Value Labs Technologies LLP, Hyderabad, Hyderabad V. DCIT, Circle-8(1), Hyderabad, Hyderabad

ITA 840/HYD/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6084 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 08-09-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 15-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHAYA ROUT
• Assessee Lawyers: P MURALI MOHANA RAO
• Keywords: Revenue expenditure
• Section: 143(3); 10AA; 37(1)

Judgement Text

ITA NO 840 OF 2017 VALUE LABS TECHNOLOGIES LLP HYD ERABAD.. PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD (THROUGH VIDEO CONFERENCING) BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER ITA NO.840/HYD/2017 ASSESSMENT YEAR: 2013-14 M/S. VALUE LABS TECHNOLOGIES LLP HYDERABAD PAN:AAHFV5240J VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 8(1) HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI P. MURALI MOHANA RAO REVENUE BY : SRI ABHAYA ROUT, DR DATE OF HEARING: 08/09/2020 DATE OF PRONOUNCEMENT: 11/09/2020 ORDER PER SMT. P. MADHAVI DEVI, J.M. THIS IS THE ASSESSEES APPEAL FOR THE A.Y 2013-1 4 AGAINST THE ORDER OF THE CIT (A)-2, HYDERABAD, DATE D 28.02.2017. 2. THE CASE WAS TAKEN UP FOR HEARING THROUGH VIDEO- CONFERENCING AND BOTH THE PARTIES I.E. THE LEARNED COUNSEL FOR THE ASSESSEE AND THE LEARNED DR WERE HEARD. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI RM, ENGAGED IN RENDERING SOFTWARE DEVELOPMENT SERVICES, FILED ITS RETURN OF INCOME FOR THE A.Y 2013-14 ELECTRONICALLY ON 29.09.2013 ADMITTING INCOME OF RS.3,77,030/-. DURING THE ASSES SMENT ITA NO 840 OF 2017 VALUE LABS TECHNOLOGIES LLP HYD ERABAD.. PAGE 2 OF 7 PROCEEDINGS U/S 143(3) OF THE ACT, THE REPRESENTATI VE OF THE ASSESSEE FIRM APPEARED BEFORE THE AO FROM TIME TO T IME AND PRODUCED THE DETAILS AND INFORMATION CALLED FOR. FR OM THE SAID DETAILS, THE AO NOTICED THAT THE ASSESSEE IS A NEWL Y ESTABLISHED UNIT IN SEZ INCORPORATED ON 13.08.2009 AND COMMENCE D ITS OPERATIONS ON 09.04.2010 AND ACCORDINGLY, THE ASSE SSEE CLAIMED EXEMPTION U/S 10AA OF THE ACT FOR AN AMOUNT OF RS.5 ,06,79,363/- AS INCOME FROM ITS UNIT IN SEZ. DURING THE COURSE O F ASSESSMENT PROCEEDINGS, THE AO REQUIRED THE ASSESSEE TO JUSTIF Y AS TO WHY TELECOMMUNICATION EXPENSES OF RS.10,29,473/- SHOULD NOT BE DISALLOWED. HE ALSO REQUIRED THE ASSESSEE TO EXPLAI N THE MISCELLANEOUS EXPENSES TO THE TUNE OF RS.11,03,592/ - AND ALSO THE CUSTOMS CLEARANCE CHARGES OF RS.23,683/-. THE A SSESSEE FILED ITS SUBMISSIONS STATING THAT THE TELECOMMUNICATION EXPENSES WERE NOT INCLUDED IN THE EXPORT TURNOVER AND THEREFORE, THE SAME SHOULD BE REDUCED FROM THE EXPORT TURNOVER FOR COMP UTATION OF EXEMPTION/DEDUCTION U/S 10AA OF THE ACT. THE AO, HO WEVER, DID NOT ACCEPT THE SAME AND TREATED IT AS PART OF THE E XPORT TURNOVER, BUT DID NOT ALLOW IT AS EXPENDITURE AND DETERMINED THE EXEMPTION AT RS.5,01,00,076/- ONLY. HE ALSO DISALLOWED THE C USTOMS CLEARANCE CHARGES AND 10% OF THE MISCELLANEOUS EXPE NSES ON THE GROUND THAT THEY COULD NOT BE EXPLAINED BY THE ASS ESSEE AND ITA NO 840 OF 2017 VALUE LABS TECHNOLOGIES LLP HYD ERABAD.. PAGE 3 OF 7 BROUGHT THE CUSTOMS CLEARANCE CHARGES, TELECOMMUNI CATION CHARGES AND 10% OF THE MISCELLANEOUS EXPENSES ALSO TO TAX. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE CIT (A) WHO DISMISSED THE SAME AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US BY RAISING THE FOLLOWING GROUNDS O F APPEAL: 1. GROUND NO. 1 1.1 THAT, THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) -2, (I/LD. CIT(A)') IS ERRONEO US BOTH ON FACTS AND IN LAW AND THUS THE CIT(A) HAS ER RED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER (1 / AD'). 1.2 THAT, FURTHER WHILE CONFIRMING THE ORDER OF THE LEARNED AO THE CIT(A) HAS FAILED TO APPRECIATE THE MATERIAL ON RECORD AND SUBMISSIONS MADE BEFORE HIM AND THUS THE ORDER OF THE CIT(A) IS VITIATED ON ACC OUNT OF IRRELEVANT AND ERRONEOUS CONSIDERATION AND BY DISREGARDING THE RELEVANT MATERIAL. 1.3 THAT, FURTHER THE ORDER OF THE CIT(A) IS BASED ON INCORRECT ASSUMPTION OF FACTS WHICH ARE BASED ON NO MATERIAL AND THE UNWARRANTED INFERENCE HAVE BEEN DRAWN WHICH ARE BOTH FACTUALLY INCORRECT AND IS BAS ED ON PRE-CONCEIVED OPINION WHICH IS UNSUPPORTED BY AN Y MATERIAL. 2. GROUND NO. 2 2.1 THE LD. CIT(A) HAS ERRED IN LAW IN NOT SPECIFIC ALLY ADJUDICATING ALL THE GROUNDS OF APPEAL RAISED BY TH E APPELLANT IN FORM 35. 3. GROUND NO. 3 3.1 THE LD. CIT(A) HAS ERRED BOTH IN FACTS AND IN L AW IN CONFIRMING THE RE-COMPUTATION OF DEDUCTION U/ S 10A A OF THE ACT AT RS.5,01,00,076/-. 3.2 THE LD. CIT(A) HAS ERRED BOTH IN FACTS AND IN L AW IN CONFIRMING THAT TELECOMMUNICATION CHARGES OF RS. 10,29,473/- HAVE TO BE REDUCED FROM THE EXPORT TURNOVER FOR THE PURPOSES OF COMPUTING AVAILABLE DEDUCTION UNDER SECTION 10AA OF THE ACT. 3.3 THE LD. CIT(A) HAS ERRED BOTH IN FACTS AND IN L AW IN NOT APPRECIATING THAT HAVING EXCLUDED ITA NO 840 OF 2017 VALUE LABS TECHNOLOGIES LLP HYD ERABAD.. PAGE 4 OF 7 TELECOMMUNICATION CHARGES FROM EXPORT TURNOVER, THE SAID CHARGES SHOULD ALSO HAVE BEEN EXCLUDED FROM TH E TOTAL TURNOVER FOR THE PURPOSES OF COMPUTING AVAILA BLE DEDUCTION UNDER SECTION 10AA OF THE ACT. 4. GROUND NO. 4 4.1 THE LD. CIT(A) HAS ERRED BOTH IN FACTS AND IN L AW IN CONFIRMING DISALLOWANCE OF RS. 10,29,4731- MADE BY THE LEARNED AA UNDER THE HEAD TELECOMMUNICATION EXPENDITURE. 5. GROUND NO. 5 5.1 THE LD. CIT(A) HAS ERRED BOTH IN FACTS AND IN L AW IN CONFIRMING AD HOC DISALLOWANCE OF RS. 1,10,3591- MA DE BY THE LEARNED AA UNDER THE HEAD MISCELLANEOUS EXPENDITURE. 6. GROUND NO. 6 6.1 THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOW ANCE OF RS.23,6831 - MADE BY THE LEARNED AA UNDER THE HE AD CUSTOMS CLEARANCE CHARGES. 6.2 THE LD. CIT(A) HAS ERRED BOTH IN FACTS AND IN L AW IN NOT APPRECIATING THE FACT THAT CUSTOM CLEARANCE CHA RGES OF RS.23,6831 - PAID BY THE APPELLANT IN RELATION T O PURCHASE OF LAPTOPS IS A REVENUE EXPENDITURE IN ACCORDANCE WITH THE NATURE OF BUSINESS OF THE APPEL LANT. 6.3 THE LD. CIT(A) HAS ERRED BOTH IN FACTS AND IN L AW IN NOT APPRECIATING THAT THE APPELLANT IS IN THE BUSIN ESS OF DEVELOPMENT AND EXPORT OF SOFTWARE AND THAT THE PURCHASE OF LAPTOPS IS DIRECTLY INCIDENTAL TO THE B USINESS OF THE APPELLANT AND THAT THE EXPENDITURE OF RS.23, 6831 - IS ALLOWABLE UL S 37(1) OF THE ACT. 7. GROUND NO. 7 7.1 THE LD. CIT(A) ERRED BOTH IN FACTS AND IN LAW I N CONFIRMING THE DETERMINATION OF TOTAL INCOME AT RS.5,22J9,906/ - WHERE IN THE AO HAS NOT EVEN ALLOW ED THE DEDUCTION OF RS.5,01,OO,076/ - U/ S 10AA OF THE ACT THAT HAS BEEN RE-COMPUTED BY AO HIMSELF IN THE ASSESSMENT ORDER. 8. GROUND NO. 8 8.1 THE LD. CIT(A) ERRED BOTH IN FACTS AND IN LAW I N NOT ALLOWING/COMPUTING DEDUCTION UNDER SECTION 10AA OF THE ACT ON THE ENHANCED PROFITS DETERMINED BY THE A O ON ACCOUNT OF DISALLOWANCE OF VARIOUS EXPENSES. ITA NO 840 OF 2017 VALUE LABS TECHNOLOGIES LLP HYD ERABAD.. PAGE 5 OF 7 THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PREJUDICE TO ONE ANOTHER. THE APPELLANT CRAVES LEAVE TO ALTER, AMEND OR WITHDRAW ALL OR ANY OF THE GROUNDS OF APPEAL HEREIN OR ADD ANY FURTHER GROUNDS AS MAY BE CONSIDERED NECESSARY AND TO SUBMIT SUCH STATEMENTS, DOCUMENTS AND PAPERS AS MAY BE CONSIDERED NECESSARY EITHER BEFORE OR DURING THE APPEAL HEARING. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT ALL THE EXPENDITURE WHICH HAVE BEEN DISALLOWED BY T HE AO HAVE TO BE REDUCED FROM THE EXPORT TURNOVER AS WELL AS THE TOTAL TURNOVER. HE, THEREFORE, SOUGHT A DIRECTION THAT THE DISALLOW ED EXPENDITURE MAY BE REDUCED FROM BOTH THE EXPORT TURNOVER AS W ELL AS TOTAL TURNOVER FOR THE PURPOSE OF COMPUTATION OF EXEMPTI ON U/S 10AA OF THE ACT. IN SUPPORT OF THIS CONTENTION, HE PLACE D RELIANCE UPON THE FOLLOWING CASE LAW. A) DELOITTE CONSULTING INDIA (P) LTD IN ITA NO.470/HYD/2011 B) MICROSOFT GLOBAL SERVICES CENTER (I)MPVT. LTD IN ITA NO.1245/HYD/2014 C) TRENDY WORKS TECHNOLOGY PVT LTD IN ITA NO.478/HYD/2016. D) CIT VS. HCL TECHNOLOGIES LTD IN CIVIL APPEAL NO. 8489- 8490 OF 2013 E) CBDT CIRCULAR 4/2018 DATED 14.08.2018 F) PLANET ONLINE PVT LTD VS. ACIT IN ITA NO.464 608/HYD/2014 G) VALUE LABS VS. ACIT IN ITA NO.342/HYD/2013 & 425/HYD/2013 ITA NO 840 OF 2017 VALUE LABS TECHNOLOGIES LLP HYD ERABAD.. PAGE 6 OF 7 H) CIT (A) VS. ASSESSEES OWN CASE FOR THE A.Y 2012 -13 IN ITA NO.0063/2015-16. I) CIT (A) VS. ASSESSEES OWN CASE FOR THE A.Y 2011 -12 IN ITA NO.1171/2014-15/CIT (A)-6/2016-17. J) CBDT CIRCULAR NO.37/2016 DATED 02.11.2016 K) ITO VS. KEVAL CONSTRUCTION REPORTED IN 33 TAXMAN N.COM 277. 6. THE LEARNED DR, HOWEVER, OPPOSED THE SAID CONTEN TION OF THE ASSESSEE. 7. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, AND PARTICULARLY THE DECISION OF THE HON 'BLE SUPREME COURT IN THE CASE OF CIT VS. HCL TECHNOLOGIES LTD. (CITED SUPRA), WE DIRECT THE AO TO EXCLUDE THE DISALLOWED EXPENDIT URE FROM BOTH THE EXPORT TURNOVER AS WELL AS TOTAL TURNOVER WHIL E COMPUTING THE EXEMPTION U/S 10AA OF THE ACT. ACCORDINGLY, THE A SSESSEES APPEAL IS ALLOWED. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH SEPTEMBER, 2020. SD/- SD/- (D.S. SUNDER SINGH) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 11 TH SEPTEMBER, 2020. VINODAN/SPS ITA NO 840 OF 2017 VALUE LABS TECHNOLOGIES LLP HYD ERABAD.. PAGE 7 OF 7 COPY TO: 1 M/S.VALUE LABS TECHNOLOGIES LLP C/O P. MURALI MOH ANA RAO, C.AS, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD 500082 2 DY.CIT, CIRCLE 8(1) HYDERABAD 3 CIT (A)-2 HYDERABAD 4 PR. CIT 2 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER