GE Medical Systems India Private Limited, Bangalore V. CIT, Bangalore

ITA 75/BANG/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63690 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 16-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: FARHAT HUSSAIN QURESHI CITII
• Assessee Lawyers: SARATH KUMAR
• Keywords: Business income
• Section: 143(3); 80HHC; 10B; 263; 10

Judgement Text

PAGE 1 OF 11 ITA NO. 75/BANG/2012 1 INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES B BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER AND BEFORE SHRI JASON P BOAZ, ACCOUNANT MEMBER ITA NO.75/BANG/2012 (ASST. YEAR 2005-06) M/S GE MEDICAL SYSTEMS INDIA PVT. LTD., NO.122 (PART-I), EPIP, WHITEFIELD, BANGALORE-66. PA NO.AAACG 7655G VS THE COMMISSIONER OF INCOME TAX, BANGALORE-1, BANGALORE. (APPELLANT) (RESPONDENT) DATE OF HEARING : 17.09.20 12 DATE OF PRONOUNCEMENT : 21.09.2012 APPELLANT BY : SHRI SARATH KUMAR RESPONDENT BY : SHRI FARHAT HUSSAIN QURE SHI, CIT-II O R D E R PER GEORGE GEORGE K : THIS APPEAL INSTITUTED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT, BANGALORE PASSED UNDER SECTION 26 3 OF THE ACT DATED 21.02.2011. THE RELEVANT ASSESSMENT YEAR IS 2005-06 . 2. THE GROUNDS OF APPEAL READ AS UNDER:- 1. ORDER UNDER SECTION 263 IS TIME BARRED 1.1 THE APPELLANT CONTENDS THAT THE ORDER UNDER SECTION 263 IS TIME BARRED. THE APPELLANT SUBMITS THAT AN ORDE R UNDER SECTION 263 IS REQUIRED TO BE MADE WITHIN TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE PAGE 2 OF 11 ITA NO. 75/BANG/2012 2 ASSESSMENT ORDER WAS PASSED. CONSIDERING THAT THE ASSESSMENT ORDER UNDER SECTION 143(3) WAS PASSED ON 31 DECEMBER 2008, THE TIME LIMIT ALLOWED TO MAKE THE O RDER WAS TILL 31 MARCH 2011 BUT THE LEARNED ASSESSING OF FICER SERVED THE ORDER UNDER SECTION 263 ON THE APPELLANT ON 18 TH NOVEMBER 2011. 2. COMPUTATION OF DEDUCTION UNDER SECTION 10A OF THE A CT. 2.1 WITHOUT PREJUDICE TO THE ABOVE MENTIONED CONTENTION THAT THE ORDER UNDER SECTION 263 IS TIME BARRED, TH E LEARNED CIT ERRED IN DIRECTING THE ASSESSING OFFICE R TO VERIFY THE COMPUTATION OF DEDUCTION UNDER SECTION 10 A OF THE ACT AS COMPUTED BY THE APPELLANT, AND DIRECTING THE ASSESSING OFFICER TO REDUCE COMMUNICATION EXPENSES AND FOREIGN TRAVEL EXPENSES FROM EXPORT TURNOVER, AFTER VERIFYING THE DETAILS. THE LEARNED CIT ERRED IN NOT ACCEPTING THE APPELLANTS CONTENTIONS THAT : O IT HAD NOT INCURRED COMMUNICATION EXPENSES OF RS.15,97,772 FOR DELIVERY OF SOFTWARE OUTSIDE INDIA ; AND O IT HAD NOT INCURRED FOREIGN TRAVEL EXPENSES OF RS.26,47,000 FOR RENDERING TECHNICAL SERVICES OUTSI DE INDIA, BUT FOR BUSINESS MEETINGS AND TRAININGS. 2.2 THE LEARNED CIT ERRED IN NOT ACCEPTING THE APPELLAN TS CONTENTION THAT WITHOUT PREJUDICE TO ITS SUBMISSION S THAT THE COMMUNICATION EXPENSES AND FOREIGN TRAVEL EXPEN SES ARE NOT LIABLE TO BE REDUCED, SHOULD THE SAME BE RE DUCED FROM EXPORT TURNOVER, A CORRESPONDING REDUCTION SHO ULD ALSO BE MADE FROM TOTAL TURNOVER. 2.3 THE LEARNED CIT ERRED IN NOT PLACING RELIANCE ON TH E ORDER OF THE HONOURABLE ITAT IN THE APPELLANTS OWN CASE FOR THE ASSESSMENT YEAR 2004-05; WHEREIN THE TRIBUNA L HELD THAT ANY ADJUSTMENT IN EXPORT TURNOVER SHOULD B E ACCOMPANIED BY A CORRESPONDING ADJUSTMENT IN THE TOT AL TURNOVER. PAGE 3 OF 11 ITA NO. 75/BANG/2012 3 2.4 THE APPELLANT PLACES RELIANCE ON THE RECENT DECISIO NS OF THE HONBLE KARNATAKA HIGH COURT IN APPELLANTS OWN CASE FOR THE ASSESSMENT YEAR 2004-05, WHEREIN IT HAS BEEN HELD THAT IF ANY EXPENSES ARE TO BE REDUCED FROM THE EXPORT TURNOVER THEN CORRESPONDINGLY SUCH EXPENSES SHOULD ALSO BE REDUCED FROM THE TOTAL TURNOVER. 3. INTEREST WITHOUT PREJUDICE TO THE ABOVE MENTIONED CONTENTION THAT THE ORDER UNDER SECTION 263 IS TIME BARRED, TH E LEARNED CIT HAS ERRED IN HOLDING THAT THE INTEREST COMPUTED BY THE APPELLANT UNDER SECTION 234C OF RS.1,51,817 IS ERRONEOUS. THE APPELLANT SUBMITS TH AT THE LEVY OF INTEREST IS CONSEQUENTIAL IN NATURE. 3. BRIEFLY STATED THE FACTS ARE AS FOLLOWS:- THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE M ANUFACTURING OF MEDICAL DIAGNOSTIC EQUIPMENT PARTS. THE ASSESSM ENT UNDER SECTION 143(3) WAS PASSED FOR THE ASSESSMENT YEAR 2005-06 ON 31.12. 2008 FIXING A TOTAL INCOME OF RS.34,41,74,170/- AFTER ALLOWING DEDUCTIO N UNDER SECTION 10A OF THE ACT TO THE TUNE OF RS.36,95,38,238/-. 3.1 SUBSEQUENTLY, THE COMMISSIONER OF INCOME TAX I SSUED NOTICE UNDER SECTION 263 OF THE ACT. ACCORDING TO THE COM MISSIONER, THE SCRUTINY ASSESSMENT ORDER COMPLETED ON 31/12/2008 WAS ERRONE OUS AND PREJUDICIAL TO THE INTEREST OF REVENUE WITHIN THE MEANING OF SECTI ON 263 OF THE ACT FOR THE FOLLOWING REASONS MENTIONED BELOW:- 1) THE ASSESSMENT WAS COMPLETED BY ALLOWING DEDUCTI ON UNDER SECTION 10A OF THE I T ACT WRONGLY WITHOUT PAGE 4 OF 11 ITA NO. 75/BANG/2012 4 DEDUCTING COMMUNICATION EXPENSES OF RS.15,97,772/- AND FOREIGN TRAVEL EXPENSES OF RS.26,47,001/- INCURRED IN FOREIGN CURRENCY FOR RENDERING TECHNICAL SERVICES OU TSIDE INDIA FROM THE EXPORT TURNOVER, WHICH HAD RESULTED IN EXCESS ALLOWANCE OF DEDUCTION UNDER SECTION 10A. 2) INTEREST INCOME AND RENTAL INCOME AMOUNTED TO RS.4,34,93,861/- AS PER THE TDS CERTIFICATES FILED WHEREAS, SUCH INCOME OFFERED TO TAX WAS ONLY RS.4,12,53,842/-. 3. THERE WAS A SHORT COMPUTATION OF INTEREST CHARGE D UNDER SECTION 234C TO THE EXTENT OF RS.39,770/-. 