ITO, Bangalore V. M/s I.B.A. Health Services (I) Pvt. Ltd., Bangalore

ITA 959/BANG/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57475 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 31-01-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 05-08-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ETWA MUNDA CITIII
• Section: 154

Judgement Text

ITA.959/BANG/2010 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A', BANGALORE BEFORE SHRI. N. BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI. GEORGE GEORGE K. JUDICIAL MEMBER I.T.A NO.959/BANG/2010 (ASSESSMENT YEAR : 2005-06) INCOME-TAX OFFICER, WARD -11(2), BANGALORE .. APPELLANT V. M/S. I. B. A. HEALTH SERVICES (I) P. LTD., SALARPURIA SOFTZONE, 6TH FLOOR, OFF : 2ND BLOCK, 'A' 'B' WING, SARJAPUR OUTER RING ROAD, BANGALORE-58 .. RESPONDE NT PAN ; AADCM5659D APPELLANT BY : SHRI. ETWA MUNDA, CIT -III RESPONDENT BY : SHRI. BALRAM R. RAO, ADVOCATE DATE OF HEARING : 31.01.2012 DATE OF PRONOUNCEMENT : 03.02.2012 O R D E R PER N. BARATHVAJA SANKAR, VICE PRESIDENT : THIS IS AN APPEAL PREFERRED BY THE REVENUE IN THE CASE OF THE ASSESSEE M/S. I. B. A. HEALTH SERVICES (I) P. LTD., BANGALORE, FOR THE ASSESSMENT YEAR 2005-06 AGAINST THE APPELLATE ORDER DATED.21.05.2010 OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, BANG ALORE. ITA.959/BANG/2010 PAGE - 2 02. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE COMPANY IS IN THE BUSINESS OF SOFTWARE DEVELOPMENT/CONSULTANCY. FOR THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE FILED ITS RETURN OF I NCOME DECLARING TOTAL INCOME OF RS.2,26,400/- AFTER CLAIMING DEDUCTION OF RS.5,33,42,130/- U/S.10A OF THE IT ACT. AFTER SCRUTINY, THE ASSESSI NG OFFICER DETERMINED THE DEDUCTION U/S.10A AT RS.3,37,07,643/ - AND THUS DISALLOWED RS.1,96,35,057/-. THE ASSESSEE MOVED TH E MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 03. ONE OF THE ISSUES TAKEN BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS THE ISSUE OF DEDUCTION OF RS.1,74,57, 364/- FROM THE EXPORT TURNOVER FOR DELAYED RECEIPT OF CFE. IN THI S REGARD THE ASSESSEE SUBMITTED BEFORE THE COMMISSIONER OF INCOME-TAX (AP PEALS) AS UNDER: 'IN THE ASSESSMENT ORDER, THE LEARNED ASSESSING OFF ICER EXCLUDED FROM THE EXPORT TURNOVER A SUM OF RS.174.5 8 LAKHS AS FOREIGN EXCHANGE RECEIVED BEYOND 6 MONTHS. IN TERMS OF SECTION 10A(3), THE SECTION IS APPLICAB LE TO UNDERTAKING IF THE EXPORT PROCEEDS ARE RECEIVED IN OR BROUGHT INTO INDIA WITHIN A PERIOD OF 6 MONTHS FROM THE END OF THE ACCOUNTING YEAR OR WITHIN SUCH FURTHER PERIOD AS TH E RBI MAY ALLOW. CRUCIAL POINT TO BE NOTED HERE ARE : I. THE APPLICABILITY OF THE BENEFITS OF THE SECTION TO THE UNDERTAKING WILL ARISE IF THE UNDERTAKING EXPORTS A ND RECEIVES THE SALE PROCEEDS OF COMPUTER SOFTWARE. ITA.959/BANG/2010 PAGE - 3 II. THE RECEIPT OF THE FOREIGN EXCHANGE, IN CASES WHERE THERE IS A DELAY BEYOND 6 MONTHS, SHOULD BE PERMITT ED BY RESERVE BANK OF INDIA. ADMITTEDLY, IN THIS CASE, RBI HAS PERMITTED AND NOT RAISED ANY OBJECTIONS WHATSOEVER TO THE CREDITING OF THE SALE PROCEEDS AS THESE ARE ALL SOFTWARE CONSULTANCY SERVICE, CARRIED -ON ON AN ONGOING BASIS. FROM THE FACTS, IT IS CLEAR, THEREF ORE, THAT THE RBI HAS PERMITTED THE RECEIPT OF FOREIGN EXCHANGE A ND AS SUCH, THERE IS NO BAR TO AVAIL THE EXEMPTION UNDER THE SE CTION 10A. THUS, IT IS RESPECTFULLY SUBMITTED THAT THE EXCLUSI ON FROM THE TOTAL TURNOVER AND ALSO FROM THE EXPORT TURNOVER TH E AMOUNT OF RS.1.74 CRORES IS TOTALLY INCORRECT AND NOT BORNE O UT BY THE RELEVANT PROVISIONS OF THE ACT. IN THIS CONNECTION , WE DRAW YOUR ATTENTION TO THE PROVISIONS OF SEC.155 (11A) W HEREIN IT HAS BEEN PROVIDED THAT IF ANY INCOME BY WAY OF CONV ERTIBLE FOREIGN EXCHANGE IS RECEIVED AFTER SIX MONTHS, WITH THE APPROVAL OF RBI OR IN ACCORDANCE WITH ANY LAW FOR THE TIME BEING IN FORCE, THEN THE ASSESSING OFFICER SHALL AM END THE ORDER AND PASS NECESSARY RECTIFICATION UNDER SECTIO N 154 OF THE ACT BY AMENDING THE QUANTUM OF DEDUCTION. UNDER TH E CIRCUMSTANCES, WE SUBMIT THAT THE AMOUNT OF CONVERT IBLE FOREIGN EXCHANGE RECEIVED SUBSEQUENTLY, WHICH IS AL SO NOTICED BY THE ASSESSING OFFICER SHOULD BE RECKONED FOR COM PUTATION OF DEDUCTION U/S.10A AND THE CLAIM AS MADE BY THE A SSESSEE SHOULD BE FULLY ALLOWED.' THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) AF TER CONSIDERING THE ABOVE SUBMISSIONS OF THE ASSESSEE FOUND THAT TH E ASSESSING OFFICER ITA.959/BANG/2010 PAGE - 4 HAD NOT DOUBTED THE GENUINENESS OF SUCH RECEIPTS, B UT HE HAD NOT INCLUDED THE SAME IN THE EXPORT TURNOVER BECAUSE SU CH RECEIPTS WERE BEYOND 6 MONTHS. THEREFORE, THE LEARNED FIRST APPE LLATE AUTHORITY FOUND MERIT IN THE ARGUMENT OF THE ASSESSEE THAT TH E ASSESSING OFFICER SHOULD BE GIVEN DIRECTION TO RECTIFY HIS ORDER ON T HIS ISSUE AS PER SECTION 155(11A) OF THE ACT. THUS THE COMMISSIONER OF INCOME-TAX (APPEALS) DIRECTED THE ASSESSING OFFICER TO INCLUDE THE RECEIPT OF RS.1.74 CRORES IN EXPORT TURNOVER AND RECOMPUTED TH E DEDUCTION U/S.10A OF THE IT ACT. THUS THE ASSESSEE SUCCEEDED BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) ON THIS POINT OF ISSUE. 04. NOW THE REVENUE IS AGGRIEVED AND IS IN SECOND A PPEAL BEFORE US. THE EFFECTIVE GROUNDS OF APPEAL BY THE REVENUE READ AS UNDER : I) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO INCLUDE THE R ECEIPT OF RS.1.74 CRORES IN EXPORT TURNOVER AND RECOMPUTE THE DEDUCTION U/S.10A OF THE IT ACT, 1961. II) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) HAS ERRED IN DIRECTING TO INCLUDE THE RECEIPT OF RS .1.74 CRORES IN EXPORT TURNOVER AND RECOMPUTE THE DEDUCTION U/S.10A OF THE IT ACT 1961 WITHOUT APPRECIATING THAT THE ASSESSEE HAD FAILED TO FURNISH ANY PROOF BEFORE THE ASSESSING OFFICER IN S UPPORT OF HAVING OBTAINED PERMISSION FROM THE COMPETENT AUTHO RITY I.E., ITA.959/BANG/2010 PAGE - 5 THE RESERVE BANK OF INDIA, AS REQUIRED UNDER THE PR OVISIONS OF SECTION 10A(3) OF THE IT ACT 1961. III) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) HAS ERRED IN ALLOWING RELIEF TO THE ASSESSEE WITHOU T EXAMINING WHETHER THE ASSESSEE COMPANY HAD OBTAINED THE APPRO VAL FROM THE RESERVE BANK OF INDIA, BEING COMPETENT AUTHORIT Y SPECIFIED IN THE ACT, IN RESPECT OF SALE PROCEEDS RECEIVED IN FOREIGN EXCHANGE BEYOND SIX MONTHS AFTER THE END OF THE REL EVANT PREVIOUS YEAR. IV) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) IS NOT CORRECT IN HOLDING THAT THERE WAS MERIT IN THE CASE THAT ASSESSING OFFICER SHOULD BE GIVEN DIRECTION TO RECT IFY ITS ORDER ON THIS ISSUE AS PER SECTION 155(11A) OF THE IT ACT , WITHOUT APPRECIATING THAT THE ASSESSEE HAD FAILED TO PROVE THAT THE SALE PROCEEDS RECEIVED BY THE ASSESSEE IN CONVERTIBLE FO REIGN EXCHANGE BEYOND THE SPECIFIED PERIOD HAD APPROVAL O F THE RESERVE BANK OF INDIA AS STIPULATED UNDER SUB-SECTI ON (11A) OF SECTION 155 OF THE IT ACT, 1961. V) WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) FAILED TO APPR ECIATE THE FACTS STATED IN THE RELEVANT ASSESSMENT ORDER THAT OUT OF RS.1,74,53,624/- A SUM OF RS.6,89,940/- WAS DUE AND NOT RECEIVED BY THE ASSESSEE TILL THE DATE OF ASSESSMEN T.' ITA.959/BANG/2010 PAGE - 6 05. AT THE TIME OF HEARING, THE BENCH PUT A QUERY T O THE LEARNED COUNSEL FOR THE ASSESSEE WHETHER THE ASSESSEE HAS A T LEAST APPLIED FOR EXTENSION OF PERIOD FOR RECEIVING THE FOREIGN EXCHA NGE, TO THE RBI. IN RESPONSE, THE LEARNED COUNSEL FOR THE ASSESSEE PLAC ED ON RECORD, THE LETTER TO RBI SEEKING CONDONATION OF THE DELAY IN R EALIZING THE EXPORT INVOICES RAISED DURING THE F.Y.2004-05, DATED.27.09 .2011, ALONGWITH ANNEXURES. HOWEVER, THE LEARNED COUNSEL FOR THE AS SESSEE WAS FAIR ENOUGH IN SUBMITTING THAT THESE MATERIALS WERE NEIT HER MADE AVAILABLE BEFORE THE ASSESSING OFFICER NOR THE COMMISSIONER O F INCOME-TAX (APPEALS). FURTHER, HE PLACED ON RECORD, THE DEC ISION OF THE BOMBAY HIGH COURT IN CIT V. MORGAN STANLEY ADVANTAGE SERVI CES P. LTD., (2011) 339 ITR 0291 AND THE DECISION OF THE ITAT, BANGALORE IN THE CASE OF DIKSHA TECHNOLOGIES P. LTD., V. DCIT IN ITA NO.1064 & 1113/BANG/2010, DATED.05.08.2011. BY PLACING THE ABOVE DECISIONS THE LEARNED COUNSEL SUBMITTED THAT NOW THE POINT AT ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THESE TWO DECISIONS. 06. WE HAVE HEARD THE LEARNED DR WHO PLEADED THAT T HE LETTERS WHICH ARE FILED NOW BEFORE THE TRIBUNAL, AS CALLED FOR BY THE BENCH WERE NOT AVAILABLE BEFORE THE LOWER AUTHORITIES. A FTER CONSIDERING THE SUBMISSIONS OF BOTH THE SIDES AND THE FACTS AND MAT ERIALS ON RECORD, WE DEEM IT FIT AND PROPER TO ADMIT THESE ADDITIONAL EV IDENCES FILED BEFORE ITA.959/BANG/2010 PAGE - 7 US AS DIRECTED BY THE BENCH AND REMIT THE MATTER BA CK TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO CONSIDER THES E MATERIALS IN THE LIGHT OF THE DECISIONS CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE AND MORE PARTICULARLY THE DECISION OF THE BANGALORE BEN CH IN THE CASE OF DIKSHA TECHNOLOGIES P. LTD., AND THEN DECIDE ACCORD ING TO LAW. NEEDLESS TO SAY THAT THE ASSESSING OFFICER SHOULD P ROVIDE EFFECTIVE OPPORTUNITY OF HEARING TO THE ASSESSEE AND THE ASSE SSEE ALSO SHOULD COOPERATE WITH THE ASSESSING OFFICER WITHOUT SEEKIN G UNNECESSARY ADJOURNMENTS, AND FILING THE COPIES OF ADDITIONAL E VIDENCES FILED BEFORE US BEFORE THE ASSESSING OFFICER ALSO. 07. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 03.02.2012. SD/- SD/- (GEORGE GEORGE K) (N. BARATHVAJA SANKAR) JUDICIAL MEMBER VICE PRESIDENT