ACIT, CHENNAI V. Triad Software (P) Ltd., CHENNAI

ITA 928/CHNY/2014

• Counselvise Citation: 92821714 RSA 2014
• Duration Of Justice: 44 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2014
• Appeal Filed By: Department
• Assessment Year: misc
• Appeal Filed On: 01-01-1970
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN IRS
• Assessee Lawyers: R RAVICHANDRAN SR MANAGER
• Section: 143(3); 80HHC; 10B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . , . . , ! ' BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER ./ I.T.A. NOS. 899 TO 902 & 928/MDS/2014. ( / ASSESSMENT YEAR :2005-06, 2006-07, 2007-08, 2008-09 & 2003-2004) THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE III(2), CHENNAI ( #$ /APPELLANT) VS M/S. TRIAD SOFTWARE (P) LTD, NO.2, VIDYODAYA EAST, 2 ND STREET, T. NAGAR, CHENNAI 600 017. [PAN: AAACT7849K] ( %&#$ /RESPONDENT) / APPELLANT BY : SHRI. N. MADHAVAN, IRS, JCIT / RESPONDENT BY : SHRI. R. RAVICHANDRAN, SR. MANAGER. /DATE OF HEARING : 24.06.2014. ! /DATE OF PRONOUNCEMENT : 26.06.2014. ' / O R D E R PER BENCH:- THESE REVENUES APPEALS FOR ASSESSMENT YEARS 200 5-06, 2006-07, 2007-08, 2008-09 AND 2003-04; EMANATE FRO M DIFFERENT I.T.A.NOS.899 TO 902/MDS/ 2014 AND ITA NO.928/MDS/2014. :- 2 -: ORDERS, ALL DATED 28.12.2013 PASSED BY THE COMMISS IONER OF INCOME TAX (APPEALS)-III, CHENNAI IN ITA NO.771/2013-14, I TA NO.854/2013- 14, ITA NO.1335/2013-14, ITA NO. 1143/2013-14 AND I TA NO.1287/2013-14 RESPECTIVELY IN PROCEEDINGS UNDER S ECTION 143(3) R.W.S 147 OF THE INCOME TAX ACT 1961 [IN SHORT THE ACT]. 2. THE REVENUES IDENTICAL GROUNDS RAISED ALL CASES AR E AS FOLLOWS:- 2.1 THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESING OFICER TO DEDUCT THE TRAVEL EXPENSES INCURRED IN FOREIGN C URRENCY AND THE COMMUNICATION CHARGES BOTH FROM THE ETO AND TTO WHILE COMPUTING EXEMPTION U/S. 10B. 2.2 IT IS SUBMITTED THAT THE DECISION OF THE SPECIA L BENCH OF THE JURISDICTIONAL ITAT IN THE CASE OF M/S. SAKSOFT LTD, RELIED UPON BY THE CIT(A) HAS NOT BECOME FINAL AND THE DEP ARTMENT HAS PREFERRED AN APPEAL U/S. 260A. 2.3 FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING O FFICER RESTORED . 3. AT THE OUTSET, THE REVENUE/APPELLANT CLARIFIES THA T THE SOLE ISSUE INVOLVED IN ALL CASES IS AS TO WHETHER EXPENDITURE INCURRED TOWARDS TRAVEL EXPENSES AND COMMUNICATION CHARGES IN FOREIG N CURRECNY FOR THE PURPOSE OF SEC 10B DEDUCTION ARE LIABLE TO BE EXCL UDED ONLY FROM EXPORT TURNOVER AS PER ASSESSING OFFICER OR FROM TOTAL TURNOVER AS WELL AS HELD BY THE CIT(A). SO, WE TAKE UP ITA NO. 899/MDS/2014 AS THE LEAD CASE. I.T.A.NOS.899 TO 902/MDS/ 2014 AND ITA NO.928/MDS/2014. :- 3 -: . 4. THE ASSESSEE/COMPANY IS ENGAGED IN THE BUSINESS OF DEVELOPMENT AND EXPORT OF SOFTWARE. ON 22.09.200 5, IT HAD FILED ITS RETURN DECLARING INCOME OF ` .6,38,43,620/- AND CLAIMED DEDUCTION U/S. 10B QUA THE ENTIRE AMOUNT. THE SAME WAS SUMMARILY PROCESSED. THEREAFTER, THE ASSESSING OFFICER FRAMED REGULAR ASSESSMENT ON 20.12.2007. IN COURSE THEREOF, HE QUOTED U/S.10B 2 (III) OF THE ACT AND HELD THAT EXPORT TURNOVER WOULD NOT INCLUDE FREIG HT, TELECOMMUNICATION CHARGES OR INSURANCE EXPENSES ATT RIBUTABLE TO DELIVERY OF THE ARTICLES OR THINGS ETC. PROCEEDING ON THIS ANALOGY, HE EXCLUDED COMMUNICATION CHARGES OF ` .5,15,765/- AND TRAVEL EXPENSES (INCURRED IN FOREIGN CURRENCY) OF ` .14,67,878/- TOTALING TO ` .19,83,643/- FROM EXPORT TURNOVER ONLY AND NOT FR OM THE TOTAL TURNOVER. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL. IN THE LOW ER APPELLATE ORDER, THE CIT(A) HAS DIRECTED THE ASSESSING OFFICE R TO EXCLUDE THE AFORESAID TRAVEL EXPENSES AND COMMUNICATION CHARGES BOTH FROM EXPORT AS WELL AS TOTAL TURNOVER AS UNDER;- 6.3.AO IN THE ASSESSMENT ORDER WHILE COMPUTING EXE MPTION U/S. 10B, EXCLUDED COMMUNICATION CHARGES AND TRAVELLING EXPEN SE INCURRED IN FOREIGN CURRENCY ONLY FROM THE EXPORT TURNOVER BUT DID NOT EXCLUDE THE SAME FROM THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTING THE EXE MPTION. I.T.A.NOS.899 TO 902/MDS/ 2014 AND ITA NO.928/MDS/2014. :- 4 -: 6.3.1 THE AR ON THE OTHER HAND HAS CONTENDED THAT DEDUCTING THE EXPENDITURE INCURRED IN FOREIGN CURRENCY (TRAVEL EX PENSES) AND ALSO THE COMMUNICATION CHARGES BASED ON THE EXPLANATION 2(II I) TO SECTION 10B ALONE IS NOT CORRECT, FOR THE REASONS, THAT THERE IS NO D EFINITION OF TOTAL TURNOVER IN SECTION 10B OF THE ACT. BUT SECTION 80HHC AND 80HH E WHICH PROVIDES THE DEDUCTION IN RESPECT OF PROFITS FROM EXPORT OF COMP UTER SOFTWARE ETC. DEFINES EXPORT TURNOVER ON SIMILAR LINES 10A AND 10B AN D ITS EXPLANATION. HENCE, THE AR STATED THAT THE TRAVEL EXPENSES AND COMMUNIC ATION CHARGES NEEDS TO BE DEDUCTED BOTH FROM TOTAL TURNOVER AS WELL AS FRO M EXPORT TURNOVER. FURTHER, HE HAS RELIED ON THE FOLLOWING DECISIONS. ITA VS. M/S. SAK SOFT LTD (2009)313 ITR (AT) 353 (C HENNAI-SB) ITO VS.D.E. BLOCK INDIA SOFTWARE (P) LTD. (ITA NOS. 983/984/HYD/ 2006) ACIT VS. SIP TECHNOLOGIES & EXPORTS LTD. (ITA NO.24 01/MDS/2005) 6.3.2. AS THE ISSUE RAISED IN THIS GROUND IS SQUARE LY COVERED BY THE ORDER OF THE HONBLE SPECIAL BENCH, CHENNAI IN THE CASE OF I TO VS M/S. SAK SOFT LTD, CITED SUPRA, THE ASSESSING OFFICER IS DIRECTED TO D EDUCT THE TRAVEL EXPENSES INCURRED IN FOREIGN CURRENCY AND THE COMMUNICATION CHARGES BOTH FROM THE ETO AND TTO. THIS GROUND IS ALLOWED. THEREFORE, THE REVENUE IS IN APPEAL. 6. WE HAVE HEARD THE REVENUE AND PERUSED THE CASE FILE. THE ASSESSEE HAD FILED A PETITION THAT DIRECTOR IN-CHAR GE IS OUT OF STATION. HOWEVER, NO PARTICULARS IN SUPPORT THEREOF HAVE BEE N STATED IN THIS ADJOURNMENT PETITION. THEREFORE, IT IS PROCEED EX- PARTE. 7. COMING TO THE MERITS OF THE CASE, IT IS TO BE SEEN FROM THE REVENUES GROUNDS THAT ITS ONLY PLEA IS THAT THOUG H THE CIT(A) HAS FOLLOWED SPECIAL BENCH DECISION OF M/S.SAKSOFT LTD( SUPRA), ITS APPEAL U/S.260A AGAINST THE SAME IS PENDING BEFORE THE JUR ISDICTIONAL HIGH I.T.A.NOS.899 TO 902/MDS/ 2014 AND ITA NO.928/MDS/2014. :- 5 -: COURT. IN OUR CONSIDERED OPINION, MERE PENDENCY OF SUCH AN APPEAL DOES NOT FORM A JUSTIFIABLE REASON TO ADOPT A DIFFE RENT APPROACH WITHOUT ANY DISTINCTION ON FACTS. HENCE, WE HOLD THAT THE CIT(A) HAS RIGHTLY DIRECTED THE ASSESSING OFFICER TO DEDUCT TR AVEL EXPENSES INCURRED IN FOREIGN CURRENCY AND COMMUNICATION CHAR GES BOTH FROM EXPORT AS WELL AS TOTAL TURNOVER IN VIEW OF THE SPE CIAL BENCHS DECISION (SUPRA). THE REVENUE GROUNDS ARE THEREFORE REJECTED . 8. SAME ORDER TO FOLLOW IN ITA NOS.900, 901, 902/ MDS/2014 AND ITA NO.928/MDS/2014. 9. TO SUM UP, ALL THE REVENUES APPEALS ARE DISMI SSED. ORDER PRONOUNCED ON THURSDAY, THE 26TH OF JUNE, 2014, AT CHENNAI. SD/- SD/- ( . ) (A.MOHAN ALANKAMONY) / ACCOUNTANT MEMBER ( . . )/ (S.S. GODARA) ! / JUDICIAL MEMBER '# /DATED:26.06.2014. K.V #$ %& '& /COPY TO: 1. ( APPELLANT 2. / RESPONDENT 3. ) ( )/CIT(A) 4. ) /CIT 5. &*+ , /DR 6. +- . /GF. I.T.A.NOS.899 TO 902/MDS/ 2014 AND ITA NO.928/MDS/2014. :- 6 -: