Intel Technology India Private Limited, Bangalore V. DCIT, Bangalore

ITA 979/BANG/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51396 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-12-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 11-08-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARCHANA CHOWDHRY CITIIDR
• Assessee Lawyers: KAUSHIK MUKARJEE
• Keywords: Depreciation; Opportunity of being heard; Question of law; Difference of opinion; Unabsorbed depreciation; Change of opinion; Revenue expenditure; Capital expenditure
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER ITA NOS. 975 & 979/BANG/2010 ASSESSMENT YEAR : 2002-03 INTEL TECHNOLOGY INDIA PRIVATE LIMITED, SRR2, SURVEY # 23-56P, DEVARABEESANAHALLI, OUTER RING ROAD, VARTHUR HOBLI, BANGALORE SOUTH TALUK, BANGALORE 560 103. KARNATAKA. PAN :AAACI 5394J VS. THE DEPUTY COMMISSIONER OF INCOME TAX, LTU, BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI KAUSHIK MUKARJEE, C.A. RESPONDENT BY : SMT. ARCHANA CHOWDHRY, CIT-II(DR) DATE OF HEARING : 19.12.2011 DATE OF PRONOUNCEMENT : 19.12.2011 O R D E R PER N.K. SAINI, ACCOUNTANT MEMBER THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST THE SEPARATE ORDERS OF THE CIT(APPEALS)-I, BANGALORE DA TED 1.6.2010 AND 2.6.2010 FOR THE SAME ASSESSMENT YEAR I.E., 2002-03 , AS THE APPEALS WERE ITA NOS. 975 & 979/BANG/10 PAGE 2 OF 13 HEARD TOGETHER, SO THESE ARE BEING DISPOSED OF BY T HIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE WILL DEAL WITH ITA NO.975/BANG/2010. I N THIS APPEAL, FOLLOWING GROUNDS HAVE BEEN RAISED: 1.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) - I, B ANGALORE ('CIT(A)') ERRED IN UPHOLDING THE ACTION OF THE ASS ISTANT COMMISSIONER OF INCOME-TAX, CIRCLE 11 (4), BANGALOR E ('ASSESSING OFFICER') IN REOPENING THE ASSESSMENT F OR THE YEAR UNDER APPEAL UNDER SECTION 143 READ WITH SECTION 14 7 OF THE INCOME-TAX ACT, 1961 ('THE ACT'). 1.2 THAT THE LEARNED CIT(A) HAS FAILED TO APPRECIA TE THAT THE PROCEEDINGS INITIATED BY THE ASSESSING OFFICER UNDE R SECTION 148 OF THE ACT AND THE IMPUGNED ORDER PASSED UNDER THE APPEAL IS BASED UPON MERE CHANGE OF OPINION. 1.3 THAT THE LEARNED CIT(A) HAS ERRED IN HOLDING T HAT THE REOPENING THE CASE UNDER SECTION 147 OF THE ACT IS ONLY PROCEDURAL AND COVERED UNDER THE DEEMING PROVISIONS OF EXPLANATION 2(C)(IV) OF SECTION 147 OF THE ACT. 2.1 THAT THE LEARNED CIT(A) HAS ERRED IN NOT DIREC TING THE ASSESSING OFFICER TO ALLOW DEDUCTION UNDER SECTION 10A OF THE ACT, ON THE ENTIRE PROFITS OF THE UNDERTAKING REGIS TERED WITH THE SOFTWARE TECHNOLOGY PARK OF INDIA (,STPI') AUTHORIT IES. 2.2 THAT THE LEARNED CIT(A) HAS ERRED IN NOT HOLDI NG THAT THE LOSS