Appeal details
Counselvise Citation
[2012] 140 COUNSELVISE.COM (IT) 57474 (ITAT-BANGALORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
10 month(s) 11 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
03-02-2012
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Assessment Year
2003-2004
Appeal Filed On
23-03-2011
Judgement Text
PAGE 1 OF 11 ITA NO.3 11/BANG/2011 1 INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES A BEFORE SHRI N K SAINI, ACCOUNANT MEMBER AND SHRI GEORGE GEORGE K, JUDICIAL MEMBER ITA NO.311/BANG/2011 (ASST. YEAR 2003-04) JULY SYSTEMS & TECHNOLOGIES PVT. LTD., #17/9C, 4 TH FLOOR, MARUTHI CHAMBERS, RUPENA AGRAHARA, HOSUR ROAD, BANGALORE-68. PA NO.AABCB6543M VS THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(3), BANGALORE. (APPELLANT) (RESPONDENT) DATE OF HEARING : 01.02.2012 DATE OF PRONOUNCEMENT : 03.02.2012 APPELLANT BY : SHRI B K MANJUNATH, C.A. RESPONDENT BY : SHRI SUNDAR RAO CHINTHALA, ADDL . CIT O R D E R PER GEORGE GEORGE K : THIS APPEAL INSTITUTED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-I, BANGALORE DATED 10.01.20 11. THE RELEVANT ASSESSMENT YEAR IS 2003-04. 2. THE ASSESSEE HAS RAISED THIRTEEN GROUNDS OF APP EAL. GROUND NOS. 1, 2 AND 13 ARE GENERAL IN NATURE AND NO SPECI FIC ADJUDICATION IS CALLED FOR. HENCE, THE SAME ARE DISMISSED. PAGE 2 OF 11 ITA NO.3 11/BANG/2011 2 3. GROUND NOS.10 AND 11 RELATE TO THE ISSUE OF LEV Y OF INTEREST UNDER SECTION 234B AND 234C OF THE ACT. 3.1 THE LEVY OF INTEREST UNDER SECTION 234B AND 234 C OF THE ACT IS MANDATORY AND CONSEQUENTIAL AND HENCE, THESE GROUNDS ARE DISMISSED. 4. GROUND NOS.3 TO 5 RELATE TO THE ISSUE OF REOPEN ING OF ASSESSMENT BY ISSUANCE OF NOTICE UNDER SECTION 148 O F THE ACT. GROUND NOS.6 TO 10 RELATE TO THE ISSUE OF COMPUTATION OF D EDUCTION UNDER SECTION 10A OF THE ACT. 5. BRIEFLY STATED THE FACTS ARE AS FOLLOWS:- THE ASSESSEE IS A PRIVATE LIMITED COMPANY CARRYING ON THE BUSINESS OF SOFTWARE DEVELOPMENT SERVICES. THE RET URN OF INCOME FOR THE CONCERNED ASSESSMENT YEAR WAS FILED ON 01.12.2003 DE CLARING A TOTAL INCOME OF RS.8,85,785/-. THE ASSESSEE HAD CLAIMED EXEMPTI ON UNDER SECTION 10A OF THE ACT OF RS.79,72,065/-. THE RETURN WAS PROCESSE D UNDER SECTION 143(1)(A) OF THE ACT ON 10.02.2004 RAISING A DEMAND OF RS.3,29,576/-. THE CASE WAS SELECTED FOR SCRUTINY AND REFERRED TO THE T RANSFER PRICING OFFICER (TPO) UNDER SECTION 92CA OF THE ACT. THE INCOME AD MITTED BY THE ASSESSEE WAS ACCEPTED AFTER CONSIDERING THE ORDER OF THE TPO AND THE ASSESSMENT WAS COMPLETED ON 30.09.2005 UNDER SECTION 143(3) OF THE ACT. SUBSEQUENTLY, THE CASE WAS REOPENED UNDER SECTION 14 7 BY ISSUE OF NOTICE UNDER SECTION 148 DATED 19/03/2008. THE ASSESSEE S OUGHT FOR A COPY OF THE REASONS RECORDED FOR REOPENING THE ASSESSMENT V IDE ITS LETTER DATED PAGE 3 OF 11 ITA NO.3 11/BANG/2011 3 18/07/2008. THE RELEVANT PORTION OF THE REASONS FU RNISHED BY THE ASSESSING OFFICER IS EXTRACTED HEREUNDER:- IT WAS OBSERVED THAT FOR THE ASSESSMENT YEAR 2003-0 4 A SUM OF RS.8,08,557/- TOWARDS TRAVEL EXPENSES INCU RRED IN FOREIGN EXCHANGE, AND RS.43,59,493/- TOWARDS COMMUNICATION CHARGES HAVE NOT BEEN DEDUCTED FROM T HE EXPORT TURNOVER WHILE WORKING OUT THE DEDUCTION UND ER SECTION 10A. SIMILARLY FOR THE ASSESSMENT YEAR 2004- 05 A SUM OF RS.21,48,634/- TOWARDS TRAVEL EXPENSES INCURRED IN FOREIGN EXCHANGE HAVE NOT BEEN DEDUCTED FROM THE EXPORT TURNOVER WHILE WORKING OUT OF THE DEDUCTION UNDER SECTION 10A, AND THEREFORE, THE INC OME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE ASSESSEE SUBMITTED A LETTER DATED 15.9.2008 OBJ ECTING THE REASONS FOR REOPENING OF THE ASSESSMENT UNDER SECTION 148 OF TH E ACT. 5.1 RE-ASSESSMENT UNDER SECTION 143 RWS 147 OF THE ACT WAS COMPLETED VIDE ORDER DATED 15/12/2008. IN THE SAID RE-ASSESSMENT ORDER, THE ASSESSING OFFICER HAD RE-CALCULATED THE DEDUCTI ON UNDER SECTION 10A OF THE ACT BY EXCLUDING THE FOLLOWING EXPENDITURE FROM THE EXPORT TURNOVER:- TRAVEL EXPENSES INCURRED IN FOREIGN EXCHANGE RS. 8 ,08,557 COMMUNICATION EXPENSES RS.43,59,493 THE ASSESSING OFFICER HAS LEVIED INTEREST UNDER SEC TION 234B AND 234C OF THE ACT OF RS.83,524/- AND RS.20,547/- RESPECTIVELY AND HAS ALSO INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE A CT. 6. THE ASSESSEE BEING AGGRIEVED CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE ASSESSEE HAS CHALLENGED THE PAGE 4 OF 11 ITA NO.3 11/BANG/2011 4 REOPENING OF THE ASSESSMENT BY CONTENDING THAT THE I SSUANCE OF NOTICE UNDER SECTION 148 IS ONLY A CHANGE OF OPINION AND THERE WA S NO NEW MATERIAL OR INFORMATION WHICH HAD COME TO THE KNOWLEDGE OF THE ASSESSING OFFICER TO ISSUE NOTICE UNDER SECTION 148 OF THE ACT. ON MERI TS IT WAS STATED THAT THE ASSESSING OFFICER EXCLUDED A SUM OF RS.43,59,493/- INCURRED TOWARDS COMMUNICATION EXPENSES AND RS.8,08,557/- TOWARDS TR AVELING EXPENSES ON THE GROUND THAT THEY DO NOT FORM PART OF EXPORT TUR NOVER AS DEFINED UNDER EXPLANATION 2(IV) TO SECTION 10A. IT WAS SUBMITTED THAT CONSIDERATION RECEIVED ON ACCOUNT OF REIMBURSEMENT OF COMMUNICATI ON EXPENSES AND TRAVELING EXPENSES WERE ALSO IN THE NATURE OF EXPOR T IN AS MUCH IF THE INVOICES WERE INCLUSIVE OF THESE CHARGES THEN OBVIO USLY IT WOULD FORM PART OF SALE PROCEEDS. ALTERNATIVELY IT WAS CONTENDED THAT IF IT IS HELD THAT THE SAID SUM DOES NOT FORM PART OF SALE PROCEEDS OF EXPORT T URNOVER THEN SIMILAR AMOUNT ALSO WOULD BE REDUCED FROM THE TOTAL TURNOVE R. THE ASSESSEE IS A 100% EOU AND THUS, EXPORT TURNOVER AND TOTAL TURNOV ER ARE THE SAME. THE ASSESSEE RELIED ON THE FOLLOWING CASES:- I GATE GLOBAL SOLUTIONS LTD. V ACIT 112 TTJ 1002 TATA ELXSI LTD. V ACIT 115 TTJ 423 ACIT V INFOSYS LTD. (ITA NO.653 & 969/BANG/2006 7. THE FIRST APPELLATE AUTHORITY, HOWEVER, REJECTED THE VARIOUS OBJECTIONS RAISED AND DISMISSED THE APPEAL. 8. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. THE LEARNED AR SUBMITTED THAT THE ALTERNATIVE CONTENTION THAT WHEN SUMS ARE EXCLUDED FROM THE EXPORT TURNOVER, THE SAME SHOULD ALSO BE EXCLUD ED FROM THE TOTAL PAGE 5 OF 11 ITA NO.3 11/BANG/2011 5 TURNOVER WHILE CALCULATING DEDUCTION UNDER SECTION 10A OF THE ACT IS SQUARELY COVERED BY THE JUDGEMENT OF THE HONBLE KARNATAKA HI GH COURT IN THE CASE OF CIT V M/S TATA ELXSI LTD. & OTHERS (2011-TIOL-68 4-HC-KAR-II), HONBLE MUMBAI HIGH COURT IN THE CASE OF CIT V GEM PLUS JEW ELLERY INDIA LTD. 330 ITR 175 AND THE ORDER OF THE SPECIAL BENCH IN THE C ASE OF ITO V M/S SAK SOFT LTD. 313 ITR 353. IT WAS ALSO SUBMITTED THAT THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-05, (ITA NO.192/BANG/2010 VIDE ORDER DATED 6 TH AUGUST, 2010) HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE COMPANY. 9. THE LEARNED DR WAS UNABLE TO CONTROVERT THE SUB MISSIONS OF THE LEARNED AR. 10. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSE D THE MATERIAL ON RECORD. THE HONBLE KARNATAKA HIGH COURT IN THE C ASE OF CIT V M/S TATA ELXSI LTD. & OTHERS HAD HELD THAT WHILE COMPUTING T HE EXEMPTION U/S 10A, IF THE EXPORT TURNOVER IN THE NUMERATOR IS TO BE ARRIV ED AT AFTER EXCLUDING CERTAIN EXPENSES, THE SAME SHOULD ALSO BE EXCLUDED IN COMPUTING THE EXPORT TURNOVER AS A COMPONENT OF TOTAL TURNOVER IN THE DE NOMINATOR. THE RELEVANT FINDING OF THE HONBLE JURISDICTIONAL HIGH COURT RE ADS AS FOLLOWS:- ..SECTION 10A IS ENACTED AS AN INCENTIVE TO EXP ORTERS TO ENABLE THEIR PRODUCTS TO BE COMPETITIVE IN THE G LOBAL MARKET AND CONSEQUENTLY EARN PRECIOUS FOREIGN EXCHAN GE FOR THE COUNTRY. THIS ASPECT HAS TO BE BORNE IN MIN D. WHILE COMPUTING THE CONSIDERATION RECEIVED FROM SUC H EXPORT TURNOVER, THE EXPENSES INCURRED TOWARDS FREI GHT, PAGE 6 OF 11 ITA NO.3 11/BANG/2011 6 TELECOMMUNICATION CHARGES, OR INSURANCE ATTRIBUTABL E TO THE DELIVERY OF THE ARTICLES OR THINGS OR COMPUTER SOFTWARE OUTSIDE INDIA, OR EXPENSES IF ANY INCURRED IN FOREIGN EXCHANGE, IN PROVIDING THE TECHNICAL SERVIC ES OUTSIDE INDIA SHOULD NOT BE INCLUDED. HOWEVER, THE WORD TOTAL TURNOVER IS NOT DEFINED FOR THE PURPOSE OF TH IS SECTION. IT IS BECAUSE OF THIS OMISSION TO DEFINE TOTAL TURNOVER, THE WORD TOTAL TURNOVER FALLS FOR INTERPRETATION BY THIS COURT; ..IN SECTION 10A, NOT ONLY THE WORD TOTAL TURNOVE R IS NOT DEFINED, THERE IS NO CLUE REGARDING WHAT IS TO BE EXCLUDED WHILE ARRIVING AT THE TOTAL TURNOVER. HOW EVER, WHILE INTERPRETING THE PROVISIONS OF SECTION 80HHC, THE COURTS HAVE LAID DOWN VARIOUS PRINCIPLES, WHICH ARE INDEPENDENT OF THE STATUTORY PROVISIONS. THERE SHOU LD BE UNIFORMITY IN THE INGREDIENTS OF BOTH THE NUMERATOR AND THE DENOMINATOR OF THE FORMULA, SINCE OTHERWISE IT WOULD PRODUCE ANOMALIES OR ABSURD RESULTS. SECTION 10A I S A BENEFICIAL SECTION WHICH INTENDS TO PROVIDE INCENTI VES TO PROMOTE EXPORTS. IN THE CASE OF COMBINED BUSINESS OF AN ASSESSEE, HAVING EXPORT BUSINESS AND DOMESTIC BUSIN ESS, THE LEGISLATURE INTENDED TO HAVE A FORMULA TO ASCER TAIN THE PROFITS FROM EXPORT BUSINESS BY APPORTIONING THE TOTAL PROFITS OF THE BUSINESS ON THE BASIS OF TURNO VERS. APPORTIONMENT OF PROFITS ON THE BASIS OF TURNOVER W AS ACCEPTED AS A METHOD OF ARRIVING AT EXPORT PROFITS. IN THE CASE OF SECTION 80HHC, THE EXPORT PROFIT IS TO BE DERIVED FROM THE TOTAL BUSINESS INCOME OF THE ASSXCESSEE, WHEREAS IN SECTION 10-A, THE EXPORT PRO FIT IS TO BE DERIVED FROM THE TOTAL BUSINESS OF THE UNDERT AKING. EVEN IN THE CASE OF BUSINESS OF AN UNDERTAKING, IT MAY INCLUDE EXPORT BUSINESS AND DOMESTIC BUSINESS, IN O THER WORDS, EXPORT TURNOVER AND DOMESTIC TURNOVER. TO T HE EXTENT OF EXPORT TURNOVER, THERE WOULD BE A COMMONA LITY BETWEEN THE NUMERATOR AND THE DENOMINATOR OF THE FORMULA. IF THE EXPORT TURNOVER IN THE NUMERATOR I S TO BE ARRIVED AT AFTER EXCLUDING CERTAIN EXPENSES, THE SAME SHOULD ALSO BE EXCLUDED IN COMPUTING THE EXPORT TUR NOVER PAGE 7 OF 11 ITA NO.3 11/BANG/2011 7 AS A COMPONENT OF TOTAL TURNOVER IN THE DENOMINATOR . THE REASON BEING THE TOTAL TURNOVER INCLUDES EXPORT TUR NOVER. THE COMPONENTS OF THE EXPORT TURNOVER IN THE NUMERA TOR AND THE DENOMINATOR CANNOT BE DIFFERENT. THEREFORE , THOUGH THERE IS NO DEFINITION OF THE TERM TOTAL TU RNOVER IN SECTION 10A, THERE IS NOTHING IN THE SAID SECTIO N TO MANDATE THAT, WHAT IS EXCLUDED FROM THE NUMERATOR T HAT IS EXPORT TURNOVER WOULD NEVERTHELESS FORM PART OF THE DENOMINATOR. WHEN THE STATUTE PRESCRIBED A FORMULA AND IN THE SAID FORMULA, EXPORT TURNOVER IS DEFINED, AND WHEN THE TOTAL TURNOVER INCLUDES EXPORT TURNOVER, THE VERY SAME MEANING GIVEN TO THE EXPORT TURNOVER BY THE LEGISLATURE IS TO BE ADOPTED WHILE UNDERSTANDING TH E MEANING OF THE TOTAL TURNOVER, WHEN THE TOTAL TURNO VER INCLUDES EXPORT TURNOVER. IF WHAT IS EXCLUDED IN COMPUTING THE EXPORT TURNOVER IS INCLUDED WHILE ARR IVING AT THE TOTAL TURNOVER, WHEN THE EXPORT TURNOVER IS A COMPONENT OF TOTAL TURNOVER, SUCH AN INTERPRETATION WOULD RUN COUNTER TO THE LEGISLATIVE INTENT AND IMPERMISSIBLE. THUS, THERE IS NO ERROR COMMITTED B Y THE TRIBUNAL IN FOLLOWING THE JUDGEMENTS RENDERED IN TH E CONTEXT OF SECTION 80HHC IN INTERPRETING SECTION 10 A WHEN THE PRINCIPLE UNDERLYING BOTH THESE PROVISIONS IS ONE AND THE SAME. 10.1 THE HONBLE MUMBAI HIGH COURT IN THE CASE OF GEM PLUS JEWELLERY INDIA LTD. (SUPRA), IN IDENTICAL CIRCUMSTA NCES, HELD THAT SINCE THE EXPORT TURNOVER FORMS PART OF THE TOTAL TURNOVER, I F AN ITEM IS EXCLUDED FROM THE EXPORT TURNOVER, THE SAME SHOULD ALSO BE R EDUCED FROM THE TOTAL TURNOVER TO MAINTAIN PARITY BETWEEN NUMERATOR AND DE NOMINATOR WHILE CALCULATING DEDUCTION U/S 10A OF THE ACT. THE RELE VANT FINDING OF THE HONBLE MUMBAI HIGH COURT READS AS FOLLOWS:- PAGE 8 OF 11 ITA NO.3 11/BANG/2011 8 THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY TH E UNDERTAKING WOULD CONSIST OF THE TURNOVER FROM EXPO RT AND THE TURNOVER FROM LOCAL SALES. THE EXPORT TURNOVER CONSTITUTES THE NUMERATOR IN THE FORMULA PRESCRIBED BY SUB-SECTION (4). EXPORT TURNOVER ALSO FORMS A CONS TITUENT ELEMENT OF THE DENOMINATOR IN AS MUCH AS THE EXPORT TURNOVER IS A PART OF THE TOTAL TURNOVER. THE EXPO RT TURNOVER, IN THE NUMERATOR MUST HAVE THE SAME MEANI NG AS THE EXPORT TURNOVER WHICH IS CONSTITUENT ELEMENT OF THE TOTAL TURNOVER IN THE DENOMINATOR. THE LEGISLATURE HAS PROVIDED A DEFINITION OF THE EXPRESSION EXPORT TUR NOVER IN EXPLN.2 TO S.10A WHICH THE EXPRESSION IS DEFINED TO MEAN THE CONSIDERATION IN RESPECT OF EXPORT BY THE UNDERT AKING OF ARTICLES, THINGS OR COMPUTER SOFTWARE RECEIVED I N OR BROUGHT INTO INDIA BY THE ASSESSEE IN CONVERTIBLE FO REIGN EXCHANGE BUT SO AS NOT TO INCLUDE INTER ALIA FREIGH T, TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES, THINGS OR SOFTWARE OUTSIDE INDIA. THEREFORE IN COMPUTING THE EXPORT TURNOVER THE LEGI SLATURE HAS MADE A SPECIFIC EXCLUSION OF FREIGHT AND INSURA NCE CHARGES. THE SUBMISSION WHICH HAS BEEN URGED ON BE HALF OF THE REVENUE IS THAT WHILE FREIGHT AND INSURANCE CHA RGES ARE LIABLE TO BE EXCLUDED IN COMPUTING EXPORT TURNOVER, A SIMILAR EXCLUSION HAS NOT BEEN PROVIDED IN REGARD TO TOTAL TURNOVER. THE SUBMISSION OF THE REVENUE, HOWEVER, MISSES THE POINT THAT THE EXPRESSION TOTAL TURNOVER HAS NOT BEEN D EFINED AT ALL BY PARLIAMENT FOR THE PURPOSES OF S.10A. HOW EVER, THE EXPRESSION EXPORT TURNOVER HAS BEEN DEFINED. THE DEFINITION OF EXPORT TURNOVER EXCLUDES FREIGHT AN D INSURANCE. SINCE EXPORT TURNOVER HAS BEEN DEFINED BY PARLIAMENT AND THERE IS A SPECIFIC EXCLUSION OF FRE IGHT AND INSURANCE, THE EXPRESSION EXPORT TURNOVER CANNOT HAVE A DIFFERENT MEANING WHEN IT FORMS A CONSTITUENT PART OF THE TOTAL TURNOVER FOR THE PURPOSES OF THE APPLICATION OF THE FORMULA. UNDOUBTEDLY, IT WAS OPEN TO PARLIAMENT TO MAKE A PROVISION WHICH HAS BEEN ENUNCIATED EARLIER MUST PR EVAIL AS A MATTER OF CORRECT STATUTORY INTERPRETATION. ANY OT HER INTERPRETATION WOULD LEAD TO AN ABSURDITY. IF THE C ONTENTION PAGE 9 OF 11 ITA NO.3 11/BANG/2011 9 OF THE REVENUE WERE TO BE ACCEPTED, THE SAME EXPRES SION VIZ. EXPORT TURNOVER WOULD HAVE A DIFFERENT CONNO TATION IN THE APPLICATION OF THE SAME FORMULA. THE SUBMISSIO N OF THE REVENUE WOULD LEAD TO A SITUATION WHERE FREIGHT AND INSURANCE, THOUGH THESE HAVE BEEN SPECIFICALLY EXCLU DED FROM EXPORT TURNOVER FOR THE PURPOSES OF THE NUME RATOR WOULD BE BROUGHT IN AS PART OF THE EXPORT TURNOVER WHEN IT FORMS AN ELEMENT OF THE TOTAL TURNOVER AS A DENOMIN ATOR IN THE FORMULA. A CONSTRUCTION OF A STATUTORY PROVISIO N WHICH WOULD LEAD TO AN ABSURDITY MUST BE AVOIDED. MOREOVE R, A RECEIPT SUCH AS FREIGHT AND INSURANCE WHICH DOES NO T HAVE ANY ELEMENT OF PROFIT CANNOT BE INCLUDED IN THE TOTA L TURNOVER. FREIGHT AND INSURANCE CHARGES DO NOT HAV E ANY ELEMENT OF TURNOVER. FOR THIS REASON IN ADDITION, THESE TWO ITEMS WOULD HAVE TO BE EXCLUDED FROM THE TOTAL TURN OVER PARTICULARLY IN THE ABSENCE OF A LEGISLATIVE PRESCRI PTION TO THE CONTRARY CIT V SUDARSHAN CHEMICALS INDUSTRIES LTD. (2000) 163 CTR (BOM) 596: (2000) 245 ITR 769 (BOM) APPLIED; CIT V LAKSHMI MACHINE WORKS (2007) 210 CTR (SC) 1: (2007) 290 ITR 667 (SC) AND CIT V CATAPHARMA (IN DIA) (P) LTD. (2007) 211 CTR (SC) 83: (2007) 292 ITR 641 (SC) RELIED ON 10.2 IN THE CASE OF SAK SOFT LTD. (SUPRA), THE ASS ESSEE WAS ENGAGED IN THE BUSINESS OF EXPORTING COMPUTER SOFTWARE AND CLAIMED DEDUCTION U/S 10B OF THE ACT. IN COMPLETING THE ASSESSMENT U/S 1 43(3) OF THE ACT, THE AO REDUCED THE EXPENDITURE INCURRED IN FOREIGN EXCH ANGE IN PROVIDING THE TECHNICAL SERVICES OUTSIDE INDIA, FROM THE EXPORT T URNOVER WITHOUT CORRESPONDING REDUCTION FROM TOTAL TURNOVER, THEREB Y REDUCING THE DEDUCTION CLAIMED BY THE ASSESSMENT U/S 10B OF THE A CT. PAGE 10 OF 11 ITA NO. 311/BANG/2011 10 10.3 IN LIGHT OF THE ABOVE FACTS, THE SPECIAL BENC H HELD AS UNDER:- FOR THE ABOVE REASONS, WE HOLD THAT FOR THE PURPOS E OF APPLYING THE FORMULA UNDER SUB-SECTION (4) OF SECTIO N 10B, THE FREIGHT, TELECOM CHARGES OR INSURANCE ATTRIBUTA BLE TO THE DELIVERY OF ARTICLES OR THINGS OR COMPUTER SOFTW ARE OUTSIDE INDIA OR THE EXPENSES, IF ANY, INCURRED IN F OREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICES OUTSID E INDIA ARE TO BE EXCLUDED BOTH FROM THE EXPORT TURNOVER AN D FROM THE TOTAL TURNOVER, WHICH ARE THE NUMERATOR AND THE DENOMINATOR RESPECTIVELY IN THE FORMULA. THE APPEAL S FILED BY THE DEPARTMENT ARE THUS DISMISSED. ALTHOUGH THE ORDER OF SPECIAL BENCH IS IN THE CONTE XT OF SECTION 10B OF THE ACT, THE RATIO LAID DOWN IN THE ABOVE DECISION APPL IES TO SECTION 10A OF THE ACT AS WELL, AS THE PROVISIONS OF SECTIONS 10A AND 10B ARE IDENTICAL ON ALL MATERIAL ASPECTS. MORE PARTICULARLY, BOTH THE SECTI ONS DEFINE ONLY EXPORT TURNOVER BUT NOT TOTAL TURNOVER AND SUB-SECTION (4) OF BOTH THE SECTIONS PRESCRIBE AN IDENTICAL FORMULA FOR COMPUTING THE EX PORT PROFITS. 10.4 IN THE LIGHT OF THE ABOVE REASONING, WE DIREC T THE AO TO EXCLUDE THE ABOVE MENTIONED EXPENSES BOTH FROM THE EXPORT TURNOVER AS WELL AS FROM THE TOTAL TURNOVER WHILE CALCULATING D EDUCTION U/S 10A OF THE ACT. 11. SINCE THE ALTERNATIVE PLEA OF THE ASSESSEE COM PANY IS ALLOWED, THE OTHER ISSUE RAISED IN THE APPEAL, NAMELY WHETHER THE REASSESSMENT IS VALID AND WHETHER A SUM OF RS.43,59,493 AND RS.8,08 ,557/- CAN BE REDUCED FROM THE EXPORT TURNOVER IS NOT ADJUDICATED. PAGE 11 OF 11 ITA NO. 311/BANG/2011 11 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD DAY OF FEBRUARY, 2012 SD/- SD/- (N K SAINI) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COPY TO:- 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONC ERNED 4. THE CIT(A) CONCERNED 5. THE DR 6. GF MSP/- BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.
