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Income Tax Appellate Tribunal, ‘B’ BENCH, BENGALURU
Before: SHRI A.K. GARODIA & SHRI PAVAN KUMAR GADALE
The revenue has filed the appeal against the order of the CIT(A)-V, Bengaluru, passed u/s 143(3) r.w.s 144C and 250 of the Income-tax Act,1961 ['the Act' for short].
The revenue has raised the following ground of appeal:
“Whether the Ld.CIT(A) is correct in directing to consider telecommunication charges in Export Turnover while computing 10A deduction relying on the Karnataka High Court decision in the case of Tata Elxsi Ltd.”
IT(TP)A No.930/Bang/2018 Page 2 of 4 3. Brief facts of the case are that the assessee is engaged in the business of trading in computer systems and providing call- centre services, back office, IT support and shares services, filed the Return of income for the assessment year 2007-08 on 30/10/2007 with ‘nil’ income. The Return of income was processed u/s 143(1) of the Act. Subsequently, the case was selected for scrutiny and notice u/s 143(2) of the Act was issued. In response, the learned AR of the assessee appeared from time to time and submitted the information. AO found that there are international transactions by the assessee with its AE and therefore, with the approval of the CIT, the matter was referred to the Transfer Pricing Officer (TPO). TPO, after considering the transfer pricing report and business profile and financial profile has determined the adjustment u/s 92CA and passed the order with adjustment towards software development services and also call centre services. The ld. AO restricted the claim of deduction u/s 10A and passed draft assessment order with transfer pricing adjustment as suggested by the TPO and assessed the total income under normal provisions u/s 1,79,59,71,433/- vide order u/s 143(3) r.w.s. 144C of the Act dated, 21/02/2011.
Aggrieved by the order, the assessee filed appeal with the CIT(A). The CIT(A) having considered the grounds of appeal and the submissions in respect of exclusion of IT(TP)A No.930/Bang/2018 Page 3 of 4 comparables and inclusion and dealt on corporate grounds and has granted partial relief.
5. Aggrieved by the order of the CIT(A), the revenue is in appeal before the Tribunal. The learned DR submitted that the CIT(A) has erred in directing to consider telecommunication charges in export turnover while computing deduction u/s 10A of the Act and supported the order of the AO. Whereas, the ld. AR relied on the CIT(A)’s order supported with judicial decisions.
We heard rival submissions and perused material on record. The sole disputed issue raised by the learned DR is with respect to considering telecommunication charges reduction in export turnover while computing deduction u/s 10A of the Act. Whereas the ld. AR submitted that the issue is squarely covered in favour of the assessee by the decision of the jurisdictional High Court in the case of CIT vs. Tata Elxsi (349 ITR 98). We found that the ld.CIT(A) followed the decision of the Hon’ble High Court of Karnataka in the case of Tata Elxsi (supra) wherein it was held that where certain expenses are excluded from the export turnover for purposes of calculating deduction u/s 10A of the Act, such expenses should also be excluded from th total turnover as the export turnover forms part of the total turnover, and granted relief to IT(TP)A No.930/Bang/2018 Page 4 of 4 the assessee. Accordingly, we do not find any infirmity in the order of the CIT(A) and further revenue could not controvert the findings of the CIT(A) with new or cogent evidence Therefore, we uphold the order of the CIT(A) and dismiss the grounds of appeal of the revenue.
In the result, the revenue’s appeal is dismissed.
Order pronounced in the open court on 17th June, 2019.