Assistant Commissioner of Income Tax circle-7(1)(2), Bangalore V. M/s Vee Technologies Pvt Ltd , Bangalore

ITA 926/BANG/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7392 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 24-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V SINIVASAN
• Keywords: Competent authority
• Section: 10B

Judgement Text

ITA.926/BANG/2017 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'A', BENGALURU BEFORE SHRI. INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI. LALIET KUMAR, JUDICIAL MEMBER I.T.A NO.926/BANG/2017 (ASSESSMENT YEAR : 2010-11) ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 7(1)(2), BENGALURU .. APPELLANT V. M/S. VEE TECHNOLOGIES P. LTD, NO.71, SONA ROAD,BENGALURU .. RESPONDENT PAN : AABCV0100C ASSESSEE BY : SHRI. V. SINIVASAN, ADVOCATE REVENUE BY : SHRI. B. R. RAMESH, JCIT HEARD ON : 10.10.2017 PRONOUNCED ON : 27.10.2017 O R D E R PER LALIET KUMAR, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE ARISES OUT OF THE ORDER OF THE CIT (A) -7, BENGALURU, DT.25.01.2017, FOR THE ASSES SMENT YEAR 2010- 11, ON THE FOLLOWING GROUNDS : ITA.926/BANG/2017 PAGE - 2 02. BRIEF FACTS ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS - OF BACK OFFICE SERVICES. THE RETURN WAS FILED DECLA RING A TOTAL TAXABLE INCOME OF RS. 14,64,7391-. THE ASSESS EE HAS CLAIMED EXEMPTION U/S 10B OF IT ACT OF RS.3,89,32,560/-. DU RING THE ASSESSMENT PROCEEDING, THE AO OBSERVED THAT THE ASS ESSEE OUGHT TO HAVE REDUCED EXPENDITURE ON ACCOUNT OF EXPENSES INC URRED ON ACCOUNT OF COMMUNICATION EXPENSES OF RS.13,54,50/-, FREIGHT CH ARGES RS.2,13,396/-, CONNECTIVITY CHARGES RS.40,30,1351- AND OTHER EXPENSES INCURRED IN FOREIGN CURRENCY TOWARD FOREIG N TRAVEL OF RS.96,43,134/-, ALL TOTALING TO RS.1,16,41,171/-, F ROM THE 'EXPORT ITA.926/BANG/2017 PAGE - 3 TURNOVER' FOR THE COMPUTATION OF DEDUCTION U/S 10B OF IT ACT AS THESE EXPENSES INCURRED ARE DIRECTLY ATTRIBUTABLE TO THE DELIVERY OF COMPUTER SOFTWARE OUTSIDE INDIA. THE AO, THEREFORE HELD THAT THESE EXPENSES WHICH ARE DEBITED TO P&L ACCOUNT OUGHT TO HAVE BEEN REDUCED FROM 'EXPORT TURNOVER' ARE BUT HAS NOT BEEN REDUCED FROM EXPORT TURNOVER'. THE AC) THEREAFTER PROCEEDED TO RE-COMPUTE DEDUCTIO N U/S 10B OF IT ACT AFTER REDUCING THE AMOUNT OF RS.1,16,41,171/- F ROM THE 'EXPORT TURNOVER'. THE AO DID NOT PROPOSE ANY CHANGE IN THE 'TOTAL TURNOVER'. THE AO ALSO FOUND THAT AS PER THE AUDITORS CERTIFIC ATE IN FORM NO.56G, DT 04.03.2013, THE APPELLANT HAS BROUGHT THE EXPORT S SALE PROCEEDS IN INDIA, IN CONVERTIBLE FOREIGN EXCHANGE WITHIN THE S TIPULATED TIME EXCEPT FOR AN AMOUNT OF RS. 11,21,718/-. THE AO OPI NED THAT THE PROVISIONS OF SECTION 10B(3) OF IT ACT PROVIDES THA T THE SALE PROCEEDS FROM EXPORT HAS TO BE BROUGHT IN INDIA WITHIN THE S PECIFIED TIME OR WITHIN THE EXTENDED PERIOD GRANTED BY THE COMPETENT AUTHORITY. THE AO FURTHER OBSERVED THAT FOR THE PURPOSE OF COMPUTI NG THE PROPORTIONATE PROFIT OF THE UNDERTAKING AS CONTEMPL ATED U/S.10B(4) OF IT ACT. THE PROVISIONS OF SECTION 10B(3) OF IT ACT OUGHT TO HAVE BEEN COMPLIED WITH WHICH IS MISSING IN THE CASE OF ASSES SEE. THE AO THEREAFTER, INFERRED THAT THE INTENT OF LEGISLATION IS TO ENSURE THAT THE RECEIPTS ARE BROUGHT INTO THE COUNTRY AND TO MINIMI SE THE OUTFLOW OF FOREIGN EXCHANGE AND IF ANY PORTION OF RECEIPT IS N OT REALIZED WITHIN THE STIPULATED TIME FRAME THEN THE CONCESSION IN TH E FORM OF DEDUCTION N/S 10(L) OF IT ACT IS NOT AVAILABLE, THE AO ALSO EXAMINED THE FACT THAT THE ASSESSEE HAS NOT SOUGHT ANY EXTENSION OF TIME A S PER THE PROVISIONS OF SECTION 155(11A) OF IT ACT. ACCORDINGLY THE CLAIM OF ASSESSEE FOR DEDUCTION U/S.10B OF IT ACT WAS DISALLOWED. AGGRIEVED BY THIS ORDER THE ITA.926/BANG/2017 PAGE - 4 ASSESSEE FILED AN APPEAL BEFORE THE CIT (A). 03. THE CIT (A), BEING NOT CONVINCED WITH THE ORDER OF THE AO, ALLOWED THE ASSESSEES APPEAL. BEING AGGRIEVED, REVENUE IS IN APPEAL BEFORE US WITH THE GROUNDS OF APPEAL REPRODUCED ELSEWHERE IN THIS ORDER. 03. IN RESPECT OF GROUND NO.2, WHEREIN THE REVENUE IS AGGRIEVED THAT THAT THE CIT (A) HAS ALLOWED THE BENEFIT OF DEDUCTI ON U/S.10B TO THE EOU EVEN WHEN THE SALE PROCEEDS RECEIVABLE IN FOREI GN EXCHANGE HAVE BEEN PARTLY RECEIVED AND FURTHER RECEIVED BEYO ND THE STIPULATED TIME. 04. WE FIND NO REASON TO INTERFERE WITH THE FINDING GIVEN BY THE CIT (A). THE CIT (A) IN PARAS 5.1 TO 5.5, HAS HELD HAS UNDER : ITA.926/BANG/2017 PAGE - 5 ITA.926/BANG/2017 PAGE - 6 FROM THE READING OF THE ABOVE, WE FIND THE FINDIN G GIVEN BY THE CIT (A) IS IN ACCORDANCE WITH LAW AND NO CONTRARY VIEW IS POSSIBLE . HOWEVER, WE WOULD LIKE TO ADD THAT IF THE ASSESSEE HAS FAILED TO REALISE THE ENTIRE EXPORT PROCEEDS THEN THE DEDUCTION U/S.1 0B WOULD BE CALCULATED ONLY ON THE BASIS OF THE SUM REALISED, O VER THE TOTAL TURNOVER INSTEAD OF GROSS EXPORT PROCEEDS (REALISED + UNREAL ISED) OVER THE TOTAL EXPORT TURNOVER. IF THE TOTAL PROFITS ARE RS.100 A ND THE SUM OF RS.200/- OUT OF THE TOTAL TURNOVER OF RS.1,000/- HAS NOT BEE N REALISED, THE EQUATION TO BE APPLIED FOR WORKING OUT THE DEDUCTI ON U/S.10B WOULD BE RS.100 X RS.800 RS.1000. IF WE TAKE THE OTHER FORMULA I.E., RS.100 X RS.800 RS.800/- THEN, THERE WILL NOT BE ANY EFFECT ON THE PROFIT OF THE ASSESSEE. IN VIEW OF THE ABOVE, WE D IRECT THE AUTHORITIES BELOW TO TAKE ONLY THE SUM REALISED OUT OF THE SAL E PROCEEDS RECEIVED IN INDIA, INSTEAD OF THE TOTAL AMOUNT OF THE SALE P ROCEEDS OF THE ARTICLE / THING EXPORTED OUTSIDE INDIA. ACCORDINGLY WE UPHOL D THE ORDER OF THE CIT (A). THE GROUND NO.2 OF THE REVENUE IS DISMISS ED. 05. GROUND NOS.3 AND 4 ARE IN RESPECT OF THE DIRECT ION OF THE AO TO EXCLUDE FROM TOTAL TURNOVER ITEMS LIKE TELECOM CHAR GES AND OTHER EXPENSES INCURRED IN FOREIGN CURRENCY BE DEDUCTED FROM THE E XPORT TURNOVER AS WELL, FOR WORKING OUT THE DEDUCTION U/S.10A. 06. WE HAVE THE RIVAL SUBMISSIONS. W E FIND THAT THE CIT (A) HAD FOLLOWED THE JUDGMENT OF HONBLE JURISDICTIONAL HIG H COURT IN THE CASE OF TATA ELXSI LTD V. CIT [349 ITR 98], IN DIRE CTING EXCLUSION OF ITA.926/BANG/2017 PAGE - 7 ITEMS WHICH ARE DEDUCTED FROM EXPORT TURNOVER ALSO TO BE DEDUCTED FROM THE TOTAL TURNOVER ALSO FOR WORKING OUT THE DE DUCTION U/S.10A OF THE ACT. JUST FOR A REASON THAT APPEAL HAS BEEN FI LED BY THE REVENUE AGAINST THE JUDGMENT OF JURISDICTIONAL HIGH COURT W OULD NOT BE A REASON NOT TO FOLLOW THE JURISDICTIONAL HIGH COURT S JUDGMENT. WE DO NOT FIND ANY LACUNAE IN THE ORDER OF CIT (A). 07. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 27TH DAY OF OCTOBER, 2017. SD/- SD/- (INTURI RAMA RAO) (LALIE T KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER SENIOR PRIVATE SECRETARY