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1/6 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 27TH DAY OF AUGUST 2018
PRESENT
THE HON’BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON’BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.966/2017
BETWEEN : 1. PR. COMMISSIONER OF INCOME TAX-7 BMTC COMPLEX, KORAMANGALA, BANGALORE.
THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-7(1)(1), [EARLIER DCIT, CIRCLE-12(4)] BANGALORE.
...APPELLANTS
(BY SRI E.I.SANMATHI, ADV.)
AND : M/s. TORRY HARRIS BUSINESS SOULUTIONS PVT. LTD., 71, SONA TOWES, MILLERS TANK ROAD, BANGALORE-560052.
…RESPONDENT
THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 13.04.2017 PASSED IN IT(TP)A NO.266/BANG/2016, FOR THE ASSESSMENT YEAR: 2011-2012 VIDE ANNEXURE-A, PRAYING TO: 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. (a)
Date of Judgment 27-08-2018, ITA No.966/2017 Pr. Commissioner of Income Tax-7 & Another Vs. M/s. Torry Harris Business Solutions Pvt. Ltd.,
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SET ASIDE THE APPELLATE ORDER DATED: 13.04.2017 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, 'A' BENCH, BANGALORE, IN APPEAL PROCEEDINGS NO. IT(TP)A NO.266/BANG/2016 FOR ASSESSMENT YEAR: 2011-2012 VIDE ANNEXURE-A, 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 ORDERS, 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 ‘A’, Bangalore, in IT[TP]A No.266/Bang/2016 dated 13.04.2017, relating to the Assessment Year 2011-12.
The substantial question of law framed by the Revenue in the Memorandum of Appeal is as under:
Date of Judgment 27-08-2018, ITA No.966/2017 Pr. Commissioner of Income Tax-7 & Another Vs. M/s. Torry Harris Business Solutions Pvt. Ltd.,
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“Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the lease line charges and other expenses incurred in foreign currency for delivery of software are to be excluded both from total turnover as well as from export turnover for computation of deduction u/s. 10A whereas such exclusion is permitted to arrive at export turnover only as per the definitions given in Sec.10A of the IT Act and total turnover has not been defined in the Section and by following the judgment of this Hon’ble Court in the case of CIT vs. Tata Elxsi Ltd., which has not become final since the same has not been accepted by the Department and SLPs filed by the revenue on this issue are pending before the Hon’ble Supreme Court?”
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).
The relevant portion of the judgment of the Hon’ble Supreme Court in the case of HCL
Date of Judgment 27-08-2018, ITA No.966/2017 Pr. Commissioner of Income Tax-7 & Another Vs. M/s. Torry Harris Business Solutions Pvt. Ltd.,
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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 ‘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.
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Date of Judgment 27-08-2018, ITA No.966/2017 Pr. Commissioner of Income Tax-7 & Another Vs. M/s. Torry Harris Business Solutions Pvt. Ltd.,
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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.
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”.
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 also. The Appeal filed by the Appellants-
Date of Judgment 27-08-2018, ITA No.966/2017 Pr. Commissioner of Income Tax-7 & Another Vs. M/s. Torry Harris Business Solutions Pvt. Ltd.,
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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.