THE PR. COMMISSIONER OF INCOME TAX CIT(A) vs. M/S GLOBAL E-BUSINESS OPERATIONS

1 ITA NO.598 OF 2017 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 07TH DAY OF MARCH, 2018 PRESENT HON’BLE MR.JUSTICE DINESH MAHESHWARI, CHIEF JUSTICE AND HON’BLE MR.JUSTICE S. SUNIL DUTT YADAY INCOME TAX APPEAL NO.598 OF 2017 BETWEEN 1. THE PR.COMMISSIONER OF INCOME-TAX, CIT(A),

“5TH FLOOR, BMTC BUILDING,

80 FEET ROAD, KORMANGALA,

BENGALURU-560 095.

CIRCLE-11(3), PRESENT ADDRESS,

CIRCLE-3(1)(2),

“2ND FLOOR, BMTC BUILDING,

80 FEET ROAD, KORMANGALA,

BENGALURU-560 095.

…APPELLANTS (BY SRI. K.V.ARAVIND, ADVOCATE)

AND M/S. GLOBAL E-BUSINESS OPERATIONS PVT.LTD.,

2 ITA NO.598 OF 2017 KALYANI PLATINA, PHASE 2 BLDG, S.NO.1,6 & 24, KUNDALAHALLI VILLAGE, K R PURAM HOBLI, BENGALURU-560 066. PAN: AABCG 2843D. …RESPONDENT

(BY SRI. SANDEEP HUILGOL, ADVOCATE)

THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT, 1961, ARISING OUT OF ORDER DATED 15.03.2017 PASSED IN M.P.NO.28/BANG/2017 (IN IT(TP)A NO.1236/BANG/2010 FOR THE ASSESSMENT YEAR 2006-2007 PRAYING THAT, 1) TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW, 2) TO ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN M.P.NO.28/BANG/2017 (IN IT(TP)A NO.1236/BANG/2010) DATED 15.03.2017 AND CONFIRM THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1)(2), BENGALURU AND ETC.

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

3 ITA NO.598 OF 2017 JUDGEMENT The learned counsel Mr. Sandeep Huilgol undertakes to file power for the respondent. The Revenue seeks to maintain this appeal under Section 260-A of the Income Tax Act, 1961 [‘the Act’] against the order dated 15.03.2017, as passed by the Income Tax Appellate Tribunal, Bench ‘B’, Bengaluru [‘the Tribunal’] in M.P. No.28/Bang/2017 [in IT(TP) A. No.1236/Bang/2010], relating to the assessment year 2006-2007.

Shorn of unnecessary details, the relevant background aspects of the matter are that the respondent-assessee is said to be engaged in the business of data processing, software development and other IT enabled services for Hewlett Packard Group. The facts relevant for the purpose of the present appeal are that for the Assessment Year in question, the assessee filed its return of income declaring loss and, inter alia, claimed deductions under Section 10-A of the Act. The Assessing Officer and the Dispute Resolution Panel though concluded that expenditure incurred in foreign currency are to

4 ITA NO.598 OF 2017 be excluded from export turnover for the purpose of computation of relief under Section 10-A of the Act but rejected the contention of the assessee that the said expenditure incurred in foreign currency and the telecommunication charges should also be reduced from the total turnover for the purpose of computation of relief under Section 10-A of the Act.

It appears that while initially deciding the appeal filed by the assessee [IT(TP) A. No.1236/Bang/2010] by the order dated 09.12.2016 , the Tribunal dealt with other issues but the issue relating to the relief under Section 10-A of the Act, though raised, was left out of consideration. Later on, the Tribunal granted the petition for rectification filed by the assessee [M.P. No.28/Bang/2017]; and held in the impugned order dated 15.03.2017 that the issue was covered by the decision of this Court in the case of COMMISSIONER OF INCOME TAX v. TATA ELXSI LTD.: [2012] 349 ITR 98 and thus, directed the Assessing Officer to reduce the expenditure incurred in foreign currency from both export turnover and

5 ITA NO.598 OF 2017 total turnover for the purpose of computing the deduction under Section 10-A of the Act.

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 the 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

6 ITA NO.598 OF 2017 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 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. 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

7 ITA NO.598 OF 2017 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

AHB/vgh*