ACIT, CHENNAI V. Think Soft Global Services Pvt. Ltd., CHENNAI

ITA 454/CHNY/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7110 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 04-08-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 20-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALAMELU LAKSHMINARAYANAN JDIE
• Assessee Lawyers: DHIRAJ
• Section: 143(3); 260A; 154

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . , . . , ! ' BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER ./ I.T.A. NO.454/MDS/2014. ( / ASSESSMENT YEAR : 2006-2007) THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE III(2), CHENNAI-600 034 ( #$ /APPELLANT) VS M/S. THINK SOFT GLOBAL SERVICES P. LTD TYPE-II, UNIT S. VIKRAM SARABHAI INDL. ESTATE, THIRUVANMIYUR, CHENNAI 600 041. [PAN: AABCT0976G] ( %&#$ /RESPONDENT) / APPELLANT BY : SMT. ALAMELU LAKSHMINARAYANAN, JDI(E) / RESPONDENT BY : SHRI. DHIRAJ, ADVOCATE. /DATE OF HEARING : 04.08.2014. ! /DATE OF PRONOUNCEMENT : 8.08.2014. ' / O R D E R PER S.S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2006-07; EMANATES FROM ORDER DATED 31.10.2013 PASSED BY THE COMMISSIO NER OF INCOME TAX (APPEALS)-III, CHENNAI IN ITA NO.1560/2013-14 I N PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961 [IN SHORT THE ACT]. I.T.A.NO.454/MDS/2014. :- 2 -: 2. THE REVENUE PLEADS ITS GRIEVANCE IN THE PRESENT AP PEAL AS UNDER:- 2.1 THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSE SSING OFFICER TO REDUCE TELECOMMUNICATION CHARGES, INSURANCE AND EXP ENSES INCURRED IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERV ICES OUTSIDE INDIA BOTH FROM THE EXPORT TURNOVER AND ALSO FROM THE TOT AL TURNOVER FOR THE PURPOSE OF CALCULATION OF DEDUCTION U/S. 10A. 2.2 IT IS SUBMITTED THAT THE DECISION OF THE SPECIA L BENCH OF THE JURISDICTIONAL ITAT IN THE CASE OF M/S. SAKSOFT LTD RELIED UPON BY THE CIT(A) HAS NOT BECOME FINAL AND THE DEPARTMENT HAS PREFERRED AN APPEAL U/S. 260A BEFORE THE MADRAS HIGH COURT. 3. THE ASSESSEE/ COMPANY IS ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT. IT HAD FILED ITS RETURN ON 17.11.20 06 DECLARING INCOME OF I60,44,219/- FOLLOWED BY REVISED ONE DATED 27. 11.2007 ADMITTING INCOME OF I40,03,372/-. THE ASSESSING OFFICER COMPL ETED SCRUTINY ASSESSMENT ON 28.11.2008. IN COURSE THEREOF, HE NO TICED THE ASSESSEE TO HAVE INCLUDED IN ITS EXPORT TURNOVER OF I25,42, 49,015/-, TELECOMMUNICATION EXPENSES OF I32,16,462/-, INSURAN CE SUM OF I9,84,751/- TOTALING I42,01,213/-. HE HELD IN THE A SSESSMENT ORDER THAT AS PER SEC 10A(8) EXPLANATION 2(IV) OF THE ACT , EXPENSES ATTRIBUTED TO DELIVERY OF COMPUTER SOFTWARE OUTSID E INDIA HAD TO BE REDUCED FROM THE EXPORT TURNOVER. THE ASSESSING OFF ICER ALSO CAME ACROSS EXPENDITURE ON TRAVEL EXPENSES, MARKETING AN D SELLING, PROFESSIONAL FEES, RENT, SALARY AND OTHER HEADS O F I2,38,89,080/-, I.T.A.NO.454/MDS/2014. :- 3 -: I24,76,390/-, I50,72,372/-, I12,06,621/-, I3,60,53, 390/- AND I76,40,386/- TOTALING I7,63,38,238/- FORMING PART O F THE EXPORT TURNOVER. THE ASSESSING OFFICER WAS OF THE VIEW TH AT AS PER THE VERY STATUTORY PROVISION, THESE EXPENSES ATTRIBUTABLE TO WARDS PROVIDING TECHNICAL SERVICES OUTSIDE INDIA DESERVED TO BE EXC LUDED FROM EXPORT TURNOVER. 4. IN ASSESSEES APPEAL, THE CIT(A) HAS HELD THAT WHA TEVER EXPENSES INCURRED IN FOREIGN EXCHANGE IS EXCLUDED F ROM EXPORT TURNOVER, THE SAME ARE ALSO TO BE EXCLUDED FROM TOT AL TURNOVER AS UNDER:- 8.3 THE NEXT ISSUE IN THE GROUNDS OF APPEAL IS REG ARDING THE EXCLUSION OF EXPENDITURE INCURRED IN FOREIGN CURRE NCY BOTH FROM THE EXPORT TURNOVER IN THE NUMERATOR AND ALSO FROM THE TOTAL TURNOVER IN THE DENOMINATOR. THE ASSESSING OFFICER WHILE COMPL ETING THE ASSESSMENT U/S. 143(3) AND ALSO WHILE PASSING THE R ECTIFICATION ORDER U/S. 154 HAS REDUCED THE QUANTUM OF TELECOMMUNICATI ON CHARGES OF I32,16,462/- AND INSURANCE EXPENSES OF I9,84,751/- AND ALSO EXPENDITURE INCURRED IN FOREIGN CURRENCY OUTSIDE IN DIA OF I7,63,38,238/- FROM THE EXPORT TURNOVER ONLY AND FO R CALCULATING THE TOTAL TURNOVER, THE EXPENSES REDUCED FROM EXPORT TU RNOVER WERE NOT CONSIDERED. 