ACIT, Cirlce-16(2), Hyd, Hyderabad V. Oakton Global Technology Services Centre (India) Pvt. Ltd., Hyd, Hyderabad

ITA 425/HYD/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2636 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-05-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 28-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S NARASAMMA
• Section: 143(3)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 425/HYD/2016 ASSESSMENT YEAR: 2011-12 DY. COMMISSIONER OF INCOME- TAX, CIRCLE 16(2), HYDERABAD. VS. M/S OAKTON GLOBAL TECHNOLOGY SERVICEC CENTRE (INDIA) PVT. LTD., HYDERABAD. (APPELLANT) (RESPONDENT) REVENUE BY : SMT. S. NARASAMMA ASSESSEE BY : SHRI ARUN KUMAR DATE OF HEARING : 23-08-2017 DATE OF PRONOUNCEMENT : 30-08-2017 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST TH E ORDER PASSED U/S 143(3) R.W.S. 92CA(3) R.W.S.144C(5) OF T HE INCOME TAX ACT, 1961 (IN SHORT ACT) DATED 28/01/2016 RELATIN G TO AY 2011-12. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT DURING TH E PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2011-12, THE ASSESS EE COMPANY EARNED INCOME OF RS.2,86,96,983/- FROM EXPORT UNDER TAKING. THE ASSESSEE COMPANY CLAIMED AN AMOUNT OF RS.2,86,96,98 3/- AS EXEMPTION UNDER SECTION 10A OF THE ACT. THE DETAILS REGARDING THE SOFTWARE DEVELOPMENT BY THE ASSESSEE COMPANY HAD BE EN CALLED FOR AND EXAMINED BY THE AO. 2.1. DURING THE COURSE OF EXAMINATION, THE AO NOTIC ED THAT THE ASSESSEE HAD DEBITED TO PROFIT & LOSS ACCOUNT AN AM OUNT OF RS.11,94,881/- TOWARDS TELEPHONE CHARGES (INTERNET) AND RS.24,81,987/- TOWARDS INSURANCE CHARGES. THE AO OB SERVED THAT FOR 2 ITA NO. 425 /HYD/2015 OAKTON GLOBAL TECHNOLOGY SERVICES CENTRE (INDIA) PV T. LTD. THE PURPOSE OF COMPUTING THE EXEMPTION U/S 10A, ASS ESSEE HAD ADOPTED THE 'EXPORT TURNOVER' AT RS.21,85,13,638/- WHICH INCLUDES RS. 11,94,881/- TOWARDS TELEPHONE CHARGES(INTERNET), RS .24,81,987/- TOWARDS INSURANCE CHARGES. HE OPINED THAT AS PER EX PLANATION 2(III) OF SECTION 10A, ANY EXPENDITURE INCURRED TOWARDS INTER NET CHARGES, INSURANCE CHARGES AND FREIGHT ATTRIBUTABLE DIRECTLY TO THE EXPORT OF ARTICLE OR THING OUTSIDE INDIA HAS TO BE EXCLUDED F ROM THE 'EXPORT TURNOVER' FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 10A. ACCORDINGLY, THE AO EXCLUDED THE ABOVE AMOUNT OF RS.11,94,881/- TOWARDS TELEPHONE CHARGES(INTERNET) AND RS.24,81,987/- TOWA RDS INSURANCE CHARGES FROM 'EXPORT TURNOVER' AND RECOMPUTED THE EXEMPTION U/S 10A ACCORDINGLY. 3. AGGRIEVED BY THE ABOVE ORDER, THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE DRP AND THE DRP RELYING ON THE DE CISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. TATA ELXSI AND OTHERS, DIRECTED THE AO TO EXCLUDE THE EXPENDITURE TOWARDS TELEPHONE CHARGES AND INSURANCE FROM BOTH THE EXPORT TURNOVE R AND TOTAL TURNOVER FOR COMPUTING THE DEDUCTION U/S 10A. 4. AGGRIEVED BY THE ORDER OF DRP, THE REVENUE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE DIRECTION OF LD. DRP-1, BENGALURU IS ERRONEO US ON FACTS AND CIRCUMSTANCES, IN LAW. 2. THE LD. DRP ERRED IN LAW DIRECTING THE AO TO ALL OW DEDUCTION U/S 10A OF THE IT ACT AFTER EXCLUDING COMMUNICATION AND BANDWIDTH CHARGES FROM THE TOTAL TURNOVER. 5. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL FACTS ON RECORD. THE HONBLE COURTS AND THE COORDINATE BE NCHES OF ITAT HAVE CONSISTENTLY HELD THAT THE INTERNET CHARGES HA VE TO BE EXCLUDED BOTH FROM THE EXPORT TURNOVER AS WELL AS FROM THE T OTAL TURNOVER WHILE COMPUTING DEDUCTION U/S 10A OF THE ACT. THE HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. GEM PLUS JEWELLERY (330 IT R 175) AS WELL AS DIFFERENT BENCHES OF TRIBUNAL INCLUDING ITAT, CHENN AI BENCH (SB) IN 3 ITA NO. 425 /HYD/2015 OAKTON GLOBAL TECHNOLOGY SERVICES CENTRE (INDIA) PV T. LTD. THE CASE OF ITO VS. SAK SOFT (313 ITR (AT) 853) HAV E HELD THAT COMMUNICATION CHARGES ATTRIBUTABLE DIRECTLY TO THE EXPORT OF ARTICLE OR THING OUTSIDE INDIA HAS TO BE EXCLUDED BOTH FROM EXPORT TURNOVER AS WELL AS TOTAL TURNOVER WHILE COMPUTING EXEMPTION U /S 10A OF THE ACT. IN VIEW OF THE ABOVE, WE ARE IN AGREEMENT WITH THE ORDER OF DRP AND DIRECT THE AO TO EXCLUDE THE INTERNET CHARGES OF RS . 11,94,881/- FROM THE EXPORT TURNOVER AS WELL AS TOTAL TURNOVER WHILE COMPUTING 10A DEDUCTION. 5.1 MOREOVER, THE LD. AR OF THE ASSESSEE FILED A CO PY OF THE JUDGMENT OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. GENPACT INDIA, ITA NOS. 1519/2010 & ITA NO. 1076/20 11, VIDE JUDGEMENT DATED NOVEMBER 16, 2011 WHEREIN THE HONB LE COURT DISMISSED THE APPEALS OF THE REVENUE BY HOLDING THA T THE REASONING GIVEN BY THE BOMBAY HIGH COURT IN THE CASE OF GEM P LUS JEWELLERY INDIA LTD. (SUPRA) AND THE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. TATA ELXSI LTD. ITA NO. 70/2009, DATED 30/08/20 11, ARE IN COMPLETE AGREEMENT. 5.2 ALL THE ABOVE DECISIONS ARE RELATING TO INTERN ET COMMUNICATION CHARGES. BY RELYING ON THE RATIOS LAID DOWN IN THE SAID CASES, WE DIRECT THE AO TO EXCLUDE THE INSURANCE CHARGES ALSO FROM THE TOTAL TURNOVER SIMILAR TO THE SITUATION WHERE COMMUNICATI ON CHARGES ARE EXCLUDED FROM EXPORT TURNOVER, THE SAME WAS EXCLUDE D FROM THE TOTAL TURNOVER ALSO. THE SAME ANALOGY CAN BE APPLIED FOR INSURANCE CHARGES ALSO. ACCORDINGLY, AO IS DIRECTED TO EXCLUD E THE INSURANCE CHARGES AND COMMUNICATION CHARGES FROM TOTAL TURNOV ER WHILE CALCULATING 10A DEDUCTION. 5.3 IN VIEW OF THE ABOVE DISCUSSION, WE UPHOLD THE ORDER OF THE DRP ON THIS COUNT AND DISMISS THE GROUNDS RAISED BY THE REVENUE. 4 ITA NO. 425 /HYD/2015 OAKTON GLOBAL TECHNOLOGY SERVICES CENTRE (INDIA) PV T. LTD. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST, 2017. SD/- SD/- (D. MANMOHAN) (S. RIFAUR RAHMAN) VICE PRESIDENT AC COUNTANT MEMBER HYDERABAD, DATED: 30 TH AUGUST, 2017. KV COPY TO:- 1) DCIT, CIRCLE 16(2), 2 ND FLOOR, B-BLOCK, IT TOWERS, AC GUARDS, MASAB TANK, HYDERBAD. 2) M/S OAKTON GLOBAL TECHNOLOGY SERVICES CENTRE (INDIA) PVT. LTD., 8-2-293, PLOT NO. 499, ROAD NO. 36, JUBILEE HILLS, HYD-33. 3) DRP-1, BENGALURU, 4) PR. CIT 4, HYDERABAD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., H YDERABAD. 6) GUARD FILE