M/s Aditya Auto Products & Engineering (I) Pvt. Ltd., Bangalore V. DCIT, Bangalore

ITA 436/BANG/2011

• Counselvise Citation: 43621114 RSA 2011
• Duration Of Justice: 1 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 18-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P V PRADEEP KUMAR JT
• Keywords: Services rendered outside India; Question of law
• Section: 80HHC; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO.436/BANG/2011 ASSESSMENT YEAR : 2007-08 M/S. ADITYA AUTO PRODUCTS & ENGINEERING (I) PVT. LTD., PLOT NO.13E, KIADB INDUSTRIAL AREA, DODDABALLAPUR, BANGALORE 561 203. PAN : AABCA 7045H VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11(1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : MS. KAVITHA, P., C.A. RESPONDENT BY : DR. P.V. PRADEEP KUMAR, JT.CIT(DR) DATE OF HEARING : 11.06.2012 DATE OF PRONOUNCEMENT : 11.06.2012 O R D E R PER N.K. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE OR DER DATED 13.01.2011 OF THE CIT(APPEALS)-I, BANGALORE. 2. THE ONLY GRIEVANCE OF THE ASSESSEE IN THIS APPEA L RELATES TO THE CONFIRMATION OF THE ACTION OF THE ASSESSING OFFICER IN REDUCING THE FREIGHT ITA NO.436/BANG/2011 PAGE 2 OF 6 CHARGES FROM THE EXPORT TURNOVER ONLY AND NOT FROM THE TOTAL TURNOVER, WHILE ALLOWING THE DEDUCTION U/S. 10B OF THE INCOME-TAX A CT, 1961 [HEREINAFTER REFERRED TO AS THE ACT IN SHORT]. 3. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE FILED ITS RETURN OF INCOME ON 30.10.2007 DISCLOSING AN INCOME OF Q 5,83,59,970, WHICH WAS PROCESSED U/S. 143(1) OF THE ACT. LATER ON THE CAS E WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE DEDUCTED THE FREI GHT CHARGES AMOUNTING TO Q 1,59,23,709 ATTRIBUTABLE TO THE DELIVERY OF GOODS OUTSIDE INDIA FROM THE EXPORT TURNOVER AS WELL AS TOTAL TURNOVER FOR THE P URPOSE OF COMPUTING THE EXEMPTION ALLOWABLE U/S. 10B OF THE ACT. THE AO, H OWEVER, WHILE ALLOWING THE DEDUCTION, REDUCED THE FREIGHT CHARGES ONLY FRO M THE EXPORT TURNOVER AND NOT FROM THE TOTAL TURNOVER. 4. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A PPEALS), WHO CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY OB SERVING IN PARA 5.1 OF THE IMPUGNED ORDER AS UNDER:- 5.1 I HAVE DISCUSSED THE ISSUE OF APPLICABILITY OF PRINCIPLES OF PARITY TO BIGGER SIZE LETTERS THE PROVISIONS OF S.1 0B OF I.T. ACT RAISED ABOVE AT 4(C) ELABORATELY IN THE CASE OF M/S. BIOPLUS LIFE SCIENCES PVT. LTD., A.YS. 2006-07 & 2007-08 IN ITA NOS. 127 & 139/DC-11 (2)/A- I/08-09 DATED 04-10-2010 AND HAVE DECIDED THE ISSUE AGAINST THE APPELLANT WH ICH IS EXTRACTED BELOW - 3.3. SUCCINCTLY IT HAS BEEN PLEADED THAT THE LEGISLATIVE INTENTION IN BRINGING THE METAMORPHOSIS FROM EXEMPTION TO DEDUCTION BY AMENDING THE S.10B(1) OF THE I.T. ACT THROUGH FINANCE ACT, 2000 W.E.F. 1-4-2001 WAS TO COLLECT SOME TAX FROM EVEN A 100% EOU WHICH IS ITA NO.436/BANG/2011 PAGE 3 OF 6 POSSIBLE ONLY WHEN THE NUMERATOR, I.E. E.T. AND DENOMINATOR T.T. ARE NOT SAME FIGURES. THIS IS POS SIBLE WHEN THE E.T. EXPLAINED IN EXPLANATION 2(III) OF SE CTION 10B IS GIVEN A STRICT AND LITERAL INTERPRETATION BE TTER TERMED AS NET E.T. CONSISTING OF BOTH POSITIVE AND NEGATIV E ELEMENTS OF THE DEFINITION. IT IS ALSO POINTED OUT THEREIN THAT INTENTIONALLY THE LEGISLATURE HAS NOT PROVIDED ANY DEFINITION OF T.T. IN THAT SECTION WHICH HAS TO BE CONSIDERED AS THE GROSS SALE PROCEEDS FROM EXPORT W HEN THE 100% EOU HAS NOT DOMESTIC SALES AT ALL. IN THA T CASE, I HAVE ALSO GIVEN SEVERAL EXAMPLES IN WHICH CASE, T .T. IS ALWAYS MORE THAN E.T + D.T TO CITE A SIMPLE EXAMP LE SUPPOSE A 100% EOU MANUFACTURES READYMADE GARMENTS AND EXPORTS THE SAME TO NEPAL AND RECEIVES A PART O F THE SALE PROCEEDS THERE IN INDIAN RUPEE. THE PART OF S ALE PROCEEDS RECEIVED IN RUPEE IS NOT E.T. BECAUSE IT H AS NOT BEEN RECEIVED IN CFE. THE SALE PROCEEDS IS NOT D.T . BECAUSE THE SALE HAS BEEN EFFECTED AND THE SAME HAS BEEN RECEIVED OUTSIDE INDIA. BUT SUCH RECEIPT IS DEFINIT ELY A PART AND PARCEL OF T.T. BUT SUCH RECEIPT IS DEFINITELY A PART AND PARCEL OF T.T. BESIDES, IN THAT CASE, I HAVE ELABOR ATED THAT SECTION 80-HHC AND 80HHE OF THE ACT IN ONE HAND AND SECTION 10B OF THE ACT ARE NOT PARI MATERIA AND THEREFORE THE DEFINITION OF TOTAL T.O. GIVEN IN SECTION 80HHC / 80HHE IS NOT IMPORTABLE TO SECTION 10B OF I.T. ACT. THE PROPER COURSE, THEREFORE IS TO RESORT TO THE MEANIN G OF TOTAL TURNOVER AND ITS SYNONYMS GROSS SALES AND GRO SS RECEIPTS IN SECTION 44AB OF I.T. ACT. THE CONCEPT O F TOTAL TURNOVER/GROSS RECEIPT. GROSS SALES IN COMMON PARLANCE MEANS ALL RECEIPTS WITHOUT ANY EXPENDITURE . THUS, EVEN IF THE UNDERTAKING IS A 100% E.O.U. HAVING NO DOMESTIC TURNOVER, THE TOTAL TURNOVER SHALL NOT INC LUDE ANY EXPENDITURE IN IT. IN OTHER WORDS, IN THAT CASE, T HE TOTAL TURNOVER APPEARING AS DENOMINATOR WILL BE GROSS EXP ORT TURNOVER WHILE THE EXPORT TURNOVER I.E., NUMERATOR HAS TO BE WORKED OUT AS PER THE STATUTORY EXPLANATION PROV IDED IN EXPLANATION 2(III) OF SECTION 10B OF I.T. ACT. THUS , THE BASIC DIFFERENCE BETWEEN THE EXPORT TURNOVER AND TO TAL TURNOVER IN CASE OF A 100% EOU HAVING NO DOMESTIC S ALES IS THAT SALE PROCEEDS IN CFE HAS TO BE REDUCED BY FREIGHT/COMMUNICATION CHARGES/INSURANCE ATTRIBUTABL E TO EXPORT AND ALSO EXPENDITURE INCURRED IN FOREIGN CUR RENCY FOR TECHNICAL SERVICES OUTSIDE INDIA TO MAKE IT THE EXPORT TURNOVER I.E, NUMERATOR, WHILE NO SUCH REDUCTIONS S HALL BE MADE IN CASE OF TOTAL TURNOVER BECAUSE THE CONCEPT OF EXPENDITURE IS FOREIGN AND ALIEN AND HENCE NOT ITA NO.436/BANG/2011 PAGE 4 OF 6 INCORPORATED IN THE WORD TOTAL TURNOVER/GROSS RECEIPT/TOTAL SALES. FOLLOWING THE SAME REASONING THE ISSUE HERE ALSO IS DECIDED AGAINST THE APPELLANT. NOW THE ASSESSEE IS IN APPEAL. 5. DURING THE COURSE OF HEARING, THE LD. COUNSEL F OR THE ASSESSEE AT THE VERY OUTSET STATED THAT THIS ISSUE IS COVERED IN FA VOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COU RT DATED 30.08.2011 IN THE CASE OF CIT V. TATA ELXSI LTD. IN ITA NO.70 OF 2009 & ORS. WHICH HAS LATER BEEN FOLLOWED IN THE JUDGMENT DATED 24.10.201 1 IN ITA NO.19/2009 IN THE CASE OF M/S. GOODRICH AEROSPACE SERVICES PRIVAT E LTD. 6. THE LD. DR IN HIS RIVAL SUBMISSIONS ALTHOUGH SUP PORTED THE ORDER OF THE AUTHORITIES BELOW, BUT COULD NOT CONTROVERT THE AFORESAID CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. 7. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PA RTIES AND THE MATERIAL AVAILABLE ON RECORD, IT IS NOTICED THAT AN IDENTICAL ISSUE HAVING SIMILAR FACTS HAS BEEN DECIDED IN FAVOUR OF THE ASS ESSEE BY THE HONBLE JURISDICTIONAL HIGH COURT VIDE JUDGMENT DATED 24.10 .2011 IN ITA NO.19 OF 2009 IN THE CASE OF M/S. GOODRICH AEROSPACE SERVICE S PRIVATE LTD., WHEREIN BY FOLLOWING ITS EARLIER JUDGMENT DATED 30. 08.2011 IN THE CASE OF CIT V. M/S. TATA ELXSI LTD. IN ITA NO.70/2009 & ORS., THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARAS 1 & 2 OF THE AFORESAID REF ERRED TO ORDER DATED 24.10.2011, WHICH READ AS UNDER:- THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER PASSED BY THE TRIBUNAL. THE QUESTION THAT ARISES F OR CONSIDERATION IN THIS APPEAL IS WHETHER THE TRIBUNAL WAS CORRECT IN HOLDING THAT WHEN COMPUTING THE RELIEF UNDER SECTION 10-A OF THE INCOME-TAX ACT, 1961 THE AMOUNT OF COMMUNICATION EXPENSES/FREI GHT, ITA NO.436/BANG/2011 PAGE 5 OF 6 INSURANCE, TELECOMMUNICATION EXPENSES AND EXPENSES INCURRED IN FOREIGN CURRENCY SHOULD BE EXCLUDED FROM THE TOTAL TURNOVER FOR THE SAME ARE REDUCED FROM EXPORT TURNOVER. 2. THIS QUESTION HAD COME UP FOR CONSIDERATION BEFO RE THIS COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. TATA ELXSI LTD., IN ITA NO.70/2009 AND OTHER CONNEC TED CASES DISPOSED OFF ON 30 TH AUGUST, 2011. AFTER REFERRING TO VARIOUS JUDGMENTS AND REFERRING TO VARIOUS EXPENSES IT WAS HELD THAT WHILE COMPUTING THE CONSIDERATION RECEIVED FRO M SUCH EXPORT TURNOVER, THE EXPENSES INCURRED TOWARDS FREIGHT, TELECOMMUNICATION CHARGES, OR INSURANCE ATTRIBUTABL E TO THE DELIVERY OF THE ARTICLES OR THINGS OF COMPUTER SOFT WARE OUTSIDE INDIA, OR EXPENSES IF ANY INCURRED IN FOREIGN EXCHA NGE IN PROVIDING THE TECHNICAL SERVICE OUTSIDE INDIA SHOUL D NOT BE INCLUDED. THE JUDGMENT PASSED BY THE TRIBUNAL IS I N CONSONANCE WITH THE LAW DECLARED BY THIS COURT. THEREFORE, WE DO NOT SEE ANY MERIT IN THIS APPEAL. THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVO UR OF THE ASSESSEE AND AGAINST THE REVENUE. 8. FROM THE ABOVE, IT IS CLEAR THAT THE ISSUE NOW S TANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT DATED 24.10. 2011 OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE AFORESAID REFERRED TO CASE OF M/S. GOODRICH AEROSPACE SERVICES PVT. LTD. IN ITA NO. 19 OF 2009. WE THEREFORE SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(A) AND ALLO W THE CLAIM OF THE ASSESSEE. 9. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS ALL OWED. PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF JUNE, 2012. SD/- SD/- ( SMT. P. MADHAVI DEVI ) ( N.K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 11 TH JUNE , 2012. DS/- ITA NO.436/BANG/2011 PAGE 6 OF 6 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.