Kewal Engineering Pvt. Ltd., Bangalore V. ACIT, Bangalore

ITA 811/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63769 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 25-10-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 12-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A SUNDAR RAJAN
• Assessee Lawyers: S RAMASUBRAMANIAN
• Section: 143(3); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH C BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T.A. NOS.811 & 812 /BANG/20 11 (ASSESSMENT YEARS : 2007-08 & 2008-09) M/S. KEWAL ENGINEERING PVT. LTD., (FORMERLY KNOWN AS KABU ENGINEERING PVT. LTD.), NO.21-A, KUMBALGOD INDL. AREA, PHASE 1, JC ROAD, BENGALURU-74 PAN AACCK 0086D VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE 11(5), BANGALORE. APPELLANT RESPONDENT. APPELLANT BY : SHRI S. RAMASUBRAMANIAN. RESPONDENT BY : SHRI A. SUNDAR RAJAN. DATE OF HEARING : 25.10.2012. DATE OF PRONOUNCEMENT : 2.11.2012. O R D E R PER SHRI JASON P. BOAZ, A.M . : THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, BANGALORE FOR ASSESSMENT YE ARS 2007-08 & 2008-09 BOTH DT.29.07.2011. AS COMMON ISSUES ARE INVOLVED, BOTH THESE APPEALS ARE BEING DISPOSED OFF BY WAY OF A COMMON ORDER. 2. THE FACTS OF THE CASE, IN BRIEF, ARE AS UNDER : 2.1 THE ASSESSEE COMPANY (HEREINAFTER REFERRED TO A S THE ASSESSEE), ENGAGED IN THE MANUFACTURE AND SALE/EXPORT OF AUTOMOBILES AND AUTO PARTS FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2007-08 ON 28.10.2007 DECLARING TOT AL INCOME OFRS.1,45,630. FOR ASSESSMENT YEAR 2008-09, THE RETURN OF INCOME WAS FILED ON 17. 9.2008 DECLARING NIL INCOME. AFTER BEING 2 ITA NO.496/BANG/11 PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX AC T, 1961 (HEREIN AFTER REFERRED TO AS 'THE ACT'). THE CASE WAS TAKEN UP FOR SCRUTINY. THE ASS ESSMENT ORDERS WERE COMPLETED UNDER SECTION 143(3) OF THE ACT ON 11.12.2009 AND 27.9.2010 FOR A SSESSMENT YEARS 2007-08 & 2008-09 RESPECTIVELY DETERMINING THE TAXABLE INCOME OF THE ASSESSEE AT RS.14,69,863 AND RS.12,63,751. 2.2 AGGRIEVED BY THE ORDERS OF ASSESSMENT FOR ASSES SMENT YEARS 2007-08 & 2008-09, THE ASSESSEE WENT IN APPEAL BEFORE THE LEARNED CIT(APPE ALS)-I, BANGALORE. THE LEARNED CIT(APPEALS) DISPOSED THE ASSESSEE'S APPEAL FOR ASS ESSMENT YEAR 2007-08 BY ORDER DT.29.7.2011 IN WHICH THE ASSESSEE WAS ALLOWED PART IAL RELIEF. THE LEARNED CIT(APPEALS) HOWEVER DISMISSED THE ASSESSEE'S APPEAL FOR ASSESSMENT YEAR 2008-09 BY ORDER DT.29.7.2011. 3.0 AGGRIEVED BY THE ORDERS OF THE CIT(APPEALS) FOR BOTH ASSESSMENT YEARS 2007-08 AND 2008-09 THE ASSESSEE IS NOW IN APPEAL BEFORE US. T HE GROUNDS OF APPEAL RAISED YEAR-WISE ISSUES ARE AS UNDER: FOR ASSESSMENT YEAR 2007-08 : 1. THAT THE ORDER OF THE LEARNED CIT (APPEALS) INSOFAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE APPELLANT IS BAD AND ERRONEOUS IN LAW AND AGAINST THE CIRCUMSTANCES OF THE CASE. 2. THAT THE LEARNED CIT (APPEALS) ERRED IN LAW AND ON FACTS IN DETERMINING THE DEDUCTION UNDER SECTION 10B AT RS.49,34,552 INSTEAD OF RS.60,72,386. 3. WITHOUT PREJUDICE TO THE GENERALITY OF THE GROU ND NO.2, THE LEARNED CIT (APPEALS) ERRED IN LAW AND ON FACTS IN DEDUCTING TH E TELECOMMUNICATION CHARGES, EXPENSES INCURRED IN FOREIGN EXCHANGE AND THE EXCHA NGE RATE DIFFERENCE FROM THE 'EXPORT TURNOVER'. 4. WITHOUT PREJUDICE TO GROUND NO.3, THE LEARNED C IT (APPEALS) OUGHT TO HAVE DEDUCTED THE TELECOMMUNICATION CHARGES, EXCHANGE RA TE DIFFERENCES AND THE EXPENDITURE INCURRED IN FOREIGN EXCHANGE FROM THE ' TOTAL TURNOVER' ALSO. 5. THAT THE LEARNED CIT (APPEALS) ERRED IN LAW AND ON FACTS IN NOT DEDUCTING FREIGHT AND INSURANCE CHARGES FROM 'TOTAL TURNOVER'. 6. THAT THE LEARNED CIT (APPEALS) ERRED IN LAW AND ON FACTS IN DETERMINING THE BOOK PROFIT AT RS.13,76,215 INSTEAD OF NIL. 3 ITA NO.496/BANG/11 7. THAT THE LEARNED CIT (APPEALS) OUGHT TO HAVE DE CIDED ON THE GROUND THAT WHILE COMPUTING BUSINESS OR PROFESSION UNDER SECTION 115J B OF THE ACT A SUM OF RS.2,95,73,861 SHOULD BE REDUCED INSTEAD OF RS.2,48 ,90,530 BEING THE INCOME REFERABLE TO SECTION 10A OF THE ACT. EACH OF THE ABOVE GROUNDS IS WITHOUT PREJUDICE TO O NE ANOTHER AND THE APPELLANT CRAVES LEAVE OF THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE TO ADD, DELETE, AMEND OR OTHERWISE MODIFY ONE OR MORE OF THE ABOVE GROUND S EITHER BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL. FOR ASSESSMENT YEAR 2008-09 : 1. THAT THE ORDER OF THE LEARNED CIT (APPEALS) INSOFAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE APPELLANT IS BAD AND ERRONEOUS IN LAW AND AGAINST THE CIRCUMSTANCES OF THE CASE. 2. THAT THE LEARNED CIT (APPEALS) ERRED IN LAW AND ON FACTS IN DETERMINING THE DEDUCTION UNDER SECTION 10B AT RS.93,79,723 INSTEAD OF RS.1,05,51,541. 3. WITHOUT PREJUDICE TO THE GENERALITY OF THE GROU ND NO.2, THE LEARNED ASSESSING OFFICER ERRED IN LAW AND ON FACTS IN DEDUCTING THE TELECOMMUNICATION CHARGES FROM THE 'EXPORT TURNOVER'. 4. WITHOUT PREJUDICE TO GROUND NO.3, THE LEARNED A SSESSING OFFICER OUGHT TO HAVE DEDUCTED THE TELECOMMUNICATION CHARGES, FREIGHT AND INSURANCE FROM THE 'TOTAL TURNOVER' ALSO. EACH OF THE ABOVE GROUNDS IS WITHOUT PREJUDICE TO O NE ANOTHER AND THE APPELLANT CRAVES LEAVE OF THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE TO ADD, DELETE, AMEND OR OTHERWISE MODIFY ONE OR MORE OF THE ABOVE GROUND S EITHER BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL. 4.0 THE GROUNDS RAISED AT S.NO.1 IN BOTH APPEALS BEING GENERAL IN NATURE, NO ADJUDICATION IS CALLED FOR THEREON. 5.1 FOR BOTH YEARS THE SINGLE ISSUE OF DISPUTE I N THE GROUNDS RAISED BY THE ASSESSEE IS IN CHALLENGING THE FINDING OF THE LEARNED CIT(APPEALS) IN DEDUCTING / EXCLUDING TELECOMMUNICATION CHARGES, EXPENSES INCURRED IN FOREIGN EXCHANGE, FRE IGHT AND INSURANCE CHARGES AND EXCHANGE RATE DIFFERENCE FROM EXPORT TURNOVER ONLY WITHOUT D EDUCTING/EXCLUDING THE SAME FROM TOTAL TURNOVER ALSO. THE LEARNED COUNSEL FOR THE ASSESSE E WHILE REITERATING THE GROUNDS RAISED SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED IN FA VOUR OF THE ASSESSEE BY THE DECISION OF THE 4 ITA NO.496/BANG/11 HON'BLE JURISDICTIONAL HIGH COURT OF KARNATAKA IN T HE CASE OF CIT VS. TATA ELXSI LTD REPORTED IN (2011) 247 CTR 334 (KAR) DT.30.8.2011. 5.2 THE LEARNED DEPARTMENTAL REPRESENTATIVE SUP PORTED THE ORDERS OF THE AUTHORITIES BELOW. 5.3 WE HAVE HEARD BOTH PARTIES AND CAREFULLY PER USED AND CONSIDERED THE MATERIAL ON RECORD AND THE JUDICIAL DECISION RELIED UPON BY THE LEARNE D COUNSEL FOR THE ASSESSEE. WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE CITED DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. TATA ELXSI LTD REPORTED IN (2011) 247 CTR 334 (KAR). IN THE SAID JUDGEMENT AN IDENT ICAL ISSUE WAS CONSIDERED BY THE HON'BLE HIGH COURT IN WHICH THEIR LORDSHIPS HELD THAT IF THE EXPORT TURNOVER IN THE NUMERATOR IS TO BE ARRIVED AT AFTER EXCLUDING CERTAIN EXPENSES, THE SAME SHOULD ALSO BE EXCLUDED IN COMPU TING THE EXPORT TURNOVER IN THE DENOMINATOR ALSO. THE REASON BEING THAT THE TOTAL TURNOVER INCLUDES EXPORT TURNOVER. THE COMPONENTS OF THE EXPORT TURNOVER IN THE NUMERA TOR AND DENOMINATOR CANNOT BE DIFFERENT. THEREFORE, THOUGH THERE IS NO DEFINITION OF THE TERM TOTAL TURNOVER IN SECTION 10-A, THERE IS NOTHING IN THE SAID SECTION TO MANDATE THAT, WHAT IS EXCLUDED FROM THE NUMERATOR THAT IS EXPORT TURNOVER WOULD NE VERTHELESS FORM PART OF THE DENOMINATOR. THOUGH WHEN A PARTICULAR WORD IS NOT DEFINED BY THE LEGISLATURE AND AN ORDINARY MEANING IS TO BE ATTRIBUTED TO THE SAME, T HE SAID ORDINARY MEANING TO BE ATTRIBUTED TO SUCH WORD IS TO BE IN CONFORMITY WITH THE CONTEXT IN WHICH IT IS USED. WHEN THE STATUTE PRESCRIBES A FORMULA AND IN THE SA ID FORMULA, 'EXPORT TURNOVER' IS DEFINED, AND WHEN THE 'TOTAL TURNOVER' INCLUDES 'E XPORT TURNOVER', THE VERY SAME MEANING GIVEN TO THE 'EXPORT TURNOVER' BY THE LEGIS LATURE IS TO BE ADOPTED WHILE UNDERSTANDING THE MEANING OF THE 'TOTAL TURNOVER', WHEN THE 'TOTAL TURNOVER', INCLUDES 'EXPORT TURNOVER'. IF WHAT IS EXCLUDED IN COMPUTIN G THE 'EXPORT TURNOVER' IS INCLUDED WHILE ARRIVING AT THE 'TOTAL TURNOVER', WHEN THE 'E XPORT TURNOVER' IS A COMPONENT OF 'TOTAL TURNOVER', SUCH AN INTERPRETATION WOULD RUN COUNTER TO THE LEGISLATIVE INTENT AND IMPERMISSIBLE. IF THAT WERE THE INTENTION OF THE L EGISLATURE, THEY WOULD HAVE EXPRESSLY STATED SO. IF THEY HAVE NOT CHOSEN TO EX PRESSLY DEFINE WHAT THE 'TOTAL TURNOVER' MEANS, THEN, WHEN THE 'TOTAL TURNOVER' IN CLUDES 'EXPORT TURNOVER', THE MEANING ASSIGNED BY THE LEGISLATURE TO THE 'EXPORT TURNOVER' IS TO BE RESPECTED AND GIVEN EFFECT TO, WHILE INTERPRETING THE 'TOTAL TUR NOVER' WHICH IS INCLUSIVE OF THE 'EXPORT TURNOVER'. THEREFORE THE FORMULA FOR COMPU TATION OF THE DEDUCTION UNDER SECTION 10A, WOULD BE AS UNDER : 5 ITA NO.496/BANG/11 PROFITS OF THE BUSINESS X EXPORT TURNO VER / (EXPORT TURNOVER + DOMESTIC TURNOVER) OF THE UNDERTAKING TOTAL TURNOVER. RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF TATA ELXSI LTD. (SUPRA), WE DIRECT THE ASSESSING OFFICER TO RECOMPUTE THE ELIGIBLE DEDUCTION UNDER SECTION 10B OF THE ACT FOR BOTH ASSESSMENT YEARS 20 07-08 AND 2008-09 BY EXCLUDING THE EXPENSES INCLUDED ON TELECOMMUNICATION CHARGES, FOR EIGN EXCHANGE RATE DIFFERENCE, FREIGHT AND INSURANCE AND EXPENDITURE IN FOREIGN EXCHANGE BOTH FROM EXPORT TURNOVER AND TOTAL TURNOVER. 6. IN THE RESULT, THE ASSESSEE'S APPEALS FOR B OTH ASSESSMENT YEARS 2007-08 AND 2008-09 IN ITA NOS.811 & 812/BANG/2011 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND NOV., 2012. SD/- SD/- (P. MADHAVI DEVI) (JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, - C BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDE R SR. PRIVATE SECRETARY, ITAT, BANGALORE