THE PR COMMISSIONER OF INCOME TAX vs. M/S CEDEGIM SOFTWARE INDIA PVT.LTD.

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ITA/339/2017HC KarnatakaKAHC01044237201727 March 2018Bench: S SUNIL DUTT YADAV,B.S PATIL5 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal held that expenses excluded from export turnover must also be excluded from total turnover when computing the deduction under Section 10A. This aligns with the principle of uniformity in the numerator and denominator of the formula.

What were the facts?

The appeal concerns the re-computation of deduction under Section 10A of the Income Tax Act. The issue was whether telecommunication and travel expenses incurred in foreign currency should be excluded from both export turnover and total turnover.

What were the issues?

Whether telecommunication and travel expenses in foreign currency should be excluded from both export and total turnover for Section 10A deduction calculation.

Which sections of the Income-tax Act were involved?

Section 10A

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 27th DAY OF MARCH 2018

PRESENT

THE HON’BLE MR.JUSTICE B.S.PATIL

AND

THE HON’BLE MR.JUSTICE S SUNIL DUTT YADAV

I.T.A.No. 339 of 2017

BETWEEN:

1.

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

2.

THE DEPUTY COMISSIONER OF INCOME-TAX, CIRCLE-2(1)(1),

2ND FLOOR, BMTC BUILDING,

80 FEET ROAD, KORMANGALA,

BENGALURU-560 095.

..APPELLANTS

(By MR K.V. ARAVIND, ADVOCATE)

AND:

M/s. CEDEGIM SOFTWARE INDIA PVT. LTD., NO.11/1, 12/1, MARUTHI INFOTECH, CENTRE, KORAMANGALA, INNER ROAD, BENGALURU – 560 071.

..RESPONDENT

(By MS. RASHMI.R FOR SRI. K.R. VASUDEVAN ADV.)

This appeal is filed under Section 260-A of Income Tax Act 1961, arising out of order dated:13/10/2016 passed in ITA No.1363/bang/2015, for the Assessment year 2008-2009 praying to formulate the substantial questions of law stated therein and to allow the appeal and set aside the order passed by the ITAT, Bengaluru in ITA No.1393/Bang/2015 dated 13/10/2016 confirming the order of the Appellate Commissioner and confirm the order passed by the Deputy Commissioner of Income-Tax, Circle-2(1)(1), Bengaluru and etc.

This Appeal coming on for Admission this day, B.S.PATIL J., delivered the following:

JUDGMENT

We have heard learned counsel for the parties.

2.

Learned counsel appearing for both parties fairly submit that the matter is covered by a decision rendered by the co-ordinate Bench of this Court in the case of Commissioner of Income Tax and another vs. Tata Elixi Limited (2012) 349 ITR 98.

3.

Challenge in this appeal, is to the order dated 13.10.2016 passed by the Income Tax Appellate Tribunal (ITAT), Bengaluru in ITA No.1393/Bang/2015. The issue involved in the appeal before the Tribunal was “whether

the Commissioner of Income Tax erred in re-computing deduction under Sec.10A of the Income Tax Act by excluding the value of telecommunication expenses and traveling expenses in foreign currency both from the export turnover and total turnover?”.

4.

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 which are reduced from the export turnover are to be necessarily reduced from the total turnover while computing deduction under Section 10A of the Act.

5.

We have perused the judgment rendered by this Court in the case of Commissioner of Income Tax and another vs. Tata Elixi Limited reported in (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 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. …”

6.

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

7.

As the other question decided in the aforesaid judgment does not arise in this case, it is unnecessary to deal with the same.

Hence, the appeal is dismissed.

Sd/-

JUDGE

Sd/- JUDGE

brn

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