Prabhu Ramachandran Rajendran, Sec'bad, Hyderabad V. ITO, Ward-10(3), Hyd, Hyderabad

ITA 455/HYD/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6083 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 27-10-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 31-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G APARNA RAO
• Assessee Lawyers: M NEELIMA DEVI
• Section: 143(3); 10B; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 455/HYD/2016 ASSESSMENT YEAR: 2011-12 PRABHU RAMACHANDRAN RAJENDRAN, SECUNDERABAD. PAN AGCPR 7667 J VS. INCOME-TAX OFFICER, WARD 10(3), HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. M. NEELIMA DEVI REVENUE BY : SMT. G. APARNA RAO DATE OF HEARING 27-10-2016 DATE OF PRONOUNCEMENT 28-10-2016 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX - 7, HYDERAB AD, DATED 18/01/2016 FOR AY 2011-12. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS ENGAGED IN MANUFACTURE AND EXPORT OF HERBAL/AYURVEDIC PRODUCTS . HE IS A PROPRIETOR OF M/S STIRITI VENTURES. FOR THE AY 2011 -12, HE FILED RETURN OF INCOME ELECTRONICALLY ON 30/09/2011 DECLARING TO TAL INCOME OF RS. 8,31,098/-. THE RETURN GOT SELECTED UNDER SCRUTINY AND THE SCRUTINY ASSESSMENT WAS COMPLETED U/S 143(3) ON 02/01/2014 B Y THE AO BY ACCEPTING THE INCOME RETURNED. 2 ITA NO. 455/H/16 PRABHU RAMACHANDRAN RAJENDRAN 3. SUBSEQUENTLY, ON PERUSAL OF RECORD, THE CIT NOTI CED THAT THE IMPUGNED ASSESSMENT ORDER PRIMA FACIE APPEARED ERRO NEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE FOR THE FOL LOWING REASONS: 1. VEHICLE LOAN OF RS. 8,37,037/- FROM AXIS BANK SHOWN IN THE BALANCE SHEET BUT THERE ARE NO SECURED LOANS AS PE R THE 3CD REPORT ANNEXURE TO TAX AUDIT REPORT. THERE IS NO A DDITION TO FIXED ASSETS ALSO. 2. INSURANCE AND COMMISSION CHARGES WERE NOT EXCLU DED FROM EXPORT TURNOVER WHILE CLAIMING DEDUCTION U/S 10B. 4. AS REGARDS THE FIRST ISSUE OF VEHICLE LOAN OF RS . 8,37,037/-, THE CIT AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, ACCEPTED. 5. AS REGARDS THE 2 ND ISSUE, THE CIT DIRECTED THE AO TO RESTRICT THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 10B FROM RS. 32,81,614/- TO RS. 23,54,839 AND TO REVISE THE ASSESSMENT ORDER B Y EXCLUDING THE INSURANCE AND COMMUNICATION CHARGES FROM EXPORT TUR NOVER AND NOT FROM THE TOTAL TURNOVER. 6. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US R AISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED CIT PASSED U/S.263 ISS UING DIRECTIONS TO THE AO ON DEDUCTION UJS.L0B IS NOT ON LY CONTRARY TO FACTS AND PROVISIONS OF LAW BUT ALSO IS WITHOUT APP LICATION OF MIND AND PERVERSE. 2. THE LEARNED CIT ERRED IN ISSUING DIRECTIONS TO T HE AO TO RESTRICT THE DEDUCTION U/S.10B AFTER CONSIDERING RE DUCTION OF FREIGHT AND INSURANCE ONLY FROM EXPORT TURNOVER AND NOT FROM TOTAL TURNOVER WHILE COMPUTING THE DEDUCTION. 3. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE FREIGHT AND INSURANCE IS NOT INCURRED IN FOREIGN EXCHANGE BUT I S INCURRED IN INDIAN CURRENCY AND FURTHER THAT TELECOMMUNICATIONS CHARGES ARE INCURRED IS ONLY FOR REGULAR BUSINESS ACTIVITY AND NOT FOR EXPORT AS THE BUSINESS IS NOT THAT OF SOFTWARE AND THEREFORE ERRED IN ISSUING DIRECTIONS TO RESTRICT DEDUCTION AFTER REDUCING THE FREIGHT, INSURANCE AND TELECOMMUNICATION CHARGES. 3 ITA NO. 455/H/16 PRABHU RAMACHANDRAN RAJENDRAN 7. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL FACTS ON RECORD. WE FIND THAT THIS ISSUE IS SQUARELY COVE RED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF CHENNAI SPECIAL BENCH I N THE CASE OF SAK SOFT LIMITED REPORTED IN 313 ITR (AT) 353 AND A CCORDINGLY WE HOLD THAT INSURANCE CHARGES AND TELECOMMUNICATION CHARGES INCURRED BY THE ASSESSEE WHICH HAVE BEEN DIRECTED BY THE CI T TO EXCLUDE ONLY FROM EXPORT TURNOVER AND NOT FROM TOTAL TURNOVER WH ILE COMPUTING DEDUCTION U/S 10B, HAVE TO BE EXCLUDED FROM THE TO TAL TURNOVER ALSO, IF SUCH AMOUNT STANDS INCLUDED THEREIN, WHILE COMPU TING THE ADMISSIBLE DEDUCTION U/S 10B OF THE ACT. 7.1 MOREOVER, THE HONBLE KARNATAKA HIGH COURT IN T HE CASE OF CIT VS. TATA ELXSI LTD. AND OTHERS, [2012] 349 ITR 98, ON WHICH RELIANCE PLACED BY THE AR OF THE ASSESSEE, HAS HELD THAT FO R THE PURPOSE OF COMPUTING EXEMPTION U/S 10A, WHEN THE EXPORT TURNOV ER IN THE NUMERATOR IS TO BE ARRIVED AT AFTER EXCLUDING COMMU NICATION EXPENSES, THE SAME SHOULD ALSO BE EXCLUDED IN COMPU TING THE EXPORT TURNOVER AS A COMPONENT OF TOTAL TURNOVER IN THE DE NOMINATOR. 7.2 IN VIEW OF THE ABOVE DISCUSSION, WE SET ASIDE THE ORDER OF THE CIT U/S 263 OF THE ACT ON THIS ISSUE AND RESTORE T HE ASSESSMENT ORDER ACCORDINGLY. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON 28 TH OCTOBER, 2016. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 28 TH OCTOBER, 2016 KV 4 ITA NO. 455/H/16 PRABHU RAMACHANDRAN RAJENDRAN COPY TO:- 1) SHRI PRABHU RAMACHANDRAN RAJENDRAN, C/O K. VASANTKUMAR & A.V. RAGHURAM, ADVOCATES, 610, 6 TH FLOOR, BABHUKHAN ESTATE, BASHEERBAGH, HYDERABAD. 2) ITO, WARD 10(3), IT TOWERS, HYD. 3) PR. CIT -7, HYDERABAD 4 JCIT, RANGE 15, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE S. NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER