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1/6 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 29TH DAY OF JUNE 2018
PRESENT
THE HON’BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON’BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.74/2016
BETWEEN :
PR. COMMISSIONER OF INCOME TAX CENTRAL REVENUE BUILDINGS, QUEENS ROAD, BANGALORE – 560 001.
DEPUTY COMMISSIONER OF INCOME TAX CIRCLE – 12 (2), BANGALORE. ... APPELLANTS
(BY SRI. SANMATHI E I., ADV.)
AND:
M/S NVIDIA GRAPHICS PVT. LTD., 9TH AND 10TH FLOOR, L6 BLOCK, MANYATHA EMBASSY, BUSINESS PARK, OUTER RING ROAD, BANGALORE – 560 045. PAN : AABCN9200H.
... RESPONDENT
(BY SRI.K MALLAHARAO & SANDEEP KARHAIL, ADVS. )
Date of Judgment 29-06-2018, ITA No.74/2016 Pr. Commissioner of Income tax & another Vs. M/s Nvidia Graphics Pvt. Ltd.
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THIS INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED:14/08/2015 PASSED IN IT(TP)A NO.1118/BANG/2014, FOR THE ASSESSMENT YEAR 2009-2010. 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 AND SET ASIDE THE APPELLATE ORDER DATED:14/08/2015 PASSED BY THE ITAT, 'C' BENCH, BENGALURU, IN APPEAL PROCEEDINGS NO.IT(TP)A NO.1118/BANG/2014 FOR ASSESSMENT YEAR 2009-2010.
THIS APPEAL COMING ON FOR HEARING, THIS DAY, Dr. VINEET KOTHARI, J., DELIVERED THE FOLLOWING:
J U D G M E N T
Mr. E.I. Sanmathi, Adv. for Appellants – Revenue Mr. Mallaha Rao, Adv., for Respondent - Assessee
This Appeal is filed by the Revenue purportedly raising substantial questions of law arising from the Order of the Income Tax Appellate Tribunal, ‘C' Bench, Bangalore, in IT[TP]A No.1118/Bang/2014 dated 14.08.2015, relating to the Assessment Year 2009-10.
Learned Counsel for the Revenue presses only substantial question of law No.2 framed by the
Date of Judgment 29-06-2018, ITA No.74/2016 Pr. Commissioner of Income tax & another Vs. M/s Nvidia Graphics Pvt. Ltd.
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Revenue in the Memorandum of Appeal which is as under: “2. Whether the Tribunal is justified in directing the assessing officer to recomputed the deduction under section 10A after reducing those expenses that were reduced only from export turnover, to reduce from the total turnover also, without appreciating that there is no provision in section 10A to the effect that such expenses should also be reduced from the total turnover, as clause [ix] of the Explanation to section 10A provides that such expenses have to be reduced only from the export turnover?”
Learned counsel for the Appellants-Revenue Mr.E.I. Sanmathi submits that the issue regarding deduction of expenditure incurred for ‘Export Turn Over’ is also required to be deducted from ‘Total Turn Over’ for the purpose of computing the deduction u/s.10A of the Act, the controversy is no longer res integra and is covered by the decision of the Division
Date of Judgment 29-06-2018, ITA No.74/2016 Pr. Commissioner of Income tax & another Vs. M/s Nvidia Graphics Pvt. Ltd.
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Bench of this Court in the case of M/s.Tata Elxsi Ltd., vs. Asst. Commissioner of Income Tax, decided on 20.10.2015 since reported in (2015) 127 DTR 0327 (Kar), which has been affirmed by 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 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
Date of Judgment 29-06-2018, ITA No.74/2016 Pr. Commissioner of Income tax & another Vs. M/s Nvidia Graphics Pvt. Ltd.
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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.
Even in common parlance, when the object of the formula is to arrive at the profit from export business, expenses excluded from export
Date of Judgment 29-06-2018, ITA No.74/2016 Pr. Commissioner of Income tax & another Vs. M/s Nvidia Graphics Pvt. Ltd.
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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”.
In the circumstances, having heard the learned Counsel appearing for both the sides, We are of the considered opinion that no substantial question of law arises for consideration in the present case.
Hence, the Appeal filed by the Appellants- Revenue is liable to be dismissed and is accordingly dismissed. No costs.
Sd/- JUDGE
Sd/- JUDGE AN/-