FT LTD. 313 ITR 353 (AT), THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF E XPORTING COMPUTER SOFTWARE AND CLAIMED DEDUCTION U/S. 10B OF THE ACT. IN COMPLETING THE ASSESSMENT U/S 143(3) OF THE ACT, THE AO REDUCED TH E EXPENDITURE INCURRED IN FOREIGN EXCHANGE IN PROVIDING THE TECHN ICAL SERVICES OUTSIDE INDIA, FROM THE EXPORT TURNOVER WITHOUT CORRESPONDI NG REDUCTION FROM TOTAL TURNOVER, THEREBY REDUCING THE DEDUCTION CLAIMED BY THE ASSESSMENT U/S 10B OF THE ACT. IN LIGHT OF THE ABOVE FACTS, THE SP ECIAL BENCH HELD AS UNDER:- 'FOR THE ABOVE REASONS, WE HOLD THAT FOR THE PURPO SE OF APPLYING THE FORMULA UNDER SUB-SECTION (4) OF SECTION 10B, THE FREIGHT, TELECOM CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF ARTICLES OR THINGS OR COMPUTER SOFTWARE OUTSIDE INDIA OR THE EXPENSES, IF ANY, INCURRED IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICES OUTSIDE INDIA ARE TO BE EXCLUDE D BOTH FROM THE EXPORT TURNOVER AND FROM THE TOTAL TURNOVER, WHICH ARE TH E NUMERATOR AND THE DENOMINATOR RESPECTIVELY IN THE FORMULA. THE APPEA LS FILED BY THE DEPARTMENT ARE THUS DISMISSED'. IN THE LIGHT OF THE ABOVE REASONING AND RESPECTFULL Y FOLLOWING THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT V TATA ELXSI LTD. AND OTHERS (2011) 247 CTR 334 (KARNATAKA), I AM ALS O DIRECTING THE AO TO EXCLUDE THE ABOVE MENTIONED EXPENSES BOTH FROM T HE EXPORT TURNOVER AS WELL AS FROM THE TOTAL TURNOVER WHILE CALCULATIN G DEDUCTION U/S. 10A OF THE ACT. WHILE DRAWING THIS CONCLUSION I RELY ON FO LLOWING JUDGMENTS. I.T.A. NO. 288/HYD/2016 M/S. XILINX INDIA TECHNOLOGY SERVICES PVT. LTD., :- 3 -: (I) ITAT, HYDERABAD IN THE CASE OF INCOME TAX OFFIC ER VS. D.E. BLOCK INDIA SOFTWARE (P) LTD. IN ITA NO.S 983 & 984/HYD/2 006 DATED 31.01.2007 (II) ITAT, HYDERABAD IN THE CASE OF ITO VS. VIRTUSA (INDIA) LIMITED IN ITA NO.757 /H/06 DATED 29.02.2008 (III) DELHI TRIBUNAL IN THE CASE OF DCIT VS. BINARY SEMANTICS LTD. (109 TTJ 556) (IV) HYDERABAD TRIBUNAL IN THE CASE OF ACIT VS. ALL IANCE IT CONSULTING INDIA (P) LTD. IN ITA NO.581/HYD/08 (V) HYDERABAD TRIBUNAL IN THE CASE OF DCIT VS. SIAN A INFORMATICS PVT. LTD. IN ITA NO.938/HYD/08. HENCE, THE ASSESSING OFFICER IS DIRECTED TO REDUCE THE COMMUNICATION EXPENSES, BOTH FROM THE EXPORT TURNOVER AND THE TOT AL TURNOVER TO DETERMINE THE QUANTUM OF EXEMPTION U/S. 10A OF THE LT. ACT. HENCE, GROUND NO. 3.3 IS ALLOWED. WE FIND NO INFIRMITY IN THIS ORDER OF THE LD. CIT(A) . GROUND NO. 2: THE LD. CIT(A) ERRED IN HOLDING THAT THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF STATUTORY DEDUCTIONS OF RS. 33,46,347/- IS ELIGIBLE FOR DEDUCTION U/S. 10A OF THE ACT. THE LD. CIT(A) AT PARA 6.7 HELD AS FOLLOWS: 6.7 THE IDENTICAL ISSUE HAS COME UP FOR APPEAL BEF ORE THE ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09 (IT A NO.1813/HYD/2012 ASSESSMENT YEAR 2008-09 XILINX IND IA TECHNOLOGY SERVICES PVT. LTD VS DCIT, CIR-3(3), IN WHICH IT IS HELD THAT: 'IT IS THE CONTENTION OF THE ASSESSEE THAT THE DISA LLOWANCE MADE HAS INCREASED THE BUSINESS PROFIT OF THE ASSESSEE. HENC E WHILE COMPUTING THE DEDUCTION U/S 1OA, THE DISALLOWANCE MADE COULD NOT BE IGNORED AND SHOULD BE CONSIDERED AS PART OF PROFIT. IN CASE OF CIT VS. GE M PLUS JEWELLERY INDIA LTD (SUPRA), THE HON'BLE BOMBAY HIGH COURT HELD THA T THE NET CONSEQUENCE OF STATUTORY DISALLOWANCE IS THAT THE BUSINESS PROFITS TO THAT EXTENT HAS BEEN ENHANCED. HENCE, THE ASSESSEE IS ENTITLED FOR DEDUC TION U/S 1OA OF THE ACT ON SUCH ENHANCED INCOME DUE TO STATUTORY DISALLOWANCE. WE FIND THAT SIMILAR VIEW HAS ALSO BEEN TAKEN BY THE CO-ORDINATE BENCHES OF THIS TRIBUNAL IN THE CASE OF M/S PROGRESSIVE SOFTWARE DEVELOPMENT (P) LT D., HYDERABAD (ITA NO.397/HYD/2010 DATED 30-9-2010 AND IN CASE OF DCIT VS. VIRINCHI TECHNOLOGIES L:IMITED (ITA NO.209/HYD/20L0 DATED 31 -3-2011. I.T.A. NO. 288/HYD/2016 M/S. XILINX INDIA TECHNOLOGY SERVICES PVT. LTD., :- 4 -: RESPECTFULLY FOLLOWING THE RATIOS LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN CASE OF CIT VS. GEM PLUS JEWELLERY (I) LTD (SUPRA), WE HOLD THAT THE STATUTORY DISALLOWANCE CANNOT BE EXCLUDED FROM THE INCOME OF THE UNDERTAKING FOR COMPUTING DEDUCTION U/S 1OA OF THE ACT. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO RE-COMPUTE THE DEDU CTION U/S 1OA OF THE ACT WITHOUT EXCLUDING THE STATUTORY DISALLOWANCE FROM T HE INCOME DERIVED FROM THE UNDERTAKING. THEREFORE, WE ALLOW THE GROUNDS RAISED BY THE ASSESSEE ON THIS ISSUE'. RESPECTFULLY, FOLLOWING THE DECISION OF ITAT AND JU DGMENTS IN THE CASE OF CIT VS. GEM PLUS JEWELLERY INDIA LTD. (330 ITR 175) (MUM), PROGRESS SOFTWARE DEVELOPMENT (P) LTD. VS. ITO ITA NO.397/HYD/2010 FOR A.Y. 2006-07, VIRINCHI TECHNOLOGIES LTD. ITA NO .209/HYD/2010 FOR A.Y. 2006-07; I ALLOW THE GROUNDS RAISED BY THE ASS ESSEE ON THIS ISSUE. HENCE, GROUND NO. 2 IS ALLOWED AND THE AO IS DIRECT ED TO RE-COMPUTE THE DEDUCTION U/S. 10A. 3. WE FIND NO INFIRMITY IN THIS ORDER OF THE LD. CIT( A). THE HON'BLE JURISDICTIONAL HIGH COURT IN ITTA NO. 531/20 14 ORDER DT. 05-08-2014 HAD UPHELD THE ORDER OF THE ITAT. RESPECT FULLY FOLLOWING THE SAME, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS AND APPEAL OF THE REVENUE. 4. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JUNE, 2016 SD/- SD/- (P. MADHAVI DEVI) (J. SUDHAKARA REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBE R HYDERABAD, DATED 15 TH JUNE, 2016 TNMM I.T.A. NO. 288/HYD/2016 M/S. XILINX INDIA TECHNOLOGY SERVICES PVT. LTD., :- 5 -: COPY TO : 1. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-17(2) , HYDERABAD. 2. M/S. XILINX INDIA TECHNOLOGY SERVICES PVT. LTD., U NIT NO. 04-01, 4 TH FLOOR, BLOCK-I, CYBER PEARL, HITECHCITY, MADHAPUR, HYDERABAD. 3. COMMISSIONER OF INCOME TAX(APPEALS)-5, HYDERABAD . 4. THE PR. COMMISSIONER OF INCOME TAX-5, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.