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1/5 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.907/2017
BETWEEN :
PRINCIPAL COMMISSIONER OF INCOME TAX-4
BMTC COMPLEX, KORMANGALA,
BENGALURU.
THE ASSISTANT COMMISSIONER
OF INCOME TAX, CIRCLE-4(1)(2)
BENGALURU.
... APPELLANTS
(BY SRI E.I.SANMATHI, ADV.)
AND:
M/s MCAFEE SOFTWARE (INDIA) PVT. LTD., EMBASSY GOLD LINK BUSINESS PARK, PINE VALLEY 2ND FLOOR, OFF. INDIRANAGAR INTERMEDIDATE RING ROAD, BANGALORE-560071 PAN: AABCN 3175H
... RESPONDENT
(BY SRI ANKUR PAI, ADV.)
THIS INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 07.04.2017 PASSED IN IT(TP)A NO.422/BANG/2016, FOR THE ASSESSMENT YEAR 2011-2012 PRAYING TO DECIDE THE
Date of Judgment 16-08-2018, ITA No.907/2017 Principal Commissioner of Income Tax-4 & another Vs. M/s Mcafee Software (India) Pvt. Ltd.
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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 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 Mr. Ankur Pai, Adv. for Respondent – Assessee.
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.422/Bang/2016 dated 07.04.2017, relating to the Assessment Year 2011-12.
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 correct in applying the ratio in the decision of the Hon’ble High Court of Karnataka in the
Date of Judgment 16-08-2018, ITA No.907/2017 Principal Commissioner of Income Tax-4 & another Vs. M/s Mcafee Software (India) Pvt. Ltd.
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case of M/s Tata Elxsi Ltd., 349 ITR 98 (Kar.) when department has filed SLP before the Hon’ble Apex Court has been filed which is pending ?
Learned counsel for the Appellants-Revenue submits that insofar 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 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
Date of Judgment 16-08-2018, ITA No.907/2017 Principal Commissioner of Income Tax-4 & another Vs. M/s Mcafee Software (India) Pvt. Ltd.
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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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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.
Date of Judgment 16-08-2018, ITA No.907/2017 Principal Commissioner of Income Tax-4 & another Vs. M/s Mcafee Software (India) Pvt. Ltd.
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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 parties, 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 liable to be dismissed and it is dismissed accordingly. No costs.
Sd/- JUDGE
Sd/- JUDGE ln.