Loading judgment…
No AI summary yet for this case.
1/10 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 28TH DAY OF JUNE 2018
PRESENT
THE HON’BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON’BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.403 /2017
BETWEEN:
PR. COMMISSIONER OF INCOME TAX - 4, BMTC COMPLEX, KORAMANGALA, BANGALORE.
DY. COMMISSIONER OF INCOME TAX, CIRCLE 12 (1), BANGALORE.
... APPELLANTS
(BY SRI. SANMATHI E I, ADV.)
AND:
M/S. MERCEDEZ BENZ RESEARCH AND DEVELOPMENT INDIA PVT. LTD., (EARLIER KNOWN AS DIAMLER CHRYSLER RESEARCH TECHNOLOGY INDIA PVT. LTD.) PINE VALLEY, 3RD FLOOR, EMBASSY GOLF LINKS, BUSINESS PARK, OFF INTERMEDIATE RING ROAD, BENGALURU – 560 071. PAN : AAACD6261B.
... RESPONDENT
Date of Judgment 28-06-2018, ITA No.403/2017 Pr. Commissioner of Income Tax & another Vs. M/s Mercedez Benz Research & Development India Pvt. Ltd.
2/10
THIS INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED: 11.11.2016 PASSED IN IT(TP)A NO.120/BANG/2014, FOR THE ASSESSMENT YEAR 2004-2005, PRAYING TO: (1) 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:11.11.2016 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, 'A' BENCH, BANGALORE, AS SOUGHT FOR, IN THE RESPONDENT-ASSESSEE'S CASE, IN APPEAL PROCEEDINGS IN IT(TP)A NO.120/BANG/2014 FOR A.Y 2004-05 & GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE.
THIS APPEAL COMING ON FOR ADMISSION, THIS DAY, Dr. VINEET KOTHARI, J., DELIVERED THE FOLLOWING:
J U D G M E N T
Mr.SANMATHI E.I. , Adv. for Appellants -
This Appeal is filed by the Revenue purportedly raising substantial questions of law arising from the Order of the Income Tax Appellate Tribunal, ‘A’ Bench, Bangalore, in IT [TP] No.120/Bang/2014 dated 11.11.2016, relating to the Assessment Year 2004-05.
Date of Judgment 28-06-2018, ITA No.403/2017 Pr. Commissioner of Income Tax & another Vs. M/s Mercedez Benz Research & Development India Pvt. Ltd.
3/10
The proposed substantial questions of law framed by the Revenue in the Memorandum of Appeal are as under: “1.
Whether in the facts and circumstances of the case, the Tribunal was justified in law in directing the Assessing Officer include traveling expenses incurred in foreign currency in export turnover as well as in total turnover by following the decision of this Hon’ble Court in case of CIT V/s Tata Elxi even when said judgment has not reached finality and no such computation is prescribed under the provisions of the I.T.Act ?
Whether on the facts and circumstances of the case, the Tribunal was justified in law in directing TPO/AO to treat foreign exchange gain/loss as operating in nature relying on the decision in the case of assessee itself for other assessment year by the Tribunal which has not reached finality ?”
Date of Judgment 28-06-2018, ITA No.403/2017 Pr. Commissioner of Income Tax & another Vs. M/s Mercedez Benz Research & Development India Pvt. Ltd.
4/10
The issue raised in the present appeal with regard to the 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 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
Date of Judgment 28-06-2018, ITA No.403/2017 Pr. Commissioner of Income Tax & another Vs. M/s Mercedez Benz Research & Development India Pvt. Ltd.
5/10
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.
XXXXXX
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,
Date of Judgment 28-06-2018, ITA No.403/2017 Pr. Commissioner of Income Tax & another Vs. M/s Mercedez Benz Research & Development India Pvt. Ltd.
6/10
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”.
The learned Tribunal, after discussing the rival contentions of both the Appellant-Revenue and Respondent-Assessee, has returned a finding as under: “5. We have considered the rival submissions and find that this issue is squarely covered in favour of the assessee by the Tribunal order in assessee’s own case for A.Y.2010-11 and in that year, the tribunal followed another tribunal order in assessee’s own case for A.Y. 2008-09 and confirmed the directions of DRP that foreign
Date of Judgment 28-06-2018, ITA No.403/2017 Pr. Commissioner of Income Tax & another Vs. M/s Mercedez Benz Research & Development India Pvt. Ltd.
7/10
exchange gain/loss as operating in nature. Since learned DR of the revenue could not point out any difference in facts, we find no reason to take a contrary view and reject this ground also.”
The controversy involved herein is no more res integra in view of the decision of this Court in I.T.A. Nos.536/2015 and 537/2015 dated 25.06.2018, wherein it has been observed that unless the finding of the Tribunal is found ex facie perverse, the Appeal u/s. 260-A of the Act, is not maintainable. The relevant portion of the Judgment is quoted below for ready reference: Conclusion: 55.
A substantial quantum of international trade and transactions depends upon the fair and quick judicial dispensation in such cases. Had it been a case of substantial question of interpretation of provisions of Double Taxation Avoidance
Date of Judgment 28-06-2018, ITA No.403/2017 Pr. Commissioner of Income Tax & another Vs. M/s Mercedez Benz Research & Development India Pvt. Ltd.
8/10
Treaties (DTAA), interpretation of provisions of the Income Tax Act or Overriding Effect of the Treaties over the Domestic Legislations or the questions like Treaty Shopping, Base Erosion and Profit Shifting (BEPS), Transfer of Shares in Tax Havens (like in the case of Vodafone etc.), if based on relevant facts, such substantial questions of law could be raised before the High Court under Section 260-A of the Act, the Courts could have embarked upon such exercise of framing and answering such substantial question of law. On the other hand, the appeals of the present tenor as to whether the comparables have been rightly picked up or not, Filters for arriving at the correct list of comparables have been rightly applied or not, do not in our considered opinion, give rise to any substantial question of law. 56. We are therefore of the considered opinion that the present appeals filed by the Revenue do not give rise to any substantial question of law and the suggested substantial questions of law do not meet the
Date of Judgment 28-06-2018, ITA No.403/2017 Pr. Commissioner of Income Tax & another Vs. M/s Mercedez Benz Research & Development India Pvt. Ltd.
9/10
requirements of Section 260-A of the Act and thus the appeals filed by the Revenue are found to be devoid of merit and the same are liable to be dismissed.
We make it clear that the same yardsticks and parameters will have to be applied, even if such appeals are filed by the Assessees, because, there may be cases where the Tribunal giving its own reasons and findings has found certain comparables to be good comparables to arrive at an ‘Arm’s Length Price’ in the case of the assessees with which the assessees may not be satisfied and have filed such appeals before this Court. Therefore we clarify that mere dissatisfaction with the findings of facts arrived at by the learned Tribunal is not at all a sufficient reason to invoke Section 260-A of the Act before this Court. 58. The appeals filed by the Revenue are therefore dismissed with no order as to costs.”
Date of Judgment 28-06-2018, ITA No.403/2017 Pr. Commissioner of Income Tax & another Vs. M/s Mercedez Benz Research & Development India Pvt. Ltd.
10/10
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 Appellant-Revenue is liable to be dismissed and is accordingly dismissed. No costs. Copy of this judgment may be sent to the Respondent-Assessee.
Sd/- JUDGE
Sd/- JUDGE
ln.