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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 9TH DAY OF SEPTEMBER 2020
PRESENT
THE HON’BLE MR. JUSTICE ALOK ARADHE
AND
THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD
I.T.A. NO.337 OF 2013
BETWEEN:
THE COMMISSIONER OF INCOME TAX
C.R. BUILDINGS, QUEENS ROAD BANGALORE.
THE ASST. COMMISSIONER OF INCOME TAX
CIRCLE-11(5), RASHTROTHANA BHAVAN NRUPATHUNGA ROAD, BANGALORE. ... APPELLANTS (BY SRI. K.V. ARAVIND, ADV.)
AND:
M/S. KMG INFOTECH PVT. LTD., NO.201/202, VANGUARD RISE NO.163, KONENA AGRAHARA OFF AIRPORT ROAD, BANGALORE-560017. ... RESPONDENT (BY SRI. T. SURYANARAYANA, ADV.) - - -
THIS I.T.A. IS FILED UNDER SECTION 260-A OF I.T.ACT, 1961, ARISING OUT OF ORDER DATED 08-02-2013 PASSED IN ITA NO.71/BANG/2012, FOR THE ASSESSMENT YEAR 2007-08, PRAYING TO:
I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN. II. ALLOW THE APPEAL AND SET ASIDE THE ORDER OF THE ITAT, BANGALORE IN ITA NO.71/BANG/2012 DATED 08-02- 2013 AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-11(5), BANGALORE.
THIS I.T.A. COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING:
JUDGMENT
Mr.K.V.Aravind, learned counsel for the revenue. Mr.T.Suryanarayana, learned counsel for the assessee.
This appeal under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’, for short) has been preferred by the revenue which was admitted by a Bench of this Court vide order dated 11.09.2013 to consider the following substantial questions of law: “1. Whether the Appellate Authorities were correct in holding that the expenditure towards telecommunication charges and expenditure incurred in foreign currency reduced from export turnover has
to be reduced from total turnover for computing deduction under Section 10B of the Act in the absence of any provisions in Section 10B of the Act which requires the concerned expenses to be reduced from total turnover also? 2. Whether the Tribunal was correct in holding that the income received by the assessee by way of notice pay from its employees leaving the service contrary to agreement is to be included in export turnover when such income is not derived from the activity of export and recorded a perverse finding?.”
Facts giving rise to the filing of this appeal briefly stated are that the assessee had incurred telecommunication expenses and foreign currency expenses. The assessee computed the deduction under Section 10B of the Act without reducing the telecommunication charges and expenditure incurred in foreign exchange from export turnover. The Assessing Officer recomputed the same by excluding the above expenses from export turnover and the assessee received notice pay from the employees who were sent to foreign countries for sight completion of projects and
who left their job on short notice by paying a sum to the assessee as per the agreement. The Assessing Officer, by an order dated 23.12.2010 included the above income in the total turnover for computing deduction under Section 10B of Act. The assessee thereafter approached the Commissioner of Income-Tax. The Commissioner of Income-Tax, by an order dated 24.10.2011 affirmed the order passed by the Assessing Officer.
The assessee thereafter filed an appeal before the Income Tax Appellate Tribunal. The Income Tax Appellate Tribunal, vide order dated 08.02.2013, inter alia, held that the expenditure excluded from the export turnover has to be excluded from total turnover. It was further held that the other income included in the total turnover has to be included in export turnover. In the aforesaid factual background, the revenue has filed this appeal.
When the matter was taken up today, learned counsel for the revenue clearly submitted that the issue involved in this appeal, is covered by a decision of the Supreme Court in ‘COMMISSIONER OF INCOME-TAX, CENTRAL-III Vs. HCL TECHNOLOGIES LTD. (2018) 93 TAXMANN.COM 33 (SC). The aforesaid contention cannot be reputed by the learned counsel for the revenue. Therefore, the first substantial question of law is answered against the revenue and in favour of the assessee.
Learned counsel for the revenue submitted that the second substantial question of law is covered by a decision of the Supreme Court in ‘COMMMISSIONER OF INCOME-TAX Vs. PUNJAB STAINLESS STEEL INDUSTRIES’ (2014) 363 ITR 144 (SC). However, it is submitted that the income received by the assessee by way of notice pay from its employees leaving the service contrary to the agreement, cannot be part of
total turnover as well as the export turnover and to the aforesaid extent, the order passed by the Tribunal be modified. The aforesaid contention is not disputed by the learned counsel for the assessee.
In view of the aforesaid submissions, the order dated 08.02.2013 passed by the Income Tax Appellate Tribunal is modified and it is directed that the income received by the assessee by way of notice pay from its employees leaving the service contrary to the agreement, can neither be included in the total turnover nor the same be included in the export turnover. Accordingly, the second substantial question of law is answered. In the result, the appeal is disposed of.
Sd/- JUDGE
Sd/- JUDGE