PR. COMMISSIONER OF INCOME TAX-4 vs. M/S. MU SIGMA BUSINESS SOLUTIONS PVT. LTD.,

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ITA/1047/2017HC KarnatakaKAHC01050928201730 August 2018Bench: S.SUJATHA,VINEET KOTHARI5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that expenses excluded from export turnover must also be excluded from total turnover to maintain the legislative intent of Section 10A. This ensures a logical and fair computation of profit from export business.

What were the facts?

The Revenue appealed against an ITAT order that directed the exclusion of certain foreign currency expenses from both export turnover and total turnover. The assessee, a business solutions company, had incurred these expenses.

What were the issues?

Whether expenses deducted from export turnover under Section 10A should also be deducted from total turnover for computing the eligible deduction.

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 30TH DAY OF AUGUST 2018

PRESENT

THE HON’BLE DR.JUSTICE VINEET KOTHARI

AND

THE HON’BLE MRS.JUSTICE S.SUJATHA

I.T.A. No.1047/2017

BETWEEN : 1. PR. COMMISSIONER OF INCOME TAX-4 BMTC COMPLEX KORAMANGALA BANGALORE

2.

THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 4(1)(2) BANGALORE.

...APPELLANTS

(BY SRI. E.I.SANMATHI, ADV.)

AND : M/s. MU SIGMA BUSINESS SOLUTIONS PVT. LTD., KALYANI PLATANI, 4TH AND 5TH FLOOR, ITPL MAIN ROAD SY.NO.6 & 24 KUNDANAHALLI VILLAGE K.R.PURAM BENGALURU – 560 066. PAN NO.AAECM3293N.

…RESPONDENT *****

THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED:23/06/2017 PASSED IN ITA NO.1763/BANG/2016, FOR THE ASSESSMENT YEAR 2010-11 WITH A PRAYER TO

Date of Judgment 30-08-2018, ITA No.1047/2017 Pr. Commissioner of Income Tax-4 & Another Vs. M/s Mu Sigma Business Solutions Pvt. Ltd.,.

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DECIDE THE FOREGOING QUESTION OF LAW AND / OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON'BLE COURT AS DEEMED FIT AND SET ASIDE THE APPELLATE ORDER DATED:23/06/2017 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, 'C' BENCH, BENGALURU, IN APPEAL PROCEEDINGS IN ITA NO. 1763/BANG/2016 FOR ASSESSMENT YEAR 2010-11, AS SOUGHT FOR IN THIS APPEAL; AND TO GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE.

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

J U D G M E N T

Mr. E.I.Sanmathi, 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 ‘C’, Bangalore, in IT[TP]A No.1763/Bang/2016 dated 23.06.2017, relating to the Assessment Year 2010-11.

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, the tribunal is justified in directing the Assessing Officer to exclude the certain expenditure incurred in foreign currency both from the export turnover and the total turnover when there is no

Date of Judgment 30-08-2018, ITA No.1047/2017 Pr. Commissioner of Income Tax-4 & Another Vs. M/s Mu Sigma Business Solutions Pvt. Ltd.,.

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provision in Section 10A which requires the said expenses to be reduced from the total turnover?”

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 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

Date of Judgment 30-08-2018, ITA No.1047/2017 Pr. Commissioner of Income Tax-4 & Another Vs. M/s Mu Sigma Business Solutions Pvt. Ltd.,.

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‘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 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

Date of Judgment 30-08-2018, ITA No.1047/2017 Pr. Commissioner of Income Tax-4 & Another Vs. M/s Mu Sigma Business Solutions Pvt. Ltd.,.

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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

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