FROM THE NON-STPI BUSINESS WILL NOT BE ADJUSTE D AGAINST THE PROFITS OF THE STPI UNITS BEFORE ALLOWING THE DEDUC TION UNDER SECTION 10A OF THE ACT. 2.3 THAT THE LEARNED CIT(A) HAS ERRED IN NOT HOLDI NG THAT THE BROUGHT FORWARD BUSINESS LOSSES OF THE ASSESSMENT Y EAR 2001-02 WILL NOT BE ADJUSTED AGAINST THE PROFITS OF THE SAI D YEAR UNDER APPEAL BEFORE ALLOWING THE DEDUCTION UNDER SECTION 10A OF THE ACT. 3.1 THAT THE LEARNED CIT(A) HAS ERRED IN NOT REVER SING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE ADDITIONAL LIABILITY ARISING DUE TO EXCHANGE FLUCTUATION OF RS . 2,46,58,999 IN RESPECT OF NON-COMPETE FEE. ITA NOS. 975 & 979/BANG/10 PAGE 3 OF 13 3.2 THAT THE LEARNED CIT(A) ERRED IN NOT HOLDING T HAT NON- COMPETE FEES HAVING BEEN ALLOWED AS A DEDUCTION IN THE PRECEDING ASSESSMENT YEAR, THE LOSS ON EXCHANGE FLU CTUATION THEREOF IS TO BE ALLOWED AS A DEDUCTION IN THE YEAR UNDER APPEAL. 4.1 THAT THE LEARNED CIT(A) HAS ERRED IN NOT REVER SING THE ACTION OF THE ASSESSING OFFICER BY REDUCING THE TELECOMMUNICATION EXPENSES OF RS.1,52,87,286 ONLY F ROM 'EXPORT TURNOVER' AND TREATING THE SAID TELECOMMUNICATION E XPENDITURE AS ATTRIBUTABLE TO THE DELIVERY OF SOFTWARE OUTSIDE IN DIA. 4.2 THAT THE LEARNED CIT(A) FAILED TO APPRECIATE T HAT IF THE SAID TELECOMMUNICATION EXPENSES ARE REDUCED FROM THE EXP ORT TURNOVER THEN THE SAID TELECOMMUNICATION EXPENSES S HOULD ALSO BE REDUCED FROM THE TOTAL TURNOVER AS WELL. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD TO AND / OR TO ALTER, AMEND, RESCIND, MODIFY, THE GROUNDS HEREIN ABOVE OR PRODUCE FURTHER DOCUMENTS BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL. 3. GROUND NOS. 1.1 TO 1.3 WERE NOT PRESSED, AS SUCH THESE ARE DISMISSED AS NOT PRESSED. 4. VIDE GROUND NOS. 2.1 TO 2.3, THE GRIEVANCE OF TH E ASSESSEE RELATES TO THE DEDUCTION U/S. 10A OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT IN SHORT]. 5. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THA T THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING LOSS OF RS.4,07,20,980. THE ASSESSEE WAS ENGAGED IN DEVELOPMENT OF SOFTWARE AND ALSO OFFERS CONSULTANCY, DATA HOSTING AND OTHER RELATED ACTIVITIES. THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS FRAMED U/S. 143(3) OF THE ACT VIDE O RDER DATED 16.3.2005 DETERMINING THE LOSS ALLOWED TO BE CARRIED FORWARD AT RS. 1,52,21,463. LATER ON, THE AO NOTICED THAT THERE WAS A MISTAKE A PPARENT ON THE RECORD IN ALLOWING THE CARRY FORWARD OF LOSS AND THAT FROM 1. 4.2001 ONWARDS ITA NOS. 975 & 979/BANG/10 PAGE 4 OF 13 DEDUCTION U/S. 10A SHOULD HAVE BEEN ALLOWED ONLY ON THE TOTAL INCOME OF THE ASSESSEE AND NOT IN THE INDIVIDUAL STP (SOFTWAR E TECHNOLOGY PARK) UNITS. THE AO POINTED OUT THAT THE ASSESSEE HAD TH REE UNITS OUT OF WHICH TWO WERE STP UNITS AND THE LOSS OF THE NON-STP UNIT SHOULD HAVE BEEN REDUCED AGAINST THE INCOME OF THE STP UNITS TO ARRI VE AT THE TOTAL INCOME FOR ALLOWING DEDUCTION U/S. 10A. THEREFORE THE AO ISSUED NOTICE U/S. 147 R.W. SEC. 148 OF THE ACT TO THE ASSESSEE ON 18.8.20 06 ON ACCOUNT OF ESCAPED INCOME. THE AO DID NOT ACCEPT THIS CONTENTI ON OF THE ASSESSEE THAT THE PROCEEDINGS WERE BASED ON CHANGE OF OPINIO N BY OBSERVING THAT THERE WAS NO CHANGE OF OPINION BUT BECAUSE OF PROCE DURAL MISTAKE IN COMPUTATION OF TOTAL INCOME BASED ON THE FACTS OF T HE CASE, HENCE THE AO WAS WELL WITHIN THE PURVIEW OF SECTION 147 R.W. SEC . 148 OF THE ACT. THE AO FRAMED THE ASSESSMENT AT AN INCOME OF RS.2,56,47,83 7 WHICH WAS ADJUSTED AGAINST THE BROUGHT FORWARD BUSINESS LOSSE S, BUT HE DID NOT ALLOW THE BENEFIT TO THE ASSESSEE TO CARRY FORWARD OF LOS S FROM NON-STP UNITS. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A), WHO CONFIRMED THE ACTION OF THE AO. NOW THE ASSESSEE IS IN APPEAL. 6. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SECTION 10A OF THE ACT IS A COMPLETE CODE IN ITSELF AND THEREFORE DEDU CTION UNDER THIS SECTION IS ALLOWABLE ON THE PROFITS FOR THE YEAR ARISING TO TH E UNDERTAKING BEFORE SETTING OFF OF THE LOSS FROM OTHER UNITS OR BROUGHT FORWARD LOSSESS OF THE EARLIER YEARS. IT WAS FURTHER STATED THAT DEDUCTION U/S. 1 0A HAS TO BE SEPARATELY COMPUTED WITH RESPECT TO PROFITS FOR EACH UNDERTAKI NG AND THE ACT DOES NOT CONTEMPLATE COMPUTATION OF SUCH DEDUCTION IN RESPEC T OF AGGREGATE PROFITS OF ALL THE UNDERTAKINGS OF THE ASSESSEE. IT WAS FU RTHER STATED THAT THE CLAIM ITA NOS. 975 & 979/BANG/10 PAGE 5 OF 13 OF THE ASSESSEE IS JUSTIFIED AND MATTER IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. YOKOGAWA INDIA LTD. & ORS. IN ITA NO.78/2011, OR DER DATED 9.8.2011. COPY OF THE SAID ORDER WAS FURNISHED. 7. IN HER RIVAL SUBMISSIONS, THE LD. CIT(DR) SUPPOR TED THE ORDERS OF THE AUTHORITIES BELOW. 8. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PA RTIES AND THE MATERIAL ON RECORD, IT IS NOTICED THAT THE ISSUE UN DER CONSIDERATION IS SQUARELY COVERED BY THE JUDGMENT OF THE HONBLE JUR ISDICTIONAL HIGH COURT IN THE CASE OF CIT V. YOKOGAWA INDIA LTD. & ORS. (SUPRA) WHEREIN AT PAGE 57 PARA 31 THEIR LORDSHIPS HAVE OBSERVED AS UNDER: 31. AS THE INCOME OF 10-A UNIT HAS TO BE EXCLUDED AT SOURCE ITSELF BEFORE ARRIVING AT THE GROSS TOTAL INCOME, T HE LOSS OF NON 10- A UNIT CANNOT BE SET OFF AGAINST THE INCOME OF 10-A UNIT UNDER SECTION 72. THE LOSS INCURRED BY THE ASSESSEE UNDE R THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION HAS TO BE SET OFF AGAINST THE PROFITS AND GAINS IF ANY, OF ANY BUSINE SS OR PROFESSION CARRIED ON BY SUCH ASSESSEE. THEREFORE, AS THE PRO FITS AND GAINS UNDER SECTION 10-A IS NOT TO BE INCLUDED IN THE INC OME OF THE ASSESSEE AT ALL, THE QUESTION OF SETTING OFF THE LO SS OF THE ASSESSEE OF ANY PROFITS AND GAINS OF BUSINESS AGAINST SUCH P ROFITS AND GAINS OF THE UNDERTAKING WOULD NOT ARISE. SIMILARLY, AS PER SECTION 72(2), UNABSORBED BUSINESS LOSS IS TO BE FIRST SET OFF AND THEREAFTER UNABSORBED DEPRECIATION TREATED AS CURRENT YEARS DE PRECIATION UNDER SECTION 32(2) IS TO BE SET OFF. AS DEDUCTION UNDER SECTION 10-A HAS TO BE EXCLUDED FROM THE TOTAL INCOME OF TH E ASSESSEE, THE QUESTION OF UNABSORBED BUSINESS LOSS BEING SET OFF AGAINST SUCH PROFIT AND GAINS OF THE UNDERTAKING WOULD NOT ARISE. IN THAT VIEW OF THE MATTER, THE APPROACH OF THE ASSESSING A UTHORITY WAS QUITE CONTRARY TO THE AFORESAID STATUTORY PROVISION S AND THE APPELLATE COMMISSIONER AS WELL AS THE TRIBUNAL WERE FULLY JUSTIFIED IN SETTING ASIDE THE SAID ASSESSMENT ORDE R AND GRANTING THE BENEFIT OF SECTION 10-A TO THE ASSESSEE. HENCE , THE MAIN SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR O F THE ASSESSEES AND AGAINST THE REVENUE. ITA NOS. 975 & 979/BANG/10 PAGE 6 OF 13 9. FROM THE ABOVE JUDGMENT OF HONBLE JURISDICTIONA L HIGH COURT, IT IS CRYSTAL CLEAR THAT THE INCOME OF THE UNIT ELIGIBLE FOR DEDUCTION U/S. 10A OF THE ACT IS TO BE EXCLUDED AT SOURCE ITSELF BEFORE ARRIV ING AT THE GROSS TOTAL INCOME, THEREFORE THE LOSS OF NON-10A UNIT CANNOT B E SET OFF AGAINST THE INCOME OF SECTION 10A UNIT FOR CARRY FORWARD OF LOS S U/S. 72 OF THE ACT. THEREFORE BY KEEPING IN VIEW THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT, WE SET ASIDE THE IMPUGNE D ORDER OF THE LD. CIT(A) AND THE AO IS DIRECTED TO ALLOW THE BENEFIT OF CARR Y FORWARD OF LOSS OF NON- STP UNIT. IN OTHER WORDS, THE LOSS OF NON-STP UNIT S CANNOT BE ADJUSTED AGAINST THE PROFIT OF STP UNITS, SO IT IS TO BE ALL OWED TO BE CARRIED FORWARD IN SUBSEQUENT YEARS IN ACCORDANCE WITH LAW. 10. VIDE GROUND NOS. 3.1 AND 3.2, THE GRIEVANCE OF THE ASSESSEE RELATES TO DISALLOWANCE OF ADDITIONAL LIABILITY ARISING DUE TO EXCHANGE FLUCTUATION. 11. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE TH AT THE AO DURING THE ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE H AD CLAIMED DEDUCTION OF RS.2,46,58,999 AS NON-COMPETE FEE. TH E ASSESSEE SUBMITTED TO THE AO THAT THE PAYMENT OF NON-COMPETE FEE WAS M ADE TO THE PROMOTERS OF M/S. NETWORK SOLUTIONS LTD. IN ACCORDANCE WITH T HE AGREEMENT ENTERED INTO, WHICH PLACED A RESTRICTIVE COVENANT ON THE PR OMOTERS FOR UNDERTAKING CERTAIN SPECIFIED BUSINESS ACTIVITIES. IT WAS ALSO STATED THAT THE EXPENDITURE ON THE PAYMENT OF NON-COMPETE FEE WAS INCURRED DURI NG THE PRECEDING YEAR RELEVANT TO A.Y. 2001-02 AND THE PRESENT CLAIM WAS ON ACCOUNT OF FOREIGN EXCHANGE VARIATION. RELIANCE WAS PLACED ON THE JUD GMENT OF HONBLE MADRAS HIGH COURT IN CIT V. LATE G.D. NAIDU AND ORS . REPORTED IN 165 ITA NOS. 975 & 979/BANG/10 PAGE 7 OF 13 ITR 63. THE AO DID NOT FIND MERIT IN THE SUBMISSI ONS OF THE ASSESSEE BY OBSERVING THAT IN THE CASE OF THE ASSESSEE THE CONS ULTING BUSINESS OF M/S. NETWORK SOLUTIONS LTD. HAD BEEN ACQUIRED AND THE RE STRICTIVE COVENANT WAS PLACED ALONG WITH THE ACQUISITION OF THE BUSINESS, BY MEANS OF RESTRICTIVE COVENANT, THE ASSESSEE DERIVED AN ENDURING BENEFIT, THEREFORE THE EXPENDITURE INCURRED WAS TO BE TREATED AS CAPITAL E XPENDITURE. 12. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT( A), WHO CONFIRMED THE ACTION OF THE AO. NOW THE ASSESSEE IS IN APPEAL. 13. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE CLAIMED ONLY THE E XPENSES RELATED TO FOREIGN EXCHANGE VARIATION AND THE ACTUAL EXPENSES WERE ALLOWED IN THE EARLIER YEAR. IT WAS FURTHER SUBMITTED THAT WHEN T HE NON-COMPETE FEE HAD BEEN ALLOWED AS REVENUE EXPENDITURE IN THE PRECEDIN G YEAR, THE CORRESPONDING FOREIGN EXCHANGE LOSS SHOULD ALSO BE ALLOWED AS REVENUE EXPENDITURE. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: (I) SUTLEJ COTTON MILLS LTD. V. CIT (1979) 116 ITR 1 (SC) (II) RADHASAOMI SATSANG V. CIT (1992) 193 ITR 321 (SC) (III) CIT V. SHIVSAGAR ESTATE (2002) 257 ITR 59 (SC) 14. IN HER RIVAL SUBMISSIONS, THE LD. DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE H AD ACQUIRED AN ENDURING BENEFIT BY BECOMING THE OWNER OF M/S. NETW ORK SOLUTIONS LTD., THEREFORE THE EXPENDITURE WAS CAPITAL EXPENDITURE A ND NOT REVENUE EXPENDITURE, AS SUCH THE LD. CIT(A) WAS JUSTIFIED I N CONFIRMING THE ACTION OF THE AO. ITA NOS. 975 & 979/BANG/10 PAGE 8 OF 13 15. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE, ONE OF THE CONTENTIONS OF THE LD. COUNSEL FOR THE ASSESSEE WAS THAT THE EXPENDITURE INCURRED FOR RESTRICTIVE COVENANT I N THE PRECEDING YEAR HAS BEEN ALLOWED AND IT WAS ONLY THE EXCHANGE FLUCTUATI ON VARIATION WHICH WAS CLAIMED AS REVENUE EXPENDITURE IN THE YEAR UNDER CO NSIDERATION. THEREFORE IT WAS ALLOWABLE AS REVENUE EXPENDITURE. FROM THE MATERIAL AVAILABLE ON RECORD, THIS FACT IS NOT VERIFIABLE AS TO WHETHER T HE EXPENDITURE INCURRED IN THE EARLIER YEAR WAS CONSIDERED AS REVENUE EXPENDIT URE BY THE DEPARTMENT AND THE CLAIM OF THE ASSESSEE WAS ALLOWED AND THIS YEAR ONLY THE EXCHANGE FLUCTUATION VARIATION WAS CLAIMED, SO WE DEEM IT AP PROPRIATE TO SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO BE DECIDED AFRESH IN ACCORDANCE WITH LAW, AFTER PROVIDING DUE AND REASON ABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSING OFFICER IS ALSO DIRECTED TO CONSIDER THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF RADHASAOMI SATSANG V. CIT (1992) 193 ITR 321, WHICH WAS HEAVILY RELIED BY THE LD. COUNSEL FOR THE ASSESSEE DURING THE COUR SE OF HEARING. 