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Income Tax Appellate Tribunal, HYDERABAD BENCH “A”, HYDERABAD
Before: SMT. P. MADHAVI DEVI & SHRI S. RIFAUR RAHMAN
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH “A”, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA No.948/Hyd/2017 Assessment Year: 2009-10 DCIT, Vs. M/s. Green Fire Agri Circle-16(2), Commodities Ltd Hyderabad. (Presently known as M/s. Proceeds India Private Limited), Hyderabad. PAN: AABCN 7753 P (Appellant) (Respondent) Assessee by: Shri P.V.S.S. Prasad Revenue by: Smt. Neeju Gupta, DR Date of hearing: 27/03/2019 Date of pronouncement: 05/04/2019 ORDER PER Smt. P. Madhavi Devi, J.M.:
This is Revenue’s appeal for the Assessment Year 2009-10 filed against the order of the CIT(A)-7, Hyderabad dated 28/10/2010.
Brief facts of the case are that the assessee-company, engaged in providing software development and Information Technology Enabled Services (ITES) filed its return of income for the assessment year 2009- 10 on 30/09/2009 admitting income at Rs. 7,90,55,572/- after claiming deduction u/s 10A of the Act. During the assessment
proceedings u/s 143(3) r.w.s 92CA of the Act, the Assessing Officer observed that the assessee has not received the export turnover within six months from the date of export but that the same were received within 12 months from the date of export.
Observing that u/s 10A(3) of the Income Tax Act, 1961, the assessee has to comply with the specific provisions of the Act for claiming deduction and since the assessee has not produced the permission from the competent authority i.e., Reserve Bank of India for bringing the foreign exchange into India beyond the date of export, he came to the conclusion that the assessee is not eligible for deduction u/s 10A of the Act to the extent of export turnover which is received after 6 months.
Aggrieved, assessee preferred an appeal before the CIT(A), who allowed the same by following the decision of the Hon’ble Bombay High Court in the case of CIT vs. Morgan Stanley Advantage Services (P) Ltd [13 taxmann.com 166 (Bom)]. Further, while computing the deduction u/s 10A of the Act, the Assessing Officer excluded the internet bandwidth charges from export turnover only but did not exclude the same from the total turnover and therefore, the CIT(A) directed the Assessing Officer to exclude the same from both export turnover as well as the total turnover for the purpose of calculation of deduction u/s 10A of the Act by following the decision of the Special Bench of the Tribunal
in the case of Sak Soft Ltd (30 SOT 55) (Chennai). Against the relief granted by the CIT(A), the Revenue is in appeal before the Tribunal by raising the following grounds of appeal:
“1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in directing the A.O. to exclude bandwith charges from export turnover as well as total turnover, against the order u/s 10A. 2. whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in directing the A.O. to allow deduction u/s 10A in respect of sale proceeds brought in foreign exchange beyond six months from the end of the previous year. 3. The prays that the order of the CIT(A) on the above grounds be set- aside and that of the Assessing Officer be restored.”
Having regard to the rival contentions and the material on record, we find that Ground No.1 is covered in favour of the assessee by various decisions including decision of the Hon’ble Karnataka High Court in the case of CIT vs. Tata Elxi Ltd [2012] 17 taxmann.com 100 (Kar.) wherein it was held that if any expenditure such as freight, telecommunications and insurance attributable to delivery of computer software is excluded from export turnover, then the same has to be excluded from the total turnover as well. The Hon’ble Supreme Court in the case of HCL Technologies Ltd., reported in [2018] 404 ITR 0719 has affirmed the above view. Respectfully following the same, the ground no.1 is rejected.
As regards the Ground No.2, we find that this issue also is covered in favour of the assessee by various decisions. For the sake of
convenience and ready reference, the relevant paras from the said decisions are reproduced here under:
“1. The Bombay High Court in the case of CIT vs. Morgan Stanley Advantage Service (P.) Ltd [2011] 13 taxmann.com 166 (Bom.) held as under: "8. Explanation 1 to section 10A(3) clearly provides that the expression 'Competent Authority' in section l0A means the Reserve Bank of India or such other Authority as is authorized under any law for the time being in force for regulating payments and dealings in foreign exchange. Admittedly, Reserve Bank of India is the competent authority under FEMA which regulates the payments and dealings in foreign exchange. Thus, what section 10A(3) of the Act provides is that the benefits under section 10A(l) would be available if the export proceeds are realised within the time prescribed by the competent authority under FEMA. In the present case, the competent authority under FEMA namely the RBI, has granted approval in respect of the export proceeds realised by the assessee till December, 2004. Therefore, the approval granted by RBI under FEMA would meet the requirements of section l0A of the Income- tax Act, 1961. In other words, once the competent authority under FEMA which regulates the payments and dealings in foreign exchange has approved realization of the export proceeds by the assessee till December, 2004, then it would meet the requirements of section 10A(3) and consequently the assessee would be entitled to the benefits under section 10A(l) of the Act. 9. Moreover, in the present case, the Reserve Bank of India which is the Competent Authority under FEMA as also under section l0A of the Income- tax Act, 1961 has neither declined nor rejected the application made by the assessee seeking extension of time under section l0A of the Act. Therefore, the decision of the Income-tax Appellate Tribunal in holding that the approval granted under FEMA constitutes a deemed approval granted by the Reserve Bank of India under section l0A(3) of the Act cannot be faulted. 10. In the result, we answer the question raised in the appeal by holding that the RBI being the competent authority under FEMA as also under section l0A (3) of the Act, in the facts of the present case, the ITAT was justified in holding that the assessee was entitled to the deduction under section l0A of the Income-tax Act, 1961 in respect of the export proceeds realised till December, 2004 for which approval has been granted by the competent authority under FEMA namely the RBI. The appeal is accordingly disposed of with no order as to costs.” 2. In the case of Wipro Ltd. v. DClT [2015] 62 taxmann.com 26 (Karnataka) the High Court held as under: "146. The facts are not in dispute. The assessee is a status holder exporter. The export has been done strictly in accordance with law. Foreign exchange remittances should have been received within six months from end of the financial year. It has not been received. Therefore,
an application is filed seeking for extension of time to the Reserve Bank of India. Even to this day the Reserve Bank of India has not rejected the said request. On the contrary, after the period of 6 months, foreign exchange remittances are received and credited to the assessee's account through the Reserve Bank of India. It is in this context merely because the written approval of extension is not passed by the Reserve Bank of India, whether the assessee could be denied the benefit of Section l0A. The Tribunal on consideration of the entire material on record, taking note of the statutory provisions and the object underlying this provision, has come to the conclusion that notwithstanding the fact there is no express order granting approval by the Reserve Bank of India, as it has not been rejected and foreign exchange is received and remitted through the proper channel, the assessee is entitled to the benefit of Section l0A. In the facts of the case, we do not find any error committed by the Tribunal. Therefore, the said substantial question is answered in favour of the assessee and against the revenue. Also in the case of CIT v.Tyco Electronics Corpn. India (P.) Ltd. [2012] 22 taxmann.com 267 (Karnataka), the Hon'ble High Court held that 9. A reading of the aforesaid provision makes it clear that the assessee to be entitled to the benefit of Section l0A, the sale proceeds would have to be brought into the country within a period of six months from the end of the previous year. However, the legislature has consciously in express words has vested the power to extend the time-limit for the said benefit, if the competent authority chooses to allow the said benefit. Therefore, the six months' period prescribed is not mandatory.: A discretion is vested with the competent authority to extend the said benefit of the Section even in cases where the sale proceeds are received beyond the period of time prescribed under the said provision. The only condition is that the sale proceeds would have to be received. If the sale proceeds are not received within 6 months period, all that the assessee has to do is to make a request to the competent authority for extension of time. Of course, he has to make all efforts to receive the sale proceeds from the foreign buyer expeditiously. Granting of extension of time is the discretion of the competent authority. But once such a discretion is exercised and the time is extended, the assessee would be entitled to the benefit of the same. 9a. The statute does not prescribe any time-limit within which the application is to be made for such an extension of time and the period within which the competent authority has to pass an order. The object behind this provision appears to be that once the sale proceeds are received in India though late and the authority vested with the power to extend the time, exercises the discretion, the assessee should be entitled to the benefit. In that view of the matter, the Tribunal was justified in setting aside the order of the Appellate Commissioner as well as the Assessing Officer and in extending the said benefit. It is in consonance with the express words used in the statute. Therefore, we do not find any substance in the said contention. Therefore, the first substantial question of law is answered in favour of the assessee and against the revenue." "Where in the assessment for any year, the deduction under section l0A or section l0B or section 10BA has not been allowed on the ground that such income has not been received in convertible foreign exchange in India, or having been received in convertible foreign exchange outside
India, or having been converted into convertible foreign exchange outside India, has not been brought into India, by or on behalf of the assessee with the approval of the Reserve Bank of India or such other authority as is authorised under any law for the time being in force for regulating payments and dealings in foreign exchange and subsequently such income or part thereof has been or is received in, or brought into, India in the manner aforesaid, the Assessing Officer shall amend the order of assessment so as to allow deduction under section l0A or section l0B or section 10BA, as the case may be, in respect of such income or part thereof as is so received in, or brought into, India, and the provisions of section -154 shall, so far as may be, apply thereto, and the period of four years shall be reckoned from the end of the previous year in which such income is so received in, or brought into, India."
Respectfully following the above High Court judgments on the issue, we do not see any reason to interfere with the order of the CIT(A). Revenue’s appeal is accordingly dismissed.
In the result, Revenue’s appeal is dismissed.
Pronounced in the open Court on 05th April, 2019.
Sd/- Sd/- (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated:05th April, 2019 OKK Copy to:- 1) M/s. Proceeds India Private Limited, 8-2-334, 1st Floor, SDE Serene chambers, Road No.5, Banjara Hills, Hyderabad-34. 2) DCIT, Circle-16(2), 2nd Floor, B-Block, IT Towers, AC Guards, Masab Tank, Hyderabad. 3) The CIT(A)-7, Hyderabad 4) The Pr. CIT-7, Hyderabad 5) The DR, ITAT, Hyderabad 6) Guard File