Deputy Commissioner of Income TAx Circle-6(1)(1), Bangalore V. M/s Sap India Pvt Ltd , Bangalore

ITA 716/BANG/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1897 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 28-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VACHANA

Judgement Text

ITA.716 & 717/BANG/2017 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'C', BENGALURU BEFORE SHRI. A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI. LALIET KUMAR, JUDICIAL MEMBER I.T.A NOS.716 & 717/BANG/2017 (ASSESSMENT YEAR : 2009-10 & 2010-11) DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE -6(1)(1), BENGALURU .. APPELLANT V. M/S. SAP INDIA P. LTD, WING A, 2 ND FLOOR, TOWER-B, SALARPURIA, SOFTZONE, SARJAPUR OUTER RING ROAD, BELANDUR POST, BENGALURU 560 103 .. RESPONDENT PAN : AAICS7826B ASSESSEE BY : MS. VACHANA, CA REVENUE BY : MS. NEERA MALHOTRA, CIT - DR HEARD ON : 19.11.2018 PRONOUNCED ON : 19.11.2018 O R D E R PER LALIET KUMAR, JUDICIAL MEMBER : THE PRESENT APPEALS ARE FILED BY THE REVENUE AGAIN ST THE ORDERS OF THE CIT (A), BENGALURU -6, BENGALURU, DT. 27.12.2016 AND 26.12.2016, FOR THE ASSESSMENT YEARS 2009-10 & 2010 -11, ON THE FOLLOWING EFFECTIVE GROUND : ITA.716 & 717/BANG/2017 PAGE - 2 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, THE CIT (A) ERRED IN CITING THE RATIO LAID DOWN BY THE HONBLE HIGH COURT IN THE CASE OF CIT V. TATA ELXSI LTD. REPORTED IN 349 ITR 98 AND DIRECTING THE AO TO REDUCE EXPENSES INCURRED IN FOR EIGN CURRENCY, BOTH FROM EXPORT TURNOVER AS WELL AS FROM TOTAL TUR NOVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S.10A, WITHOU T APPRECIATING THE FACT THAT THE STATUTE ALLOWS EXCLU SION OF SUCH EXPENDITURE ONLY FROM EXPORT TURNOVER BY WAY OF A S PECIFIC DEFINITION FOR EXPORT TURNOVER IN THE ACT. ON THE OTHER HAND, THERE IS NO SPECIFIC PROVISION IN SECTION 10A WARRA NTING EXCLUSION OF THE ABOVE EXPENSES FROM THE TOTAL TURNOVER ALSO. 02. THE LD. DR SUBMITTED THAT THE CIT (A) WAS WRONG IN DIRECTING THE AO TO REDUCE THE EXPENSES DEDUCTED BO TH FROM EXPORT TURNOVER AS WELL AS FROM THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S.10A OF THE ACT. HE FU RTHER SUBMITTED THAT THE CIT (A) HAD NOT APPRECIATED THE FACT THAT THE STATUTE ALLOWS EXCLUSION OF SUCH EXPENDITURE ONLY FROM EXPORT TURN OVER. 03. ON THE OTHER HAND THE LD. AR FOR THE ASSESSEE S UPPORTED THE ORDER OF THE LOWER AUTHORITIES. 04. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THIS ISSUE IS PUT TO REST BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE MATTER OF CIT V. H CL TECHNOLOGIES LTD [(2018) 93 TAXMANN.COM 33], WHEREI N THE HONBLE SUPREME COURT HAS DECIDED THE ISSUE IN FAVO UR OF THE ASSESSEE HOLDING THAT THE EXPENSES BE REDUCED BOTH FROM THE EXPORT TURNOVER AS WELL AS FROM THE TOTAL TURNOVER. THE H ONBLE SUPREME COURT IN PARAS 20 AND 21, HELD AS UNDER : ITA.716 & 717/BANG/2017 PAGE - 3 20. EVEN IN COMMON PARLANCE, WHEN THE OBJECT OF THE FO RMULA IS TO ARRIVE AT THE PROFIT FROM EXPORT BUSINESS, EXPENSES EXCLUDED FROM EXPORT TURNOVER HAVE TO BE EXCLUDED FROM TOTAL TURN OVER ALSO. OTHERWISE, ANY OTHER INTERPRETATION MAKES THE FORMU LA UNWORKABLE AND ABSURD. HENCE, WE ARE SATISFIED THAT SUCH DEDUC TION SHALL BE ALLOWED FROM THE TOTAL TURNOVER IN SAME PROPORTION AS WELL. 21. ON THE ISSUE OF EXPENSES ON TECHNICAL SERVICES PRO VIDED OUTSIDE, WE HAVE TO FOLLOW THE SAME PRINCIPLE OF INTERPRETAT ION AS FOLLOWED IN THE CASE OF EXPENSES OF FREIGHT, TELECOMMUNICATION ETC., OTHERWISE THE FORMULA OF CALCULATION WOULD BE FUTILE. HENCE, IN T HE SAME WAY, EXPENSES INCURRED IN FOREIGN EXCHANGE FOR PROVIDING THE TECHNICAL SERVICES OUTSIDE SHALL BE ALLOWED TO EXCLUDE FROM T HE TOTAL TURNOVER. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE HONB LE SUPREME COURT, WE DIRECT THAT THE EXPENSES INCURRED SHALL B E DEDUCTED BOTH FROM THE EXPORT TURNOVER AS WELL AS THE TOTAL TURNO VER FOR ARRIVING AT THE DEDUCTION U/S.10A OF THE ACT. 05. IN THE RESULT, APPEALS OF THE REVENUE ARE DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH DAY OF NOVEMBER, 2018. SD/- SD/- (A. K. GARODIA) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBE R BENGALURU DATED : 19.11.2018 MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, BANGALORE.