Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, BANGALORE BENCH ‘A’
PER SHRI N.V VASUDEVAN, JUDICIAL MEMBER :
This is an appeal by the Revenue against the order dated 31/1/2017 of Commissioner of Income-tax (Appeals) - 3 relating to asst. year 2011-12.
The grounds of appeal raised by the Revenue are as follows:
“1) The order of the learned CIT(A) is opposed to law and facts of the case. 2) The CIT(A) erred in following the ratio laid down by the Hon'ble High Court in the case of MIS, Tata Elxsi Ltd.
3) The CIT(A) erred in holding that the expenses reduced from the export turnover has to be reduced from the total turnover also, since no provision u/s. 10A provides for exclusion of such expenses from total turnover. 4)For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT(A) in so far as it relates to the above grounds may be reversed and that of the Assessing Officer may be restored. 5) The appellant craves leave to add, alter, amend and / or delete any of the grounds mentioned above.”
The Assessee is a company engaged in the business of developing software. It is not in dispute that the Assessee was entitled to claim deduction u/s.10A of the Income Tax Act, 1961 on profits and gains as are derived from the export of computer software. Sec.10A(4) provides the methodology of computation of deduction u/s.10A of the Act and it lays down that the profits derived from export of articles or things or computer software shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking. Export turnover has been defined under Explanation 2 (iv) to Sec.10A as:
"export turnover" means the consideration in respect of export by the undertaking of articles or things or computer software received in, or brought into, India by the assessee in convertible foreign exchange in accordance with sub-section (3), but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India.”
The AO noticed that while computing export turnover for the purpose of deduction u/s.10A, the Assessee had included a sum of Rs.3,86,11,444/- being communication expenses and Rs.12,65,71,076 being travelling and conveyance expenses. Both the aforesaid expenses had been incurred in foreign currency. The AO therefore excluded the aforesaid sum from the export turnover without excluding them from the total turnover. As a result, the deduction claimed u/s.10A of the Act by the Assessee was allowed at a lesser sum than what was claimed by the Assessee.
It was the plea of the Assessee in the appeal against the assessment order before the CIT(A) that at all times during the relevant previous year, it was engaged in development of computer software and not in rendering any technical services. Communication expenses were incurred not for export of computer software outside India and therefore the exclusion from export turnover as done by the AO was not correct . Without prejudice to its contention that the aforesaid sums should not be excluded from the export turnover while computing deduction u/s.10A of the Act, the Assessee has also made an alternate prayer that expenses that are reduced from the export turnover should also be reduced from the total turnover and in this regard has placed reliance on the decision of the Hon’ble Karnataka High Court in the case of CIT v. Tata Elxsi Ltd [2012] 349 ITR 98 (Karn) wherein it was held that while computing deduction u/s.10A of the Act expenses that are reduced from the export turnover should also be reduced from the total turnover. The CIT(A) accepted the alternate prayer of the Assessee and directed that the expenses reduced from the export turnover should also be reduced from the total turnover. As a result, the deduction as claimed by the Assessee u/s.10A of the Act stood allowed. Aggrieved by the relief allowed by the CIT(A), the revenue has preferred the present appeal before the Tribunal.
We have heard the ld. counsel for the assessee who relied on the order of the CIT(A) and the ld. DR who relied on the order of the CIT(A).
Taking into consideration the decision rendered by the Hon’ble High Court of Karnataka in the case of CIT v. Tata Elxsi Ltd [2012] 349 ITR 98 (Karn), we are of the view that the order of the CIT(A) directing the Assessing Officer to exclude communication charges and travelling and conveyance expenses both from export turnover and total turnover, is just and proper and calls for no interference. The only grievance of the Revenue is that the decision of Hon'ble High Court of Karnataka in Tata Elxsi (supra) has not attained finality and a SLP by the department is pending before the Hon'ble Supreme Court. We are of the view that as of today, law declared by the Hon'ble High Court of Karnataka which is the jurisdictional High Court is binding on us. We therefore hold that the order of CIT(A) does not call for any interference and accordingly the same is confirmed.
In the result, the appeal by the revenue is dismissed.