Microsemi India Private Limited, Hyderabad V. Dy.CIT, Circle-16(2), Hyderabad

ITA 49/HYD/2014

• Counselvise Citation: 4922514 RSA 2014
• Duration Of Justice: 1 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 28-04-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 10-01-2014
• Court: TRIBUNAL
• Department Lawyers: RAMAKRISHNA BANDI
• Assessee Lawyers: VAIBHAV GUPTA ARS
• Keywords: Depreciation
• Section: 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 49/HYD/2014 ASSESSMENT YEAR: 2010-11 MICROSEMI INDIA PRIVATE LIMITED., HYDERABAD [PAN: AAHCA7379L] VS DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-16(2), HYDERABAD FOR ASSESSEE : SHRI ARUN CHHABRA & SHRI VAIBHAV GUPTA, ARS FOR REVENUE : SHRI RAMA KRISHNA, BANDI, DR DATE OF HEARING : 18-08-2015 DATE OF PRONOUNCEMENT : 31-08-2015 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN ASSESSEES APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-V, HYDERABAD DATED 23-09-2013 FOR THE AY. 2010-11. 2. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE WA S PRIMARILY ENGAGED IN THE PROVISION OF INFORMATION TECHNOLOGY (IT') A ND IT ENABLED SERVICES. ASSESSEE CARRIED ON ITS BUSINESS THROUGH A UNIT IN SOFTWARE TECHNOLOGY PARK (STP'), WHICH WAS ENTITLED FOR THE CLAIM OF TAX HO LIDAY U/S. 10A OF THE I.T.A. NO. 49/HYD/14 MICROSEMI INDIA PRIVATE LIMITED :- 2 - : INCOME TAX ACT [ACT]. DURING THE YEAR, ASSESSEE'S 1 00% REVENUE CAME FROM EXPORT OF THESE SERVICES. 3. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E RAISED AN INVOICE ON 31 MARCH 2010 FOR A VALUE OF USD 3,21,352 EQUIVA LENT TO RS. 1,48,72,171 [INVOICE NUMBER ACT/2009-10/006] FOR TH E SERVICES RENDERED IN THE MONTH OF MARCH 2010. IN COMPLIANCE WITH THE FO REIGN EXCHANGE REGULATION, ASSESSEE SUBMITTED A DECLARATION OF THE SOFTWARE EXPORTS IN A 'SOFTWARE EXPORT DECLARATION ('SOFTEX') FORM' WITH THE STPI AUTHORITIES. 4. THE STPI AUTHORITIES VIDE A LETTER DATED 6 TH MAY 2010 PROVIDED EXPORT CLEARANCE REQUIRED FOR COLLECTION OF FOREIGN REMITT ANCE AGAINST THE SAID INVOICE. THE AUTHORITIES ALSO ENDORSED THE INVOICE RAISED ON 31 ST MARCH 2012 FOR FURNISHING IT TO THE BANK. 5. THE ASSESSING OFFICER (AO) HELD THAT THAT INVOIC E ISSUED ON 31 ST MARCH 2010 WAS CLEARED BY STPI AUTHORITY ON 6 MAY 2010, I .E. IN FY 2010-11, HENCE, THE SAME CANNOT BE CONSIDERED AS AN EXPORT T URNOVER FOR THE FY. 2009-10. AO DENIED CONSEQUENT CLAIM OF DEDUCTION U/ S 10A BY RE WORKING THE ELIGIBLE AMOUNT EXCLUDING THE ABOVE AMOUNT FROM EXPORT TURNOVER, WHILE RETAINING THE SAME IN TOTAL TURNOVER. THIS VIEW WAS UPHELD BY THE LD. CIT(APPEALS), WHO FURTHER HELD THAT ASSESSEE IS AT LIBERTY TO CLAIM THE AMOUNT OF RS. 1.48 CRORES IN THE EXPORT TURNOVER OF THE SUBSEQUENT FY. I.E. 2010-11 FOR AY. 2011-12. AGGRIEVED, ASSESSEE PREFER RED THE PRESENT APPEAL RAISING FOUR GROUNDS. 6. GROUND NOS. 1 & 4 ARE GENERAL IN NATURE. GROUND NO.3 PERTAINING TO DISALLOWANCE OF DEPRECIATION ON CERTAIN USED FIXED ASSETS OF RS. 4,83,158/- WAS NOT PRESSED. 7. GROUND NO. 2 IS ON THE DENIAL U/S. 10A ON TURNOV ER OF RS. 1,48,72,171/- BY THE AO WHILE CALCULATING THE DEDUC TION U/S. 10A. GROUND I.T.A. NO. 49/HYD/14 MICROSEMI INDIA PRIVATE LIMITED :- 3 - : NO. 2.2 IS AN ALTERNATE CLAIM THAT IF THE ABOVE AMO UNT IS EXCLUDED FROM THE EXPORT TURNOVER, THE SAME SHOULD ALSO BE REDUCED FR OM THE TOTAL TURNOVER. 8. AFTER CONSIDERING THE RIVAL CONTENTIONS AND PERU SING THE SUBMISSIONS AND ORDERS OF THE AUTHORITIES, WE ARE OF THE OPINIO N THAT THE ACTION OF AO AND CIT(A) IS NOT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. THERE IS NO DISPUTE WITH REFERENCE TO RECEIPT OF FOREIGN EXCHAN GE PERTAINING TO THE INVOICE RAISED ON 31-03-10 AS ASSESSEE RECEIVED ADV ANCE AND ADJUSTED THE SALE PROCEEDS FROM THE AMOUNT RECEIVED EARLIER. THE ONLY DISPUTE IS WITH REFERENCE TO TREATMENT OF SUCH VALUE AS PERTAINING TO NEXT YEAR ON THE BASIS OF SOFTEX FORM SUBMITTED. THE VIEW CANVASSED BY AO AND SUPPORTED BY CIT(A) IS NOT ACCORDING TO PROVISIONS OR RULES OF I T ACT. 9. CLAUSE (IV) OF EXPLANATION 2 TO SECTION 10A DEFI NES 'EXPORT TURNOVER' AS FOLLOWS: 'EXPORT TURNOVER' MEANS THE CONSIDERATION IN RESPEC T OF EXPORT BY THE UNDERTAKING OF ARTICLES OR THINGS OR COMPUTER SOFTW ARE RECEIVED IN, OR BROUGHT INTO. INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE IN ACCORDANCE WITH SUB-SECTION (3), BUT DOES NOT INCLU DE FREIGHT, TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES OR THINGS OR COMPUTER SOFTWARE OUTSIDE INDIA OR EXPENSES, IF ANY, INCURRED IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICES OUTSIDE INDIA;' FURTHER, SUB-SECTION 3 OF SECTION 10A PROVIDES AS UNDER: '(3) THIS SECTION APPLIES TO THE UNDERTAKING, IF TH E SALE PROCEEDS OF ARTICLES OR THINGS OR COMPUTER SOFTWARE EXPORTED OU T OF INDIA ARE RECEIVED IN, OR BROUGHT INTO, INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE, WITHIN A PERIOD OF SIX MONTHS FROM THE EN D OF THE PREVIOUS YEAR OR, WITHIN SUCH FURTHER PERIOD AS THE COMPETEN T