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Income Tax Appellate Tribunal, “C” BENCH : BANGALORE
Before: SMT. ASHA VIJAYARAGHAVAN & SHRI INTURI RAMA RAO
Per Asha Vijayaraghavan, Judicial Member
This appeal is by the revenue against the order dated 01.09.2015 of the CIT(Appeals)-2, Bengaluru for the assessment year 2008-09.
The assessee is a private limited company engaged in providing IT enable services and filed its return of income for the assessment year 2008-09 on 29.09.2008 declaring NIL income under the normal provisions.
However, it had declared book profits u/s. 115JB at Rs.6,36,63,164 and paid the tax accordingly. Initially the return was processed u/s. 143(1) and then selected for scrutiny. In the assessment concluded u/s. 143(3) of the Act, the total income has been determined at Nil but only after restricting the deduction u/s. 10B at Rs.3,59,90,887 against Rs.5,94,41,191 claimed by the assessee.
The brief facts are that the AO noted that the assessee had declared Nil income after claiming deduction u/s. 10B at Rs.5,94,41,191 and in doing so, the assessee had not set off the brought forward loss on unabsorbed depreciation amounting to Rs.2,34,50,304 before calculating the deduction u/s. 10B and that it had reduced the incidental expenses such as telecommunication charges and travelling expenses incurred in foreign currency from both the export turnover and total turnover instead of reducing such expenses only from the export turnover. Accordingly, the AO first set off the brought forward losses and unabsorbed depreciation amounting to Rs.2,34,50,304 and from the balance income reduced the incidental expenses mentioned above amounting to RS.1,19,15,214 only from the export turnover and restricted the deduction available u/s 10B to Rs.3,59,90,887 against Rs.5,94,41,191 claimed by the assessee.
Aggrieved, the assessee went in appeal before the CIT(Appeals).
The CIT(Appeals) after considering the submissions made by the ld. AR for the assessee, held as regards setting off of brought forward losses that the issue is covered by the decision of the Hon’ble High Court of Karnataka in the case of CIT v. Yokogawa India Ltd., 341 ITR 389 (Kar).
The CIT(A) further held that the ruling is applicable with equal force in respect of set off of unabsorbed depreciation. Therefore, the CIT(A) directed the AO to work out the deduction u/s. 10B of the Act before set off of brought forward losses and unabsorbed depreciation.
As regards the deduction of incidental expenses from total turnover, the CIT(Appeals) relied on the decision of Hon'ble High Court of Karnataka in the case of Tata Elxsi Ltd. v. ACIT, 349 ITR 98 wherein it has been held that where certain expenses are excluded from the export turnover for the purpose of calculating deduction admissible under the Act, such expenses should also be excluded from the total turnover. as the export turnover forms part of the total turnover. The CIT(A) also relied on the subsequent decision of the Hon'ble High Court of Karnataka in the case of CIT & DCIT v. Motor Industries Co. Ltd. [ITA No.776/2007 c/w ITA No.1171/2006, 744/2007 and 1155/2006 dated 13.6.2014].
Aggrieved, the Revenue is in appeal before us on the following grounds:-
, 871 & 872/B/16 & CO 4/B/16 Page 4 of 6 “1. The Ld.CIT(A) ought to have considered the fact that the Jurisdictional High Court decision relied upon by him has not been accepted by the department and an SLP has been filed before the Hon'ble Supreme Court which is pending.
2. The Ld. CIT(A) has failed to appreciate that as per the amended provisions of section 10A w.e.f. 1.4.2001, the deduction u/s 10A has to be finally allowed from the total income of the assessee and total income is computed after aggregation of the profits/losses of various units and after setting off b/f loss/unabsorbed depreciation relating to the earlier assessment years.
3. Ld.CIT(A) ought to have appreciated that there is no provision in section 10A which requires the concerned expenses, which are required to reduced from the export turnover as per clause (iv) of the Explanation to section 10A to be reduced from the total turnover also.”
We have heard the rival submissions and perused the material on record and also considered the decision of Hon'ble High Court of Karnataka in CIT v. Yokogawa India Ltd. (supra) wherein it has been held that relief u/s. 10A of the Act is to be computed prior to giving effect to carry forward and set off provisions of the Act. The Hon’ble High Court in paras 10 to 20 of its judgment dealt with this issue and noticed that section 10A(1) of the Act is in pari materia with section 10B of the Act. Hence, we are convinced that the CIT(Appeals) was right in his decision and his order does not call for any interference. Accordingly, we dimiss the Revenue’s appeal on this issue.
The next issue is with regard to exclusion of expenses from export turnover vis-à-vis total turnover for the purpose of calculating deduction u/s. 10B of the Act.
The CIT(Appeals) has relied upon the decision of the Hon'ble jurisdictional High Court in the case of Tata Elxsi Ltd. v. ACIT, 349 ITR 98 and the subsequent decision in CIT & DCIT v. Motor Industries Co. Ltd. (supra) and directed the AO to allow the assessee’s claim for reducing the expenditure incurred in foreign currency not only from the export turnover, but also from the total turnover for the purpose of calculating deduction u/s. 10B of the Act.
It transpires that the Revenue is in appeal before us only to keep the issue alive since it has not accepted the decision of Hon'ble High Court of Karnataka. However, nothing was brought on record before us to the effect that the decision of the Hon'ble High Court of Karnataka has been reversed /modified by the Hon’ble Supreme Court, even though it is claimed that SLP has been recommended to be filed by before the Hon’ble Supreme Court. In such facts and circumstances, the Tribunal and other authorities under the jurisdiction of the Hon'ble High Court of Karnataka are bound by its decision. Hence, we do not find any infirmity in the order of the CIT(Appeals), wherein he has followed the Hon'ble jurisdictional High Court decision in the case of Tata Elxsi Ltd. (supra). Hence we dimiss the departmental appeal on this issue. , 871 & 872/B/16 & CO 4/B/16 Page 6 of 6 12. In the result, the appeal by the department is dismissed.
Pronounced in the open court on this 24th day of June, 2016.