ACIT, Bangalore V. M/s Igate Global solutions Ltd., Bangalore

ITA 624/BANG/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2067 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-07-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 15-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JASON P BOAZ
• Assessee Lawyers: H N KHINCHA
• Section: 143(3)

Judgement Text

PAGE 1 OF 5 ITA NO.624 & 625/BANG/09 1 IN THE INCOME TAX APPELLATE TRIBUNA L, BANGALORE BENCH A BEFORE SHRI GEORGE GEORGE K, J.M. AND SHRI A MOHAN ALANKAMONY, A.M ITA NO.624 & 625/BANG/2009 (ASSESSMENT YEARS 2002-03 AND 2003-04) THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-11(4), BANGALORE. - APPELLANT VS M/S IGATE GLOBAL SOLUTIONS LTD., NO.158-162(P) & 165(P)-170(P), EPIP PHASE II, WHITEFIELD, BANGALORE-66. - RESPOND ENT APPELLANT BY : SHRI JASON P BOAZ RESPONDENT BY : SHRI H N KHINCHA ORD ER PER GEORGE GEORGE K : THESE APPEALS, FILED BY THE REVENUE, ARE DIRECTED AGAINST THE CONSOLIDATED ORDER OF LEARNED CIT(A)-I, BANGALORE DATED 20TH MARCH, 2009 IN RELATION TO ASST. YEARS 20 02-03 AND 2003-04. THE ORDER OF THE CIT(A) EMANATES OUT OF T HE ORDER OF THE ASSISTANT COMMISSIONER OF INCOME TAX DATED 31.1 2.2007 PASSED U/S 143(3) R.W.S. 147 OF THE ACT. 2. SINCE THE ISSUES INVOLVED IN BOTH THE APPEALS A RE COMMON, THEY ARE DISPOSED OFF BY THIS CONSOLIDATED OR DER FOR THE SAKE OF CONVENIENCE AND BREVITY. PAGE 2 OF 5 ITA NO.624 & 625/BANG/09 2 3. TWO ISSUED ARE INVOLVED IN THESE APPEALS AND TH EY ARE AS FOLLOWS:- I) WHETHER THE CIT(A) IS JUSTIFIED IN HOLDING THAT THE EXPENDITURE INCURRED IN FOREIGN CURRENCY ON TRAVEL AND TELECOMMUNICATION EXPENSES IS TO BE REDUCED FROM THE TOTAL TURNOVER WHEN THE SAME IS REDUCED FROM THE EXPORT TURNOVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 10A OF THE ACT. II) WHETHER THE CIT(A) IS JUSTIFIED IN HOLDING THAT THE ASSESSING OFFICER IS NOT CORRECT IN REDUCING 12% AND 48% OF PROFITS OF THE BUSINESS, FOR ASST. YEARS 2002-03 AND 2003-04 RESPECTIVELY, FOR THE REASON IT CONSTITUTE PROFITS DERIVED FROM RENDERING SERVICES OUTSIDE INDIA AND HENCE NOT ELIGIBLE FOR DEDUCTION U/S 10A OF THE ACT. 3.1 AT THE VERY OUTSET, IT IS SUBMITTED BY BOTH THE PARTIES THAT THE FIRST ISSUE MENTIONED ABOVE IS COVERED BY T HE ORDER OF THE TRIBUNAL IN ASSESSEE'S OWN CASE (ITA NOS.248 & 249/ BANG/2007 DATED 27TH NOVEMBER, 2007) AS WELL AS THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ITO V M/S SAK SOFT LTD. (2009) 313 ITR (AT) 353 (CHENNAI) (S.B.), WHEREIN T HE SPECIAL BENCH HELD AS FOLLOWS:- 'WE HOLD THAT FOR THE PURPOSE OF APPLYING THE FORMULA UNDER SUB-SECTION (4) OF SECTION 10B, THE FREIGHT, TELECOM CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF ARTICLES OR THINGS OR COMPUTER SOFTWARE OUTSIDE INDIA OR THE EXPENSES, IF ANY, INCURRED IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICES OUTSIDE INDIA ARE TO BE PAGE 3 OF 5 ITA NO.624 & 625/BANG/09 3 EXCLUDED BOTH FROM THE EXPORT TURNOVER AND FROM THE TOTAL TURNOVER, WHICH ARE THE NUMERATOR AND THE DENOMINATOR RESPECTIVELY IN THE FORMULA'. 