AUTHORITY MAY ALLOW IN THIS BEHALF.' FROM ABOVE, ONE CAN CLEARLY INFER THAT THE ONLY CON DITION FOR SOFTWARE EXPORTED FROM INDIA TO BE CONSIDERED IN AN YEAR IS RECEIPT OF CONSIDERATION OF I.T.A. NO. 49/HYD/14 MICROSEMI INDIA PRIVATE LIMITED :- 4 - : SALES PROCEEDS WITHIN SIX MONTHS FROM THE END OF PR EVIOUS YEAR (OR WITHIN PERIOD EXTENDED BY RBI) IN CONVERTIBLE FOREIGN EXCH ANGE. IMPORTING OF ANY OTHER CONDITION SUCH AS FURNISHING OF SOFTEX FORM O R OBTAINING OF STPI CLEARANCE IN THE DEFINITION OF 'EXPORT TURNOVER' BY THE LD. AO IS COMPLETELY UNWARRANTED AND AGAINST THE INDUSTRY PRACTICE. 10. FURTHER, SECTION 7 OF THE FOREIGN EXCHANGE MANA GEMENT ACT, 1999 PROVIDES FOR FURNISHING OF A DECLARATION TO THE RES ERVE BANK OR TO SUCH OTHER AUTHORITIES AS MAY BE SPECIFIED, CONTAINING PARTICU LARS IN RELATION TO PAYMENT FOR SUCH SERVICES BY THE EXPORTER OF SERVIC ES. THE SECTION PROVIDES AS FOLLOWS: '7. EXPORT OF GOODS AND SERVICES. - (1) EVERY EXPOR TER OF GOODS SHALL- (A) FURNISH TO THE RESERVE BANK OR TO SUCH OTHER AU THORITY A DECLARATION IN SUCH FORM AND IN SUCH MANNER AS MAY BE SPECIFIED , CONTAINING TRUE AND CORRECT MATERIAL PARTICULARS, INCLUDING THE AMO UNT REPRESENTING THE FULL EXPORT VALUE OR, IF THE FULL EXPORT VALUE OF T HE GOODS IS NOT ASCERTAINABLE AT THE TIME OF EXPORT, THE VALUE WHIC H THE EXPORTER, HAVING REGARD TO THE PREVAILING MARKET CONDITIONS, EXPECTS TO RECEIVE ON THE SALE OF THE GOODS IN A MARKET OUTSIDE INDIA; (B) FURNISH TO THE RESERVE BANK SUCH OTHER INFORMAT ION AS MAY BE REQUIRED BY THE RESERVE BANKFOR THE PURPOSE OF ENSU RING THE REALIZATION OF THE EXPORT PROCEEDS BY SUCH EXPORTER. (2) THE RESERVE BANK MAY, FOR THE PURPOSE OF ENSURI NG THAT THE FULL EXPORT VALUE OF THE GOODS OR SUCH REDUCED VALUE OF THE GOODS AS THE RESERVE BANK DETERMINES, HAVING REGARD TO THE PREVA ILING MARKET CONDITIONS, IS RECEIVED WITHOUT ANY DELAY, DIRECT A NY EXPORTER TO COMPLY WITH SUCH REQUIREMENTS AS IT DEEMS FIT. (3) EVERY EXPORTER OF SERVICES SHALL FURNISH TO THE RESERVE BANK OR TO SUCH OTHER AUTHORITIES A DECLARATION IN SUCH FORM A ND IN SUCH MANNER AS MAY BE SPECIFIED. CONTAINING THE TRUE AND CORRECT M ATERIAL PARTICULARS IN RELATION TO PAYMENT FOR SUCH SERVICES.' 