DCIT, Bangalore V. M/s Tektronix Engineering Development (india) Pvt. Ltd., Bangalore

ITA 655/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57506 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 10-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS JOSE JT
• Section: 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER ITA NO. 655/BANG/2011 ASSESSMENT YEAR : 2005-06 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 12(4), BANGALORE. VS. M/S. TEKTRONIX ENGINEERING DEVELOPMENT (INDIA) PVT. LTD., SAMRAH PLAZA, NO.4/2, ST. MARKS ROAD, BANGALORE 560 001. PAN: AAACT 7289F APPELLANT RESPONDENT APPELLANT BY : SMT. SUSAN THOMAS JOSE, JT.CIT(DR) RESPONDENT BY : NONE DATE OF HEARING : 01.03.2013 DATE OF PRONOUNCEMENT : 01.03.2012 O R D E R PER N.K. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE O RDER DATED 10.02.2011 OF THE CIT(APPEALS)-III, BANGALORE. 2. THE ONLY EFFECTIVE GROUND RAISED IN THIS APPEAL READS AS UNDER: 2. THE CIT(A) ERRED IN LAW IN DIRECTING THE AO TO EXCLUDE TELECOMMUNICATION CHARGES OF RS.40,00,358/-, INSURA NCE CHARGES ITA NO.655/BANG/11 PAGE 2 OF 5 OF RS.5,91,139/- AND EXPENDITURE INCURRED IN FOREIG N CURRENCY AMOUNTING TO RS.1,48,43,230/- ATTRIBUTABLE TO THE D ELIVERY OF SOFTWARE FROM TOTAL TURNOVER FOR THE PURPOSE OF COM PUTATION OF DEDUCTION U/S. 10A OF THE I.T. ACT, 1961. 3. THE FACTS OF THE CASE RELATING TO THIS ISSUE UND ER CONSIDERATION IN BRIEF ARE THAT THE ASSESSEE WAS ENGAGED IN THE BUSI NESS OF EXPORT OF COMPUTER SOFTWARE AND FILED ITS RETURN OF INCOME ON 30.10.2005 DECLARING TOTAL INCOME OF RS.73,10,180. LATER ON THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF HEARING, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD INCLUDED THE FOLLOWING EXPENSES WITHIN THE EXPORT TURNOVER FOR THE PURPOSE OF COMPUTATION OF INCOME U/S. 10A O F THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT IN SHORT ]. FREIGHT : NIL TELECOMMUNICATION : RS.40,00,358 INSURANCE : RS. 5,91,139 ----------------- RS.45,91,497 ----------------- 4. THE AO REDUCED THOSE EXPENSES FROM THE EXPORT TU RNOVER. HE ALSO EXCLUDED THE FOLLOWING EXPENSES INCURRED IN FOREIGN EXCHANGE FROM THE EXPORT TURNOVER: TRAVEL EXPENSES : RS. 48,41,516 PAYMENT TO TEKTRONICS, USA : RS. 44,47,867 DATA LINE : RS. 26,97,734 OTHERS : RS. 28,56,113 ------------------ RS.1,48,43,230 ------------------ ITA NO.655/BANG/11 PAGE 3 OF 5 5. THE ASSESSEE CARRIED THE MATER TO THE LD. CIT(AP PEALS), WHO DIRECTED THE AO TO REDUCE THE AFORESAID EXPENSES FR OM THE EXPORT TURNOVER AS WELL AS FROM THE TOTAL TURNOVER AND THE RELEVANT FINDINGS GIVEN BY HIM IN PARA 5 AND 5.1 READ AS UNDER: 5.0. I HAVE HEARD THE ARS AND THE WRITTEN SUBMISS IONS FILED BY THEM. THE JUDICIAL DECISIONS RELIED ON BY THE APPEL LANT WERE CAREFULLY PERUSED. IT HAS BEEN HELD BY THE HONORABL E BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TA X VS GEM PLUS JEWELLERY INDIA LIMITED (SUPRA), CHENNAI SPECI AL BENCH IN THE CASE OF SAK SOFT LIMITED (SUPRA), JURISDICTIONA L BANGALORE INCOME TAX APPELLATE TRIBUNAL ('ITAT') IN A NUMBER OF CASES, THAT IF ANY PART OF EXPENSES IS TO BE EXCLUDED FROM THE EXPORT TURNOVER, THE SAME OUGHT TO BE EXCLUDED FROM THE TO TAL TURNOVER TOO, BASED ON THE DECISION REFERRED ABOVE AND ALSO ON THE FOLLOWING DECISIONS: - M/S TATA ELXSI LTD (ITA NO 315/BANG/2006 DATED O CTOBER 16, 2007) - M/S INFOSYS TECHNOLOGY LTD (ITA NO 653 AND 969/ BANG/2006 DATED OCTOBER 17, 2007) - DELL INTERNATIONAL SERVICES INDIA LTD (ITA NO 25 1 & 309/BANG/07 DATED NOVEMBER 16, 2007) 5.1. THEREFORE, RESPECTFULLY APPLYING THE RATIO OF THE ABOVE DECISIONS AND THE DECISION OF THE JURISDICTIONAL BA NGALORE ITAT WHICH IS IN FAVOUR OF THE APPELLANT, I HEREBY DIREC T THE AO TO EXCLUDE THE EXPENDITURE INCURRED TOWARDS TELECOMMUN ICATION OF RS.40,00,358, INSURANCE EXPENSES AMOUNTING TO RS 5, 91,139 AND EXPENDITURE INCURRED IN FOREIGN CURRENCY AMOUNTING TO RS.1,48,43,230 FROM THE EXPORT TURNOVER AND CORRESP ONDINGLY FROM THE TOTAL TURNOVER OF THE APPELLANT WHILE COMP UTING DEDUCTION U/S 10A OF THE ACT. ACCORDINGLY, THIS GRO UND OF APPEAL IS TREATED AS ALLOWED. NOW THE DEPARTMENT IS IN APPEAL. 