3.2 AS IT IS NOT DISPUTED BY THE REVENUE THAT THE A BOVE ISSUE IS ALREADY COVERED BY THE AFORESAID DECISIONS, THE FIRST ISSUE MENTIONED ABOVE IS DECIDED IN FAVOUR OF ASSESSEE AN D WE CONFIRM THE CIT(A)'S DIRECTION TO REDUCE THE EXPENDITURE IN CURRED IN FOREIGN CURRENCY ON TRAVEL AND TELECOMMUNICATION EXP ENSES NOT ONLY FROM THE EXPORT TURNOVER BUT ALSO FROM THE TOTAL TU RNOVER FOR THE PURPOSE OF DEDUCTION U/S 10A OF THE ACT. 4. AS REGARDS THE SECOND ISSUE MENTIONED ABOVE, TH E ASSESSING OFFICER IN THE ASSESSMENT COMPLETED U/S 1 43(3) R.W.S. 147 (DATED 31.12.2007) WAS OF THE VIEW, SINCE ASSES SEE IS INVOLVED IN PROVIDING TECHNICAL SERVICES, IT IS NOT ENTITLED TO DEDUCTION U/S 10A OF THE I T ACT, 1961, ON THE PROFITS EARNED FROM TE CHNICAL SERVICES. THIS PROFIT FROM TECHNICAL SERVICES WAS WORKED OUT ON AN ESTIMATED BASIS FOR THE ASST. YEAR 2002-03 BY COMPARING THE TO TAL TRAVELING EXPENSES TO TRAVEL EXPENSES IN FOREIGN CURRENCY. AS THE TRAVELING EXPENSES IN FOREIGN CURRENCY TO TOTAL TRAVELING EXPE NSES WORKED OUT TO 12% IN ASST. YEAR 2002-03, 12% OF THE 10A PROFIT WAS REMOVED FROM THE PROFIT ELIGIBLE U/S 10A. 4.1 SIMILARLY, FOR THE ASST. YEAR 2003-04, THE PERCE NTAGE IS WORKED OUT AT 48% BY CONSIDERING THE EXPENDITURE OF 6,82,84,000/- BEING FOREIGN CURRENCY TRAVELING EXPEN SES AND DIRECT PAGE 4 OF 5 ITA NO.624 & 625/BANG/09 4 EXPENSES ATTRIBUTABLE TO TECHNICAL EXPENSES ESTIMAT ED AT RS.1,25,84,52,500/-. THE ORDERS U/S 143(3) R.W.S. 147 WERE CARRIED IN APPEAL AND THE COMMISSIONER OF INCOME TAX (APPEA L) AT PARA 7 AND 7.1 OF THE APPELLATE ORDER HELD THAT THE APPELL ANT WAS NOT INVOLVED IN TECHNICAL CONSULTANCY. (AS THERE WERE S OME ERRORS IN PARA 7 AND 7.1, THE COMMISSIONER OF INCOME TAX (APP EAL) PASSED A CORRIGENDUM ON 8.6.2009). A COPY OF THE CORRIGENDUM IS PLACED ON RECORD. 4.2 IT IS POINTED OUT BY THE LEARNED AR THAT THIS I SSUE IS COVERED IN ASSESSEE'S OWN CASE FOR THE ASST. YEAR 20 01-02 (ITA NO.2291/BANG/2004 DATED 11TH AUGUST, 2006) WHEREIN THE TRIBUNAL FOLLOWED ITS EARLIER ORDERS IN THE CASE OF M/S INFO SYS TECHNOLOGIES LTD. (ITA NOS.50,793 TO 795, 742 & 732 TO 734 DATED 31.3.2005). 4.3 THE LEARNED DR DID NOT CONTROVERT THE SUBMISSI ON MADE BY THE ASSESSEE'S COUNSEL. 4.4 ON THE SECOND ISSUE, AS RIGHTLY POINTED OUT BY T HE LEARNED COUNSEL FOR THE ASSESSEE, THE MATTER STANDS COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEE'S OWN CASE (IT A NO.2291/04 DT.11.8.2006 AND ITA NOS.391 & 392/07 DATED 30.10.2 007). THE FACTS IN ASST. YEAR 2001-02 BEING IDENTICAL FOR THE ASST. YEAR UNDER CONSIDERATION, WE ARE INCLINED TO FOLLOW THE COORDI NATE BENCH OF THE TRIBUNAL AND UPHOLD THE ORDER OF THE CIT(A). PAGE 5 OF 5 ITA NO.624 & 625/BANG/09 5 5. IN THE RESULT, THE APPEALS FILED BY REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 18TH DECEMBER, 20 09. SD/- SD/- (A MOHAN ALANKAMONY) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED : 18/12/2009 COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF 7. GF, ITAT, NEW DELHI. MSP/17/12/ BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.