DCIT, Bangalore V. M/s Cognizant Global Services Pvt. Ltd., Bangalore

ITA 754/BANG/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8477 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 30-03-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 10-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: MANOJ SHENOY
• Keywords: Opportunity of being heard
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE S HRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO , ACCOUNTANT MEMBER I.T . (T.P) A. NO S.754 TO 756 /BANG/20 16 (ASSESSMENT YEAR S : 20 08 - 09 TO 2010 - 11 ) THE DY. COMMISSIONER OF I NCOME TAX, CIRCLE 2(1)(1), BANGALORE. . APPELLANT. VS. M/S. COGNIZANT GLOBAL SERVICES PVT. LTD., LAKE VIEW, 5 TH FLOOR, BLOCK A, BAGMANE TECH PARK, CV RAMAN NAGAR, BANGALORE - 560 093 . .. RESPONDENT. PAN AAACD 7204L APPELLANT BY : MS. NEERA MALHOTRA, CIT (DR) (ITAT) - 2, BENGALURU. R E SPONDENT BY : SHRI MANOJ SHENOY, CA. DATE OF H EARING : 30.03.2017. DA TE OF P RONOUNCEMENT : 30.03. 201 7 . O R D E R PER BENCH : THIS THREE APPEAL S BY THE REVENUE ARE DIRECTED AGAINST THE ASSESSMENT ORDER S PASSED UNDER SE CTION 143(3) R.W.S. 144C OF THE 2 IT (TP) A NO S . 754 TO 756 /BANG/201 6 INCOME TAX ACT, 1961 (IN SHORT 'THE ACT' ) FOR THE ASSESSMENT YEAR S 20 08 - 09 TO 2010 - 11. COMMON GROUNDS ARE RAISED IN THESE REVENUE S APPEALS. 2. WE HAVE HEARD THE LEARNED D.R. AS WELL AS LEARNED A.R. AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LEARNED DEPARTMENTAL REPRESENTATIVE AS WELL AS LEARNED AUTHORISED REPRESENTATIVE HAS POINTED OUT THAT ONLY TWO COMMON ISSUES ARE INVOLVED IN THESE APPEALS REGARDING (I) THE EXECLUSION OF EXPENDITURE FROM THE EXPORT TURNOVE R AS WELL AS TOTAL TURNOVER WHILE COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE ACT AND (II) THE ISSUE OF EXPENDITURE INCURRED IN FOREIGN CURRNENCY FOR PROVIDING TECHNICAL SERVICES OUTSIDE INDIA OR NOT. BOTH THE REPRESENTATIVES OF ASSESSEE AS WELL AS D EPARTMENT SUBMITTED THAT THESE ISSUES ARE COVERED BY THE DECISION OF THIS TRIBUNAL DT.3.11.2016 IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2007 - 08 IN IT(TP)A NO.1278/BANG/2015. 3. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND CAREFUL PERUSAL OF RECO RD, WE FIND THAT THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2007 - 08 VIDE ORDER DT.3.11.2016 3 IT (TP) A NO S . 