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1/6 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 16TH DAY OF AUGUST 2018
PRESENT
THE HON’BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON’BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.905/2017
BETWEEN :
Pr. COMMISSIONER OF INCOME TAX-VI
BMTC COMPLEX, KORMANGALA,
BANGALORE.
DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-12(3), 14/3, 4TH FLOOR,
RASTROTHANA BHAVAN (OPP. RBI)
NRUPATHUNGA ROAD,
BENGALURU.
... APPELLANTS
(BY SRI E.I.SANMATHI, ADV.)
AND:
M/s SUBEX LTD., UNIT-I, ADARSH TECH PARK, OUTER RING ROAD DEVARABISANAHALLI, OUTER RING ROAD BANGALORE-560037.
... RESPONDENT
THIS INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 31.05.2017 PASSED IN IT(TP)A NO.239/BANG/2014, FOR THE ASSESSMENT YEAR 2009-2010 PRAYING TO FOREGOING THE QUESTION OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON’BLE COURT AS
Date of Judgment 16-08-2018, ITA No.905/2017 Pr. Commissioner of Income Tax-VI & another Vs. M/s Subex Ltd.
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DEEMED FIT AND SET ASIDE THE APPELLATE ORDER IMPUGNED AND ETC.
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 Appellant – Revenue
This Appeal is filed by the Revenue purportedly raising substantial question of law arising from the Order of the Income Tax Appellate Tribunal, ‘ B' Bench, Bangalore, in IT[TP]A No.239/Bang/2014 dated 31.05.2017, relating to the Assessment Year 2009-10.
The proposed substantial question of law framed by the Revenue in the Memorandum of Appeal is as under: “Whether on the facts and in the circumstances of the case, the Tribunal is right in setting aside the computation made by the assessing authority in respect of section 10-Appellate Authority by holding that
Date of Judgment 16-08-2018, ITA No.905/2017 Pr. Commissioner of Income Tax-VI & another Vs. M/s Subex Ltd.
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if the expenditure on travel is excluded from both export turnover and total turnover, the effect remains the same, without appreciating the fact that the statute allows exclusion of such expenditure expressly only from the export turnover by way of specific definition as envisaged in the Act and there is no specific provision in section 10-A warranting exclusion of the above expenses from the total turnover also ?”
Learned counsel for the Appellants-Revenue submits that in so far as the aforesaid substantial question of law is concerned, the same is covered by the decision of the Hon’ble Apex 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 16-08-2018, ITA No.905/2017 Pr. Commissioner of Income Tax-VI & another Vs. M/s Subex 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 16-08-2018, ITA No.905/2017 Pr. Commissioner of Income Tax-VI & another Vs. M/s Subex 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 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 Appellant-Revenue is
Date of Judgment 16-08-2018, ITA No.905/2017 Pr. Commissioner of Income Tax-VI & another Vs. M/s Subex Ltd.
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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
ln.