D.C.I.T Cir - 2,kolkata, Kolkata V. M/s Metalogic Systems Pvt Ltd, Kolkata

ITA 697/KOL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1748 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 16-03-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 02-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T VARKEY JUDIC IA L M EMBER
• Assessee Lawyers: D C MONDAL JCIT SRDR SH
• Section: 143(3); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI ABY.T VARKEY, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 697 / KOL / 2013 ASSESSMENT YEAR :2004-05 DCIT CIRCLE-2, AAYAKAR BHAWAN, 7TH FLOOR,P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 V/S . M/S MTALOGIC SYSTEMS PVT. LTD., PLOT-J 1/1, BLOCK-EP & GP, SECTOR-V, SALT LAKE, KOLKATA-91 [ PAN NO.AACCM 0773 H ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI D.C. MONDAL, JCIT, SR-DR /BY RESPONDENT SHRI SAJJAN KUMAR TULSIYAN, ADVOCATE /DATE OF HEARING 16-03-2017 /DATE OF PRONOUNCEMENT 12-05-2017 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-XX, KOLKATA DA TED 14.12.2012. ASSESSMENT WAS FRAMED BY ACIT, CIRCLE-2, KOLKATA U/ S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) VIDE HIS ORDER DATED 31.10.2006 FOR ASSESSMENT YEAR 2004-05. SHRI D.C. MONDAL, LD. DEPARTMENTAL REPRESENTATIVE R EPRESENTED ON BEHALF OF REVENUE AND SHRI SAJJAN KUMAR TULSIYAN, LD. ADVOCAT E APPEARED ON BEHALF OF ASSESSEE. 2. THE SOLITARY SUBSTANTIAL GRIEVANCE OF THE REVENU E IS THAT LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO TAKE TH E TOTAL TURNOVER IN PURSUANCE ITA NO.697/KOL/2013 A.Y. 2004-05 DCIT CIR-2, KOL. VS. M/S METALOGIC SYST EMS PVT. LTD. PAG E 2 OF PROVISION OF SEC. 80HHE OF THE ACT FOR THE PURPO SE OF CALCULATING THE DEDUCTION U/S. 10A OF THE ACT. 3. THE FACTS IN BRIEF ARE THAT ASSESSEE IS A PRIVAT E LIMITED COMPANY ENGAGED IN THE BUSINESS OF EXPORTS OF COMPUTER SOFT WARE. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS MADE A REVISED CLAIM O F DEDUCTION U/S. 10A OF THE ACT FOR 94,28,468/- ONLY. THE ASSESSEE WHILE DETERMINING DE DUCTION UNDER SECTION 10A OF THE ACT, HAS REDUCED THE EXPEN SES INCURRED IN FOREIGN EXCHANGE IN PROVIDING TECHNICAL SERVICES OUTSIDE IN DIA FROM THE TOTAL TURNOVER. HOWEVER, THE AO WAS OF THE VIEW THAT THE ASSESSEE H AS SHOWN TOTAL TURNOVER OF 6.04 CRORES IN ITS BOOKS OF ACCOUNT. THEREFORE, TH E ASSESSEE WAS REQUIRED TO DETERMINE THE DEDUCTION U/S. 10A OF THE ACT BY T AKING THE TOTAL TURNOVER OF 6.04 CRORES. ACCORDINGLY, AO WORKED OUT THE DEDUCTI ON U/S. 10A OF THE ACT FOR 61,54,684/- ONLY. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT EXPENSE I NCURRED BY IT IN FOREIGN CURRENCY FOR PROVIDING SERVICES OUTSIDE INDIA SHALL NOT BE PART OF TOTAL TURNOVER FOR THE PURPOSE OF CALCULATION OF DEDUCTION U/S. 10 A OF THE ACT. THE ASSESSEE ALSO SUBMITTED THAT LD. CIT(A) FOR THE IMMEDIATE PR ECEDING AY 2003-04 HAS ACCEPTED THE CONTENTION OF ASSESSEE IN APPEAL NO. 9 2/A-II/CIR-2/05-06 DATED 23.05.2006. THE ASSESSEE ALSO SUBMITTED THAT THERE IS NO DEFINITION GIVEN UNDER THE PROVISION OF SEC. 10A OF THE ACT. THEREFO RE THE DEFINITION PROVIDED UNDER THE PROVISION OF SEC. 80HHE DEFINING THE TOTA L TURNOVER SHOULD BE APPLIED IN THE INSTANCE CASE. LD. CIT(A) AFTER CONS IDERING THE SUBMISSION OF ASSESSEE HAS GRANTED RELIEF BY OBSERVING AS UNDER:- . 2 I HAVE PERUSED THE ASSESSMENT ORDER AND CONSIDERE D THE SUBMISSION OF THE APPELLANT. THE SIMILAR ISSUE IN THE APPELLANTS OWN CASE FOR THE A.Y 2003- 04 WAS DECIDED BY THE CIT(A)-II, KOLKATA VIDE HIS O RDER NO.92/A-II/CIR-2/05-06 DATED 23.05.2006 IN WHICH HE ALLOWED THE APPEAL IN FAVOUR OF THE APPELLANT ON THE SIMILAR FACTS. FOLLOWING THE DECISION TAKEN BY THE CIT(A) (SUPRA) WHICH HAS BEEN DISCUSSED IN DETAIL BY HIM IN HIS ORDER, APPEA L IS ALLOWED. THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFORE U S ON THE FOLLOWING GROUNDS:- ITA NO.697/KOL/2013 A.Y. 2004-05 DCIT CIR-2, KOL. VS. M/S METALOGIC SYST EMS PVT. LTD. PAG E 3 1. THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN DIRECTI NG TO TAKE THE TOTAL TURNOVER AS DEFINED IN SECTION 80HHE FOR THE PURPOSE OF CA LCULATING DEED U/S. 10A OF THE IT ACT, 1961. 2. THAT THE CIT(A) ERRED IN LAW AND IN FACTS IN DIR ECTING TO ALLOW DEDUCTION U/S. 10A AT RS.94,28,468/- INSTEAD OF RS.61,54,684/- TAK EN BY THE ASSESSING OFFICER. 5. LD. DR VEHEMENTLY RELIED ON THE ORDER OF ASSESSI NG OFFICER WHEREAS LD. AR FOR THE ASSESSEE HAS RELIED HEAVILY ON THE ORDER OF LD. CIT(A). LD. AR FOR THE ASSESSEE ALSO FILED PAPER BOOK WHICH IS RUNNING PAGES FROM 1 O 40 AND SUBMITTED THAT THE ISSUE WAS ALLOWED IN ASSESSEES OWN CASE FOR A.Y. 2003-04 IN ITA NO.1555/KOL/2006 DATED 17.08.2007. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE HAVE ALSO CONSIDE RED THE PAPER BOOK FILED BY THE LD. COUNSEL FOR THE ASSESSEE. IN THE INSTANT CASE, THE ASSESSEE HAS CLAIMED DEDUCTION U/S. 10A OF THE ACT FOR 94,28,468/- AFTER HAVING RELIANCE IN THE DEFINITION OF TOTAL TURNOVER AS SPECIFIED IN EX PLANATION-(E) BELOW SECTION 80HHE(5) OF THE ACT. HOWEVER, AO DISREGARDED THE CO MPUTATION FOR THE DEDUCTION U/S. 10A OF THE ACT AND REDUCED THE SAME FROM THE AMOUNT AS CLAIMED BY ASSESSEE AS DISCUSSED ABOVE. IN THIS CONNECTION, WE FIND THAT CBDT IN CIRCULAR N O. 694 ISSUED DATED 23.11.1994 HAS CLARIFIED THAT THE TOTAL TURNOVER FO R THE PURPOSE OF SEC. 10A WILL BE TAKEN AS PER THE PROVISION OF U/S 80HHE OF THE A CT I.E. THE EXPENDITURE INCURRED IN FOREIGN CURRENCY IN PROVIDING TECHNICAL SERVICES OUTSIDE INDIA SHOULD BE EXCLUDED FROM THE TOTAL TURNOVER OF THE A SSESSEE. IN THE CASE ON HAND, WE FIND THAT ASSESSEE HAS WORKED OUT THE DEDU CTION U/S/. 10A OF THE ACT IN TERMS OF THE CBDT CIRCULAR NO. 694 AS DISCUSSED ABOVE. THUS, THERE REMAIN NO ERRORS IN THE COMPUTATION OF DEDUCTION U/ S. 10A OF THE ACT. IN THIS CONNECTION, WE ALSO RELY IN THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. GEM PLUS JEWELLERY INDIA LTD REPORTED IN 330 ITR 175 (BOM) WHERE IN THE RELEVANT EXTRACT IS REPRODUCED BELOW:- THE ASSESSING OFFICER HELD THAT WHILE COMPUTING EXE MPTION UNDER SECTION 10A, FREIGHT AND INSURANCE CHARGES SHOULD NOT BE EXCLUDE D FROM TOTAL TURNOVER. THE ITA NO.697/KOL/2013 A.Y. 2004-05 DCIT CIR-2, KOL. VS. M/S METALOGIC SYST EMS PVT. LTD. PAG E 4 COMMISSIONER (APPEALS) AFFIRMED THE VIEW OF THE ASS ESSING OFFICER. ON APPEAL, THE TRIBUNAL HELD THAT (I) THE EXPRESSION 'TOTAL TURNOV ER' HAS NOT BEEN DEFINED IN SECTION 10A; (II) PROFITS DERIVED FROM EXPORT HAVE TO BE CO MPUTED BY TAKING INTO CONSIDERATION BOTH - THE EXPORT TURNOVER AND TOTAL TURNOVER OF TH E BUSINESS CARRIED ON BY THE UNDERTAKING; (III) BOTH - THE EXPORT TURNOVER AND T OTAL TURNOVER WHICH CONSTITUTE THE NUMERATOR AND DENOMINATOR IN THE APPLICATION OF THE FORMULA UNDER SUB-SECTION (4) OF SECTION 10A SHOULD BE COMPARABLE; AND (IV) FREIGHT AND INSURANCE HAVE NO ELEMENT OF PROFIT AND, HENCE, CANNOT BE INCLUDED IN THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE INDUSTRIAL UNDERTAKING. THE TRIBUNAL, ACCORD INGLY, DIRECTED THAT THE DEDUCTION UNDER SECTION 10A SHOULD BE COMPUTED AFTER EXCLUDIN G FREIGHT AND INSURANCE CHARGES FROM THE TOTAL TURNOVER. WE ALSO FIND SUPPORT AND GUIDANCE FROM THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. TECH MAHINDRA LTD . REPORTED IN 229 TAXMAN 298 (BOM), WHERE THE HEAD NOTE READS AS UNDER : SECTION 10A OF THE INCOME-TAX ACT, 1961 - FREE TRAD E ZONE (COMPUTATION OF DEDUCTION) - ASSESSMENT YEAR 2004-05 - WHETHER EXPE NSES INCURRED IN FOREIGN CURRENCY ON TELECOMMUNICATION CHARGES AND PROVIDING TECHNICAL SERVICES OUTSIDE INDIA SHOULD BE EXCLUDED FROM TOTAL TURNOVER FOR PU RPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 10A - HELD, YES KEEPING IN VIEW OF THE CBDT CIRCULAR AND RESPECTFUL LY FOLLOWING THE ORDER OF CO-ORDINATE BENCH IN ASSESSEES OWN CASE (SUPRA) AN D PRINCIPLE LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN THE AFORESAID CASE LAW, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). WE HOLD ACCORDINGLY. THIS GROUND OF REVENUES APPEAL IS DISMISSED. 7. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 12 /05/2017 SD/- SD/- (ABY. T. VARKEY) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 12 / 05 /201 7 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DCIT, CIRCLE-2, AAYAKAR BHAWAN, 7 TH FL, P-7, CHOWRINGHEE SQ. KOL-69 2. /RESPONDENT-M/S METALOGIC SYSTEMS PVT. LTD., PLOT-J 1/1, BLOCK-EP & GP, SECTOR- V, SALT LAKE, KOLKATA- 91 3. ) *+ , , - / CONCERNED CIT KOLKATA 4. , , -- / CIT (A) KOLKATA 5. 012 33*+, , *+ , / DR, ITAT, KOLKATA 6. 267 89 / GUARD FILE. BY ORDER/ , , /TRUE COPY/ SR. PRIVATE SECRETARY/HEAD OF OFFICE/DDO , *+ ,