DCIT, Bangalore V. M/s Span Outsourceing Pvt. Ltd., Bangalore

ITA 53/BANG/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8634 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 02-02-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 20-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUN IL KUMAR AGARWALJ
• Assessee Lawyers: C SANDEEP
• Section: 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, BANGALORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO. 53 / BANG/20 15 (ASSESSMENT YEAR: 2010 - 11 ) DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 6(1)(2), BANGALORE. VS. APPELLANT M/S. SPAN OUTSOURCING PVT. LTD. HSR LAYOUT, 6 TH SECTOR, BANGALORE - 560034. PAN: AAICS 2409 N RESPONDENT APPELLANT BY : SHRI SUNIL KUMAR AGARWAL, JCIT(DR). RESPONDENT BY : SHRI C.SANDEEP, CA. DATE OF HEARING : 02/02/2016 DATE OF PRONOUNCEMENT : 24 /02/2016 O R D E R PER I NTURI RAMA RAO, AM : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX - (APPEALS) - III [CIT(A)], BANGALORE, DATED 0 7/10 / 2014 FOR THE ASSESSMENT YEAR 2010 - 11. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE CIT (APPEALS) IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ITA NO . 53 /BANG/201 5 PAGE 2 OF 5 CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER TOWARDS TELECOMMUNICATION EXPENSES INCURRED BY THE ASSESSEE AND THEREBY HOLDING THAT THE AMOUNT INCURRED IN INDIAN CURRENCY BY THE ASSESSEE TOWARDS TELECOMMUNICATION EXPENSES SHOULD NOT BE EXCLUDED WI THOUT APPRECIATING THE FINDING OF THE AO THAT THE ASSESSEE IS IN THE BUSINESS OF DEVELOPMENT OF COMPUTER SOFTWARE AND THE ABOVE EXPENSES HAS DIRECT NEXUS WITH THE BUSINESS OF THE ASSESSEE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN DIRECTING THE AO TO REDUCE THE EXPENDITURE INCURRED IN FOREIGN CURRENCY BOTH FROM THE EXPORT TURNOVER AND AS WELL FROM TOTAL TURNOVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 10A OF THE INCOME TAX ACT WITHOUT APPRECIATING THE FACT THAT THE STATU TE ALLOWS EXCLUSION OF SUCH EXPENDITURE ONLY FROM THE EXPORT TURNOVER BY WAY OF SPECIFIC DEFINITION OF EXPORT TURNOVER AS ENVISAGED BY SUB CLAUSE (4) OF EXPLANATION 2 BELOW SUB SECTION 8 OF SECTION 10A. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO OF RS. 5,23,549/ - TOWARDS REMITTANCE OF EMPLOYEE'S CONTRIBUTION TO PROVIDENT FUND DUE TO DELAY BY THE ASSESSEE IN REMITTING THE SAME WITHOUT APPRECIATING THE LAW THAT THE REMITTANCE OF EMPLOYEE'S CONTRIB UTION TOWARDS PF IS GOVERNED BY SECTION 36(1)(VA) R.W.S. 2(24)(X) OF THE INCOME TAX ACT. 4. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS HUMBLY PRAYED THAT THE ORDER OF THE CIT(A) IN SO FAR AS IT RELATES TO THE ABOVE GROUND S MAY BE REVERED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5. THE APPELLATE CRAVES LEAVE TO ADD, TO ALTER, TO AMEND OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL. 3. THE FIRST GROUND OF APPEAL RAISED BY THE REVENU E RELATES TO THE TREATMENT GIVEN BY THE ASSESSING OFFICER [AO] TO TELECOMMUNICATION EXPENSES INCURRED BY THE ASSESSEE - COMPANY ITA NO . 53 /BANG/201 5 PAGE 3 OF 5 WHICH IS ENGAGED IN THE BUSINESS OF COMPUTER SOFTWARE AND CLAIMING DEDUCTION U/S 10A OF THE INCOME - TAX ACT,1961 [ THE ACT FOR SHO RT]. THE AO EXCLUDED THE TELECOMMUNICATION EXPENSES INCURRED O N EXPORT OF SOFTWARE FROM EXPORT TURNOVER. THE CONTENTION OF THE ASSESSEE - COMPANY IS THAT TELECOMMUNICATION EXPENSES WERE INCURRED IN INDIAN RUPEES, NOT IN FOREIGN CURRENCY AND THEREFORE THE SA ME SHOULD NOT BE REDUCED FROM THE EXPORT TURNOVER. 