ATOS ORIGIN INDIA P. LTD, MUMBAI V. CIT 8, MUMBAI

ITA 3447/MUM/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8992 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 14-12-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 27-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Services rendered outside India
• Section: 143(3); 10B; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER. A ND SMT. ASHA VIJAY RAGHAVAN, JUDICIAL MEMBER ITA NO.3447/MUM./2009 (ASSESSMENT YEARS : 2004 05 ) DATE OF HEARING: 14.12.2010 ATOS ORIGIN INDIA P. LTD. 126/127, SDF IV, SEEPZ ANDHERI (EAST), MUMBAI 400 096 PAN AAACO2461J .. APPELLANT V/S THE ASSESSING OFFICER (HEADQUARTERS) 8 INCOME TAX DEPARTMENT MUMBAI .... RESPONDENT ASSESSEE BY : SHRI ALIASGAR RAMPURAWALA REVENUE BY : SHRI PAVAN VED O R D E R PER ASHA VIJAY RAGHAVAN, J.M. THIS APPEAL BY THE ASSESSEE, IS DIRECTED AGAINST TH E IMPUGNED ORDER DATED 20 TH MARCH 2009, PASSED BY THE LEARNED CIT VIII, MUMBAI, FOR ASSESSMENT YEAR 2004 05. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFI CER COMPLETED ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX A CT, 1961 (FOR SHORT THE ACT ) AT AN INCOME OF ` 7,73,95,960. THE LEARNED CIT, ON PERUSAL OF THE ASSESSMENT ORDER, WAS OF THE OPINION THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS INASMUCH AS THE SAME IS PREJUD ICIAL TO THE INTERESTS OF REVENUE FOR THE REASONS THE ASSESSEE HAS DEDUCTED ` 46,30,916 ON ACCOUNT ATOS ORIGIN INDIA P. LTD. ITA NO.3447/MUM./2009 2 OF TELECOMMUNICATION COST ATTRIBUTABLE TO DELIVERY OF EXPORTS AND ` 2,13,65,784 IN FOREIGN CURRENCY FOR PROVIDING SERVI CES OUTSIDE INDIA, FROM THE TOTAL TURNOVER. THE ASSESSEE COMPANY HAD DEDUCTED T HESE EXPENSES FOR WORKING OUT THE ADMISSIBLE DEDUCTION UNDER SECTION 80HHE IN ACCORDANCE WITH THE PROVISIONS OF THE ACT BUT NO SUCH DEDUCTIO NS WERE MADE WHILE COMPUTING ADMISSIBLE DEDUCTION UNDER SECTION 10A/10 B WHICH HAS RESULTED IN EXCESS DEDUCTION UNDER SECTION 10A/10B OF ` 74,56,071. HE, ACCORDINGLY, ISSUED NOTICE DATED 6 TH MARCH 2009, AND CALLED UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY THE ASSESSMENT MADE BY THE ASSESSIN G OFFICER SHOULD NOT BE SET ASIDE. 3. LEARNED COUNSEL FOR THE ASSESSEE, BEFORE THE LEARNE D CIT, SUBMITTED THAT THE TELECOMMUNICATION CHARGES AND FOREIGN CURR ENCY EXPENSES FOR DELIVERY / SERVICES OF GOODS OUTSIDE INDIA WHICH WE RE REDUCED FROM THE EXPORT TURNOVER ARE ALSO REQUIRED TO BE REDUCED FRO M THE TOTAL TURNOVER. FOR THIS, HE PLACED RELIANCE ON THE DEFINITION OF TOTAL TURNOVER. LEARNED COUNSEL ALSO PLACED RELIANCE ON THE DEFINITION OF TOTAL TUR NOVER GIVEN FOR SECTION 80HHE AND CLAIMED THAT THE SAME DEFINITION SHOULD B E TAKEN FOR SECTION 10A, EVEN THOUGH NO SPECIFIC DEFINITION FOR TOTAL TURNOV ER IS PROVIDED UNDER SECTION 10A AND 10B OF THE ACT. IT WAS ALSO CONTENDED THAT, ON THE SIMILAR MATTER, THE CIT(A) HAS ALLOWED RELIEF FOR OTHER YEARS AND T HE JURISDICTIONAL BENCH OF THE TRIBUNAL IS ALSO INTERPRETING THE TOTAL TURNOVE R IN SECTIONS 10A AND 10B ON THE SAME LINES AS FOR SECTION 80HHE. FURTHER, IT WAS CONTENDED THAT EXPENSES WHICH RELATE TO SECTION 10A / 10B UNITS AR E ONLY PART OF THE TOTAL EXPENSES MENTIONED IN THE NOTICE UNDER SECTION 263 AND THE PROPER WORKING WAS GIVEN. 