6. NOBODY WAS PRESENT ON BEHALF OF THE ASSESSEE . WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DR AND CAREFU LLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IT IS NOTICED THAT AN IDENTICAL ISSUE HAS BEEN ITA NO.655/BANG/11 PAGE 4 OF 5 DECIDED IN FAVOUR OF THE ASSESSEE BY THE SPECIAL BE NCH OF ITAT CHENNAI IN THE CASE OF ITO V. SAK SOFT LTD. 313 ITR (AT) 353 (CHENNAI)(SB) WHEREIN IT HAS BEEN HELD AS UNDER: TO SAY THAT IN THE ABSENCE OF ANY DEFINITION OF T OTAL TURNOVER FOR THE PURPOSE OF SECTION 10B, THERE IS NO AUTHORITY TO EXCLUDE ANYTHING FROM THE EXPRESSION AS UNDERSTOOD IN GENERAL PARLANCE WOULD BE WRONG, AS THERE HAS TO BE AN ELEM ENT OF TURNOVER IN THE RECEIPT IF IT HAS TO BE INCLUDED IN THE TOTAL TURNOVER. THAT ELEMENT IS MISSING IN THE CASE OF FR EIGHT, TELECOM CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY O F THE GOODS OUTSIDE INDIA AND EXPENSES INCURRED IN FOREIGN EXCH ANGE IN CONNECTION WITH THE PROVIDING OF TECHNICAL SERVICES OUTSIDE INDIA. THESE RECEIPTS CAN ONLY BE RECEIVED BY THE ASSESSEE AS REIMBURSEMENT OF SUCH EXPENSES INCURRED BY HIM. MER E REIMBURSEMENT OF EXPENSES CANNOT HAVE AN ELEMENT OF TURNOVER. IT IS ONLY IN RECOGNITION OF THIS POSITION THAT IN THE DEFINITION OF EXPORT TURNOVER IN SECTION 10B, THE AFORESAID TWO ITEMS HAVE BEEN DIRECTED TO BE EXCLUDED. SECONDLY, THE DEFINIT ION OF EXPORT TURNOVER CONTEMPLATES THAT THE AMOUNT RECEIVED BY T HE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE SHOULD REPRESENT CONS IDERATION IN RESPECT OF THE EXPORT. ANY REIMBURSEMENT OF THE TWO ITEMS OF EXPENSES MENTIONED IN THE DEFINITION CAN UNDER NO C IRCUMSTANCES BE CONSIDERED TO REPRESENT CONSIDERATION FOR THE EXPORT OF THE COMPUTER SOFTWARE OR ARTICLES OR THINGS. THUS, THE EXPRESSION TOTAL TURNOVER WHICH IS NOT DEFINED IN SECTION 10 B SHOULD ALSO BE INTERPRETED IN THE SAME MANNER. THUS, THE TWO IT EMS OF EXPENSES REFERRED TO IN THE DEFINITION OF EXPORT T URNOVER CANNOT FORM PART OF THE TOTAL TURNOVER SINCE THE RECEIPTS BY WAY OF RECOVERY OF SUCH EXPENSES CANNOT BE SAID TO REPRESE NT CONSIDERATION FOR THE GOODS EXPORTED SINCE TOTAL TURNOVER IS NOTHING BUT THE AGGREGATE OF THE DOMESTIC TURNOVER AND THE EXPORT TURNOVER. IN THE FORMULA PRESCRIBED BY SECTION 10B( 4) THE FIGURE OF EXPORT TURNOVER HAS TO BE THE SAME BOTH IN THE N UMERATOR AND IN THE DENOMINATOR OF THE FORMULA. IT FOLLOWS THAT THE TOTAL TURNOVER CANNOT INCLUDE THE TWO ITEMS OF EXPENSES R ECOVERED BY THE ASSESSEE AND REFERRED TO IN THE DEFINITION OF EXPORT TURNOVER. 7. THE AFORESAID DECISION HAD BEEN CONSIDERED AND A FFIRMED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF TATA ELXSI LTD. & ORS. 2011- ITA NO.655/BANG/11 PAGE 5 OF 5 TIOL-684-HC-KAR-II WHEREIN IT HAS BEEN HELD THAT FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S. 10A OF THE ACT, IF AN Y EXPENDITURE IS EXCLUDED FROM THE EXPORT TURNOVER, THE SAME HAS TO BE EXCLUD ED FROM THE TOTAL TURNOVER ALSO. A SIMILAR VIEW HAS ALSO BEEN TAKEN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GEM PLUS JEWELLERY INDIA LTD. 2010-TIOL-456- HC-MUM-IT . WE, THEREFORE, BY CONSIDERING THE TOTALITY OF TH E FACTS AS DISCUSSED HEREINABOVE, ARE OF THE VIEW THAT THE LD. CIT(APPEALS) WAS JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE AND DIRECTING THE AO TO EXCLUDE THE EXPENSES BOTH FROM EXPORT TURNOVER AS W ELL AS TOTAL TURNOVER WHILE CALCULATING THE DEDUCTION U/S. 10A OF THE ACT . WE THEREFORE FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LD. CIT(APPE ALS) ON THIS ISSUE. 8. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS D ISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 1 ST DAY OF MARCH, 2012. SD/- SD/- ( GEORGE GEORGE K. ) ( N.K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 1 ST MARCH , 2012. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. C IT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.