11. THE RESERVE BANK OF INDIA IN EXERCISE OF THE PO WERS CONFERRED BY CLAUSE (3) OF SECTION 7 OF THE FOREIGN EXCHANGE MAN AGEMENT ACT, 1999, I.T.A. NO. 49/HYD/14 MICROSEMI INDIA PRIVATE LIMITED :- 5 - : NOTIFIED SOFTWARE EXPORT DECLARATION REQUIREMENTS I N PARA 6 OF THE FOREIGN EXCHANGE MANAGEMENT (EXPORT OF GOODS AND SERVICES) REGULATIONS, 2000. THE RELEVANT REGULATIONS ARE EXTRACTED HEREIN BELOW : '6. AUTHORITY TO WHOM DECLARATION IS TO BE FURNISHE D AND THE MANNER OF DEALING WITH THE DECLARATION: C. DECLARATION IN FORM SOFTEX (3) (I) THE DECLARATION INFORM SOFTEX IN RESPECT OF EXPORT OF COMPUTER SOFTWARE AND AUDIO/VIDEO/TELEVISION SOFTWARE SHALL BE SUBMITTED IN TRIPLICATE TO THE DESIGNATED OFFICIAL OF DEPARTMENT OF ELECTRONICS OF GOVERNMENT OF INDIA AT THE SOFTWARE TECHNOLOGY PARK S OF INDIA (STPIS) OR AT THE FREE TRADE ZONES (FTZS) OR EXPORT PROCESS ING ZONES (EPZS) IN INDIA. (II) AFTER CERTIFYING ALL THREE COPIES OF THE SOFTE X FORM, THE SAID DESIGNATED OFFICIAL SHALL FORWARD THE ORIGINAL DIRE CTLY TO THE NEAREST OFFICE OF 'THE RESERVE BANK AND RETURN THE DUPLICAT E TO THE EXPORTER. THE TRIPLICATE SHALL BE RETAINED BY THE DESIGNATED OFFI CIAL FOR RECORD. D. SUBMISSION OF DUPLICATE DECLARATION FORMS TO THE RESERVE BANK ON REALISATION OF THE EXPORT PROCEEDS, THE AUTHORIS ED DEALER SHALL, AFTER DUE CERTIFICATION, SUBMIT THE DUPLICATE OF THE GR/S DF, PP OR AS THE CASE MAY BE, SOFTEX FORM TO THE NEAREST OFFICE OF THE RE SERVE BANK.' 12. ON PERUSAL OF ABOVE REGULATIONS, IT IS AMPLY CL EAR THAT THE FURNISHING OF THE SOFTEX FORM AND CERTIFICATION OF THE SAID FO RM BY STPI IS A POST- FACTO PROCEDURE PRESCRIBED BY THE RESERVE BANK OF I NDIA TO ENSURE TIMELY AND APPROPRIATE COLLECTION OF EXPORT PROCEEDS. 13. THE LEGISLATURE IN ITS WISDOM HAS PROVIDED A PE RIOD OF SIX MONTHS FROM THE END OF PREVIOUS YEAR FOR SUCH COLLECTION. THUS, THE PROCEDURAL COMPLIANCE IN THE COURSE OF COLLECTION OF SUCH EXPO RT PROCEEDS I.E. FURNISHING OF SOFTEX FORM IN ACCORDANCE WITH PARA 6.C.3.1 AND CERTIFICATION BY STPI AUTHORITY IN ACCORDANCE WITH PARA 6.C.3.2 OF THE FO REIGN EXCHANGE MANAGEMENT (EXPORT OF GOODS AND SERVICES) REGULATIO NS, 2000 WITHIN THE I.T.A. NO. 49/HYD/14 MICROSEMI INDIA PRIVATE LIMITED :- 6 - : STIPULATED PERIOD SIX MONTHS FROM THE END OF THE FI NANCIAL YEAR SHOULD NOT RESULT IN REVENUE FROM EXPORT OF SOFTWARE MADE IN F Y 2009-10 TO BE TREATED AS 'EXPORT TURNOVER' OF THE SUBSEQUENT YEAR I.E. FY 2010-11. 14. CONSIDERING THE ABOVE, WE ARE OF THE OPINION TH AT EXPORTS MADE VIDE INVOICE DT. 31-03-2010 HAS TO BE CONSIDERED AS PART OF THE TURNOVER OF THIS YEAR AND AOS ACTION IN EXCLUDING THE SAME CANNOT B E SUPPORTED EITHER ON FACTS OR ON LAW. AS STATED EARLIER THE PROCEEDS OF THIS INVOICE WAS ALREADY RECEIVED DURING THE YEAR AS ADVANCE. SO THE FURNISH ING OF FORM UNDER FEMA IS ONLY A FORMALITY. THEREFORE, AO IS DIRECTED TO I NCLUDE THE TURNOVER AND ALLOW THE DEDUCTION ACCORDINGLY. 