THE PR.COMMISSIONER vs. M/S CENTURY LINK TECHNOLOGY

1 ITA.No.786 OF 2017

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 7TH DAY OF MARCH, 2018 PRESENT HON'BLE MR. JUSTICE DINESH MAHESHWARI, CHIEF JUSTICE

AND HON'BLE MR.JUSTICE S.SUNIL DUTT YADAV INCOME TAX APPEAL NO.786 OF 2017 BETWEEN: 1. THE PR. COMMISSIONER OF INCOME-TAX CIT(A), 5TH FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA, BENGALURU-560 095.

… APPELLANTS

(BY SRI DILIP.M. ADVOCATE, FOR K.V. ARAVIND, ADVOCATE)

AND:

M/s. CENTURY LINK TECHNOLOGY INDIA PVT. LTD.,

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SALARPURIA HALLMARK, SURVEY NO.15/3, 16, KADUBEESANAHALLI VARTHUR HOBLI, BENGALURU-560 103. … RESPONDENT (RESPONDENT IS SERVED)

THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF THE INCOME TAX ACT, 1961, ARISING OUT OF ORDER DATED 15.05.2017, PASSED IN ITA NO.2059/BANG/2016 FOR THE ASSESSMENT YEAR 2011-2012 PRAYING: (1) TO FORMULATE SUBSTANTIAL QUESTIONS OF LAW (2) TO ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN I.T.A. NO.2059/BANG/2016 DATED 115.05.2017, CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND ETC.

THIS APPEAL COMING ON FOR ADMISSION, THIS DAY, THE CHIEF JUSTICE DELIVERED THE FOLLOWING:

JUDGMENT

The Revenue seeks to maintain this appeal under Section 260-A of the Income Tax Act, 1961 [‘the Act’] against the order dated 15.05.2017, as passed by the Income Tax Appellate Tribunal, ‘C’ Bench, Bengaluru [‘the Tribunal’], in ITA No. 2059/Bang/2016 (relating to the Assessment Year 2011-2012).

Shorn of unnecessary details, the relevant background aspects of the matter are that the respondent-assessee is

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said to be engaged in the business of software development. For the Assessment Year in question, the assessee claimed deduction of Rs.41,58,86,300/- under Section 10-A of the Act. During the scrutiny proceedings, the Assessing Officer recomputed the deduction claimed and restricted the same to Rs.35,44,48,046/-.

The assessee claimed that whatever amount was adjusted/reduced from the export turnover, an equal amount was also required to be reduced from the total turnover for computing the profits eligible for deduction under Section 10-A of the Act. These contentions were not accepted by the Assessing Officer. However, in appeal, the Commissioner of Income Tax (Appeals), Bengaluru-2 [‘the CIT(A)’] accepted the contention of the assessee, inter alia, with reference to the decision of this Court in the case of COMMISSIONER OF INCOME TAX .v. TATA ELXSI LTD. : [2012] 349 ITR 98 (Karnataka). The order so passed by the CIT(A) has been approved by the Tribunal in the order impugned, while following the aforesaid decision in the case of Tata Elxsi Ltd.

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Seeking to assail the order so passed by the Tribunal, it is sought to be argued on behalf of the Revenue that the Tribunal was not right in allowing the expenses that had been reduced from export turnover, to be also reduced from the total turnover, since nothing in Section 10-A of the Act provides for such an exclusion.

Having heard learned counsel for the appellants and having examined the record with reference to the law applicable, we are satisfied that no substantial question of law is involved and this appeal does not merit admission.

The method of computing the exemption under Section 10-A of the Act and precisely, the question as to whether the expenses excluded from the export turnover are also to be excluded from the total turnover for the purpose of Section10-A of the Act, has been dealt with by this Court in the case of TATA ELXSI LTD. (supra); and this Court has answered the question against the Revenue, while holding, inter alia, as under: “… 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

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component of total turnover in the denominator. The reason being the total turnover includes export turnover. The components of the export turnover in the numerator and the denominator cannot be different. Therefore, though there is no definition of the term ‘total turnover’ in Section 10- A, there is nothing in the said Section to mandate that, what is excluded from the numerator that is export turnover would nevertheless form part of the denominator. Though when a particular word is not defined by the legislature and an ordinary meaning is to be attributed to the same, the said ordinary meaning to be attributed to such word is to be in conformity with the context in which it is used. When the statute prescribes a formula and in the said formula, ‘export turnover’ is defined, and when the ‘total turnover’ includes export turnover, the very same meaning given to the export turnover by the legislature is to be adopted while understanding the meaning of the total turnover, when the total turnover includes export turnover. If what is excluded in computing the export turnover is included while arriving at the total turnover, when the export turnover is a component of total turnover, such an interpretation would run counter to the legislative intent and impermissible. If that were the intention of the legislature, they would have expressly stated so.

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If they have not chosen to expressly define what the total turnover means, then, when the total turnover includes export turnover, the meaning assigned by the legislature to the export turnover is to be respected and given effect to, while interpreting the total turnover which is inclusive of the export turnover . . .”

(underlining supplied)

The principles aforesaid directly apply to the present case too, and therefore, we are unable to find any infirmity in the order impugned.

The appeal, therefore, stands dismissed.

Sd/- CHIEF JUSTICE

Sd/- JUDGE

BKV/vgh*