Assistant Commissioner of Income TAx Circle-3(1)(1), Bangalore V. M/s First American India Pvt Ltd , Bangalore

ITA 746/BANG/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5388 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 31-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C H SUNDAR RAO
• Assessee Lawyers: J KEERTHANA REDDY

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI N.V VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.746/BANG/201 7 (ASST. YEAR 2011-12) THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-3(1)(1), BENGALURU. . APPELLANT VS. M/S FIRST AMERICAN INDIA PVT. LTD., LEVEL 1, NAVIGATOR BUILDING, ITPL WHITEFIELD ROAD, BENGALURU. . RESPONDENT APPELLANT BY : SHRI C.H SUNDAR RAO, CIT RESPONDENT BY : SHRI J. KEERTHANA REDDY, ADVOCATE DATE OF HEARING : 08-03-2018 DATE OF PRONOUNCEMENT : 28-03-2018 O R D E R PER SHRI N.V VASUDEVAN, JUDICIAL MEMBER : THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 31/1/2017 OF COMMISSIONER OF INCOME-TAX (APPEALS) - 3 RELATING T O ASST. YEAR 2011-12. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS FOLLOWS: 1) THE ORDER OF THE LEARNED CIT(A) IS OPPOSED TO L AW AND FACTS OF THE CASE. 2) THE CIT(A) ERRED IN FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE HIGH COURT IN THE CASE OF MIS, TATA ELXSI LTD. ITA NO.746/B/17 2 3) THE CIT(A) ERRED IN HOLDING T HAT THE EXPENSES REDUCED FROM THE EXPORT TURNOVER HAS TO BE REDUCED FROM THE TOTAL TU RNOVER ALSO, SINCE NO PROVISION U/S. 10A PROVIDES FOR EXCLUSION OF SUCH EXPENSES FROM TOTAL TURNOVER. 4)FOR THESE AND OTHER GROUNDS THA T MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT(A) IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND TH AT OF THE ASSESSING OFFICER MAY BE RESTORED. 5) THE APPELLANT CRAVES LEAVE TO A DD, ALTER, AMEND AND / OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE. 3. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINE SS OF DEVELOPING SOFTWARE. IT IS NOT IN DISPUTE THAT THE ASSESSEE WAS ENTITLED TO CL AIM DEDUCTION U/S.10A OF THE INCOME TAX ACT, 1961 ON PROFITS AND GAINS AS ARE DERIVED FROM THE EXPORT OF COMPUTER SOFTWARE. SEC.10A(4) PROVIDES THE METHODOLOGY OF C OMPUTATION OF DEDUCTION U/S.10A OF THE ACT AND IT LAYS DOWN THAT THE PROFITS DERIVE D FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE SHALL BE THE AMOUNT WHICH BEARS T O THE PROFITS OF THE BUSINESS OF THE UNDERTAKING, THE SAME PROPORTION AS THE EXPORT TURN OVER IN RESPECT OF SUCH ARTICLES OR THINGS OR COMPUTER SOFTWARE BEARS TO THE TOTAL TURN OVER OF THE BUSINESS CARRIED ON BY THE UNDERTAKING. EXPORT TURNOVER HAS BEEN DEFINED U NDER EXPLANATION 2 (IV) TO SEC.10A AS: 'EXPORT TURNOVER' MEANS THE CONSIDERATION IN RESPEC T OF EXPORT BY THE UNDERTAKING OF ARTICLES OR THINGS OR COMPUTER SOFTWARE RECEIVED IN, OR BROUGHT INTO, INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE IN ACCORDANCE WITH SUB -SECTION (3), BUT DOES NOT INCLUDE FREIGHT, TELECOMMUNICATION CHA RGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTIC LES OR THINGS OR COMPUTER SOFTWARE OUTSIDE INDIA OR EXPENSES, IF ANY , INCURRED IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICE S OUTSIDE INDIA. ITA NO.746/B/17 3 4. THE AO NOTICED THAT WHILE COMPUTING EXPORT TURN OVER FOR THE PURPOSE OF DEDUCTION U/S.10A, THE ASSESSEE HAD INCLUDED A SUM OF RS.3,86 ,11,444/- BEING COMMUNICATION EXPENSES AND RS.12,65,71,076 BEING TRAVELLING AND C ONVEYANCE EXPENSES. BOTH THE AFORESAID EXPENSES HAD BEEN INCURRED IN FOREIGN CUR RENCY. THE AO THEREFORE EXCLUDED THE AFORESAID SUM FROM THE EXPORT TURNOVER WITHOUT EXCLUDING THEM FROM THE TOTAL TURNOVER. AS A RESULT, THE DEDUCTION CLAIMED U/S.1 0A OF THE ACT BY THE ASSESSEE WAS ALLOWED AT A LESSER SUM THAN WHAT WAS CLAIMED BY TH E ASSESSEE. 5. IT WAS THE PLEA OF THE ASSESSEE IN THE APPEAL A GAINST THE ASSESSMENT ORDER BEFORE THE CIT(A) THAT AT ALL TIMES DURING THE RELEVANT PREVIOUS YEA R, IT WAS ENGAGED IN DEVELOPMENT OF COMPUTER SOFTWARE AND NOT IN RENDERI NG ANY TECHNICAL SERVICES. COMMUNICATION EXPENSES WERE INCURRED NOT FOR EXPORT OF COMPUTER SOFTWARE OUTSIDE INDIA AND THEREFORE THE EXCLUSION FROM EXPORT TURNO VER AS DONE BY THE AO WAS NOT CORRECT . WITHOUT PREJUDICE TO ITS CONTENTION THAT THE AFORESAID SUMS SHOULD NOT BE EXCLUDED FROM THE EXPORT TURNOVER WHILE COMPUTING D EDUCTION U/S.10A OF THE ACT, THE ASSESSEE HAS ALSO MADE AN ALTERNATE PRAYER THAT EXP ENSES THAT ARE REDUCED FROM THE EXPORT TURNOVER SHOULD ALSO BE REDUCED FROM THE TOT AL TURNOVER AND IN THIS REGARD HAS PLACED RELIANCE ON THE DECISION OF THE HONBLE KARN ATAKA HIGH COURT IN THE CASE OF CIT V. TATA ELXSI LTD [2012] 349 ITR 98 (KARN) WHEREIN IT WAS HELD THAT WHILE COMPUTING DEDUCTION U/S.10A OF THE ACT EXPENSES THA T ARE REDUCED FROM THE EXPORT TURNOVER SHOULD ALSO BE REDUCED FROM THE TOTAL TURN OVER. THE CIT(A) ACCEPTED THE ALTERNATE PRAYER OF THE ASSESSEE AND DIRECTED THAT THE EXPENSES REDUCED FROM THE EXPORT TURNOVER SHOULD ALSO BE REDUCED FROM THE TOTAL TURN OVER. AS A RESULT, THE DEDUCTION AS CLAIMED BY THE ASSESSEE U/S.10A OF THE ACT STOOD AL LOWED. AGGRIEVED BY THE RELIEF ALLOWED BY THE CIT(A), THE REVENUE HAS PREFERRED TH E PRESENT APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE HEARD THE LD. COUNSEL FOR THE ASSESSEE WHO RELIED ON THE ORDER OF THE CIT(A) AND THE LD. DR WHO RELIED ON THE ORDER OF TH E CIT(A). ITA NO.746/B/17 4 7. TAKING INTO CONSIDERATION THE DECISION RENDERED BY THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V. TATA ELXSI LTD [2012] 349 ITR 98 (KARN) , WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) DIRECTING THE ASSESSING OFFICER TO EXCLUDE COMMUNICATION CHARGES AND TRAVELLING AND CONVEYANCE EXPENSES BOTH FROM EXPORT TURNOVER AND TOTAL TURNOVER, IS JUST AND PROPER AND CALLS FOR NO INTERFERENCE. THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE DECISION OF HO N'BLE HIGH COURT OF KARNATAKA IN TATA ELXSI (SUPRA) HAS NOT ATTAINED FINALITY AND A SLP BY THE DEPARTM ENT IS PENDING BEFORE THE HON'BLE SUPREME COURT. WE ARE OF THE VI EW THAT AS OF TODAY, LAW DECLARED BY THE HON'BLE HIGH COURT OF KARNATAKA WHICH IS THE JURISDICTIONAL HIGH COURT IS BINDING ON US. WE THEREFORE HOLD THAT THE ORDER OF CIT(A) DOES NOT CALL FOR ANY INTERFERENCE AND ACCORDINGLY THE SAME IS CONFIRMED. 8. IN THE RESULT, THE APPEAL BY THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH MARCH, 2018 . SD/- SD/- (JASON P BOAZ) (N. V VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMB ER BANGALORE DATED : 28/3/2018 VMS COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER SR. PRIVAT E SECRETARY, ITAT, BANGALORE ITA NO.746/B/17 5 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR. P. S... 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE .. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT.. 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. ..