4. LEARNED CIT, CONSIDERING THE SUBMISSIONS MADE BY TH E LEARNED COUNSEL FOR THE ASSESSEE, HELD AS UNDER: THE SUBMISSIONS OF THE ASSESSEE ARE CAREFULLY GONE THROUGH AND THE ASSESSEE HAS ADMITTED THAT THE EXPENSES IN THE NATU RE OF TELECOMMUNICATION EXPENSES AND OTHER EXPENSES INCUR RED IN FOREIGN EXCHANGE REGARDING THE DELIVERY OF ARTICLES OR THIN GS OR FOR PROVIDING TECHNICAL SERVICES OUTSIDE INDIA HAVE BEEN EXCLUDED FROM THE EXPORT TURNOVER AND TOTAL TURNOVER RELATING TO 10A AND 10B UNITS. AS PER ATOS ORIGIN INDIA P. LTD. ITA NO.3447/MUM./2009 3 PROVISIONS OF SECTION 10A AND 10B, THERE IS NO PROV ISION MADE FOR EXCLUDING SUCH EXPENSES FROM THE TOTAL TURNOVER AND THE DEFINITION PROVIDED U/S.80HHC CANNOT BE APPLIED TO THE PROVISI ONS OF SECTION 10A AND 10B. THEREFORE, THE ASSESSING OFFICERS ACTION IN NOT MAKING PROPER ENQUIRIES REGARDING SUCH EXPENSES HAS LED TO AN ERRONEOUS ASSESSMENT AND THE SAME IS PREJUDICIAL TO THE INTER EST OF THE REVENUE. THE ASSESSEES CONTENTION THAT ONLY EXPENSES RELATI NG TO 10A AND 10B UNITS SHOULD BE EXCLUDED, APPEARS TO BE REASONABLE. ACCORDINGLY, THE ASSESSMENT MADE BY THE A.O. TO THE EXTENT OF COMPUT ATION OF DEDUCTION U/S.10A AND 10B IS SET ASIDE FOR RECOMPUT ING THE DEDUCTION AFTER EXCLUDING THE EXPENSES IN THE NATURE OF TELEC OMMUNICATION AND OTHER EXPENSES INCURRED IN FOREIGN EXCHANGE PERTAIN ING TO 10A AND 10B UNITS FOR DELIVERY OF SUCH ARTICLES/THINGS/COMP UTER SOFTWARE OR FOR TECHNICAL SERVICES PROVIDED OUTSIDE INDIA. THE A.O. SHALL PROVIDE OPPORTUNITY TO THE ASSESSEE FOR GIVING THE CORRECT DETAILS OF SUCH EXPENSES. 5. AGGRIEVED BY THE ORDER SO PASSED BY THE LEARNED CIT , THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL, TAKING FOLLO WING GROUNDS OF APPEAL: 1. ON THE FACT AND THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT, ERRED IN DIRECTING THE A.O. TO REDUCE EXPE NDITURE INCURRED IN FOREIGN EXCHANGE FOR SERVICES RENDERED OUTSIDE INDI A FROM ONLY THE EXPORT TURNOVER AND NOT THE TOTAL TURNOVER FOR COMP UTING THE DEDUCTION AVAILABLE TO YOUR APPELLANT UNDER SECTION 10A AND 10B OF THE ACT WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCE S OF THE CASE. 6. DURING THE COURSE OF HEARING, LEARNED COUNSEL FOR T HE ASSESSEE, SHRI ALIASGAR RAMPURAWALA, SUBMITTED BEFORE US THAT THE TELECOMMUNICATION CHARGES AND FOREIGN CURRENCY EXPENSES FOR DELIVERY AND SERVICES OF GOODS OUTSIDE INDIA WHICH WERE REDUCED FROM THE EXPORT TU RNOVER ARE ALSO REQUIRED TO BE REDUCED FROM THE TOTAL TURNOVER. HE, ACCORDIN GLY, PRAYED THAT A DIRECTION MAY BE GIVEN TO MODIFY THE ORDER PASSED B Y THE LEARNED CIT INASMUCH AS THE ORDER OF THE LEARNED CIT UNDER SECT ION 263 IS LEGALLY WRONG AND RELIED ON THE DECISION OF THE TRIBUNAL RENDERED IN ITA NO.6477 AND 6478/ MUM./2007, IN THE