DCIT, V. M/s Unisys India pvt. Ltd., Bangalore

ITA 691/BANG/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95254 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 10-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MADHUKAR DHAKAPPA
• Keywords: Business income; Question of law
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI VIJAYPAL RAO, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.691 /BANG/2013 (ASST. YEAR 2008-09) THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-12(5), BANGALORE. . APPELLANT VS. M/S UNISYS INDIA PVT. LTD., #4 TH & 5 TH FLOOR, BLOCK WRAP SJR PARK, WHITE FILED AREA, NO.13,14 & 15, , K.R PURAM, BANGALORE-560 066. . RESPONDENT APPELLANT BY : SHRI SARAVANAN, JCIT RESPONDENT BY : SHRI MADHUKAR DHAKAPPA, C.A DATE OF HEARING : 15-9-2015 DATE OF PRONOUNCEMENT : 24-9-2015 O R D E R PER SHRI VIJAYPAL RAO, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 6/3/2013 OF COMMISSIONER OF INCOME-TAX (APPEALS) - III, BANGALORE FOR THE ASSESSMENT YEAR 2008-09. ITA NO.691/B/13 2 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN LAW IN DIRECTING THE AO TO EXCLUDE THE REIMBURSEMENT OF EXPENSES OF TELECOMMUNICATION CHARGES AND BANDWIDTH & INTERNET CHARGES AND TRAVEL EXPENDITURE INCURRED IN FOREIGN CURRENCY BOTH FROM THE EXPORT TURNOVER AS WELL AS F ROM TOTAL TURNOVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 10A WITHOUT APPRECIATING THE FACT THA T THE STATUTE ALLOWS EXCLUSION OF SUCH EXPENDITURE ONLY F ROM EXPORT TURNOVER BY WAY OF SPECIFIC DEFINITION OF EX PORT TURNOVER AS ENVISAGED BY SUB-CLAUSE (4) OF EXPLANAT ION 2 BELOW SUB-SEC (8) OF SEC. 10A AND THE TOTAL TURNOVE R HAS NOT BEEN DEFINED IN THIS SECTION. II. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT(A) IS SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND THAT OF THE AO MAY BE RESTORED. 3. THE ONLY ISSUE RAISED IN THE APPEAL OF THE REVEN UE IS REGARDING THE EXPENDITURE INCURRED ON TELECOMMUNICATION CHARG ES AND BANDWIDTH & INTERNET CHARGES AND TRAVEL EXPENDITURE INCURRED IN ITA NO.691/B/13 3 FOREIGN CURRENCY EXCLUDED BY THE AO FROM THE EXPORT TURNOVER FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 10A. 4. WE HAVE HEARD THE LEARNED DR AS WELL AS LEARNED AR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE AO HAS EXCLUDED THE EXPENDITURE INCURRED ON TELECOMMUNICATION CHARGES B ANDWIDTH & INTERNET CHARGES AND TRAVEL EXPENDITURE INCURRED IN FOREIGN CURRENCY FROM EXPORT TURNOVER WHILE COMPUTING THE DEDUCTION U/S 10A. ON APPEAL, THE CIT(A) HAS DIRECTED THE AO TO EXCLUDE T HE SAID EXPENDITURE FROM THE TOTAL TURNOVER AS WELL WHILE COMPUTING THE DEDUCTION U/S 10A BY FOLLOWING THE DECISION OF HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF TATA ELXSI, 349 ITR 98. AT THE OUTSET WE NOTE THAT THIS ISSUE IS NOW COVERED BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF TATA ELXSI (SUPRA), THE RELEVANT FINDING OF THE HONBLE JURISDICTIONAL HIGH COURT READS AS FOLLOWS:- ..SECTION 10A IS ENACTED AS AN INCENTIVE TO EXPORTERS TO ENABLE THEIR PRODUCTS TO BE COMPETITIV E IN THE GLOBAL MARKET AND CONSEQUENTLY EARN PRECIOUS FOREIGN EXCHANGE FOR THE COUNTRY. THIS ASPECT HAS TO BE BORNE IN MIND. WHILE COMPUTING THE CONSIDERATI ON RECEIVED FROM SUCH EXPORT TURNOVER, THE EXPENSES ITA NO.691/B/13 4 INCURRED TOWARDS FREIGHT, TELECOMMUNICATION CHARGES , OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE AR TICLES OR THINGS OR COMPUTER SOFTWARE OUTSIDE INDIA, OR EXPENSES IF ANY INCURRED IN FOREIGN EXCHANGE, IN PROVIDING THE TECHNICAL SERVICES OUTSIDE INDIA SHOU LD NOT BE INCLUDED. HOWEVER, THE WORD TOTAL TURNOVER IS NOT DEFINED FOR THE PURPOSE OF THIS SECTION. IT IS BECAUSE OF THIS OMISSION TO DEFINE TOTAL TURNOVER , THE WORD TOTAL TURNOVER FALLS FOR INTERPRETATION BY T HIS COURT; ..IN SECTION 10A, NOT ONLY THE WORD TOTAL TURNOV ER IS NOT DEFINED, THERE IS NO CLUE REGARDING WHAT IS TO BE EXCLUDED WHILE ARRIVING AT THE TOTAL TURNOVER. HOWEVER, WHILE INTERPRETING THE PROVISIONS OF SECTI ON 80HHC, THE COURTS HAVE LAID DOWN VARIOUS PRINCIPLES , WHICH ARE INDEPENDENT OF THE STATUTORY PROVISIONS. THERE SHOULD BE UNIFORMITY IN THE INGREDIENTS OF BO TH THE NUMERATOR AND THE DENOMINATOR OF THE FORMULA, SINCE OTHERWISE IT WOULD PRODUCE ANOMALIES OR ABSUR D RESULTS. SECTION 10A IS A BENEFICIAL SECTION WHICH INTENDS TO PROVIDE INCENTIVES TO PROMOTE EXPORTS. IN THE CASE OF COMBINED BUSINESS OF AN ASSESSEE, HAVIN G EXPORT BUSINESS AND DOMESTIC BUSINESS, THE LEGISLAT URE INTENDED TO HAVE A FORMULA TO ASCERTAIN THE PROFITS FROM EXPORT BUSINESS BY APPORTIONING THE TOTAL PROF ITS OF THE BUSINESS ON THE BASIS OF TURNOVERS. APPORTIONMENT OF PROFITS ON THE BASIS OF TURNOVER W AS ITA NO.691/B/13 5 ACCEPTED AS A METHOD OF ARRIVING AT EXPORT PROFITS. IN THE CASE OF SECTION 80HHC, THE EXPORT PROFIT IS TO BE DERIVED FROM THE TOTAL BUSINESS INCOME OF THE ASSXCESSEE, WHEREAS IN SECTION 10-A, THE EXPORT PRO FIT IS TO BE DERIVED FROM THE TOTAL BUSINESS OF THE UNDERTAKING. EVEN IN THE CASE OF BUSINESS OF AN UNDERTAKING, IT MAY INCLUDE EXPORT BUSINESS AND DOMESTIC BUSINESS, IN OTHER WORDS, EXPORT TURNOVER AND DOMESTIC TURNOVER. TO THE EXTENT OF EXPORT TURNOVE R, THERE WOULD BE A COMMONALITY BETWEEN THE NUMERATOR AND THE DENOMINATOR OF THE FORMULA. IF THE EXPORT TURNOVER IN THE NUMERATOR IS TO BE ARRIVED AT AFTER EXCLUDING CERTAIN EXPENSES, THE SAME SHOULD ALSO BE EXCLUDED IN COMPUTING THE EXPORT TURNOVER AS A COMPONENT OF TOTAL TURNOVER IN THE DENOMINATOR. TH E REASON BEING THE TOTAL TURNOVER INCLUDES EXPORT TURNOVER. THE COMPONENTS OF THE EXPORT TURNOVER IN THE NUMERATOR AND THE DENOMINATOR CANNOT BE DIFFERENT. THEREFORE, THOUGH THERE IS NO DEFINITIO N OF THE TERM TOTAL TURNOVER IN SECTION 10A, THERE IS NOTHING IN THE SAID SECTION TO MANDATE THAT, WHAT I S EXCLUDED FROM THE NUMERATOR THAT IS EXPORT TURNOVER WOULD NEVERTHELESS FORM PART OF THE DENOMINATOR. WHEN THE STATUTE PRESCRIBED A FORMULA AND IN THE SA ID FORMULA, EXPORT TURNOVER IS DEFINED, AND WHEN THE TOTAL TURNOVER INCLUDES EXPORT TURNOVER, THE VERY SAME MEANING GIVEN TO THE EXPORT TURNOVER BY THE LEGISLATURE IS TO BE ADOPTED WHILE UNDERSTANDING TH E ITA NO.691/B/13 6 MEANING OF THE TOTAL TURNOVER, WHEN THE TOTAL TURNO VER INCLUDES EXPORT TURNOVER. IF WHAT IS EXCLUDED IN COMPUTING THE EXPORT TURNOVER IS INCLUDED WHILE ARRIVING AT THE TOTAL TURNOVER, WHEN THE EXPORT TURNOVER IS A COMPONENT OF TOTAL TURNOVER, SUCH AN INTERPRETATION WOULD RUN COUNTER TO THE LEGISLATIVE INTENT AND IMPERMISSIBLE. THUS, THERE IS NO ERROR COMMITTED BY THE TRIBUNAL IN FOLLOWING THE JUDGEMEN TS RENDERED IN THE CONTEXT OF SECTION 80HHC IN INTERPRETING SECTION 10A WHEN THE PRINCIPLE UNDERLY ING BOTH THESE PROVISIONS IS ONE AND THE SAME. FROM THE AFORESAID JUDGMENTS, WHAT EMERGES IS THAT, THERE SHOULD BE UNIFORMITY IN THE INGREDIENTS OF BOTH THE NUMERATOR AND THE DENOMINATOR OF THE FORMULA, SINCE OTHERWISE IT WOUL D PRODUCE ANOMALIES OR ABSURD RESULTS. SECTION 10A I S A BENEFICIAL SECTION. IT IS INTENDED TO PROVIDE INCENTIVES TO PROMOTE EXPORTS. THE INCENTIVE IS TO EXEMPT PROFITS RELATABLE TO EXPORTS. IN THE CASE O F COMBINED BUSINESS OF AN ASSESSEE, HAVING EXPORT BUSINESS AND DOMESTIC BUSINESS, THE LEGISLATURE INTENDED TO HAVE A FORMULA TO ASCERTAIN THE PROFITS FROM EXPORT BUSINESS BY APPORTIONING THE TOTAL PROF ITS OF THE BUSINESS ON THE BASIS OF TURNOVERS. APPORTIONMENT ON THE BASIS OF TURNOVER WAS ACCEPTED AS A METHOD OF ARRIVING AT EXPORT PROFITS. IN THE CASE ITA NO.691/B/13 7 OF SECTION 80HHC, THE EXPORT PROFIT IS TO BE DERIVE D FROM THE TOTAL BUSINESS INCOME OF THE ASSESSEE, WHEREAS IN SECTION 10A, THE EXPORT PROFIT IS TO BE DERIVED FROM THE TOTAL BUSINESS OF THE UNDERTAKING. EVEN IN THE CASE OF BUSINESS OF AN UNDERTAKING, IT MAY INCLUDE EXPORT BUSINESS AND DOMESTIC BUSINESS, IN OTHER WORDS, EXPORT TURNOVER AND DOMESTIC TURNOVER. THE EXPORT TURNOVER WOULD BE A COMPONENT OR PART OF A DENOMINATOR, THE OTHER COMPONENT BEING THE DOMESTIC TURNOVER. IN OTHER WORDS TO THE EXTENT OF EXPORT TURNOVER, THERE WOULD BE A COMMONALITY BETWEEN THE NUMERATOR AND THE DENOMINATOR OF THE FORMULA. IN VIEW OF THE COMMONALITY, THE UNDERSTANDING SHOULD ALSO BE THE SAME. IN OTHER WORDS, IF THE EXPORT TURNOVER IN THE NUMERATOR IS T O BE ARRIVED AT AFTER EXCLUDING CERTAIN EXPENSES, THE SA ME SHOULD ALSO BE EXCLUDED IN COMPUTING THE EXPORT TURNOVER AS A COMPONENT OF TOTAL TURNOVER N THE DENOMINATOR. THE REASON BEING THE TOTAL TURNOVER INCLUDES EXPORT TURNOVER. THE COMPONENTS OF THE EXPORT TURNOVER IN THE NUMERATOR AND THE DENOMINATOR CANNOT BE DIFFERENT. THEREFORE, THOUG H THERE IS NO DEFINITION OF THE TERM TOTAL TURNOVER IN SECTION 10A, THERE IS NOTHING IN THE SAID SECTION T O MANDATE THAT, WHAT IS EXCLUDED FROM THE NUMERATOR THAT IS EXPORT TURNOVER WOULD NEVERTHELESS FORM PAR T OF THE DENOMINATOR. THOUGH WHEN A PARTICULAR WORD IS NOT DEFINED BY THE LEGISLATURE AND AN ORDINARY ITA NO.691/B/13 8 MEANING IS TO BE ATTRIBUTED TO THE SAME, THE SAID ORDINARY MEANING TO BE ATTRIBUTED TO SUCH WORD IS T O BE IN CONFORMITY WITH THE CONTEXT IN WHICH IT IS US ED. WHEN THE STATUE PRESCRIBES A FORMULA AND IN THE SAI D FORMULA, EXPORT TURNOVER IS DEFINED, AND WHEN THE TOTAL TURNOVER INCLUDES EXPORT TURNOVER, THE VERY SAME MEANING GIVEN TO THE EXPORT TURNOVER BY THE LEGISLATURE IS TO BE ADOPTED WHILE UNDERSTANDING TH E MEANING OF THE TOTAL TURNOVER, WHEN THE TOTAL TURNOVER INCLUDES EXPORT TURNOVER. IF WHAT IS EXCLUDED IN COMPUTING THE EXPORT TURNOVER IS INCLUDED WHILE ARRIVING AT THE TOTAL TURNOVER, WHEN THE EXPORT TURNOVER IS A COMPONENT OF TOTAL TURNOVER, S UCH AN INTERPRETATION WOULD RUN COUNTER TO THE LEGISLAT IVE INTENT AND IMPERMISSIBLE. IF THAT WERE THE INTENTI ON OF THE LEGISLATURE, THEY WOULD HAVE EXPRESSLY SATED SO . IF THEY HAVE NOT CHOSEN TO EXPRESSLY DEFINE WHAT TH E TOTAL TURNOVER MEANS, THEN, WHEN THE TOTAL TURNOVER INCLUDES EXPORT TURNOVER, THE MEANING ASSIGNED BY T HE LEGISLATURE TO THE EXPORT TURNOVER IS TO BE RESPECT ED AND GIVEN EFFECT TO WHILE INTERPRETING THE TOTAL TURNOVER WHICH IS INCLUSIVE OF THE EXPORT TURNOVER. THEREFORE, THE FORMULA FOR COMPUTATION OF THE DEDUCTION US 10A, WOULD BE AS UNDER: PROFITS OF THE BUSINESS EXPORT TURNOVER OF THE UNDERTAKING X,--------------------------- ------------------- (EXPORT TURNOVE R + DOMESTIC TURNOVER) TOTAL TURNOVER ITA NO.691/B/13 9 IN THAT VIEW OF THE MATTER, WE DO NOT SEE ANY ERRO R COMMITTED BY THE TRIBUNAL IN FOLLOWING THE JUDGMENT S RENDERED I THE CONTEXT OF SECTION 80HHC IN INTERPRETING SECTION 10A WHEN THE PRINCIPLE UNDERLYING BOTH THESE PROVISIONS IS ONE AND THE SAM E. THEREFORE, WE DO NOT SEE ANY MERIT IN THESE APPEALS . THE SUBSTANTIAL QUESTION OF LAW FRAMED IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 5. THE CIT(A) HAS DECIDED THIS ISSUE BY FOLLOWING T HE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF TA TA ELXSI (SUPRA). THEREFORE, WE DO NOT FIND ANY ERROR OR LEGALITY IN THE IMPUGNED ORDER OF THE CIT(A) ON THIS ISSUE. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH SEPT, 2015. SD/- SD/- (JASON P BOAZ) (VIJAYPAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER VMS. BANGALORE DATED : 24/9/2015 ITA NO.691/B/13 10 COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REGISTRAR, I TAT, BANGALORE.