DCIT, Bangalore V. M/s Intel Technology India Pvt. Ltd., Bangalore

ITA 695/BANG/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0699 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-11-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 09-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWATHI S PATIL
• Assessee Lawyers: VIKASH DHARIWALA
• Keywords: Tax effect

Judgement Text

ITA NO.695/B/09 1 IN THE INCOME TAX APPELL ATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH BANGALORE BENCH BANGALORE BENCH BANGALORE BENCH B BB B BEFORE BEFORE BEFORE BEFORE GEORGE GEORGE K, JUDICIAL MEMBER GEORGE GEORGE K, JUDICIAL MEMBER GEORGE GEORGE K, JUDICIAL MEMBER GEORGE GEORGE K, JUDICIAL MEMBER AND AND AND AND SHRI SHRI SHRI SHRI A. MOHAN ALANKAMONY A. MOHAN ALANKAMONY A. MOHAN ALANKAMONY A. MOHAN ALANKAMONY, A , A, A , ACCOUNTANT MEMBER CCOUNTANT MEMBER CCOUNTANT MEMBER CCOUNTANT MEMBER ITA NO.695/BAN G/2009 (ASSESSMEN T YEAR 2004-05) THE DY. COMMISSIONER OF INCOME-TAX, LTU, BANGALORE. . APPELLANT VS. M/S INTEL TECHNOLOGY INDIA PVT. LTD., (SUCCESSOR IN INTEREST TO SOFTWARE & SILICON SYSTEMS INDIA PVT. LTD.) DEVARABEESANHALLI, OUTER RING ROAD, VARTHUR HOBLI, BANGALORE-560 037. . RESPONDENT APPELLANT BY : SMT. SWATHI S PATIL RESPONDENT BY : SHRI VIKASH DHARIWALA O R D E R O R D E R O R D E R O R D E R PER PER PER PER GEORGE GEORGE GEORGE GEORGE GEORGE GEORGE GEORGE GEORGE K KK K, , , , JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER : : : : THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AG AINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) - IV, BANGALORE DATED 30.04.2009. THE ASSESSMENT YEAR CO NCERNED IS 2004-05. 2. THE REVENUE HAS RAISED THE FOLLOWING EFFECTIVE G ROUNDS : (I) THE CIT(A) HAS ERRED IN DIRECTING THE AO TO A LLOW THE DEDUCTION ABOUT REDUCING TELECOMMUNICATION EXPENSES FROM THE EXPORT TURNOVER AS WELL AS THE TO TAL TURNOVER WHILE COMPUTING THE DEDUCTION U/S 10A OF T HE ITA NO.695/B/09 2 IT ACT. IN A RECENT DECISION IT IS SEEN THAT THE C HENNAI BENCH OF THE INCOME-TAX TRIBUNAL HAS HELD IN THE CA SE OF CALIFORNIA SOFTWARE COMPANY LTD. VS. ACIT 118 TTJ 844 THAT IT IS NOT NECESSARY THAT WHATEVER IS REDUCED FROM THE EXPORT TURNOVER NEED TO BE REDUCED FROM THE TOTAL TURNOVER AS WELL. THE DEPARTMENT IS IN APPEAL ON THIS ISSUE IN VARIOUS FORUMS ON THE GROUN D THAT IN THE ABSENCE OF AN EXPRESS PROVISION, THE ORDINARY MEANING OF THE TOTAL TURNOVER IS TO ADOPTE D FOR THE COMPUTATION OF THE DEDUCTION. (II) TAX EFFECT ON THIS ISSUE ALONE IS LESS THAN RS.2,00,000/-. HOWEVER, WHEN THE ISSUES RELATING T O TP ADJUSTMENT ARE RE-EXAMINED IN THE LIGHT OF THE DIRECTION ISSUED BY THE CIT(A), THERE IS LIKELIHOOD OF VARIATION IN THE DEDUCTION U/S 10A. CONSEQUENTLY, THE TAX EFFECT FOR APPEAL PURPOSE WOULD BE MORE THAN RS.2,00,000/-. HENCE, THE APPEAL IS NECESSARY TO F ILE BEFORE ITAT. THE BRIEF FACTS OF THE CASE ARE AS FOLLOWS : 3. THE SOFTWARE & SILICON SYSTEMS INDIA PVT. LTD., (SSS OF THE COMPANY) WAS AN INDIAN COMPANY INCORPORATED ON 17, JUL 1995 UNDER THE PROVISIONS OF THE INDIAN COMPANIES ACT, 1956. THE COMPANY WAS ENGAGED IN THE BUSINESS OF RENDERING SOFTWARE SERVI CES. 3.1 THE COMPANY WAS AMALGAMATED WITH INTEL TECHNOLO GY INDIA PVT. LTD. W.E.F 01 APR, 2004 THROUGH A SCHEME OF AM ALGAMATION SANCTIONED BY THE HONBLE HIGH COURT OF KARNATAKA. IN THE YEAR ITA NO.695/B/09 3 UNDER CONSIDERATION, THE COMPANY CARRIED ON ITS SOF TWARE DEVELOPMENT SERVICES FROM AN UNDERTAKING REGISTERED WITH THE ST P1 AUTHORITIES. THE COMPANY WAS ELIGIBLE FOR AND ACCORDINGLY CLAIME D DEDUCTION IN RESPECT OF PROFITS OF BUSINESS OF ITS UNDERTAKING U /S 10A OF THE INCOME- TAX ACT, 1961. 3.2 FOR THE YEAR ENDED ON 31 MAR, 2004, THE ENTIRE INCOME OF THE COMPANY FROM THE SAID STP1 REGISTERED UNDERTAKING W AS FROM EXPORT TURNOVER ONLY. THE COMPANY THEREFORE CLAIMED DEDUC TION U/S 10A OF THE ACT, OF THE ENTIRE INCOME OF THE UNDERTAKING, A S BOTH EXPORT TURNOVER AND TOTAL TURNOVER OF THE UNDERTAKING WAS SAME. 3.3 THE COMPANY HAD TAKEN A DATA CIRCUIT CONNECTIVI TY LINK LINE FOR CONNECTIVITY IN INDIA FOR ACCESSING INTERNET, SERVE RS ETC. AND INVOLVES CHARGES ONLY FOR UPLINKING OF THE DATA. ACCORDING TO ASSESSEE COMPANY, THE PAYMENT OF RS.1,09,85,243/- WAS ONLY F OR CONNECTIVITY WITHIN INDIA AND THE COMMUNICATION EXPENSES OF RS.1 ,09,85,243/- DID NOT INCLUDE ANY AMOUNT ATTRIBUTABLE TO CONNECTIVITY CHARGES OUTSIDE INDIA. THEREFORE ASSESSEE COMPANY WHILE COMPUTING DEDUCTION U/S 10A OF THE ACT, THE COMPANY HAD NOT MADE ANY ADJUST MENT IN THE EXPORT TURNOVER, OR DATA-LINK CHARGES ATTRIBUTABLE TO DELIVERY OF SOFTWARE OUTSIDE INDIA. 3.4 THE AO HAS IN HIS ASSESSMENT ORDER REDUCED THE AFORESAID DATA-LINK CHARGES OF RS.1,09,85,243/- BY THE COMPAN Y FROM EXPORT ITA NO.695/B/09 4 TURNOVER. THE AO, HOWEVER, HAS NOT REDUCED SUCH CH ARGES FROM TOTAL TURNOVER. IN VIEW OF THIS, EXPORT TURNOVER, IN THE RATIO OF EXPORT TURNOVER TO TOTAL TURNOVER, STANDS REDUCED. HENCE, IN SPITE OF THE COMPANY EXPORTING THE ENTIRE (100%) OUTPUT OF THE S AID STP1 REGISTERED UNDERTAKING, THE DEDUCTION OF THE ENTIR E PROFIT OF THE UNDERTAKING U/S 10A OF THE ACT HAS NOT BEEN GRANTED BY THE AO. 4. AGAINST THE ORDER OF THE AO, ASSESSEE FILED APP EAL BEFORE THE CIT(A). THE CIT(A) RELYING ON THE VARIOUS DECISI ONS OF THE TRIBUNAL INCLUDING M/S TAX ELXSI LTD. (ITA NO.315/BANG/2006 AND M/S I GATE GLOBAL SOLUTIONS LTD. VS. AICT (ITA NO.248 AND 249/ BANG/2007) DIRECTED THE AO TO EXCLUDE THE DATA-LINK CHARGES OF RS.1,09,85,243/- THE REVENUE BEING AGGRIEVED BY THE ORDER OF THE CI T(A) IS IN APPEAL BEFORE US. 5. AT THE VERY OUTSET, IT WAS POINTED OUT BY THE L EARNED COUNSEL FOR THE ASSESSEE THAT THE ISSUE IN QUESTION IS SQUARELY COVERED BY THE TRIBUNALS DECISION IN ASSESSEES OWN CASE VIDE ITA NO.427/BANG/2009 DATED 25/09/2009. A COPY OF TRIBU NALS ORDER IS PLACED ON RECORD. THE LEARNED DR FAIRLY CONCEDED T HE ISSUE IS COVERED BY ABOVE SAID TRIBUNAL ORDER IN FAVOUR OF ASSESSEE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE ARE OF THE CONSIDERED VIEW THAT THE I SSUE HAS BEEN ITA NO.695/B/09 5 DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL I N ASSESSEES OWN CASE CITED SUPRA, WHEREIN IT WAS HELD AS FOLLOWS: IN VIEW OF THE ABOVE, THE CORRESPONDING EFFECT OF THE REDUCTION OF THE EXPENSES INCURRED IN FOREIGN CURRENCY FROM EXPORT TURNOVER BE GIVEN BY REDUCING IT FROM THE TOTAL TURNOVER AS WELL, FOR UNIFORMITY BET WEEN THE TWO COMPONENTS WHILE COMPUTING THE DEDUCTION U/ S 10A OF THE ACT. HENCE, FOLLOWING THE CO-ORDINATE BENCH DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE CITED SUPRA, WE UPHOLD THE O RDER OF THE CIT(A). 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON 13TH NOV, 2009. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - ( (( (A. MOHAN ALANKAMONY A. MOHAN ALANKAMONY A. MOHAN ALANKAMONY A. MOHAN ALANKAMONY) ) ) ) ( ( ( (GEORGE GEORGE K) GEORGE GEORGE K) GEORGE GEORGE K) GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE DATED : 13/11/09 VMS. COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF 7. GF, ITAT, NEW DELHI. BY ORDER ASST. REGISTRAR, ITAT, BANGAL ORE.