CASE OF JEWEL ENTERPRISES V/S ITO . LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, RELIED ON THE OR DER OF THE LEARNED CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE OR DERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT IN THE CASE OF ACIT V/S M/S. ATOS ORIGIN (INDIA) P. LTD., I.E., IN ASSESSEES OWN CASE, IN ASSESSMENT YEAR 2002 03, WHERE THE QUESTION WAS AS UNDER: ATOS ORIGIN INDIA P. LTD. ITA NO.3447/MUM./2009 4 1. ON THE FACT AND THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A), ERRED IN DIRECTING THE A.O. TO REDU CE EXPENDITURE INCURRED IN FOREIGN CURRENCY FROM EXPORT TURNOVER A S WELL AS ON TOTAL TURNOVER FOR THE PURPOSE OF DEDUCTION UNDER S ECTION 10B OF THE ACT AS AGAINST THE ACTION OF THE A.O. TO REDUCE THE EXPENDITURE FROM EXPORT TURNOVER ONLY WITHOUT APPRE CIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. 8. THE TRIBUNAL, IN ASSESSEES OWN CASE CITED SUPRA, H ELD AS UNDER: WE FIND THAT THE IDENTICAL ISSUE HAS BEEN CONSIDER ED BY THE HONBLE SPECIAL BENCH IN THE CASE OF SAK SOFT LTD. (SUPRA) AND IT IS HELD THAT FOR THE PURPOSE OF APPLYING FORMULA UNDER SUB-SEC.( 4) OF SEC.10-B OF THE ACT, THE EXPENSES LIKE THE FREIGHT, TELECOM CHA RGES, INSURANCE ATTRIBUTABLE TO DELIVER ALL ARTICLES OR THINGS OR C OMPUTER SOFTWARE OUTSIDE INDIA OR EXPENSES IF ANY INCURRED IN FOREIG N EXCHANGE IN PROVIDING THE TECHNICAL SERVICES OUTSIDE INDIA ARE TO BE EXCLUDED BOTH FROM THE EXPORT TURNOVER AS WELL AS FROM THE TOTAL TURNOVER, WHICH ARE THE NUMERATOR AND DENOMINATOR RESPECTIVELY IN THE S AID FORMULA. WE, THEREFORE, RESPECTIVELY FOLLOWING THE PRINCIPLE S LAID DOWN BY THE HONBLE SPECIAL BENCH IN THE CASE OF SAK SOFT LTD. (SUPRA) CONFIRM THE ORDER OF THE LD. CIT(A) AND ACCORDINGLY, DISMISS TH E GROUNDS TAKEN BY THE REVENUE. 9. SINCE THE ISSUE BEFORE US IS IDENTICAL TO THE AFORE SAID ISSUE DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT Y EAR 2002 03, CITED SUPRA, WE ACCORDINGLY MODIFY THE ORDER PASSED BY TH E LEARNED CIT BY DIRECTING THE ASSESSING OFFICER TO REDUCE THE EXPEN DITURE INCURRED IN FOREIGN EXCHANGE FOR THE SERVICES RENDERED OUTSIDE INDIA FR OM THE EXPORT TURNOVER AND ALSO THE TOTAL TURNOVER FOR COMPUTING THE DEDUC TION AVAILABLE TO THE ASSESSEE UNDER SECTIONS 10A AND 10B OF THE ACT. 10. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH JANUARY, 2011 SD/- - J. SUDHAKAR REDDY ACCOUNTANT MEMBER SD/- ASHA VIJAYARAGHAVAN JUDICIAL MEMBER MUMBAI, DATED: 7 TH JANUARY, 2011 ATOS ORIGIN INDIA P. LTD. ITA NO.3447/MUM./2009 5 COPY TO : (1) THE ASSESSEE (2) THE RESPONDENT (3) THE CIT(A), MUMBAI, CONCERNED (4) THE CIT, MUMBAI CITY CONCERNED (5) THE DR, G BENCH, ITAT, MUMBAI TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ATOS ORIGIN INDIA P. LTD. ITA NO.3447/MUM./2009 6 DATE INITIAL 1. DRAFT DICTATED ON 14.12.2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 5.1.2011 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. DATE OF PRONOUNCEMENT SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER