ITO, ward-7(2), Kolkata, Kolkata V. M/s Vision Comptech Integrators Ltd., Kolkata

ITA 403/KOL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70409 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2013
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 13-03-2012
• Court: TRIBUNAL
• Assessee Lawyers: RAJU BISWAS SRDR
• Keywords: Depreciation; Bad and doubtful debts; Revenue expenditure
• Section: 143(3); 10B; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI ABRAHAM.P.GEORGE, ACCOUNTANT MEMBER ITA NO. 403 / KOL / 2012 ASSESSMENT YEAR :2006-07 ITO WARD-7(2)/KOL, AAYAKAR BHAVAN, P-7, CHOWRINGHEE SQUARE, 5 TH FLOOR, KOL-69 V/S . M/S VISION COMPTECH INTEGRATOS LTD., 21A, SHAKESPEARE SARANI, 3 RD FLOOR, KOLKATA 700017 [ PAN NO.AABCV1677Q ] / APPELLANT .. / RESPONDENT) /BY APPELLANT SMT. RAJU BISWAS, SR-DR /BY RESPONDENT SHRI SUBASH AGARWAL, AR /DATE OF HEARING 06-11-2013 /DATE OF PRONOUNCEMENT 21- 11-2013 / // / O R D E R PER BENCH:- THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER CIT (APPEALS)-VIII, KOLKATA IN APPEAL NO. 942/CIT(A)-VIII/KOL/08-09 DAT ED 21-12-2011. THE ASSESSMENT WAS FRAMED BY THE ITO, WARD-7(2), KOLKAT A VIDE HIS ORDER DATED 31-12-2008 FOR ASSESSMENT YEAR 2006-07 U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) IN HOLDING THAT FOR THE PURPOSE OF COMPUTATION OF D EDUCTION U/S. 10A OF THE ACT THE AMOUNT OF RS.1,44,56,768/- IS REDUCED FROM THE TOTAL TURNOVER AS REDUCED ITA NO.403/KOL/2012 A.Y. 2006-07 ITO WD-7(2)KOL V. M/S. VISION COMPTECH INTEGRATO RS LTD. PAGE 2 FROM THE EXPORT TURNOVER BY THE ASSESSING OFFICER. FOR THIS, REVENUE HAS RAISED THE FOLLOWING GROUNDS NO. 1 TO 3:- 1. THAT THE LD. C.I.T.(APPEALS)-VIII, KOLKATA HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S. 10A OF THE ACT THE SIMILAR AMOUNT OF RS.1,44,56,768/- SHOULD HAVE TO BE REDUCED FROM THE TOTAL TURNOVER AS WAS REDUCED FROM EXPORT TURNOVER BY THE AO. 2. THAT THE LD C.I.T. (APPEALS)-VIII, KOLKATA HAS E RRED ON FACTS AND IN LAW IN ACCEPTING THE ABOVE CONTENTION OF THE ASSESS EE IN SO FAR AS THE ASSESSEE ITSELF HAD NOT DEDUCTED THE AMOUNT IT HAD REDUCED FROM THE EXPORT TURNOVER FOR COMPUTATION OF DEDUCTION U/S. 10A FROM THE FIGURE OF TOTAL TURNOVER OF THE UNDERTAKING FOR THE PURPOSE O F COMPUTATION OF DEDUCTION U/S. 10A WHILE SUBMITTING ITS RETURN OF I NCOME. 3. THAT THE LD C.I.T. (APPEALS)-VIII, KOLKATA HAS E RRED IN LAW ON THE ABOVE ISSUE IN SO FAR AS THAT THE ACT BEING SILENT ON THE ISSUE OF DEFINITION OF TOTAL TURNOVER WHILE PARTICULARLY DEF INING THE EXPORT TURNOVER U/S. 10A OF THE ACT MEANS THAT TOTAL TURNO VER OF THE BUSINESS MEANS THE WHOLE OF THE TURNOVER OF THE ASSESSEE AND THE SAME IS NOT TO BE REDUCED OR CHANGED OTHERWISE. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSING OFFI CER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED FROM THE COMPUTATION OF TOTAL INCOME THAT THE ASSESSEE HAS CLAIMED U/S. 10A OF THE ACT OF RS.2,30 ,46,197/- BEING REGISTERED WITH SOFTWARE TECHNOLOGY PARK. IT WAS CLAIMED BEFOR E THE ASSESSING OFFICER THAT THE COMPANY IS REGISTERED UNDER THE SOFTWARE T ECHNOLOGY PARK (STP FOR SHORT) SCHEME AS 100% EXPORT ORIENTED UNIT FOR THE DEVELOPMENT / MANUFACTURE AND EXPORT OF COMPUTER SOFTWARE USING D ATA COMMUNICATION CHANNEL AND PHYSICAL DATA. THE AO WHILE FRAMING ASS ESSMENT DEDUCTED THE EXPENSES INCURRED IN FOREIGN CURRENCY I.E., FOREIGN ADVANCE AGAINST FOREIGN TRAVEL, PROFESSIONAL FEE, SALES AND MARKETING EXPEN SES, FOREIGN EXHIBITION EXPENSES IN FOREIGN CURRENCY, INTERNET CHARGES, COM MUNICATION CHARGES AND INSURANCE CHARGES. ACCORDING TO AO, THERE IS NO CO- RELATION OF BILLING AND NON- BILLING EXPENSES IN THE BILLS OF SERVICES RENDERED AND ACCORDING TO HIM, DEFINITION OF EXPORT TURNOVER BE TAKEN AS GIVEN IN THE STATUTE. ACCORDING TO HIM, THESE EXPENSES ARE TO BE EXCLUDED FROM EXPORTS TURN OVER WHILE DELIVERY THE ARTICLES OR THINGS OUTSIDE INDIA. ACCORDINGLY, HE R EDUCED A SUM OF ITA NO.403/KOL/2012 A.Y. 2006-07 ITO WD-7(2)KOL V. M/S. VISION COMPTECH INTEGRATO RS LTD. PAGE 3 RS.1,44,56,768/-- FROM THE EXPORT PROCEEDS AND RE-C OMPUTED THE INCOME EXEMPTED U/S.10A OF THE ACT. 4. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT( A), WHO AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND FOLL OWING THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. TATA ELXSI LTD. 2011 TAX PUB(DT) 1960 042 (I) ITCL 337 (KAR) WHEREIN IT IS H ELD THAT WHEN THE STATUTE PRESCRIBES A FORMULA AND IN THE SAID FORMULA, EXPO RT 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 THE MEANING OF THE TOTAL TURNOVER, WH EN THE TOTAL TURNOVER INCLUDES EXPORT TURNOVER. IF WHAT IS EXCLUDED IN CO MPUTING THE EXPORT TURNOVER IS INCLUDED WHILE ARRIVING AT THE TOTAL TURNOVER, W HEN THE EXPORT TURNOVER IS A COMPONENT OF TOTAL TURNOVER, SUCH AN INTERPRETATION WOULD RUN COUNTER TO THE LEGISLATIVE INTENT AND IMPERMISSIBLE. IF THAT WERE THE INTENTION OF THE LEGISLATURE, THEY WOULD HAVE EXPRESSLY STATED SO. IF THEY HAVE N OT CHOSEN TO EXPRESSLY DEFINE WHAT THE TOTAL TURNOVER MEANS, THEN, WHEN TH E TOTAL TURNOVER INCLUDES EXPORT TURNOVER, THE MEANING ASSIGNED BY THE LEGISL ATURE TO THE EXPORT TURNOVER IS TO BE RESPECTED AND GIVEN EFFECT TO, WH ILE INTERPRETING THE TOTAL TURNOVER WHICH IS INCLUSIVE OF THE EXPORT TURNOVER. CIT(A) DIRECTED THE AO TO REDUCE THE EXPENSES FROM THE TOTAL TURNOVER ALSO AS WAS REDUCED FROM EXPORT TURNOVER WHILE COMPUTING DEDUCTION U/S. 10A OF THE ACT AND ACCORDINGLY, RECALCULATE THE DEDUCTION ALLOWABLE U/S. 10A OF THE ACT. AGGRIEVED, REVENUE CAME IN APPEAL BEFORE US ON THIS ISSUE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSI NG OFFICER HAS REDUCED THE FOLLOWING EXPENSES AS GIVEN IN ASSESSMENT ORDER AS UNDER:- VIII) CONSIDERING THE DISCUSSION MADE ABOVE, THE E XPORT TURNOVER OF THE UNDERTAKING IS COMPUTED AS UNDER: ITA NO.403/KOL/2012 A.Y. 2006-07 ITO WD-7(2)KOL V. M/S. VISION COMPTECH INTEGRATO RS LTD. PAGE 4 EXPORT PROCEEDS RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE OF THE UNDERTAKING. LESS: BAD DEBTS 14,61,72,220/- 1,28,208/- 14,60,44,012/- LESS: A)EXPENSES IN FOREIGN CURRENCY :FOREIGN TRAVEL AS PER ASSESSEES CLAIM :ADV. AGT. FOREIGN TRAVEL AS DISCUSSED :PROFESSIONAL FEES AS PER ASSESSEES CLAIM :SALES & MARKETING EXPENSES AS PER ASSESSEES CLAIM :EXHIBITION EXP. IN FOREIGN CURRENCY AS DISCUSSED 89,17,741/- 5,15,684/- 10,46,702/- 3,91,255/- 8,635/ - LESS: B)INTERNET CHARGES AS DISCUSSED 18,07,177/- LESS: C)COMMUNICATION CHARGES AS DISCUSSED 16,65,865/- LESS: D)INSURANCE CHARGES (OVERSEAS MEDICLAIM) AS DISCUSSED 1,03,709/- 1,44,56,768/- EXPORT TURNOVER 13,15,87,244/- WE FIND THAT CIT(A) HAS FOLLOWED THE DECISION OF HO NBLE KARNATAKA HIGH COURT IN THE CASE OF TATA ELXSI LTD. (SUPRA) AND ALSO THE DECISION OF SPECIAL BENCH OF THIS CHENNAI TRIBUNAL IN THE CASE OF INCOME TAX OFFICER V. SAK SOFT LTD. 121 TTJ 865 (CHENNAI) (SB), WHEREIN IT IS HELD AS UNDER :- FOR THE ABOVE REASONS, WE HOLD THAT FOR THE PURPOS E OF APPLYING THE FORMULA UNDER SUB-S. (4) OF S. 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, INC URRED IN FOREIGN, EXCHANGE IN PROVIDING THE TECHNICAL SERVICES OUTSID E INDIA ARE TO BE EXCLUDED BOTH FROM THE EXPORT TURNOVER AND FROM THE TOTAL TURNOVER, WHICH ARE THE NUMERATOR AND THE DENOMINATOR RESPECT IVELY IN THE FORMULA. THE APPEALS FILED BY THE DEPARTMENT ARE TH US DISMISSED. WE MAKE IT CLEAR THAT WE HAVE NOT DECIDED THE CASES OF THE INTERVENERS AND THEY WILL BE DECIDED BY THE RESPECTIVE BENCHES IN C ONFORMITY WITH OUR DECISION. ITA NO.403/KOL/2012 A.Y. 2006-07 ITO WD-7(2)KOL V. M/S. VISION COMPTECH INTEGRATO RS LTD. PAGE 5 WE FIND THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF SAK SOFT LTD. (SUPRA) AND ALSO OF THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF TATA ELXSI LTD. (SUPRA). RESPECTFULLY FOLLOWING THE SAME, WE CONFIRM THE ORD ER OF CIT(A) AND THIS ISSUE OF REVENUE IS DISMISSED. 6. NEXT ISSUE OF THE REVENUE IS AS REGARDS TO THE O RDER OF CIT(A) ALLOWING THE DEPRECIATION ON ACCOUNT OF ALLOCATION OF DEFERR ED REVENUE EXPENSE TO THE COST OF FIXED ASSETS. FOR THIS, REVENUE HAS RAISED THE FOLLOWING GROUND NO.4:- 4. THAT THE LD. C.I.T.(APPEALS)-VIII, KOLKATA HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT DEPRECIATION IS TO BE ALLOWED O N ACCOUNT OF ALLOCATION OF DEFERRED REVENUE EXPENDITURE TO THE COST OF FIXE D ASSETS FOLLOWING THE ORDER OF CIT(A)-C-1, KOLKATA IN APPEAL PROCEEDINGS FOR THE AY 2005-06 IN THE CASE OF THE ASSESSEE. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. BRIEFLY STATED FACTS ARE THAT THE ASSESSSEE INCURRED EXPENSES OF RS.55,70,454/- ON ACCOUNT OF SETTING UP OF BPO BUSINESS IN EARLIER YEARS I.E., SHOWN AS DEFERRED EXPENSES. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER DISAL LOWED THE EXPENSE CLAIMED BY THE ASSESSEE UNDER THE HEAD DEFERRED RE VENUE EXPENDITURE WRITTEN OFF TO THE TUNE OF RS.11,14,091/-. THE ASS ESSEE ALSO CLAIMED REVISION OF DEPRECIATION ALLOWABLE U/S. 32 OF THE ACT FOR TH E REASONS THAT EXPENSES INCURRED WERE IN THE NATURE OF PRE-OPERATIVE EXPENS ES QUALIFYING TO BE ADDED TO THE COST OF FIXED ASSETS. THE AO DID NOT ACCEPT THE CLAIM OF ASSESSEE FOR THE REASON THAT THE AMOUNT ADDED TO DEFERRED REVENU E EXPENDITURE TOWARDS THE COST OF FIXED ASSETS OF THE BPO BUSINESS WERE C LAIMED AS REVENUE EXPENDITURE. AGGRIEVED, ASSESSEE PREFERRED APPEAL B EFORE THE CIT(A), WHO ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS U NDER:- IN THE COURSE OF THE APPELLANT PROCEEDING, THE AR OF THE APPELLANT SUBMITTED AS UNDER:- I)THE CLAIM FOR REVISED DEPRECIATION STARTS FROM A SST YEAR 2005-06, IN WHICH THE INITIAL DEDUCTION OF DEFERRED REVENUE EXP ENDITURE WAS CLAIMED. ITA NO.403/KOL/2012 A.Y. 2006-07 ITO WD-7(2)KOL V. M/S. VISION COMPTECH INTEGRATO RS LTD. PAGE 6 II) IT WAS DECIDED IN APPEAL BEFORE CIT(A) C-1 KO LKATA IN APPEAL NO. 108/CC-VI/CIT(A)-C-1/2007-08 VIDE ORDER DT. 04/05/2 009 THAT TO THE EXTENT OF 50% OF THE EXPENSES SHALL BE ALLOCATED TO FIXED ASSETS AND DEPRECIATION WILL BE ALLOWED THEREON. III) WE REQUEST YOUR HONOUR TO KINDLY DIRECT LD. A. O TO ALLOW HIGHER DEPRECIATION AS A CONSEQUENCE OF AFORESAID EFFECT O F APPEAL ORDER IN AY 2005-06. 8. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE AS W ELL AS LD. SR-DR WAS ASKED WHETHER THE REVENUE HAS PREFERRED AN APPEAL A GAINST THE ORDER OF CIT(A) FOR THE AY 2005-06 DECIDED IN APPEAL NO. 108 /CC-VI/CIT(A),C-1/07-08 ORDER DATED 04.05.2009 WHEREIN CIT(A) ALLOWED THE R ELIEF TO THE ASSESSEE. THE ANSWER WAS IN NEGATIVE THAT NO SUCH APPEAL WAS FILED BY THE REVENUE AND THAT ORDER HAS BECOME FINAL. LD. COUNSEL FOR TH E ASSESSEE HAS FILED A COPY OF JUDGMENT OF HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF COMMISSIONER OF INCOME-TAX V. ASHOKA CEMENT LTD. IT REFERENCE NO. 102 OF 1978 DATED 22-02-1989 AND STATED THAT ISSUE IS SQUA RELY COVERED BY THIS JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT, WHER EIN IT IS HELD THAT ASSESSEE IS ENTITLED TO PRE-DEPRECIATION ALLOWANCE AND DEVEL OPMENT REBATE IN RESPECT OF CAPITALIZATION OF PRE-PRODUCTION EXPENDITURE. REVEN UE COULD NOT POINT OUT ANYTHING AGAINST THE ORDER OF CIT(A) ON THIS ISSUE AND EVEN OTHERWISE THE DECISION OF CIT(A) IN AY 2005-06 HAS BECOME FINAL A ND WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) IN THE PRESENT A PPEAL. 9. IN THE RESULT, REVENUES APPEAL IS DISMISSED. 10. ORDER PRONOUNCED IN OPEN COURT ON 21 ST NOVEMBER, 2013 SD/- SD/- (ABRAHAM.P. GEORGE) (MAHAVIR SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP !' #- 21 /11/2013 ) ITA NO.403/KOL/2012 A.Y. 2006-07 ITO WD-7(2)KOL V. M/S. VISION COMPTECH INTEGRATO RS LTD. PAGE 7 **+ **+ **+ **+ ,+ ,+ ,+ ,+ / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '.'*/ 0 / CONCERNED CIT 4. 0- / CIT (A) 5. +34 ***/, */ , / DR, ITAT, KOLKATA 6. 478 9: / GUARD FILE. BY ORDER/ , ;/< '= */ , )