THE PR COMMISSIONER OF vs. M/S ARIBA TECHNOLOGIES INDIA

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 28TH DAY OF FEBRUARY, 2018 PRESENT HON'BLE MR. JUSTICE DINESH MAHESHWARI, CHIEF JUSTICE AND HON'BLE MR.JUSTICE S.SUNIL DUTT YADAV INCOME TAX APPEAL NO. 383 OF 2017 BETWEEN: 1. THE PR. COMMISSIONER OF INCOME – TAX, CIT (A), 5TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BENGALURU-560 095.

AND:

M/s. ARIBA TECHNOLOGIES INDIA PVT. LTD.,

RMZ ICON, NO.51, PLACE ROAD BENGALURU-560 052. … RESPONDENT (BY Ms.TANMAYEE RAJKUMAR, ADVOCATE FOR M/s KING AND PATRIDGES, ADVOCATES)

THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF THE INCOME TAX ACT, 1961, ARISING OUT OF ORDER DATED 09.12.2016, PASSED IN IT(TP)A NO.441/BANG/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, IT(TP)A NO.441/BANG/2012 DATED 9.12.2016 AND CONFIRM THE ORDER PASSED BY THE INCOME TAX OFFICER, WARD-1(1)(2), BENGALURU, (3) TO PASS SUCH OTHER SUITABLE ORDERS.

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 09.12.2016, as passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Bengaluru [‘the Tribunal’], in IT (TP) A No. 441/Bang/2012 (relating to the Assessment Year 2007-2008). Shorn of unnecessary details, the relevant background aspects of the present appeal are that the respondent-

assessee is engaged in the business of providing software development and IT enabled services. For the Assessment Year in question, the assessee filed its return declaring income of Rs. 64,425/-. After the case was selected for scrutiny and was referred to the Transfer Pricing Officer, the learned Assessing Officer made the Assessment Order dated 28.01.2011. In regard to the claim for deduction under Section 10-A the Act, the Assessing Officer observed that the internet expenses/telecommunication expenses in foreign currency were to be reduced from the export turnover; but did not accept the submissions of the assessee 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 profits eligible for deduction under Section 10-A. However, in appeal, the Commissioner of Income Tax (Appeals)-IV, Bengaluru [‘the CIT(A)’] accepted this 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).

It appears that while initially deciding the appeals filed by the assessee and the Revenue [IT(TP) A. Nos. 441/Bang/2012 and 442/Bang/2012] by the order dated 02.02.2016, the Tribunal dealt with other grounds but the matter 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 Revenue [M.P. No. 101/Bang/2017] and the appeals were taken up for reconsideration on the said grounds. Ultimately, by the impugned order dated 09.12.2016, the relevant part of the order passed by the CIT(A), has been approved by the Tribunal, while following the decision in the case of TATA ELXSI LTD. (supra).

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 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 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*