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Income Tax Appellate Tribunal, BANGALORE BENCH “ A ”
Before: SHRI VIJAYPAL RAO & SHRI JASON P. BOAZ
Appellant By : Shri A.S. Sriraman, Advocate. Respondent By : Shri G.R. Reddy, CIT (D.R) Date of Hearing : 10.9.2015. Date of Pronouncement : 18.9.2015. O R D E R Per Shri Jason P. Boaz, A.M. : This appeal by the assessee is directed against the final order of assessment for Assessment Year 2006-07 passed under Section 143(3) rws 144C(13) of the Income Tax Act, 1961 (in short 'the Act') vide order dt.29.10.2010 in pursuance to the directions of the Dispute Resolution Panel (‘DRP’), Bangalore issued under Section 144C of the Act dt.29.9.2010.
The facts of the case, briefly, are as under :-
2.1 The assessee company, engaged in the business of export of software development services, filed its return of income for Assessment Year 2006-07 on 29.11.2006 declaring total income of Rs.35,92,600 after claiming deduction of Rs.1,80,35,296 under Section 10A of the Act. The return was processed under Section 143(1) of the Act and the case was subsequently taken up for scrutiny. Since the assessee had reportedly entered into the following international transactions, the Assessing Officer made a reference to the Transfer Pricing Officer (‘TPO’) for determination of the Arm’s Length Price (‘ALP’) thereof. International Transactions Amount (Rs.) Provision of Software development services 4,83,84,000 Reimbursement of expenses received 1,55,274.
The TPO after examination of the matter, passed an order under Section 92CA of the Act dt.30.10.2009 wherein he proposed a T.P. Adjustment of Rs.32,56,440 to the software development services segment of the assessee. 2.2 In consequence thereof, the Assessing Officer passed a draft assessment order dt.23.12.2009, inter alia, including the proposed T.P. Adjustment and restricted the deduction claimed by the assessee under Section 10A of the Act. The assessee filed its objections thereto before the DRP. The DRP disposed off the assessee's objections vide its directions under Section 144C of the Act dt.29.9.2010 allowing the assessee partial relief. In pursuance thereof, the Assessing Officer passed the final order of assessment under Section 143(3) rws 144C(13) of the Act vide order dt.29.10.2010 wherein the income Rs.38,10,260 in view of the restriction of the assessee's claim for deduction under Section 10A of the Act to Rs.1,78,17,937.
Aggrieved by the final order of assessment for Assessment Year 2006-07, dt.29.10.2010, the assessee in appeal before this Tribunal raising the following grounds :- “
1. The Assessing Officer taking the natural meaning of the word Total Turnover for computing the deduction under Section 10A is against equity and law.
2. The Assessing Officer erred in not considering the Hon'ble ITAT order in the appellant’s case pertains to the Assessment Year 2003-04 even thogh the same has been highlighted.
3. The Dispute Resolution Panel also endorsing the Assessing Officer’s view in adopting the natural meaning for the Total Turnover even though the Hon'ble ITAT have explicitly passed an order in the appellant’s own case is against equity and law.
4. The appellant craves leave to adduce additional ground/arguments at the time of hearing.”
4. Ground Nos.1 to 4 : Deduction under Section 10A of the Act. 4.1 In these grounds, the sole issue of dispute in this appeal, the assessee challenge the action of the authorities below (i.e. the Assessing Officer and the DRP) in excluding expenses incurred in foreign currency towards telecommunication and travel expenses towards delivery of software from export turnover while computing the deduction under Section 10A of the Act. It was contended that admittedly, the assessee had computed its claim for deduction under Section 10A of the Act by excluding the aforesaid expenses from both export turnover as well as total turnover which was not accepted by the Assessing Officer who proceeded to recompute the deduction under Section 10A of the Act by reducing the aforesaid expenses incurred in foreign currency from the Export Turnover only. The assessee submits that the aforesaid expenses that are reduced from export turnover should also be reduced from total turnover and placed reliance on the decision of the Hon'ble Karnataka High Court in the case of CIT V Tata Elxsi Ltd. (2012) 349 ITR 98 (Kar), which decision has been followed by the co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2005-06 in IT(TP)A No.175/Bang/2012 dt.30.4.2015.
4.2 We have heard both the learned Authorised Representative and the learned Departmental Representative in the matter. Taking into consideration the decision rendered by the Hon'ble High Court of Karnataka in the case of Tata Elxsi Ltd. (supra) and of the co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2005-06 (supra), are of the view that it would be just and appropriate to direct the Assessing Officer that telecommunication charges and travel expenses incurred in foreign currency are to be excluded from both export turnover as well as total turnover while Section 10A of the Act, as has been prayed by the assessee. It is ordered accordingly.
In the result, assessee's appeal for Assessment Year 2006-07 is allowed. Order pronounced in the open court on 18th Sept., 2015.