8.4 THE A.R OF THE APPELLANT HAS ARGUED THAT IF THE EXPENSES IN QUESTION ARE SO EXCLUDED FROM THE EXPORT TURNOVER, THE SAME SHOULD ALSO BE REDUCED FROM THE TOTAL TURNOVER WHILE COMPU TING THE DEDUCTION. IN THIS REGARD, THE APPELLANT HAS RELIED ON THE DECISION OF THE HONBLE ITAT, BANGALORE IN THE CASE OF MPHASIS BFI LTD VS. ITO [ I.T.A.NO.454/MDS/2014. :- 4 -: ITA NO.120/BANG/2011] AND THE DECISION OF THE JURIS DICTIONAL ITAT IN THE CASE OF ITO VS. SAK SOFT LIMITED [121 TTJ 865] IN SUPPORT OF ITS CONTENTION. 8.5 I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT OR DER, CONSIDERED THE STATEMENT OF FACTS AND THE GROUNDS O F APPEAL. AFTER GOING THOUGH THE WRITTEN SUBMISSIONS, DECISION RELI ED UPON BY THE APPELLANT, I AM OF THE OPINION THAT RELIEF FOR EXCL UDING CERTAIN EXPENSES AND EXPENSES INCURRED IN FOREIGN CURRENCY FROM THE TOTAL TURNOVER WITHOUT CORRESPONDING REDUCTION FROM THE T OTAL TURNOVER FOR THE CLAIM OF BENEFIT AVAILABLE U/S. 10A OF THE ACT IS SQUARELY COVERED BY THE ORDER OF THE ITAT, CHENNAI SPECIAL BENCHS H EARING IN THE CASE OF M/S. SAK SOFT LTD. THE DECISION HIGHLIGHTED IN THE SAID CASE IS REPRODUCED AS UNDER: ...... WE HOLD THAT FOR THE PURPOSE OF APPLYING T HE FORMULA UNDER SUB-S(4) OF S.10B, THE FREIGHT, TELEC OM CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY O F ARTICLES OR THINGS OR COMPUTER SOFTWARE OUTSIDE IND IA OR THE EXPENSES, IF ANY INCURRED IN FOREIGN EXCHANG E IN PROVING THE TECHNICAL SERVICES OUTSIDE INDIA ARE TO BE EXCLUDED BOTH FROM THE EXPORT TURNOVER AND FROM THE TOTAL TURNOVER, WHICH ARE THE NUMERATOR AND THE DENOMINATOR RESPECTIVELY IN THE FORMULA 8.5.1 RESPECTFULLY FOLLOWING THE DECISION OF THE JU RISDICTIONAL BENCH OF THE HONBLE TRIBUNAL IN THE CASE OF ITO VS. SAK SOFT LIMITED [121 TTJ 865] AND ALSO ON THE DECISION OF THE HONBLE I TAT C BENCH, CHENNAI IN ITA NOS. 54 & 1197 (MDS)/2010 IN THE APP ELLANTS OWN CASE FOR THE ASSESSMENT YEARS 2002-03 AND 2003-04 C ITED SUPRA, ACCORDINGLY, I DIRECT THE AO TO REDUCE TELECOMMUNIC ATION EXPENSES, INSURANCE AND EXPENSES INCURRED IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICES OUTSIDE INDIA BOTH FROM THE EXPORT TURNOVER AND ALSO FROM THE TOTAL TURNOVER. THIS GROUND OF T HE APPELLANT IS ALLOWED. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. I.T.A.NO.454/MDS/2014. :- 5 -: THEREFORE, THE REVENUE IS IN APPEAL. 5. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH THE CAS E FILE. THE SOLE ISSUE IS AS TO WHETHER THE EXPENDITURE ON TEL ECOMMUNICATION AND OTHER HEADS INCURRED IN FOREIGN EXCHANGE EXCLUDED F ROM EXPORT TURNOVER HAS ALSO TO BE REDUCED FROM THE TOTAL TUR NOVER OR NOT. WE FIND THAT A SPECIAL BENCH OF THE TRIBUNAL IN CASE OF SAK SOFT LIMITED (SUPRA) HAD ALREADY DECIDED THIS QUESTION AGAINST T HE REVENUE. ON BEING GRANTED OPPORTUNITY, THE APPELLANT/REVENUE FA ILS TO POINT OUT ANY DISTINGUISHING FEATURES. IN THESE CIRCUMSTANCES, WE REJECT THE REVENUES GROUNDS. 6. THE REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 8TH OF AUGUST , 2014, AT CHENNAI. SD/- SD/- ( . ) (A.MOHAN ALANKAMONY) / ACCOUNTANT MEMBER ( . . ) (S.S. GODARA) ! / JUDICIAL MEMBER '# /CHENNAI, $% /DATED:08.08.2014. KV %& '( )( /COPY TO: 1. * APPELLANT 2. / RESPONDENT 3. + ( )/CIT(A) 4. + /CIT 5. (,- . /DR 6. -/ 0 /GF. I.T.A.NO.454/MDS/2014. :- 6 -: