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1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU
ON THE 14TH DAY OF NOVEMBER, 2018
BEFORE
THE HON'BLE MR. JUSTICE RAVI MALIMATH
AND
THE HON’BLE MR.JUSTICE K.NATARAJAN
INCOME TAX APPEAL NO.185 OF 2011
BETWEEN:
COMMISSIONER OF INCOME TAX-III REVENUE, BUILDINGS, QUEENS ROAD, BENGALURU – 560 001.
THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 12(3), BENGALURU. ... APPELLANTS
(BY SRI E I SANMATHI, ADVOCATE)
AND:
M/S SUBEX LIMITED UNIT-1, ADARSH TECH PARK, OUTER RING ROAD, DEVARABEESANAHALLI, BENGALURU – 560 037. ... RESPONDENT
(BY SRI TATA KRISHNA & SRI SHARATH S, ADVOCATES)
2 THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF THE INCOME-TAX ACT 1961, ARISING OUT OF ORDER DATED 31.01.2011 PASSED IN ITA NO.676/BANG/2010, FOR THE ASSESSMENT YEAR 2002- 03, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN; SET ASIDE THE COMMON APPELLATE ORDER DATED 31.01.2011 PASSED BY THE ITAT, ‘A’ BENCH, BENGALURU IN APPEAL PROCEEDINGS ITA NO.676/BANG/2010.
*****
THIS INCOME TAX APPEAL COMING ON FOR HEARING THIS DAY, RAVI MALIMATH J., DELIVERED THE FOLLOWING:
JUDGMENT
The appeal was admitted to consider the following four substantial questions of law. 1. “Whether in the facts and circumstances of the case, the tribunal is justified in law in directing the Assessing Officer to exclude telecommunication expenses and foreign travel expenditure incurred in foreign currency amounting to Rs.43,19,905/- and Rs.58,00,729/- respectively from total turnover for the purpose of computing deduction under section 10A of the Income Tax Act, 1961’’? 2. “Whether the tribunal is justified in law in holding that foreign travel expenses incurred on employees
3 for onsite software development does not amount to expenses incurred in providing technical services outside India without appreciating that onsite software development amounts to providing technical services outside India and travel expenses incurred on employees sent for onsite software development are liable to be excluded from export turnover for the purposes of computation of deduction Under Section 10A of Income Tax Act, 1961’’? 3. “Whether the tribunal is justified in law in not considering its own decision in the case of M/s.Intellinet Technologies Pvt. Ltd. in ITA No.1021/Bang/2009 and holding that deduction under section 10A should be allowed on profits of the 10A undertaking before setting off brought forward losses and losses of non STPI unit’’? 4. “ Whether the tribunal is correct in law in concluding that the judgement of Hon’ble Supreme Court in the case of Liberty India Vs.CIT (317 ITR 218) is not applicable to the facts of the assessee’s case and holding that other incomes such as interest on fixed deposits, etc. which are not connected to income derived from export of software are not to be
4 reduced from the profits of STP undertaking for the purpose of computing 10A deduction’’?
So far as the first substantial question of law is concerned, the same is covered by the Judgment of the Supreme Court in the case of COMMISSIONER OF INCOME-TAX, CENTRAL – III vs. HCL TECHNOLOGIES LTD., reported in [2018] 93 TAXMANN.COM 33 (SC). Hence, the first substantial question of law is held in favour of the assessee and against the revenue.
The second substantial question of law is covered by the Judgment in the case of COMMISSIONER OF INCOME-TAX, BANGALORE vs. KHESHMA TECHNOLOGIES LIMITED., reported in [2016] 381 ITR 435(KARNATAKA). Hence, the second substantial question of law is answered in favour of the assessee and against the revenue in terms of the aforesaid Judgment.
The third substantial question of law is covered by the Judgment in the case of COMMISSIONER OF INCOME-TAX & ANOTHER vs. YOKOGOWA INDIA LTD.,
5 reported in (2017) 391 ITR 274 (SC). Following the said Judgment, the third question of law is answered in favour of the assessee and against the revenue. 5. The fourth substantial question of law is covered by the Full Bench decision of this Court in the case of COMMISSIONER OF INCOME TAX v. HEWLETT PACKARD GLOBAL SOFT LTD., reported in [2018] 403 ITR 453(KARNATAKA) (FB). Hence, the fourth substantial question of law is answered in favour of the assessee and against the revenue. The substantial questions of law are accordingly answered.
The appeal is disposed off.
SD/- SD/- JUDGE
JUDGE
Rsk/-