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1/6 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 14th DAY OF AUGUST 2018
PRESENT
THE HON'BLE Dr.JUSTICE VINEET KOTHARI
AND
THE HON’BLE Mrs.JUSTICE S.SUJATHA
I.T.A.No.847/2017
BETWEEN:
THE PR. COMMISSIONER OF INCOME-TAX 5TH FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA BENGALURU-560 095.
THE ASST. COMMISSIONER OF INCOME-TAX CIRCLE-3(1)(1), 2ND FLOOR BMTC BUILDING, 80 FEET ROAD KORMANGALA, BENGALURU-560 095.
…APPELLANTS (By Mr. ARAVIND K.V. ADV.)
AND:
M/S. INDEGENE LIFE SYSTEMS PVT. LTD., 4TH FLOOR, PINE VALLEY EMBASSY GOLF LINK BUSINESS PARK OFF INTERMEDIATE RING ROAD BENGALURU-560 071 PAN: AAACI 4552N.
…RESPONDENT (By Mr. CHYTHANYA K.K. ADV.)
THIS I.T.A. IS FILED UNDER SECTION 260-A OF THE IT ACT, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW. ALLOW THE APPEAL AND SET ASIDE THE ORDERS
Date of Judgment 14-08-2018 I.T.A.No.847/2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Indegene Life Systems Pvt. Ltd.,
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PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, BANGALORE IN ITA No.711/BANG/2016 DATED 31-03-2017, CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-3(1)(1), BENGALURU & ETC.
THIS I.T.A. COMING ON FOR ADMISSION THIS DAY, S. SUJATHA J. DELIVERED THE FOLLOWING:-
JUDGMENT
Mr. Aravind K.V. Adv. for Appellants- Revenue Mr. Chythanya K.K. Adv. for Respondent - Assessee
The Appellants-Revenue have filed this appeal u/s.260A of the Income Tax Act, 1961, raising purportedly certain substantial questions of law arising from the order of the ITAT, Bangalore Bench ‘A’, Bangalore, dated 31.03.2017 passed in ITA No.711/Bang/2016 (The Asst.Commissioner of Income Tax vs. M/s.Indegene Life Systems Pvt. Ltd.,) for A.Y.2010-11.
The proposed substantial questions of law framed in the Memorandum of appeal by the
Date of Judgment 14-08-2018 I.T.A.No.847/2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Indegene Life Systems Pvt. Ltd.,
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Appellants-Revenue are quoted below for ready reference:- “1. Whether the Tribunal was correct in holding that the expenses reduced from the export turnover has to be reduced from the total turnover also since no provision under section 10A provides for exclusion of such expenses from the total turnover?
Whether the Tribunal was correct in upholding the decision of the appellate Commissioner in not allowing set-off of losses of earlier years before deduction under section 10A of the Act?”
Learned counsel for the Appellants-Revenue Mr.K.V.Aravind submits that in so far as the first 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).
Date of Judgment 14-08-2018 I.T.A.No.847/2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Indegene Life Systems Pvt. Ltd.,
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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 ‘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.
Date of Judgment 14-08-2018 I.T.A.No.847/2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Indegene Life Systems 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”.
Regarding Substantial Question No.2: 4. Learned counsel for the appellants-Revenue Mr.K.V.Aravind has submitted that the Hon'ble Supreme Court has settled the controversy in the case
Date of Judgment 14-08-2018 I.T.A.No.847/2017 The Pr. Commissioner of Income-tax & Anr. Vs. M/s. Indegene Life Systems Pvt. Ltd.,
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of Commissioner of Income-tax V/s. Yokogawa India Ltd., [(2017) 77 taxmann.com 41 (SC)] and therefore the said controversy is covered by the decision of the Hon'ble Supreme Court.
Having heard the learned counsels 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 Appellants-Revenue is liable to be dismissed and it is dismissed accordingly. No costs.
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