DCIT, Bangalore V. M/s Sketa Software Pvt. Ltd., Bangalore

ITA 385/BANG/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1439 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 10-08-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 21-03-2014
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Assessee Lawyers: G SIVAKUMAR
• Section: 143(3); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH B, BANGALORE BEFORE SHRI GEORGE GEORGE, K, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.385(B)/2014 (ASSESSMENT YEAR : 2006-07) THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-12(3), BANGALORE APPELLANT VS M/S SKELTA SOFTWARE PVT.LTD., SURVEY NO.15A & 14P& KADUBEESANAHALLI, VARTHUR HOBLI, BANGALORE SOUTH TALUK, BANGALORE-560 087 PAN NO.AAHCS3154M RESPONDENT REVENUE BY : DR. P.K.SRIHARI, ADDL.CIT ASSESSEE BY : SHRI G. SIVAKUMAR, ADVOCATE DATE OF HEARING : 10-08-2015 DATE OF PRONOUNCEMENT : 12-08 -2015 O R D E R PER SHRI GEORGE GEORGE, K JM: THIS APPEAL AT THE INSTANCE OF REVENUE IS DIRECTED AGAINST THE CIT(A)S ORDER DATED 23-12-2013. THE RELEVANT ASSESSMENT YE AR IS 2006-07. 2. THE SOLITARY ISSUE THAT ARISES FOR OUR CONSIDERA TION IS WHETHER THE CIT(A) IS JUSTIFIED IN DIRECTING TO CALCULATE DEDUC TION U/S 10A OF THE ACT BY EXCLUDING EXPENDITURE INCURRED IN FOREIGN EXCHANGE BOTH FROM THE EXPORT TURNOVER AS WELL AS FROM THE TOTAL TURNOVER. ITA NO.385 (BANG)2014 2 3. BRIEFLY STATED THE FACTS OF THE CASE ARE AS FOLL OWS; THE ASSESSEE IS A PRIVATE LIMITED COMPANY. IT IS EN GAGED IN DEVELOPMENT OF SOFTWARE PRODUCTS AND RELATED SERVIC ES. FOR THE RELEVANT ASSESSMENT YEAR THE RETURN OF INCOME WAS FILED DECL ARING AN INCOME OF RS.27,80,977/-. THE ASSESSEE HAD CLAIMED DEDUCTION U/S 10A OF THE ACT AMOUNTING TO RS.2,19,94,156/-. IN THE ASSESSMENT COMPLETED U/S 143(3) OF THE ACT, DEDUCTION U/S 10A WAS RE-COMPUTED BY EX CLUDING FROM THE EXPORT TURNOVER THE FOLLOWING EXPENSES, NAMELY; A) TELECOMMUNICATION EXPENSES RS.11,82,269 B) EXPENDITURE IN FOREIGN CURRENCY RS.30,77,618 4. CONSEQUENT TO RE-COMPUTATION OF DEDUCTION U/S 10 A OF THE ACT, THE CLAIM OF DEDUCTION WAS REDUCED TO RS.2,04,22,205/- FROM RS.2,19,94,154/. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO THE F IRST APPELLATE AUTHORITY. THE CIT(A) FOLLOWING THE JUDGMENT OF TH E HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S TATA ELXSI LTD (2012) 349 ITR 98(KAR.)DIRECTED THAT THE EXPENSES EXCLUDED FROM TH E EXPORT TURNOVER ARE ALSO TO BE EXCLUDED FROM THE TOTAL TURNOVER WHILE C OMPUTING THE DEDUCTION U/S 10A OF THE ACT. ITA NO.385 (BANG)2014 3 6. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US RA ISING THE FOLLOWING GROUNDS; A) THE ORDER OF THE CIT(A) IS OPPOSED TO LAW AND FA CTS OF THE CASE. B) ON THE FATS AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A)ERRED IN LAW IN DIRECTING THE AO TO EXCLUD E THE EXPENDITURE INCURRED IN FOREIGN CURRENCY AND TOWARD S COMMUNICATION CHARGES BOTH FROM THE EXPORT TURNOVER AS WELL AS FROM TOTAL TURNOVER FOR THE PURPOSE OF COMPUTATI ON OF DEDUCTION U/S 10A, WITHOUT APPRECIATING THE FACT TH AT THE STATUTE ALLOWS EXCLUSION OF SUCH EXPENDITURE ONLY F ROM EXPORT TURNOVER BY WAY OF SPECIFIC DEFINITION OF EX PORT TURNOVER AS ENVISAGED BY SUB-CLAUSE(4) OF EXPLANATI ON 2 BELOW SUB-SECTION (8) OF SECTION 10A AND THE TOTAL TURNOVER HAS NOT BEEN DEFINED IN THIS SECTION. C. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD.CIT(A) ERRED IN DIRECTING THE AO TO COMPUTE DED UCTION U/S 10A IN THE ABOVE MANNER BY PLACING RELIANCE ON THE DECISION OF HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF M /S TATA ELXSI LTD., WHICH HAS NOT BECOME FINAL SINCE THE SA ME HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND SLPS ARE PE NDING BEFORE THE HONBLE SUPREME COURT. D. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT(A) IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVER SED AND THAT OF THE AO MAY BE RESTORED. ITA NO.385 (BANG)2014 4 E. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR DELETE ANY OF THE GROUNDS. 7. AT THE VERY OUTSET, LEARNED COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS M/S TATA ELXSI LTD.,349 ITR 98.(SUPRA). 8. THE LEARNED DR WAS UNABLE TO CONTROVERT THE ABOV E SUBMISSIONS OF THE LEARNED AR. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE RAISED BY THE REVENUE IS NO LON GER RES INTEGRA AND HAS NOW BEEN DECIDED BY THE HONBLE HIGH COURT OF KARNA TAKA IN THE CASE OF IN THE CASE OF TATA ELXSI LTD. IN 349 ITR 98(KAR.) WHE REIN IT HAS BEEN HELD THAT WHATEVER IS EXCLUDED FROM EXPORT TURNOVER SHOULD AL SO BE EXCLUDED FROM THE TOTAL TURNOVER. THE FACT THAT THE REVENUE HAS NOT ACCEPTED THE DECISION ITA NO.385 (BANG)2014 5 OF THE HONBLE SUPREME COURT CANNOT BE THE BASIS NO T TO FOLLOW THE DECISION OF THE HONBLE KARNATAKA HIGH COURT. IN VIEW OF TH E ABOVE REASONING, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE LE ARNED CIT(A) AND WE CONFIRM THE SAME. IT IS ORDERED ACCORDINGLY. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 12 TH AUGUST, 2015. SD/- SD/- (JASON P BOAZ) (GEORGE GEO RGE,K) ACCOUNTANT MEMBER JUDICIAL MEMBER D A T E D : 12-08-2015 PLACE: BANGALORE AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER AR, ITAT, BANGALORE