754 TO 756 /BANG/201 6 (SUPRA) HAS CONSIDERED AND ADJUDICATED THESE TWO ISSUES IN PARAS 5 TO 8 AS UNDER : 5. WE HAVE CONSIDERED THE RIVAL SUB MISSIONS. REGARDING GROUND NO.1, WE HOLD THAT THIS GROUND IS GENERAL IN NATURE AND NO SPECIFIC ADJUDICATION IS CALLED FOR. 6. GROUND NO.2 IS DISMISSED BY FOLLOWING THE JUDGMENT OF THE HON BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF M/S TATA ELXSI LTD VS ACIT(SUPRA) 7. FOR GROUND NO.3, WE FIND THAT THE ISSUE IN DISPUTE HAS BEEN DECIDED BY THE LD. CIT(A) AS PER PARA - 4.4 OF HIS ORDER WHICH IS RE - PRODUCED HEREIN BELOW: 4.4 THE QUESTION FOR CONSIDERATION IS WHETHER THE APPELLANT WAS ENGAGED IN RENDERING TECHNICAL SERVICES SO AS TO BE DEPRIVED OF THE BENEFIT OF DEDUCTION U/S 10A. HOWEVER, FROM THE MATERIALS PLACED BEFORE ME DURING THE APPEAL HEARINGS, IT IS NOTICED THAT THE APPELLANT IS ENGAGED ONLY IN DEVELOPING SOFTWARE. IT HAS BEEN HELD IN THE CASE OF I NFOSYS TECHNOLOGIES LTD V JCIT (109 TTJ 631) THAT WHERE AN ASSESSEE IS ENGAGED IN THE DEVELOPMENT OF COMPUTER PROGRAM IT SHOULD NOT BE REGARDED AS BEING ENGAGED IN RENDERING TECHNICAL SERVICES BUT IN THE DEVELOPMENT OF COMPUTER SOFTWARE. THE APPELLANT HAS RELIED ON THE DECISION IN ZYLOG SYSTEMS LTD (ITA NO.1138/MDS/2007) TO DRIVE HOME THE POINT THAT EXPENSES INCURRED WITH STAFF IN A FOREIGN BRANCH DO NOT RELATE TO RENDERING TECHNICAL SERVICES AS IT IS CONNECTED WITH THE OBJECT OF DEVELOPING COMPUTER SOFTWAR E. IN VIEW OF THESE DECISIONS, I HOLD THAT THE AO ERRED IN REDUCING THE EXPENSES MENTIONED ABOVE FROM THE EXPORT TURNOVER TO RESTRICT THE DEDUCTION U/S 10A OF THE ACT AND DIRECT THE AO TO ALLOW THE APPELLANT S CLAIM IN THIS REGARD . 8. FROM THE ABOVE PARA OF THE LD. CIT(A) S ORDER, IT IS SEEN THAT HE HAS FOLLOWED THE TRIBUNAL ORDER RENDERED IN THE CASE OF M/S INFOSYS TECHNOLOGIES LTD VS JCIT(SUPRA), BUT IN THIS CASE AFTERWARDS, THE MATTER TRAVELLED UP TO HON BLE KARNATAKA HIGH COURT AND AS PER THE JUDGMENT REPORTED IN 34 TAXMAN.COM 91(KAR.), HON BLE KARNATAKA HIGH COURT HAS RESTORED THE MATTER BACK TO THE FILE OF THE AO FOR FRESH DECISION AFTER EXAMINING THIS ASPECT AS TO WHETHER THE EXPENDITURE INCURRED IN FOREIGN CURRENCY WAS FOR PROVIDING TECHNICAL SERVIC ES OUTSIDE INDIA. IN THE PRESENT CASE, THE BENCH WANTED THE LD. AR OF THE ASSESSEE TO FURNISH THE AGREEMENT/CONTRACTS WITH VARIOUS BUYERS AS PER WHICH THE ASSESSEE WAS REQUIRED TO SEND ITS EMPLOYEES TO THE PLACE OF CUSTOMERS TO FIND OUT WHETHER THE EMPLOYE ES OF THE ASSESSEE COMPANY WERE SENT TO THE PLACE OF CUSTOMERS IN CONNECTION WITH SUPPLY OF SOFTWARE TO THEM OR WHETHER THE EMPLOYEES OF THE ASSESSEE COMPANY WERE SENT TO THE PLACE OF CUSTOMERS FOR RENDERING TECHNICAL SERVICES AND THEN ONLY THE ISSUE CAN B E DECIDED AS TO WHETHER SUCH EXPENSES INCURRED IN FOREIGN CURRENCY FOR DEPUTING THE EMPLOYEES OF THE ASSESSEE COMPANY TO THE PLACE OF FOREIGN COMPANIES WAS IN CONNECTION WITH SUPPLY OF COMPUTER SOFTWARE OR WERE IN CONNECTION WITH RENDERING TECHNICAL SERVIC ES BUT HE REPLIED THAT NO SUCH MATERIAL IS READILY AVAILABLE. THE LD.CIT(A) HAS ALSO NOT GIVEN ANY CLEAR FINDING ABOUT THIS FACTUAL ASPECT AND HE HAS PASSED A CRYPTIC ORDER ON THIS ISSUE BY SAYING THAT AS PER THE MATERIALS PLACED BEFORE HIM DURING THE APPE LLATE PROCEEDINGS, IT IS NOTICED BY HIM THAT THE ASSESSEE IS 4 IT (TP) A NO S . 754 TO 756 /BANG/201 6 ENGAGED ONLY IN DEVELOPING SOFTWARE BUT THIS IS NOT COMING OUT AS TO WHAT WAS THE MATERIAL PLACED BEFORE HIM AND ON WHAT BASIS, HE CAME TO THIS CONCLUSION. UNDER THESE FACTS AND IN VIEW OF THE S UBSEQUENT JUDGMENT OF THE HON BLE KARNATAKA HIGH COURT CITED BY THE LD. DR OF THE REVENUE HAVING BEEN RENDERED IN THE CASE OF CIT VS M/S INFOSYS TECHNOLOGIES LTD.(SUPRA), WE FEEL IT PROPER THAT THIS MATTER SHOULD GO BACK TO THE FILE OF THE AO FOR A FRESH D ECISION AFTER EXAMINING THE FACTUAL ASPECT AS TO WHETHER THE EMPLOYEES OF THE ASSESSEE COMPANY WERE DEPUTED TO THE PLACE OF FOREIGN CUSTOMERS AS A PART OF THE AGREEMENT WITH THEM FOR SUPPLYING COMPUTER SOFTWARE, BUT IF IT IS FOUND THAT AS PER THE AGREEMENT WITH FOREIGN CUSTOMER REGARDING SUPPLY OF SOFTWARE, THE ASSESSEE WAS UNDER NO OBLIGATION TO DEPUTE THEIR EMPLOYEES TO THE PLACE OF CUSTOMER, THAN IT MAY BE A CASE OF RENDERING TECHNICAL SERVICES OUTSIDE INDIA WHICH HAS BEEN ACCOUNTED FOR BY THE ASSESSEE A S SALE OF COMPUTER SOFTWARE. HENCE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATTER BACK TO THE FILE OF AO FOR FRESH DECISION ON THIS ASPECT AS PER ABOVE DISCUSSION AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND NO.3 OF THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ACCORDINGLY, IN VIEW OF THE EARLIER ORDER AS WELL AS ORDER OF THE TRIBUNAL IN ASSESSEE'S OWN CASE AS WELL AS DECISION OF HON'BLE JURISDICTIONAL HIGH COURT, THE FIRST ISSUE REGARDING EXCLUSION OF THE EXPENSES FROM EXPORT TURNOVER AS WELL AS TOTAL TURNOVER WHICH IS COVERED BY THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF TATA ELXSI LTD. VS. ACIT 349 ITR 98 AND IS DECIDED AGAINST THE REVENUE. 4. AS R EGARDS THE SECOND ISSUE, THE TRIBUNAL FOR A.Y. 2007 - 08 HAS SET ASIDE THE SAME TO THE RECORD OF THE ASSESSING OFFICER FOR FRESH DECISION. ACCORDINGLY, BY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEE'S OWN CASE (SUPRA), WE SET ASIDE THIS ISSUE TO THE R ECORD OF THE ASSESSING OFFICER FOR FRESH DECISION ON THE SAME TERMS. 5 IT (TP) A NO S . 754 TO 756 /BANG/201 6 5. IN THE RESULT, THE APPEALS OF REVENUE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 30 TH DAY OF MAR., 201 7 . SD/ - ( INTURI RAMA RAO ) ACCOUNTANT MEMBER SD/ - ( VIJAY PAL RAO ) JUDICIAL MEMBER BANGALORE, DT. 30/03/2017. *REDDY GP COPY TO : 1 . APPELLANT 2 . RESPONDENT 3 . C.I.T. 4 . CIT(A) 5 . DR, ITAT, BANGALORE. 6 . GUARD FILE. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL BANGALORE.