THE PR. COMMISSIONER OF INCOME TAX vs. M/S ARM EMBEDDED TECHNOLOGIES PVT LTD

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ITA/142/2018HC KarnatakaKAHC01036529201831 August 2018Bench: S.SUJATHA,VINEET KOTHARI5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the issue was covered by the Supreme Court's decision in HCL Technologies Ltd. The court found that expenses excluded from export turnover must also be excluded from total turnover to avoid an illogical and unjust result, aligning with legislative intent.

What were the facts?

The Revenue filed an appeal against the ITAT's order allowing relief to the assessee on deduction under Section 10A of the Income Tax Act. The issue revolved around the exclusion of certain expenses from total turnover when calculating export turnover.

What were the issues?

Whether expenses deducted from export turnover should also be deducted from total turnover for the purpose of computing relief under Section 10A of the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 10A

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

1/5 IN THE HIGH COURT OF KARNATAKA, BENGALURU

DATED THIS THE 31ST DAY OF AUGUST 2018

PRESENT

THE HON’BLE DR.JUSTICE VINEET KOTHARI

AND

THE HON’BLE MRS.JUSTICE S.SUJATHA

I.T.A. No.142/2018

BETWEEN : 1. THE PR. COMMISSIONER OF INCOME-TAX, 5TH FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA, BENGALURU 560 095.

2.

THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-11(1), PRESENT ADDRESS CIRCLE-1(1)(1), 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU 560 095.

...APPELLANTS

(BY SRI DILIP, ADV. FOR SRI K.V.ARAVIND, ADV.)

AND : M/s. ARM EMBEDDED TECHNOLOGIES PVT. LTD., SALARPURIA HALLMARK, BLOCK-B, LEVEL-III, MARATHALLI, SARJAPUR BENGALURU 560 029. PAN: AAACA 1582E.

…RESPONDENT

THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 24/08/2017, PASSED IN C.O.No.19/BANG/2016, FOR

Date of Judgment 31-08-2018, ITA No.142/2018 The Pr. Commissioner of Income-tax & Another Vs. M/s. ARM Embedded Technologies Pvt. Ltd.,

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THE ASSESSMENT YEAR 2008-2009 VIDE ANNEXURE-D, PRAYING TO: 1. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. 2. ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN C.O.No.19/BANG/2016 DATED 24/08/2017 VIDE ANNEXURE-D, CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1), BENGALURU.

THIS APPEAL COMING ON FOR ORDERS, THIS DAY, S. SUJATHA, J., DELIVERED THE FOLLOWING:

J U D G M E N T Mr. Dilip, Adv. for Mr. K.V.Aravind, Adv. for Appellants – Revenue.

This Appeal is filed by the Revenue purportedly raising substantial questions of law arising from the Order of the Income Tax Appellate Tribunal, Bangalore Bench ‘B’, Bangalore, in C.O.No.19/BANG/2016 in ITA No.624/Bang/2013 dated 24.08.2017, relating to the Assessment Year 2008-09.

2.

The substantial question of law framed by the Revenue in the Memorandum of Appeal is as under: “Whether, on the facts and circumstances of the case and in law, the Tribunal was right in allowing relief to assessee on the issue of

Date of Judgment 31-08-2018, ITA No.142/2018 The Pr. Commissioner of Income-tax & Another Vs. M/s. ARM Embedded Technologies Pvt. Ltd.,

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deduction under section 10A of the Income Tax Act, 1961 by relying upon the decision of this Hon’ble Court in the case of CIT V/s. Tata Elxsi Ltd., [reported in 349 ITR page 98]?”

3.

The issue is covered by the decision of the Hon’ble Supreme Court in the case of Commissioner of Income-tax, Central – III vs. HCL Technologies Ltd., [2018] 93 Taxmann.com 33(SC).

4.

The relevant portion of the judgment of the Hon’ble Supreme Court in the case of HCL Technologies Ltd. (supra), is quoted below for ready reference:- “17. The similar nature of controversy, akin this case, arose before the Karnataka High Court in CIT v. Tata Elxsi Ltd. [2012] 204 Taxman 321/17/taxman.com 100/349 ITR 98. The issue before the Karnataka High Court was whether the Tribunal was correct in holding that while computing relief under Section 10A of the IT Act, the amount of communication expenses should be excluded from the total turnover if the same are reduced from the export turnover? While giving

Date of Judgment 31-08-2018, ITA No.142/2018 The Pr. Commissioner of Income-tax & Another Vs. M/s. ARM Embedded Technologies Pvt. Ltd.,

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the answer to the issue, the High Court, inter-alia, held that when a particular word is not defined by the legislature and an ordinary meaning is to be attributed to it, the said ordinary meaning is to be in conformity with the context in which it is used. Hence, what is excluded from ‘export turnover’ must also be excluded from ‘total turnover’, since one of the components of ‘total turnover’ is export turnover.

Any other interpretation would run counter to the legislative intent and would be impermissible.

18.

XXXXXX

19.

In the instant case, if the deductions on freight, telecommunication and insurance attributable to the delivery of computer software under Section 10A of the IT Act are allowed only in Export Turnover but not from the Total Turnover then, it would give rise to inadvertent, unlawful, meaningless and illogical result which would cause grave injustice to the Respondent which could have never been the intention of the legislature.

20.

Even in common parlance, when the object of the formula is to arrive at the profit from export business, expenses excluded from export

Date of Judgment 31-08-2018, ITA No.142/2018 The Pr. Commissioner of Income-tax & Another Vs. M/s. ARM Embedded Technologies Pvt. Ltd.,

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turnover have to be excluded from total turnover also. Otherwise, any other interpretation makes the formula unworkable and absurd. Hence, we are satisfied that such deduction shall be allowed from the total turnover in same proportion as well”.

5.

Having heard the learned counsel appearing for the Appellants-Revenue, we are therefore of the opinion that no substantial question of law arises in the present case. The Appeal filed by the Appellants- Revenue is liable to be dismissed and it is dismissed accordingly. No costs.

Copy of this Order be sent to the Respondent- Assessee forthwith.

Sd/- JUDGE

Sd/- JUDGE

NC.

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