16. VIDE GROUND NOS. 4.1 AND 4.2, THE GRIEVANCE OF THE ASSESSEE RELATES TO THE REDUCTION OF TELECOMMUNICATION EXPENSES FROM EXPORT TURNOVER. 17. THE FACTS RELATING TO THIS ISSUE IN BRIEF ARE T HAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDING NOTICED THAT THE AS SESSEE HAD ADOPTED THE EXPORT TURNOVER AND TOTAL TURNOVER AT THE SAME FIGURES. THE AO WAS OF THE VIEW THAT AS PER THE DEFINITION OF EXPORT TURNO VER GIVEN IN CLAUSE (IV) EXPLANATION 2 TO SEC. 10A OF THE ACT, THE SAME WAS TO BE REDUCED BY THE TELECOMMUNICATION CHARGES ATTRIBUTABLE TO DELIVERY OF COMPUTER SOFTWARE ITA NOS. 975 & 979/BANG/10 PAGE 9 OF 13 OUTSIDE INDIA. HE ALSO POINTED OUT THAT THE TWO ST P UNITS OF THE ASSESSEE DID NOT HAVE ANY DOMESTIC TURNOVER, THEREFORE, THE ENTIRE TELECOMMUNICATION CHARGES WERE ATTRIBUTABLE TO THE DELIVERY OF SOFTWARE OUTSIDE INDIA. HE THEREFORE REDUCED A SUM OF RS.1, 52,87,286 FROM THE EXPORT TURNOVER, BUT NOT FROM THE TOTAL TURNOVER AN D ACCORDINGLY WORKED OUT THE DEDUCTION U/S. 10A. 18. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT( APPEALS), WHO CONFIRMED THE ACTION OF THE AO. NOW THE ASSESSEE I S IN APPEAL. 19. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE ITO V. SAK SOFT LTD. 313 ITR (AT) 353 (CHENNAI) SB AND ALSO OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. TATA ELXSI LTD. & ORS. IN ITA NO.70 OF 2009 ORDER DATED 30.8.2001 . COPY OF THE SAID ORDER WAS FURNISHED. 20. IN HER RIVAL SUBMISSIONS, THE LD. CIT(DR) ALTHO UGH SUPPORTED THE ORDERS OF AUTHORITIES BELOW, BUT COULD NOT CONTROVE RT THE ABOVE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. 21. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IT IS NOTICED THAT AN IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF TH E ASSESSEE BY THE SPECIAL BENCH OF ITAT CHENNAI IN THE CASE OF ITO V. SAK SOFT LTD. 313 ITR (AT) 353 (CHENNAI)(SB) WHEREIN IT HAS BEEN HELD AS UNDER: TO SAY THAT IN THE ABSENCE OF ANY DEFINITION OF T OTAL TURNOVER FOR THE PURPOSE OF SECTION 10B, THERE IS NO AUTHORITY TO EXCLUDE ANYTHING FROM THE EXPRESSION AS UNDERSTOOD IN GENERAL PARLANCE WOULD BE WRONG, AS THERE HAS TO BE AN ELEM ENT OF TURNOVER IN THE RECEIPT IF IT HAS TO BE INCLUDED IN THE TOTAL ITA NOS. 975 & 979/BANG/10 PAGE 10 OF 13 TURNOVER. THAT ELEMENT IS MISSING IN THE CASE OF FR EIGHT, TELECOM CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY O F THE GOODS OUTSIDE INDIA AND EXPENSES INCURRED IN FOREIGN EXCH ANGE IN CONNECTION WITH THE PROVIDING OF TECHNICAL SERVICES OUTSIDE INDIA. THESE RECEIPTS CAN ONLY BE RECEIVED BY THE ASSESSEE AS REIMBURSEMENT OF SUCH EXPENSES INCURRED BY HIM. MER E REIMBURSEMENT OF EXPENSES CANNOT HAVE AN ELEMENT OF TURNOVER. IT IS ONLY IN RECOGNITION OF THIS POSITION THAT IN THE DEFINITION OF EXPORT TURNOVER IN SECTION 10B, THE AFORESAID TWO ITEMS HAVE BEEN DIRECTED TO BE EXCLUDED. SECONDLY, THE DEFINIT ION OF EXPORT TURNOVER CONTEMPLATES THAT THE AMOUNT RECEIVED BY T HE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE SHOULD REPRESENT CONS IDERATION IN RESPECT OF THE EXPORT. ANY REIMBURSEMENT OF THE TWO ITEMS OF EXPENSES MENTIONED IN THE DEFINITION CAN UNDER NO C IRCUMSTANCES BE CONSIDERED TO REPRESENT CONSIDERATION FOR THE EXPORT OF THE COMPUTER SOFTWARE OR ARTICLES OR THINGS. THUS, THE EXPRESSION TOTAL TURNOVER WHICH IS NOT DEFINED IN SECTION 10 B SHOULD ALSO BE INTERPRETED IN THE SAME MANNER. THUS, THE TWO IT EMS OF EXPENSES REFERRED TO IN THE DEFINITION OF EXPORT T URNOVER CANNOT FORM PART OF THE TOTAL TURNOVER SINCE THE RECEIPTS BY WAY OF RECOVERY OF SUCH EXPENSES CANNOT BE SAID TO REPRESE NT CONSIDERATION FOR THE GOODS EXPORTED SINCE TOTAL TURNOVER IS NOTHING BUT THE AGGREGATE OF THE DOMESTIC TURNOVER AND THE EXPORT TURNOVER. IN THE FORMULA PRESCRIBED BY SECTION 10B( 4) THE FIGURE OF EXPORT TURNOVER HAS TO BE THE SAME BOTH IN THE N UMERATOR AND IN THE DENOMINATOR OF THE FORMULA. IT FOLLOWS THAT THE TOTAL TURNOVER CANNOT INCLUDE THE TWO ITEMS OF EXPENSES R ECOVERED BY THE ASSESSEE AND REFERRED TO IN THE DEFINITION OF EXPORT TURNOVER. 22. THE AFORESAID DECISION HAD BEEN CONSIDERED AND AFFIRMED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF TATA ELXSI LTD. & ORS. 2011- TIOL-684-HC-KAR-II WHEREIN IT HAS BEEN HELD THAT FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S. 10A OF THE ACT, IF AN Y EXPENDITURE IS EXCLUDED FROM THE EXPORT TURNOVER, THE SAME HAS TO BE EXCLUD ED FROM THE TOTAL TURNOVER ALSO. A SIMILAR VIEW HAS ALSO BEEN TAKEN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GEM PLUS JEWELLERY INDIA LTD. 2010-TIOL-456- HC-MUM-IT . WE, THEREFORE, BY CONSIDERING THE TOTALITY OF TH E FACTS AS ITA NOS. 975 & 979/BANG/10 PAGE 11 OF 13 DISCUSSED HEREINABOVE, ARE OF THE VIEW THAT THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER. WE THEREFORE SET ASIDE THE IMPUGNED ORDER ON THIS ISSUE AND THE ASSE SSING OFFICER IS DIRECTED TO EXCLUDE THE TELECOMMUNICATION CHARGES F ROM THE EXPORT TURNOVER AS WELL AS TOTAL TURNOVER WHILE WORKING OU T THE DEDUCTION U/S. 10A. 23. NOW WE WILL DEAL WITH ITA NO.979/BANG/2010. TH IS APPEAL IS AGAINST THE ORDER DATED 2.6.2010 OF THE LD. CIT(A)-I, BANGA LORE WHO HAS CONSIDERED THE APPEAL OF THE ASSESSEE AGAINST THE ASSESSMENT O RDER DATED 16.3.2005 U/S. 143(3) OF THE ACT PASSED BY THE ASSESSING OFFI CER AS INFRUCTUOUS BY OBSERVING AS UNDER:- 2. DURING THE COURSE OF APPELLATE HEARING IT WAS FOUND THAT THIS YEAR ASSESSMENT HAS BEEN SUPERSEDED BY ISSUANC E OF NOTICE U/S. 148 OF I.T.ACT ON 18-08-2006 AND COMPLETION OF ASSESSMENT U/S. 143(3) R.W . S. 147 OF I.T.ACT ON 28 - 12-2007 AGAINST WHICH AN APPEA L HAS ALSO BEEN FILED ON 28-01-2008 COVERING ALSO ALL THE ISSUES RAISED IN THIS APPEAL ALSO . 3. IN VIEW OF THIS, I FIND THE APPEAL HAS BECOME INFRUCTU OUS. THEREFORE THE APPEAL IS TREATED AS DISMISSED/DISPOS ED OFF FOR S T ATISTICAL PURPOSE. 24. NOW THE ASSESSEE IS IN APPEAL. DURING THE COUR SE OF HEARING THE LD. COUNSEL FOR THE ASSESSEE COULD NOT CONTROVERT THE A FORESAID OBSERVATIONS OF THE LD. CIT(A) AND IN HER RIVAL SUBMISSIONS THE LD. CIT(DR) SUBMITTED THAT THE ORDER PASSED BY THE LD. CIT(A) IS A JUST ORDER, SO DO NOT REQUIRE ANY INTERFERENCE. 25. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE INSTANT CASE, IT IS NOTICED THAT THE ORIGINAL ASSESSMENT ORDER WA S PASSED BY THE AO U/S. ITA NOS. 975 & 979/BANG/10 PAGE 12 OF 13 143(3) OF THE ACT ON 16.3.2005. LATER ON THE ASSES SMENT WAS REOPENED U/S. 143(3) R.W. SEC. 147 OF THE ACT ON 28.12.07, AGAINST THE SAID ORDER THE ASSESSEE PREFERRED AN APPEAL TO THE LD. CIT(A) AND THE SIMILAR ISSUES WHICH HAVE BEEN RAISED IN THIS APPEAL WERE ALSO RAISED IN THAT APPEAL I.E., THE APPEAL AGAINST THE ASSESSMENT ORDER DATED 28.12.07. THE LD. CIT(A) DECIDED THE APPEAL OF THE ASSESSEE AGAINST THE ASSE SSMENT ORDER DATED 28.12.2007 PASSED U/S. 143(3) R.W. SEC. 147 OF THE ACT. THAT ORDER WAS SUBJECT MATTER OF THE APPEAL OF THE ASSESSEE IN ITA NO.975/B/10 (SUPRA) , WHICH WE HAVE ALREADY ADJUDICATED IN THE FORMER PAR T OF THIS ORDER, THEREFORE THIS APPEAL BECOMES INFRUCTUOUS. IN THAT VIEW OF THE MATTER, WE DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE I MPUGNED ORDER OF THE LD. CIT(A) AND AS SUCH DO NOT SEE MERIT IN THIS APPEAL OF THE ASSESSEE AND THE SAME IS DISMISSED. 26. IN THE RESULT, THE APPEAL IN ITA NO.975/BANG/20 10 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES, WHILE THE APPEAL IN ITA N O.979/BANG/2010 IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF DECEMBER, 2011. SD/- SD/- ( GEORGE GEORGE K.) ( N.K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 19 TH DECEMBER, 2011. DS/- ITA NOS. 975 & 979/BANG/10 PAGE 13 OF 13 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. C IT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.