Fair Isaac India Software Private Ltd, Bangalore V. ACIT, Bangalore

ITA 44/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57426 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-01-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 17-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS JOSE JT
• Assessee Lawyers: K R GIRISH
• Section: 234B; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER ITA NO.44/BANG/2011 ASSESSMENT YEAR : 2005-06 M/S. FAIR ISAAC INDIA SOFTWARE PRIVATE LTD., 135, AIRPORT ROAD, KODIHALLI, BANGALORE 560 017. PAN : AAACF 7670G VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 11(3), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI K.R. GIRISH, C.A. RESPONDENT BY : SMT. SUSAN THOMAS JOSE, JT.CIT(DR) DATE OF HEARING : 09.01.2012 DATE OF PRONOUNCEMENT : 09.01.2012 O R D E R PER N.K. SAINI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 30.10.2010 OF THE CIT(APPEALS)-I, BANGALORE. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L: 1. REDUCTION IN DEDUCTION IN UNDER SECTION L0A OF THE INCOME-TAX ACT, 1961 ('THE ACT') ITA NO.44/BANG/2011 PAGE 2 OF 6 1.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ['CIT(A)'] ERR ED IN CONCLUDING THAT TELECOMMUNICATION EXPENSES OF RS. 2,925,475 SHOULD BE REDUCED FROM THE 'EXPORT TURNOV ER'. 1.2 WITHOUT PREJUDICE TO POINT 1.1. ABOVE THE CIT( A) HAS ERRED IN NOT ACCEPTING THE CONTENTION OF FI INDIA THAT TELECOMMUNICATION CHARGES OF RS. 12,645 COULD AT BE ST BE ATTRIBUTABLE TO THE DELIVERY OF COMPUTER SOFTWARE O UTSIDE INDIA. 1.3 WITHOUT PREJUDICE TO 1.1 AND 1.2 THE LEARNED C IT(A) HAS ERRED IN CONCLUDING THAT IN THE ABSENCE OF THE DEFI NITION OF 'TOTAL TURNOVER', THE ADJUSTMENT OF TELECOMMUNICATI ON EXPENSES OF RS.2,925,475 TO BE MADE TO THE 'EXPORT TURNOVER' NEED NOT BE MADE TO THE 'TOTAL TURNOVER'. 1.4 THE LEARNED CIT(A) HAS ERRED IN NOT FOLLOWING THE PRINCIPLES ARISING OUT OF THE VARIOUS BANGALORE TRI BUNAL DECISIONS / THE SPECIAL BENCH DECISION IN THE CASE OF SAKSOFT LTD V. ITO 2009 [20 DTR 514] AND THE MUMBAI HIGH COURT DECISION IN THE CASE OF GEM PLUS JEWELLERY INDIA LTD V.CIT [233 CTR 248]. 1.5 THE APPELLANT THEREFORE PRAYS THAT THE ORDER P ASSED BY THE CIT(A) UNDER SECTION 250 OF THE ACT AND THE CONSEQU ENTIAL EFFECT THEREOF, INCLUDING UNDER SECTIONS 234B OF TH E ACT IS BAD IN LAW, AND SHOULD BE ANNULLED. 2 RELIEF THE APPELLANT PRAYS THAT DIRECTIONS BE GIVEN TO GRA NT ALL SUCH RELIEF ARISING FROM THE PRECEDING GROUNDS AS A LSO ALL RELIEFS CONSEQUENTIAL THERETO. THE APPELLANT CRAVES LEAVE TO ADD TO OR ALTER, BY D ELETION, SUBSTITUTION OR OTHERWISE, ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFORE OR DURING THE HEARING OF THE APPEAL. THE APPELLANT SUBMITS THAT THE ABOVE GROUNDS ARE IN DEPENDENT AND WITHOUT PREJUDICE TO ONE ANOTHER. 3. FROM THE ABOVE GROUNDS IT IS GATHERED THAT THE O NLY GRIEVANCE OF THE ASSESSEE RELATES TOT THE INCLUSION OF TELECOMMUNICA TION EXPENSES AND TELECOMMUNICATION CHARGES IN THE TOTAL TURNOVER. ITA NO.44/BANG/2011 PAGE 3 OF 6 4. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE FILED ITS RETURN OF INCOME ON 30.10.2005 DECLARING NIL INCOME AFTER CLA IMING DEDUCTION U/S. 10A OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERR ED TO AS THE ACT IN SHORT] AMOUNTING TO RS.2,37,81,389. LATER ON THE CASE WAS SELECTED FOR SCRUTINY. THE AO WAS OF THE VIEW THAT AS PER THE DE FINITION OF EXPORT TURNOVER GIVEN IN CLAUSE (IV) TO EXPLANATION 2, THE EXPENSES ATTRIBUTABLE TO THE DELIVERY OF THE PRODUCT OR SOFTWARE OUTSIDE IND IA SHOULD BE REDUCED FROM THE EXPORT TURNOVER. THE AO HELD THAT IN THE ABSENCE OF A DEFINITION FOR TOTAL TURNOVER IN SECTION 10A, THE NORMAL DEFIN ITION OF TOTAL TURNOVER HAS TO BE ADOPTED AND AS SUCH THE EXPENSES WHICH ARE RE DUCED FROM THE EXPORT TURNOVER IN ACCORDANCE WITH THE SPECIFIC DEF INITION CANNOT BE REDUCED FROM THE TOTAL TURNOVER. 5. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A PPEALS), WHO CONFIRMED THE ACTION OF THE ASSESSING OFFICER. NOW THE ASSESSEE IS IN APPEAL. 6. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE ITO V. SAK SOFT LTD. 313 ITR (AT) 353 (CHENNAI) SB AND ALSO OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. TATA ELXSI LTD. & ORS. IN ITA NO.70 OF 2009 ORDER DATED 30.8.2001 . COPY OF THE SAID ORDER WAS FURNISHED. 7. IN HER RIVAL SUBMISSIONS, THE LD. DR ALTHOUGH SU PPORTED THE ORDERS OF AUTHORITIES BELOW, BUT COULD NOT CONTROVERT THE ABO VE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. ITA NO.44/BANG/2011 PAGE 4 OF 6 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IT IS NOTICED THAT AN IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF TH E ASSESSEE BY THE SPECIAL BENCH OF ITAT CHENNAI IN THE CASE OF ITO V. SAK SOFT LTD. 313 ITR (AT) 353 (CHENNAI)(SB) WHEREIN IT HAS BEEN HELD AS UNDER: TO SAY THAT IN THE ABSENCE OF ANY DEFINITION OF T OTAL TURNOVER FOR THE PURPOSE OF SECTION 10B, THERE IS NO AUTHORITY TO EXCLUDE ANYTHING FROM THE EXPRESSION AS UNDERSTOOD IN GENERAL PARLANCE WOULD BE WRONG, AS THERE HAS TO BE AN ELEM ENT OF TURNOVER IN THE RECEIPT IF IT HAS TO BE INCLUDED IN THE TOTAL TURNOVER. THAT ELEMENT IS MISSING IN THE CASE OF FR EIGHT, TELECOM CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY O F THE GOODS OUTSIDE INDIA AND EXPENSES INCURRED IN FOREIGN EXCH ANGE IN CONNECTION WITH THE PROVIDING OF TECHNICAL SERVICES OUTSIDE INDIA. THESE RECEIPTS CAN ONLY BE RECEIVED BY THE ASSESSEE AS REIMBURSEMENT OF SUCH EXPENSES INCURRED BY HIM. MER E REIMBURSEMENT OF EXPENSES CANNOT HAVE AN ELEMENT OF TURNOVER. IT IS ONLY IN RECOGNITION OF THIS POSITION THAT IN THE DEFINITION OF EXPORT TURNOVER IN SECTION 10B, THE AFORESAID TWO ITEMS HAVE BEEN DIRECTED TO BE EXCLUDED. SECONDLY, THE DEFINIT ION OF EXPORT TURNOVER CONTEMPLATES THAT THE AMOUNT RECEIVED BY T HE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE SHOULD REPRESENT CONS IDERATION IN RESPECT OF THE EXPORT. ANY REIMBURSEMENT OF THE TWO ITEMS OF EXPENSES MENTIONED IN THE DEFINITION CAN UNDER NO C IRCUMSTANCES BE CONSIDERED TO REPRESENT CONSIDERATION FOR THE EXPORT OF THE COMPUTER SOFTWARE OR ARTICLES OR THINGS. THUS, THE EXPRESSION TOTAL TURNOVER WHICH IS NOT DEFINED IN SECTION 10 B SHOULD ALSO BE INTERPRETED IN THE SAME MANNER. THUS, THE TWO IT EMS OF EXPENSES REFERRED TO IN THE DEFINITION OF EXPORT T URNOVER CANNOT FORM PART OF THE TOTAL TURNOVER SINCE THE RECEIPTS BY WAY OF RECOVERY OF SUCH EXPENSES CANNOT BE SAID TO REPRESE NT CONSIDERATION FOR THE GOODS EXPORTED SINCE TOTAL TURNOVER IS NOTHING BUT THE AGGREGATE OF THE DOMESTIC TURNOVER AND THE EXPORT TURNOVER. IN THE FORMULA PRESCRIBED BY SECTION 10B( 4) THE FIGURE OF EXPORT TURNOVER HAS TO BE THE SAME BOTH IN THE N UMERATOR AND IN THE DENOMINATOR OF THE FORMULA. IT FOLLOWS THAT THE TOTAL TURNOVER CANNOT INCLUDE THE TWO ITEMS OF EXPENSES R ECOVERED BY THE ASSESSEE AND REFERRED TO IN THE DEFINITION OF EXPORT TURNOVER. ITA NO.44/BANG/2011 PAGE 5 OF 6 9. THE AFORESAID DECISION HAD BEEN CONSIDERED AND A FFIRMED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF TATA ELXSI LTD. & ORS. 2011- TIOL-684-HC-KAR-II WHEREIN IT HAS BEEN HELD THAT FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S. 10A OF THE ACT, IF AN Y EXPENDITURE IS EXCLUDED FROM THE EXPORT TURNOVER, THE SAME HAS TO BE EXCLUD ED FROM THE TOTAL TURNOVER ALSO. A SIMILAR VIEW HAS ALSO BEEN TAKEN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GEM PLUS JEWELLERY INDIA LTD. 2010-TIOL-456- HC-MUM-IT . 10. WE, THEREFORE, BY CONSIDERING THE TOTALITY OF T HE FACTS AS DISCUSSED HEREINABOVE, ARE OF THE VIEW THAT THE LD. CIT(APPEA LS) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER. IN THAT VIEW OF THE MATTER, WE ASIDE THE IMPUGNED ORDER ON THIS ISSUE AND THE A SSESSING OFFICER IS DIRECTED TO EXCLUDE THE TELECOMMUNICATION EXPENSES AND TELECOMMUNICATION CHARGES FROM THE EXPORT TURNOVER AS WELL AS TOTAL TURNOVER WHILE WORKING OUT THE DEDUCTION U/S. 10A. 11. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON THIS 9 TH DAY OF JANUARY, 2012. SD/- SD/- ( GEORGE GEORGE K. ) ( N.K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 9 TH JANUARY, 2012. DS/- ITA NO.44/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 ASSISTANT REGISTRAR ITAT, BANGALORE.