ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-7(1)(2), BANGALORE vs. M/S VEE TECHNOLOGIES PVT LTD, BANGALORE

This appeal filed by the Revenue arises out of the order of the CIT (A) -7, Bengaluru, dt.25.01.2017, for the assessment year 2010- 11, on the following grounds :

Brief facts are that the assessee company is engaged in the business-of back office services. The return was filed declaring a total taxable income of Rs. 14,64,7391-. The assessee has claimed exemption u/s 10B of IT Act of Rs.3,89,32,560/-. During the assessment proceeding, the AO observed that the assessee ought to have reduced expenditure on account of expenses incurred on account of communication expenses of Rs.13,54,50/-, freight charges Rs.2,13,396/-, connectivity charges Rs.40,30,1351- and other expenses incurred in Foreign currency toward foreign travel of Rs.96,43,134/-, all totaling to Rs.1,16,41,171/-, from the 'export Ita.926/Bang/2017 Page - 3 turnover' for the computation of deduction u/s 10B of IT Act as these expenses incurred are directly attributable to the delivery of Computer Software outside India. The AO, therefore held that these expenses which are debited to P&L Account ought to have been reduced from 'export turnover' are but has not been reduced from export turnover'. The AC) thereafter proceeded to re-compute deduction u/s 10B of IT Act after reducing the amount of Rs.1,16,41,171/- from the 'export turnover'. The AO did not propose any change in the 'total turnover'. The AO also found that as per the Auditors Certificate in Form No.56G, dt 04.03.2013, the appellant has brought the exports sale proceeds in India, in convertible foreign exchange within the stipulated time except for an amount of Rs. 11,21,718/-. The AO opined that the provisions of section 10B(3) of IT Act provides that the sale proceeds from export has to be brought in India within the specified time or within the extended period granted by the competent authority. The AO further observed that for the purpose of computing the proportionate profit of the undertaking as contemplated u/s.10B(4) of IT Act. The provisions of section 10B(3) of IT Act ought to have been complied with which is missing in the case of assessee. The AO thereafter, inferred that the intent of legislation is to ensure that the receipts are brought into the country and to minimise the outflow of foreign exchange and if any portion of receipt is not realized within the stipulated time frame then the concession in the form of deduction n/s 10(l) of IT Act is not available, The AO also examined the fact that the assessee has not sought any extension of time as per the provisions of section 155(11A) of IT Act. Accordingly the claim of assessee for deduction u/s.10B of IT Act was disallowed. Aggrieved by this order the Ita.926/Bang/2017 Page - 4 assessee filed an appeal before the CIT (A).

The CIT (A), being not convinced with the order of the AO, allowed the assessee’s appeal. Being aggrieved, Revenue is in appeal before us with the grounds of appeal reproduced elsewhere in this order.

We find no reason to interfere with the finding given by the CIT (A). The CIT (A) in paras 5.1 to 5.5, has held has under :

Ground nos.3 and 4 are in respect of the direction of the AO to exclude from total turnover items like telecom charges and other expenses incurred in foreign currency be deducted from the export turnover as well, for working out the deduction u/s.10A.

In the result, appeal of the Revenue is dismissed. Order pronounced in the open court on the 27th day of October, 2017.