THE PR COMMISSIONER OF INCOME TAX CIT(A) vs M/S AMD INDIA PVT. LTD.,

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 20TH DAY OF MARCH, 2018 PRESENT

THE HON’BLE MR.JUSTICE B.S.PATIL & THE HON’BLE MR.JUSTICE S.SUNIL DUTT YADAV I.T.A.No.626/2017

BETWEEN

THE PR. COMMISSIONER OF INCOME TAX, CIT(A), 5TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU-560 095.

THE DEPUTY COMMISSIONER OF INCOEME TAX, CIRCLE-11(1), PRESENT ADDRESS CIRCLE-1(1)(1), 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU-560 095.

... APPELLANTS

(By Sri SANMATHI E.I., ADV. FOR Sri ARAVIND K.V., ADV.)

AND

M/s AMD INDIA PVT. LTD., PLOT # 102 & 103, EXPORT PROMOTION INDUSTRIAL PARK, WHITEFIELD, BENGALURU-560 066.

… RESPONDENT

(By Sri SHARATH S., ADV. FOR Sri CHYTHANYA K.K., ADV.)

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THIS ITA IS FILED UNDER SEC.260A OF THE INCOME TAX ACT 1961, PRAYING TO ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN IT(TP)A NO.92/BANG/2014 DATED 08/03/2017 CONFIRMING THE ORDER OF THE DRP AND CONFIRM THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1), BENGALURU, AND ETC.

THIS APPEAL COMING ON FOR ORDERS, THIS DAY, B.S.PATIL, J., DELIVERED THE FOLLOWING:

JUDGMENT

Though this matter is listed for orders, as it is submitted at the bar that issue raised in this appeal is covered by the decision of a co-ordinate Bench of this Court, which has been indeed followed by the Tribunal, we have taken up this matter for final disposal.

We have heard the learned counsel for both parties.

This appeal is filed by the revenue challenging the order dated 08.03.2017 passed by the Income Tax Appellate Tribunal (ITAT), Bengaluru Bench, Bengaluru, in IT(TP)A No.92/Bang/2014.

Briefly stated, facts involved in the case are that respondent – Company is incorporated under the provisions of

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Companies Act. It is engaged in research, design and development of application solutions for semiconductor products, marketing and rendering technical support for AMD products. Returns of income for the assessment year 2009-10 was filed by the respondent – Company declaring income of `34,69,591/-. The case was taken up for scrutiny. The Assessing Officer, during the course of assessment noticed that assessee had reported international transactions hence, he referred the matter to Transfer Pricing Officer (TPO). The TPO passed an order under Section 92CA of Income Tax Act on 29.01.2013 and suggested Arm’s Length Price (ALP) adjustment of `7,37,16,897/- . Thereafter, Assessment Officer passed the draft assessment order on 06.03.2013 after incorporating transfer price adjustment apart from adjusting export turnover by reducing communication expenses and foreign currency expenditure for the purpose of computing deduction under Section 10A. This was approved by DRP and after considering the objections filed, he directed the Assessing Officer not to keep a cap on working capital adjustment and also directed not to reduce the foreign travel expenditure and communication expenditure from export turnover. Aggrieved by the same, the

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revenue preferred ITA(TP)A No.92/Bang/2014 before the Tribunal raising several contentions.

The Tribunal, following the judgment of this Court in the case of COMMISSIONER OF INCOME TAX AND ANOTHER VS. TATA ELIXI LIMITED - (2012) 349 ITR 98, has held that expenses that are reduced from the export turnover are to be necessarily reduced from the total turnover while computing deduction under Section 10A of the Act. Aggrieved by the dismissal of the appeal, the revenue has come up before this Court.

We have perused the judgment rendered by this Court in the case of COMMISSIONER OF INCOME TAX AND ANOTHER VS. TATA ELIXI LIMITED - (2012) 349 ITR 98. A co-ordinate Bench of this Court has categorically laid down the law on the point at paragraph 17 as under;

“From the aforesaid judgments, what emerges is that, there should be uniformity in the ingredients of both the numerator and the denominator of the formula, since otherwise it would produce anomalies or absurd results. Section 10A is a beneficial section. It is intended to provide incentives to promote exports. The incentive is to exempt profits relatable to exports. In the case of combined

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business of an assessee, having export business and domestic business, the Legislature intended to have a formula to ascertain the profits from export business by apportioning the total profits of the business on the basis of turnovers. Apportionment of profits on the basis of turnover was accepted as a method of arriving at export profits. In the case of section 80HHC, the export profit is to be derived from the total business income of the assessee, whereas in section 10A, the export profit is to be derived from the total business of the undertaking. Even in the case of business of an undertaking, it may include export business and domestic business, in other words, export turnover and domestic turnover. The export turnover would be a component or part of a denominator, the other component being the domestic turnover. In other words, to the extent of export turnover, there would be a commonality between the numerator and the denominator of the formula. In view of the commonality, the understanding should also be the same. In other words, if the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded in computing the export turnover as a component of total turnover in the denominator. …”

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In the light of above pronouncement and as per enunciation of law made therein, we do not find any merit in this appeal. Hence, the appeal is dismissed.

Sd/- JUDGE

PKS

THE PR COMMISSIONER OF INCOME TAX CIT(A) vs. M/S AMD INDIA PVT. LTD.,