3.1 ON APPEAL BEFORE THE LD. CIT(A), THIS GROUND OF APPEAL WAS ALLOWED BY THE LD. CIT(A) BY HOLDING THAT EXPLANATION 2(IV) OF SEC.10A IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE AS THE TELECOM MUNICATION CHARGES ATTRIBUTABLE TO DELIVERY OF COMPUTER SOFTWARE IS NOT INCURRED IN FOREIGN CURRENCY , PLACING RELIANCE ON THE DECISION OF THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF CALIFORNIA SOF W ARE C O . LTD. V. ACIT ( 118 TTJ 842 ) . 3.2 WE HEAR D THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS UNDISPUTED THAT TELECOMMUNICATION EXPENSES ATTRIBUTABLE TO DELIVERY OF COMPUTER SOFTWARE ARE INCURRED IN INDIAN CURRENCY. THEREFORE, ON THE PLAIN READING OF THE PROVISIONS OF EXPLANATION 2 (IV) OF SEC.10A, IT IS SELF - EXPLANATORY THAT ACTUAL EXPENSES INCURRED IN FOREIGN CURRENCY ARE REQUIRED TO BE REDUCED FROM THE EXPORT TURNOVER. THE CO - ORDINATE BENCH OF CHENNAI IN THE CASE OF CALIFORNIA SOFTARE C O . LTD. CITED SUPRA ALSO HELD THAT THE INTEN TION OF THE LEGISLATURE IS ONLY TO REDUCE THOSE ITA NO . 53 /BANG/201 5 PAGE 4 OF 5 EXPENDITURE WHICH IS INCURRED IN CONVERTIBLE FOREIGN CURRENCY NOT TO DISALLOW THE EXPENDITURE INCURRED ON TELECOMMUNICATION EXPENDITURE IN INDIAN RUPEES, WE ARE IN TOTAL AGREEMENT WITH THE RATIO OF THE DECISI ON OF THE CO - ORDINATE BENCH AND ACCORDINGLY THE GROUND OF APPEAL BY THE REVENUE IN THIS REGARD IS DISMISSED. 4. THE SECOND GROUND OF APPEAL RELATES TO EXCLUSION OF THE EXPENDITURE INCURRED IN FOREIGN CURRENCY FROM THE EXPORT TURNOVER. THE CONTENTION OF THE ASSESSEE - COMPANY IS THAT WHEN THE EXPENDITURE IS REDUCED FROM EXPORT TURNOVER, THE SAME IS REQUIRED TO BE REDUCED FROM THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 10A OF THE ACT. THE LD. CIT(A) ACCEPTED THE CONTENTION OF THE AS SESSEE - COMPANY PLACING RELIANCE ON THE DECISION OF THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS TATA ELXSI (349 ITR 98). SINCE THE LD. CIT(A) FOLLOWED THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF TATA ELXSI (SUPR A) FOR ALLOWING THE CLAIM OF THE DEDUCTION OF THE ASSESSEE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE REASONING OF THE LD. CIT(A). HENCE, THE GROUND OF APPEAL RAISED BY THE REVENUE IN THIS REGARD IS ALSO DISMISSED. 5. THE THIRD GROUND RELATES TO A LLOWANCE OF DEDUCTION ON ACCOUNT OF EMPLOYEES CONTRIBUTION TO PF U/S 36(1)(VA) READ WITH SE.2(24)(X) OF THE ACT. ITA NO . 53 /BANG/201 5 PAGE 5 OF 5 THE FACTS RELATING TO THIS GROUND ARE THAT THERE WAS A DELAY IN REMITTANCE OF EMPLOYEES CONTRIBUTION TO PF AND THEREFORE, ACCORDING TO THE A O, UNDER THE PROVISIONS OF SEC.36(1)(VA) READ WITH SED.2(24)(X) OF THE ACT, IT SHOULD BE TREATED AS INCOME AND NO DEDUCTION SHOULD BE ALLOWED FOR DELAYED REMITTANCE. THE LD. CIT(A), FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN TH E CASE OF M /S ESSAE TERA OKA PVT. LTD. VS. DCIT ( 366 ITR 408) ALLOWED THE CLAIM. THE CONTENTION OF THE REVENUE CANNOT BE ACCEPTED IN VIEW OF THE JURISDICTIONAL HIGH COURT JUDGMENT IN THE ABOVE CASE. THAT APART, WE MAY ALSO STATE THAT SEVERAL HIGH COURTS ALSO FOLLOW ED THE SAME RATIO. HENCE, WE DO NOT INTEND TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) IN THIS REGARD ON THIS GROUND OF APPEAL. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF FEBRUARY, 2016 SD/ - (VIJAY PAL RAO) SD/ - (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE : BANGALORE D A T E D : 24/02/2016 SRINIVASULU, SPS COPY TO : 1 APPE LLANT 2 RESPONDENT 3 CIT(A) - II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE