The ACIT, Cirlce-1(2), Hyderabad V. M/s. Deloitee Consulting India P. Ltd, Hyderabad

ITA 470/HYD/2011

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3001 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 11-02-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 22-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIVEDITA BISWAS
• Assessee Lawyers: SURYA KIRAN M ARS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI D.MANMOHAN, VICE PRESIDENT AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.470/HYD/2011 : ASSESSMENT YEAR 2005-06 ASST. COMMISSIONER OF INCOME - TAX, CIRCLE 1(2), HYDERABAD V/S M/S. DELOITTE CONSULTING INDIA (P) LTD., HYDERABAD (PAN - AABCD 9761 D ) (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. NIVEDITA BISWAS DR RESPONDENT BY : S/SHRI SISTLA VENKATESWARLU & SURYA KIRAN M. ARS DATE OF HEARING 11.2.2016 DATE OF PRONOUNCEMENT 11.2.2016 O R D E R PER D.MANMOHAN, VICE PRESIDENT : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX(APPEALS) I II, HYDERABAD AND IT PERTAINS TO ASSESSMENT YEAR 2005-06. 2. THE ONLY ISSUE URGED BY THE REVENUE IN THIS AP PEAL IS WITH REGARD TO COMPUTATION OF DEDUCTION UNDER S.10A OF T HE ACT; WHETHER COMMUNICATION CHARGES ARE TO BE EXCLUDED FROM THE T OTAL TURNOVER FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER S.10A. 3. THE FACTS ARE NARRATED IN BRIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT SERVICES AND I T-ENABLED SERVICES. THE ASSESSEE CLAIMED DEDUCTION OF RS.3,00 ,30,869 UNDER S.10A OF THE ACT IN THE RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR 2005-06. WHILE VERIFYING THE DETAILS OF EXPENDITURE , THE ASSESSING OFFICER FOUND THAT A SUM OF RS.2,07,13,351 WAS INCU RRED BY THE ITA NO.470/HYD/2011 M/S. DELOITTE CONSULTING INDIA (P) LTD. HYDERABAD 2 ASSESSEE TOWARDS COMMUNICATION CHARGES. ACCORDING T O HIM, THE SAME SHOULD NOT BE DEDUCTED FOR COMPUTING THE EXPORT TUR NOVER, UNDER S.10A OF THE ACT. IN RESPONSE THERETO, THE ASSESSE E SUBMITTED THAT THE SAME WAS INCURRED IN INDIAN CURRENCY AND, EVEN OTHERWISE, IF IT IS EXCLUDED FROM THE EXPORT TURNOVER, IT SHOULD ALSO B E EXCLUDED FROM THE TOTAL TURNOVER. 4. THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE, REFERRING TO THE MEANING OF EXPORT TURNO VER AS GIVEN IN EXPLANATION 2(IV) TO S.10A. THE ASSESSING OFFICER C ONCLUDED THAT THE ASSESSEE INCURRED EXPENDITURE FOR DELIVERY OF GOODS OUTSIDE INDIA AND THE SAME DESERVES TO BE EXCLUDED FROM THE FIGURE OF EXPORT TURNOVER AND HE ACCORDINGLY RE-DETERMINED THE CLAIM OF EXEMP TION UNDER S.10A OF THE ACT. 5. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE CIT(A ) THAT THE IMPUGNED EXPENDITURE WAS INCURRED IN INDIAN RUPEES AND THE SAME WAS NOT REIMBURSED BY THE CLIENT TO THE ASSESSEE IN FOREIGN CURRENCY, IN WHICH EVENT, EVEN AS PER THE DEFINITION OF EXPO RT TURNOVER IN S.10(2)(IV), THE CLAIM SHOULD NOT BE EXCLUDED FROM THE EXPORT TURNOVER. AN ALTERNATIVE PLEA WAS RAISED THAT EVEN IF IT IS TO BE DEDUCTED FROM THE EXPORT TURNOVER, THAT WOULD NOT LEAD TO ANY DISALLOWANCE SINCE COMMUNICATION CHARGES SHOULD HAV E BEEN CORRESPONDINGLY DEDUCTED FROM THE TOTAL TURNOVER WH ILE COMPUTING THE DEDUCTION UNDER S.10A OF THE ACT. THE LEARNED CIT(A ) ACCEPTED THE ALTERNATIVE CONTENTION OF THE ASSESSEE IN THE LIGHT OF DECISION OF CHENNAI SPECIAL BENCH IN THE CASE OF ITO V/S. SAK SOFT LD. CIT(A). (313 ITR (AT)353)(CHENNAI(SB)). 6. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. ITA NO.470/HYD/2011 M/S. DELOITTE CONSULTING INDIA (P) LTD. HYDERABAD 3 7. AT THE TIME OF HEARING, LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELIED UPON THE ORDER PASSE D BY THE ASSESSING OFFICER, WHEREAS THE LEARNED COUNSEL FOR THE ASSESS EE REFERRED TO PARA 4.3 OF THE ORDER OF THE CIT(A) TO SUBMIT THAT THE I SSUE IS SQUARELY COVERED BY THE DECISION OF THE SPECIAL BENCH AS WEL L AS BY THE DECISIONS OF THE HYDERABAD BENCH OF THE ITAT. HE A LSO SUBMITTED THAT RECENTLY, THE HON'BLE KARNATAKA HIGH COURT IN THE C ASE OF CIT V/S. TATA ELXSI LTD. (349 ITR 98), REFERRED TO PLETHORA OF DE CISIONS ON THIS POINT , INCLUDING THE DECISION OF THE HON'BLE BOMBAY HIGH C OURT IN THE CASE OF CIT V/S. GEM PLUS JEWELLERY INDIA LTD. (330 ITR 175 ) AS WELL AS THE DECISION OF THE ITAT SPECIAL BENCH CHENNAI IN THE C ASE OF SAK SOFT LTD. (SUPRA) TO OBSERVE THAT THE LEGISLATURE INTENDED TO HAVE A FORMULA TO ASCERTAIN THE PROFITS FROM EXPORT BUSINESS BY APPOR TIONING THE TOTAL PROFITS OF THE BUSINESS ON THE BASIS OF TURNOVER, A ND WHILE APPLYING THE FORMULA, THERE SHOULD BE UNIFORMITY IN THE INGREDIE NTS OF BOTH THE NUMERATOR AND DENOMINATOR, AS OTHERWISE, IT WILL PR ODUCE ANOMALIES OR ABSURD RESULTS. HON'BLE KARNATAKA HIGH COURT THUS C ONFIRMED THE VIEW TAKEN BY THE ITAT SPECIAL BENCH CHENNAI IN HOLDING THAT ANY EXPENDITURE WHICH IS EXCLUDED FROM THE EXPORT TURNO VER SHOULD ALSO BE EXCLUDED FROM THE TOTAL TURNOVER. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS AND PERUSED THE RECORD. AS COULD BE NOTICED FROM THE V IEW TAKEN BY THE VARIOUS HIGH COURTS AS WELL AS ITAT SPECIAL BENCH C HENNAI IN THE CASES REFERRED TO ABOVE, THE COMMUNICATION CHARGES HAVING BEEN EXCLUDED FROM THE EXPORT TURNOVER, IT SHOULD ALSO BE EXCLUDE D FROM THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTIO N UNDER S.10A OF THE ACT. SINCE THE VIEW TAKEN BY THE CIT(A) IS IN C ONFORMITY WITH THE VIEW TAKEN IN THE AFORESAID DECISIONS, WE DO NOT FI ND ANY INFIRMITY IN THE ORDER PASSED BY THE LEARNED CIT(A). ITA NO.470/HYD/2011 M/S. DELOITTE CONSULTING INDIA (P) LTD. HYDERABAD 4 9. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. PRONOUNCED ACCORDINGLY IN THE OPEN COURT. SD/- SD/- (S.RIFAUR RAHMAN) (D.MANMOHAN) ACCOUNTANT MEMBER. VICE PRESIDENT DT/- 11 TH FEBRUARY, 2016 COPY FORWARDED TO: 1. M/S. DELOITTE CONSULTING INDIA PVT. LTD., RMZ F UTURA , BLOCK B, 4 TH FLOOR, PLOT NO.14 & 15, ROAD NO.2, HITECH CITY LAY OUT, MADHAPUR, HYDERABAD 500 081 2. ASST COMMISSIONER OF INCOME-TAX CIRCLE 1(2), HYD ERABAD 3. COMMISSIONER OF INCOME - TAX(APPEALS) III, HYDERABAD 4. COMMISSIONER OF INCOME - TAX I, HYDERABAD 5. DEPAR TMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S.