M/s. GE Medical Systems (India) Pvt. Ltd., Bangalore V. CIT, Bangalore

ITA 304/BANG/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9397 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-08-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 09-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREETI GARG
• Assessee Lawyers: VISHWESHWAR MUDIGONDA
• Keywords: Wholly owned subsidiary

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE A BENCH, BANGALORE BEFORE SHRI SHAILENDRA KUMAR YADAV, JM AND SHRI A. MOHAN ALANKAMONY, AM ITA NO.304(BANG.)/2009 (ASSESSMENT YEAR : 2004-05) M/S GE MEDICAL SYSTEMS (INDIA) PVT. LTD., NO.122, PART-1, EPIP, WHITEFIELD, BANGALORE APPELLANT VS THE COMMISSIONER OF INCOME-TAX, BANGALORE-560 001. RESPONDENT APPELLANT BY : SHRI VISHWESHWAR MUDIGONDA RESPONDENT BY : SMT. PREETI GARG O R D E R PER SHAILENDRA KUMAR YADAV,JM: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT, BANGALORE DATED 20-01-2009 FOR THE ASSESSMENT YEAR 2004-05 ON THE POINT OF FOREIGN TRAVEL EXPENSES INCURRED IN FOREIG N CURRENCY FROM THE EXPORT TURNOVER FOR THE PURPOSES OF COMPUTING DEDUC TION U/S10A OF THE IT ACT, 1961. 2. WE HAVE DISCUSSED AND DECIDED THIS ISSUE IN FAV OUR OF ASSESSEE IN ITA NOS.344 & 345(B)/2009 FOR THE ASSESSMENT YEA RS 2003-04 & 2004-05, WHEREIN VIDE PARA-4, WE HAVE HELD AS UNDER : ITA NO.304(B)/09 2 4. THE ASSESSEE COMPANY, A WHOLLY OWNED SUBSIDIARY OF HONEYWELL INTERNATIONAL INC. USA ENGAGED IN THE BUSINESS OF PERFORMING HIGH QUALITY SOFTWARE DEVELOPMENT, OFFER TESTING AND SUPPORT SERVICES TO OTHER UNITS OF THE HONEYWELL GROUP. THE AO REJECTED THE CLAIM OF EXEMPTION U/S 10A BY REDUCING AN AMOUNT OF RS.8,84,85,536/- BEING EXPENDITURE INCURRED IN FORE IGN CURRENCY ON TRAVEL FROM THE FIGURE OF EXPORT TURNOV ER. UNDER THE PROVISIONS OF SECTION 10A, THE TOTAL TURN OVER OF THE DEFINITION OF THE TERM TOTAL TURNOVER AS C ONTAINED IN A SIMILAR PROVISION OF THE ACT, I.E. 80HHE SHOUL D BE APPLIED. ACCORDING TO WHICH, IN CASE EXPENDITURE INCURRED IN FOREIGN CURRENCY ON TRAVEL IS TO BE RED UCED FROM THE EXPORT TURNOVER, A SIMILAR REDUCTION SHOUL D BE MADE TO CALCULATE TOTAL TURNOVER FOR THE PURPOSES OF COMPUTATION OF DEDUCTION U/S 10A. THE EXPENDITURE INCURRED ON FOREIGN TRAVEL FOR DELIVERY OF SOFTWARE SHOULD BE REDUCED FROM THE EXPORT TURNOVER AND CORRESPONDI NG REDUCTION SHOULD ALSO BE MADE FROM THE TOTAL TURNOV ER, WHILE COMPUTING THE DEDUCTION U/S 10A IN VIEW OF TH E DECISIONS OF THE AP HIGH COURT IN CIT VS DREDGING CORPORATION OF INDIA (1988) 174 ITR 682 AND THE DECISION OF THE ITAT, CHENNAI BENCH IN THE CASE OF M/S NEYVELI LIGNITE CORPORATION LTD., VS ACIT (2004) 9 3 TTJ 685 THIS VIEW IS FORTIFIED BY THE DECISION OF ITAT , BANGALORE BENCH IN CASE OF M/S TATA ELXSI LTD., VS ACIT, IN ITA NO.315(B)/2006 DATED 16-10-2007, WHEREIN THE TRIBUNAL HELD THAT THE FORMULA PRESCRIB ED FOR COMPUTING DEDUCTION U/S 10A OF THE ACT IS THE SAME AS PRESCRIBED IN SECTION 80HHE OF THE IT ACT. SECT ION 10A OF THE IT ACT, INCORPORATED THE ENTIRETY THE ITA NO.304(B)/09 3 PHILOSOPHY OF SECTION 80HHE OF THE ACT. THE DEFINIT ION OF THE TERM COMPUTER SOFTWARE AND CONVERTIBLE FO REIGN EXCHANGE IN SECTION 10A ARE THE SAME AS IN SECTION 80HHE. HOWEVER, FROM OUT OF THE THREE TERMS RELEVA NT FOR APPLYING THE FORMULA, SEC.10A DEFINES ONLY ONE TERM NAMELY EXPORT TURNOVER. THE OTHER TWO TERMS PRO FITS OF THE BUSINESS AND TOTAL TURNOVER ARE NOT DEFINED. SINCE THE SECTION PROCEEDS BROADLY ON LINES SIMILAR TO SE CTION 80HHE, SO IN THE ABSENCE OF THE DEFINITION OF ANY T ERM IN SECTION 10A, ONE COULD REFER TO THE DEFINITION O F A SIMILAR TERM IN SECTION 80HHE. THUS THE TERM TOTAL TURNOVER FOR SEC.10A PURPOSES SHOULD BE THE SAME A S UNDERSTOOD FOR THE PURPOSES OF SECTION 80HHE. THE TERM TOTAL TURNOVER WOULD BE AN ENLARGEMENT OF TH E TERM EXPORT TURNOVER. IN OTHER WORDS, THE SUM TO TAL OF EXPORT TURNOVER AND DOMESTIC TURNOVER WOULD CONSTIT UTE TOTAL TURNOVER. THE FORMULA FOR COMPUTATION OF TH E DEDUCTION U/S 10A, WHEREIN RE-STATED IN THE ABOVE MANNER, WOULD BE AS UNDER: EXPORT TURNOVER PROFITS OF THE BUSINESS X ------------------ ------------- EXPORT TURNOVER + DOM ESTIC TURNOVER THE TERM EXPORT TURNOVER WOULD THEN BE A COMPONEN T OR PART OF THE DENOMINATOR, THE OTHER COMPONENT BEI NG DOMESTIC TURNOVER. IN OTHER WORDS, TO THE EXTENT OF EXPORT TURNOVER, THERE WOULD BE A COMMONALITY BET WEEN THE NUMERATOR AND THE DENOMINATOR OF THE FORMULA. IN VIEW OF THE COMMONALITY, THE UNDERSTANDING SHOULD A LSO BE THE SAME. IN CASE EXPORT TURNOVER IN THE NUMERA TOR IS TO BE ARRIVED AT AFTER EXCLUDING CERTAIN EXPENSE S, THE ITA NO.304(B)/09 4 SAME SHOULD ALSO BE EXCLUDED IN COMPUTING THE TOTA L TURNOVER IN THE DENOMINATOR. SO IN CASE SOME EXPEN SES, FOR ANY REASON ARE EXCLUDED IN ARRIVING AT EXPORT TURNOVER THE SAME SHOULD BE REDUCED FROM THE TOTA L TURNOVER ALSO. THE ITAT BANGALORE BENCH, IN CASE O F ACIT VS M/S INFOSYS TECHNOLOGIES LTD., BANGALORE IN ITA NOS.653 & 969(B)/2006 DATED 17-10-2007 HAS ALSO TAKEN A SIMILAR VIEW. FACTS BEING SAME, SO FOLLOWI NG THE SAME REASONING, WE ARE NOT INCLINED TO INTERFERE WI TH THE FINDINGS OF CIT(A) WHO HAS DIRECTED THE AO TO EXCLU DE EXPENDITURE INCURRED BY THE ASSESSEE IN FOREIGN CURRENCY ON TRAVEL FROM THE TOTAL TURNOVER AS WELL . THE SAME IS UPHELD. THIS VIEW IS FORTIFIED BY THE DECI SION OF CHENNAI SPECIAL BENCH IN ITA NOS.691 & 1953(MDS.) 2007 IN THE CASE OF ITO VS SAK SOFT LD., CHENNAI DATED 06-03-2009. FACTS BEING SAME, SO FOLLOWING THE SAME REASONING T HE AO IS DIRECTED TO EXCLUDE FOREIGN TRAVEL EXPENSES INCURRE D FOR TECHNICAL SERVICES OUTSIDE INDIA FROM THE TOTAL TURNOVER AS WELL FOR C OMPUTING THE DEDUCTION U/S 10A OF THE IT ACT, 1961. THE AO IS DIRECTED A CCORDINGLY. 3. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE OF HEARING. (A. MOHAN ALANKAMONY) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE: BANGALORE DATED: AM * ITA NO.304(B)/09 5 COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3. CIT(A) 4. CIT 5. DR 6. GF(BLORE) 7. GF(DELHI AR, ITAT, BANGALORE