15. GROUND NO. 2.2 IS ON THE ALTERNATE CLAIM THAT I F THE INVOICE WHICH WAS RAISED ON 31-03-2010 WAS EXCLUDED THE SAME SHOULD A LSO BE EXCLUDED FROM THE TOTAL TURNOVER. SINCE WE HAVE UPHELD ASSESSEE S CONTENTIONS IN GROUND NO. 2.1, THIS CONTENTION IS ACADEMIC IN NATURE AT P RESENT. WE ALSO OBSERVE THAT AOS ACTION IN EXCLUDING ONLY FROM EXPORT TURN OVER CANNOT BE SUPPORTED ON THE REASON THAT IF ASSESSEE HAS NOT EX PORTED THE GOODS AS CLAIMED THEN, THE TOTAL TURNOVER ALSO SHOULD NOT IN CLUDE THE ABOUT AMOUNT. AO CANNOT EXCLUDE A PART OF THE TURNOVER ONLY FROM EXPORT TURNOVER WHILE INCLUDING THE SAME IN THE TOTAL TURNOVER. HE SHOUL D HAVE EXCLUDED THE SAME ON THE SAME REASONING WHICH HE HAS ADOPTED FOR EXCL UDING THE ABOVE INVOICE FROM THE EXPORT TURNOVER. THIS WAS NOT DONE FOR TH E SIMPLE REASON THAT AOS INTENTION SEEMS TO BE TO RESTRICT DEDUCTION U/S. 10 A. THEREFORE, ACTION OF THE AO CANNOT BE JUSTIFIED AT ALL. SINCE WE HAVE A LREADY ADJUDICATED THAT THE INVOICE OF 31-03-2010 HAS TO BE CONSIDERED AS PART OF EXPORT TURNOVER OF THE YEAR, THERE IS NO NEED TO ADJUDICATE ON THIS CONTEN TION. THE PRINCIPLE THAT WHATEVER AMOUNT IS EXCLUDED FROM EXPORT TURNOVER HA S TO BE EXCLUDED FROM TOTAL TURN IS APPROVED BY THE HONBLE BOMBAY HIGH C OURT IN THE CASE OF CIT VS. GEMPLUS JEWELLERY INDIA LTD., [42 DTR (BOM)] 73 AND ALSO BY SPECIAL BENCH OF ITAT IN ITO VS. SAKSOFT LTD [313 ITR (AT) 353]. SUFFICE TO SAY THAT ASSESSEE HAS MERIT IN ITS CONTENTIONS. I.T.A. NO. 49/HYD/14 MICROSEMI INDIA PRIVATE LIMITED :- 7 - : 16. THEREFORE, AO IS DIRECTED TO ALLOW THE CLAIM OF ASSESSEE AND INCLUDE THE INVOICE AMOUNT AS PART OF EXPORT TURNOVER OF TH E YEAR. TO THAT EXTENT, ORDER OF THE CIT(A) AND AO ARE SET ASIDE AND ASSESS EES GROUNDS ARE ALLOWED. 17. IN THE RESULT, APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST AUGUST, 2015 SD/- SD/- (P. MADHAVI DEVI) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 31 ST AUGUST, 2015 TNMM COPY TO 1. MICROSEMI INDIA PRIVATE LIMITED, 12 TH & 13 TH FLOORS, TOWER A, KAPIL TOWERS, SURVEY NO. 115/1, IT PARK, NANAKRAMGU DA, SERILINGAMPALLY MANDAL, HYDERABAD. 2. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-16(2), AAYAKAR BHAVAN, BASHEER BAGH, HYDERABAD. 3. CIT(APPEALS)-V, HYDERABAD. 4. CIT-VI, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.