4. THE ASSESSEE OBJECTED TO THE PROPOSED REVISION AND RE-COMPUTATION OF DEDUCTION UNDER SECTION 10A OF TH E ACT. IT WAS SUBMITTED THAT THE COMMUNICATION EXPENSES AND FOREI GN TRAVEL EXPENSES INCURRED IN FOREIGN CURRENCY OUGHT NOT TO BE REDUCED FROM THE EXPORT TURNOVER. ALTERNATIVELY IT WAS SUBMITTED THAT WHEN THE ABOVE SAID EXPENSES ARE REDUCED FROM THE EXPORT TURNOVER, NECESSARILY TH E SAID SUM OUGHT TO BE REDUCED ALSO FROM THE TOTAL TURNOVER WHILE COMPUTIN G DEDUCTION UNDER SECTION 10A OF THE ACT. FOR THE ALTERNATIVE CONTEN TION OF THE ASSESSEE, IT RELIED ON A NUMBER OF ORDERS OF THE BANGALORE BENCH OF THE TRIBUNAL AND THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE C ASE OF ITO V M/S SAK SOFT LTD. REPORTED IN 313 ITR 353. 5. THE CIT, HOWEVER, REJECTED THE ASSESSEES CONTE NTION AND DIRECTED THE ASSESSING OFFICER TO RE-COMPUTE DEDUCT ION UNDER SECTION 10A OF THE ACT BY REDUCING THE COMMUNICATION EXPENSES AN D THE FOREIGN TRAVEL EXPENSES INCURRED IN FOREIGN CURRENCY FROM THE EXPOR T TURNOVER. THE CIT PAGE 5 OF 11 ITA NO. 75/BANG/2012 5 HOWEVER DID NOT DIRECT THE ASSESSING OFFICER TO EXC LUDE THE ABOVE SAID EXPENSES FROM THE TOTAL TURNOVER WHILE COMPUTING DE DUCTION UNDER SECTION 10A OF THE ACT. 6. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 7. AT THE VERY OUTSET THE LEARNED AR SUBMITTED THAT THE GROUND NOS.2.2 TO 2.4 ARE COVERED BY THE JUDGEMENT OF THE H ONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V M/S TATA ELXSI LTD. & OT HERS (2011-TIOL-684- HC-KAR-II), HONBLE MUMBAI HIGH COURT IN THE CASE O F CIT V GEM PLUS JEWELLERY INDIA LTD. 330 ITR 175 AND THE ORDER OF TH E SPECIAL BENCH IN THE CASE OF ITO V M/S SAK SOFT LTD. 313 ITR (AT) 353. 8. THE LEARNED DR PRESENT WAS DULY HEARD. 9. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. THE HONBLE KARNATAKA HIGH COURT IN THE C ASE OF CIT V M/S TATA ELXSI LTD. & OTHERS HAD HELD THAT WHILE COMPUTING T HE EXEMPTION U/S 10A, IF THE EXPORT TURNOVER IN THE NUMERATOR IS TO BE ARRIV ED AT AFTER EXCLUDING CERTAIN EXPENSES, THE SAME SHOULD ALSO BE EXCLUDED FROM THE TOTAL TURNOVER IN THE DENOMINATOR. THE RELEVANT FINDING OF THE HON BLE JURISDICTIONAL HIGH COURT READS AS FOLLOWS:- ..SECTION 10A IS ENACTED AS AN INCENTIVE TO EXP ORTERS TO ENABLE THEIR PRODUCTS TO BE COMPETITIVE IN THE G LOBAL MARKET AND CONSEQUENTLY EARN PRECIOUS FOREIGN EXCHAN GE FOR THE COUNTRY. THIS ASPECT HAS TO BE BORNE IN MIN D. WHILE COMPUTING THE CONSIDERATION RECEIVED FROM SUC H EXPORT TURNOVER, THE EXPENSES INCURRED TOWARDS FREI GHT, PAGE 6 OF 11 ITA NO. 75/BANG/2012 6 TELECOMMUNICATION CHARGES, OR INSURANCE ATTRIBUTABL E TO THE DELIVERY OF THE ARTICLES OR THINGS OR COMPUTER SOFTWARE OUTSIDE INDIA, OR EXPENSES IF ANY INCURRED IN FOREIGN EXCHANGE, IN PROVIDING THE TECHNICAL SERVIC ES OUTSIDE INDIA SHOULD NOT BE INCLUDED. HOWEVER, THE WORD TOTAL TURNOVER IS NOT DEFINED FOR THE PURPOSE OF TH IS SECTION. IT IS BECAUSE OF THIS OMISSION TO DEFINE TOTAL TURNOVER, THE WORD TOTAL TURNOVER FALLS FOR INTERPRETATION BY THIS COURT; ..IN SECTION 10A, NOT ONLY THE WORD TOTAL TURNOVE R IS NOT DEFINED, THERE IS NO CLUE REGARDING WHAT IS TO BE EXCLUDED WHILE ARRIVING AT THE TOTAL TURNOVER. HOW EVER, WHILE INTERPRETING THE PROVISIONS OF SECTION 80HHC, THE COURTS HAVE LAID DOWN VARIOUS PRINCIPLES, WHICH ARE INDEPENDENT OF THE STATUTORY PROVISIONS. THERE SHOU LD BE UNIFORMITY IN THE INGREDIENTS OF BOTH THE NUMERATOR AND THE DENOMINATOR OF THE FORMULA, SINCE OTHERWISE IT WOULD PRODUCE ANOMALIES OR ABSURD RESULTS. SECTION 10A I S A BENEFICIAL SECTION WHICH INTENDS TO PROVIDE INCENTI VES TO PROMOTE EXPORTS. IN THE CASE OF COMBINED BUSINESS OF AN ASSESSEE, HAVING EXPORT BUSINESS AND DOMESTIC BUSIN ESS, THE LEGISLATURE INTENDED TO HAVE A FORMULA TO ASCER TAIN THE PROFITS FROM EXPORT BUSINESS BY APPORTIONING THE TOTAL PROFITS OF THE BUSINESS ON THE BASIS OF TURNO VERS. APPORTIONMENT OF PROFITS ON THE BASIS OF TURNOVER W AS 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 UNDERT AKING. EVEN IN THE CASE OF BUSINESS OF AN UNDERTAKING, IT MAY INCLUDE EXPORT BUSINESS AND DOMESTIC BUSINESS, IN O THER WORDS, EXPORT TURNOVER AND DOMESTIC TURNOVER. TO T HE EXTENT OF EXPORT TURNOVER, THERE WOULD BE A COMMONA LITY BETWEEN THE NUMERATOR AND THE DENOMINATOR OF THE FORMULA. IF THE EXPORT TURNOVER IN THE NUMERATOR I S TO BE ARRIVED AT AFTER EXCLUDING CERTAIN EXPENSES, THE SAME PAGE 7 OF 11 ITA NO. 75/BANG/2012 7 SHOULD ALSO BE EXCLUDED IN COMPUTING THE EXPORT TUR NOVER AS A COMPONENT OF TOTAL TURNOVER IN THE DENOMINATOR . THE REASON BEING THE TOTAL TURNOVER INCLUDES EXPORT TUR NOVER. THE COMPONENTS OF THE EXPORT TURNOVER IN THE NUMERA TOR AND THE DENOMINATOR CANNOT BE DIFFERENT. THEREFORE , THOUGH THERE IS NO DEFINITION OF THE TERM TOTAL TU RNOVER IN SECTION 10A, THERE IS NOTHING IN THE SAID SECTIO N TO MANDATE THAT, WHAT IS EXCLUDED FROM THE NUMERATOR T HAT IS EXPORT TURNOVER WOULD NEVERTHELESS FORM PART OF THE DENOMINATOR. WHEN THE STATUTE PRESCRIBED A FORMULA AND IN THE SAID 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 TURNO VER INCLUDES EXPORT TURNOVER. IF WHAT IS EXCLUDED IN COMPUTING THE EXPORT TURNOVER IS INCLUDED WHILE ARR IVING 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 B Y THE TRIBUNAL IN FOLLOWING THE JUDGEMENTS RENDERED IN TH E CONTEXT OF SECTION 80HHC IN INTERPRETING SECTION 10 A WHEN THE PRINCIPLE UNDERLYING BOTH THESE PROVISIONS IS ONE AND THE SAME. 9.1 THE HONBLE MUMBAI HIGH COURT IN THE CASE OF G EM PLUS JEWELLERY INDIA LTD. (SUPRA), IN IDENTICAL CIRCUMSTA NCES, HELD THAT SINCE THE EXPORT TURNOVER FORMS PART OF THE TOTAL TURNOVER, I F AN ITEM IS EXCLUDED FROM THE EXPORT TURNOVER, THE SAME SHOULD ALSO BE R EDUCED FROM THE TOTAL TURNOVER TO MAINTAIN PARITY BETWEEN NUMERATOR AND DE NOMINATOR WHILE CALCULATING DEDUCTION U/S 10A OF THE ACT. THE RELE VANT FINDING OF THE HONBLE MUMBAI HIGH COURT READS AS FOLLOWS:- PAGE 8 OF 11 ITA NO. 75/BANG/2012 8 THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY TH E UNDERTAKING WOULD CONSIST OF THE TURNOVER FROM EXPO RT AND THE TURNOVER FROM LOCAL SALES. THE EXPORT TURNOVER CONSTITUTES THE NUMERATOR IN THE FORMULA PRESCRIBED BY SUB-SECTION (4). EXPORT TURNOVER ALSO FORMS A CONS TITUENT ELEMENT OF THE DENOMINATOR IN AS MUCH AS THE EXPORT TURNOVER IS A PART OF THE TOTAL TURNOVER. THE EXPO RT TURNOVER, IN THE NUMERATOR MUST HAVE THE SAME MEANI NG AS THE EXPORT TURNOVER WHICH IS CONSTITUENT ELEMENT OF THE TOTAL TURNOVER IN THE DENOMINATOR. THE LEGISLATURE HAS PROVIDED A DEFINITION OF THE EXPRESSION EXPORT TUR NOVER IN EXPLN.2 TO S.10A WHICH THE EXPRESSION IS DEFINED TO MEAN THE CONSIDERATION IN RESPECT OF EXPORT BY THE UNDERT AKING OF ARTICLES, THINGS OR COMPUTER SOFTWARE RECEIVED I N OR BROUGHT INTO INDIA BY THE ASSESSEE IN CONVERTIBLE FO REIGN EXCHANGE BUT SO AS NOT TO INCLUDE INTER ALIA FREIGH T, TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES, THINGS OR SOFTWARE OUTSIDE INDIA. THEREFORE IN COMPUTING THE EXPORT TURNOVER THE LEGI SLATURE HAS MADE A SPECIFIC EXCLUSION OF FREIGHT AND INSURA NCE CHARGES. THE SUBMISSION WHICH HAS BEEN URGED ON BE HALF OF THE REVENUE IS THAT WHILE FREIGHT AND INSURANCE CHA RGES ARE LIABLE TO BE EXCLUDED IN COMPUTING EXPORT TURNOVER, A SIMILAR EXCLUSION HAS NOT BEEN PROVIDED IN REGARD TO TOTAL TURNOVER. THE SUBMISSION OF THE REVENUE, HOWEVER, MISSES THE POINT THAT THE EXPRESSION TOTAL TURNOVER HAS NOT BEEN D EFINED AT ALL BY PARLIAMENT FOR THE PURPOSES OF S.10A. HOW EVER, THE EXPRESSION EXPORT TURNOVER HAS BEEN DEFINED. THE DEFINITION OF EXPORT TURNOVER EXCLUDES FREIGHT AN D INSURANCE. SINCE EXPORT TURNOVER HAS BEEN DEFINED BY PARLIAMENT AND THERE IS A SPECIFIC EXCLUSION OF FRE IGHT AND INSURANCE, THE EXPRESSION EXPORT TURNOVER CANNOT HAVE A DIFFERENT MEANING WHEN IT FORMS A CONSTITUENT PART OF THE TOTAL TURNOVER FOR THE PURPOSES OF THE APPLICATION OF THE FORMULA. UNDOUBTEDLY, IT WAS OPEN TO PARLIAMENT TO MAKE A PROVISION WHICH HAS BEEN ENUNCIATED EARLIER MUST PR EVAIL AS A MATTER OF CORRECT STATUTORY INTERPRETATION. ANY OT HER INTERPRETATION WOULD LEAD TO AN ABSURDITY. IF THE C ONTENTION PAGE 9 OF 11 ITA NO. 75/BANG/2012 9 OF THE REVENUE WERE TO BE ACCEPTED, THE SAME EXPRES SION VIZ. EXPORT TURNOVER WOULD HAVE A DIFFERENT CONNO TATION IN THE APPLICATION OF THE SAME FORMULA. THE SUBMISSIO N OF THE REVENUE WOULD LEAD TO A SITUATION WHERE FREIGHT AND INSURANCE, THOUGH THESE HAVE BEEN SPECIFICALLY EXCLU DED FROM EXPORT TURNOVER FOR THE PURPOSES OF THE NUME RATOR WOULD BE BROUGHT IN AS PART OF THE EXPORT TURNOVER WHEN IT FORMS AN ELEMENT OF THE TOTAL TURNOVER AS A DENOMIN ATOR IN THE FORMULA. A CONSTRUCTION OF A STATUTORY PROVISIO N WHICH WOULD LEAD TO AN ABSURDITY MUST BE AVOIDED. MOREOVE R, A RECEIPT SUCH AS FREIGHT AND INSURANCE WHICH DOES NO T HAVE ANY ELEMENT OF PROFIT CANNOT BE INCLUDED IN THE TOTA L TURNOVER. FREIGHT AND INSURANCE CHARGES DO NOT HAV E ANY ELEMENT OF TURNOVER. FOR THIS REASON IN ADDITION, THESE TWO ITEMS WOULD HAVE TO BE EXCLUDED FROM THE TOTAL TURN OVER PARTICULARLY IN THE ABSENCE OF A LEGISLATIVE PRESCRI PTION TO THE CONTRARY CIT V SUDARSHAN CHEMICALS INDUSTRIES LTD. (2000) 163 CTR (BOM) 596: (2000) 245 ITR 769 (BOM) APPLIED; CIT V LAKSHMI MACHINE WORKS (2007) 210 CTR (SC) 1: (2007) 290 ITR 667 (SC) AND CIT V CATAPHARMA (IN DIA) (P) LTD. (2007) 211 CTR (SC) 83: (2007) 292 ITR 641 (SC) RELIED ON 9.2 IN THE CASE OF SAK SOFT LTD. (SUPRA), THE ASSE SSEE WAS ENGAGED IN THE BUSINESS OF EXPORTING COMPUTER SOFTWARE AND CLAIMED DEDUCTION U/S 10B OF THE ACT. IN COMPLETING THE ASSESSMENT U/S 1 43(3) OF THE ACT, THE AO REDUCED THE EXPENDITURE INCURRED IN FOREIGN EXCH ANGE IN PROVIDING THE TECHNICAL SERVICES OUTSIDE INDIA, FROM THE EXPORT T URNOVER WITHOUT CORRESPONDING REDUCTION FROM TOTAL TURNOVER, THEREB Y REDUCING THE DEDUCTION CLAIMED BY THE ASSESSMENT U/S 10B OF THE A CT. 9.3 IN LIGHT OF THE ABOVE FACTS, THE SPECIAL BENCH HELD AS UNDER:- FOR THE ABOVE REASONS, WE HOLD THAT FOR THE PURPOS E OF APPLYING THE FORMULA UNDER SUB-SECTION (4) OF SECTIO N 10B, PAGE 10 OF 11 ITA NO .75/BANG/2012 10 THE FREIGHT, TELECOM CHARGES OR INSURANCE ATTRIBUTA BLE TO THE DELIVERY OF ARTICLES OR THINGS OR COMPUTER SOFTW ARE OUTSIDE INDIA OR THE EXPENSES, IF ANY, INCURRED IN F OREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICES OUTSID E INDIA ARE TO BE EXCLUDED BOTH FROM THE EXPORT TURNOVER AN D FROM THE TOTAL TURNOVER, WHICH ARE THE NUMERATOR AND THE DENOMINATOR RESPECTIVELY IN THE FORMULA. THE APPEAL S FILED BY THE DEPARTMENT ARE THUS DISMISSED. 9.4 IN THE LIGHT OF THE ABOVE JUDGEMENTS OF THE HI GH COURTS AND THE ORDER OF THE SPECIAL BENCH, WE DIRECT THE ASSES SING OFFICER TO REDUCE THE COMMUNICATION EXPENSES OF RS.15,97,772/- AND FO REIGN TRAVEL EXPENSES OF RS.26,47,000/- ALSO BOTH FROM THE EXPORT TURNOVE R AS WELL AS FROM THE TOTAL TURNOVER WHILE COMPUTING DEDUCTION UNDER SECT ION 10A OF THE ACT. IT IS ORDERED ACCORDINGLY. HENCE, GROUNDS NO. 2.2 TO 2.4 IS ALLOWED. 9.5 SINCE THE ALTERNATIVE GROUND IS ALLOWED IN FAV OUR OF THE ASSESSEE, GROUND NO.2.1 IS NOT ADJUDICATED. THE G ROUND NO.3 IS RELATING TO THE ISSUE OF LEVY OF INTEREST UNDER SECTION 234C IS ONLY CONSEQUENTIAL AND HENCE, IS DISMISSED. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST DAY OF SEPTEMBER, 2012 SD/- SD/- (JASON P BOAZ) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER PAGE 11 OF 11 ITA NO .75/BANG/2012 11 COPY TO:- 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCER NED 4. THE CIT(A) CONCERNED 5. THE DR 6. GF MSP/- BY ORDER SENIOR PRIVATE SECRETARY, ITAT, BANGALORE.