THE DCIT, Hyderabad V. M/s Viranchi technologies Ltd, Secunderabad

ITA 554/HYD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3248 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-06-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 19-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 10B; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI G.C.GUPTA, VICE PRESIDENT AND SHRI AKBE R BASHA, ACCOUNTANT MEMBER ITA NO.554/HYD/2010 : ASSESSMENT YEAR 2 003-04 DCIT, CIR-3 (3), -V- HYDERABAD. (APPELLANT) M/S VIRANCHI TECHNOLOGIES LTD., SECUNDERABAD. (PAN AAACV 6672 N) (RESPONDENT) APPELLANT: SHRI B.V. PRA SAD REDDY RESPONDENT: SHRI M. V. JOSH I O R D E R PER AKBER BASHA, AM:- THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER OF THE CIT (A)-IV, HYDERABAD DATED 29-1-2010 AND IT PERTAINS TO THE ASSESSMENT YEAR 2003-04. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE READS AS UNDER:- THE CIT(A)S ORDER DIRECTING TO EXCLUDE COMMUNICAT ION CHARGES AND TECHNICAL CONSULTANCY CHARGES FROM BOTH THE TOTAL TURNOVER AND THE EXPORT TURNOVER FOR THE PURP OSE OF ITA NO.584 OF 2010 VIRANCHI TECHNOLOGIES LIMITED, HYD. ============================ 2 COMPUTING THE ELIGIBLE DEDUCTION U/S 10B OF THE IT ACT, IS AGAINST THE PROVISIONS OF SECTION 10 B OF THE I T A CT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPA NY, M/S VIRINCHI TECHNOLOGIES LIMITED, IS ENGAGED IN THE BU SINESS OF SOFTWARE DEVELOPMENT AND IT HAS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEARS 2003-04 ON 29-10-2003 DECLARING TO TAL INCOME OF RS.8,19,520/- AFTER CLAIMING EXEMPTION UNDER SEC TION 10B OF THE ACT FOR RS.66,96,936/-. THE ASSESSMENT UNDER SECT ION 143(3) WAS COMPLETED ON 28-2-2006. THE ASSESSING OFFICER A LLOWED EXEMPTION U/S 10B OF THE ACT AT RS.51,12,960/- AS A GAINST RS.66,96,936/- ON THE CONTENTION THAT THE EXPENDITU RE OF RS.79.46 LAKHS INCURRED IN FOREIGN EXCHANGE WAS NOT REDUCED FROM THE EXPORT TURNOVER WHILE COMPUTING THE DEDUCTION UNDER SECTION 10B OF THE ACT AND ACCORDINGLY THE ASSESSMENT WAS FINAL IZED DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 22,67,400/-. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, TH E ASSESSEE WENT IN APPEAL BEFORE THE CIT (A). ON APPEAL, THE CIT (A) HELD IN PARA 4.2 OF HIS ORDER WHICH READS AS UNDER:- I HAVE GONE THROUGH THE SUBMISSIONS OF THE APPELLAN T. IT IS SEEN THAT HONBLE JURISDICTIONAL ITAT IN THE CASE OF ITO VS. DE BLOCK INDIA SOFTWARE PVT. LTD., HYDERABAD IN ITA NO.983/HYD/2006, HAVE OPINED THAT EXPENDITURE INCUR RED IN FOREIGN CURRENCY TOWARDS TELECOMMUNICATION EXPENSES ETC., WHICH DO NOT HAVE ANY ELEMENT OF PROFIT HAVE TO BE EXCLUDED BOTH FROM THE TOTAL TURNOVER AND THE EXPORT TURNOVE R FOR THE PURPOSES OF COMPUTING DEDUCTION UNDER SECTION 10A. A SIMILAR VIEW HAS BEEN TAKEN IN THE CASE OF M/S PRITHVI INFO RMATION, WHICH HAS BEEN RELIED UPON BY THE APPELLANT HOLDING THAT IN ORDER TO MAKE THE FORMULA FOR THE PURPOSE OF EXPORT TURN OVER ITA NO.584 OF 2010 VIRANCHI TECHNOLOGIES LIMITED, HYD. ============================ 3 WORKABLE, ON HAS TO GIVEN A SCHEMATIC INTERPRETATIO N OF THE FORMULA AND THEREFORE, ELIMINATION OF SUCH EXPENDIT URE SHOULD BE BOTH FROM THE DENOMINATOR AND THE NUMERATOR. A SIM ILAR VIEW HAS BEEN ECHOED IN THE DECISION IN THE CASE OF ITO VS. SAK SOFT LTD. (313 ITR (AT) 353) (CHENNAI) (SB), WHEREIN SUPP ORT FOR THIS PROPOSITION WAS DRAWN FROM THE DECISION OF THE HON BLE APEX COURT IN THE CASE OF CIT VS. LAKSHMI MACHINE WORKS (290 ITR 6676). RESPECTFULLY FOLLOWING THE ABOVE REFERRED D ECISIONS, THE ASSESSING OFFICER IS DIRECTED TO EXCLUDE COMMUNICAT ION CHARGES AND TECHNICAL CONSULTANCY CHARGES FROM BOTH THE TOT AL TURNOVER AND THE EXPORT TURNOVER FOR THE PURPOSE OF COMPUTIN G THE ELIGIBLE DEDUCTION U/S 10B. 3. AT THE OUTSET, WE FIND THAT, ON SIMILAR AND IDEN TICAL FACTS, WE HAVE ALREADY DECIDED THE ISSUE IN FAVOUR OF THE ASS ESSEE IN THE CASE OF PRITHVI INFORMATION SOLUTIONS LIMITED IN I TA NO.225/HYD/05 FOR ASSESSMENT YEAR 2001-02. RESPECT FULLY FOLLOWING THE ABOVE DECISION OF THE TRIBUNAL, WE UP HOLD THE FINDINGS OF THE CIT (A) ON THIS ISSUE AND REJECT TH E GROUNDS RAISED BY THE REVENUE FOR THE YEAR UNDER CONSIDERATION. 4. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. ORDER WAS PRONOUNCED IN THE COURT ON 24- 06 -2011. SD/- (G.C. GUPTA) SD/- (AKBER BASHA) VICE PRESIDENT ACCOUNTANT MEMBER DT. 24-06-2011. JMR* ITA NO.584 OF 2010 VIRANCHI TECHNOLOGIES LIMITED, HYD. ============================ 4 COPY FORWARDED TO: 1. 2. 3. 4. 5. P.MURALI & COMPANY, CAS, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD. DCIT, CIR-3(3) HYDERABAD. CIT (A)-IV, HYDERABAD. CIT, AP, HYDERABAD. THE DR, ITAT, HYDERABAD.