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Income Tax Appellate Tribunal, BANGALORE BENCH ‘B’, BANGALORE
Before: SHRI GEORGE GEORGE, K & SHRI JASON P BOAZ
This appeal at the instance of revenue is directed against the CIT(A)’s order dated 23-12-2013. The relevant assessment year is 2006-07.
The solitary issue that arises for OUR consideration is whether the CIT(A) is justified in directing to calculate deduction u/s 10A of the Act by excluding expenditure incurred in foreign exchange both from the export turnover as well as from the total turnover.
Briefly stated the facts of the case are as follows;
The assessee is a Private Limited Company. It is engaged in development of software products and related services. For the relevant assessment year the return of income was filed declaring an income of Rs.27,80,977/-. The assessee had claimed deduction u/s 10A of the Act amounting to Rs.2,19,94,156/-. In the assessment completed u/s 143(3) of the Act, deduction u/s 10A was re-computed by excluding from the export turnover the following expenses, namely; a) Telecommunication expenses Rs.11,82,269 b) Expenditure in foreign currency Rs.30,77,618
Consequent to re-computation of deduction u/s 10A of the Act, the claim of deduction was reduced to Rs.2,04,22,205/- from Rs.2,19,94,154/.
Aggrieved, assessee preferred an appeal to the first appellate authority. The CIT(A) following the judgment of the Hon’ble jurisdictional High Court in the case of M/s Tata Elxsi Ltd (2012) 349 ITR 98(Kar.)directed that the expenses excluded from the export turnover are also to be excluded from the total turnover while computing the deduction u/s 10A of the Act.
Aggrieved, the revenue is in appeal before us raising the following grounds;
a) The order of the CIT(A) is opposed to law and facts of the case. b) On the fats and in the circumstances of the case the ld.CIT(A)erred in law in directing the AO to exclude the expenditure incurred in foreign currency and towards communication charges both from the export turnover as well as from total turnover for the purpose of computation of deduction u/s 10A, without appreciating the fact that the statute allows exclusion of such expenditure only from export turnover by way of specific definition of export turnover as envisaged by sub-clause(4) of Explanation 2 below Sub-section (8) of Section 10A and the total turnover has not been defined in this Section. c. On the facts and in the circumstances of the case the ld.CIT(A) erred in directing the AO to compute deduction u/s 10A in the above manner by placing reliance on the decision of Hon’ble High Court of Karnataka in the case of M/s Tata Elxsi Ltd., which has not become final since the same has not been accepted by the Department and SLPs are pending before the Hon’ble Supreme Court. d. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT(A) in so far as it relates to the above grounds may be reversed and that of the AO may be restored. e. The appellant craves leave to add, alter, amend and/or delete any of the grounds.
At the very outset, learned counsel for the assessee submitted that this issue is covered in favour of the assessee by the jurisdictional High Court in the case of CIT Vs M/s Tata Elxsi Ltd.,349 ITR 98.(Supra).
The learned DR was unable to controvert the above submissions of the learned AR.
We have heard the rival submissions and perused the material on record. The issue raised by the revenue is no longer res integra and has now been decided by the Hon’ble High Court of Karnataka in the case of in the case of Tata Elxsi Ltd. in 349 ITR 98(Kar.) wherein it has been held that whatever is excluded from export turnover should also be excluded from the total turnover. The fact that the revenue has not accepted the decision of the Hon’ble Supreme Court cannot be the basis not to follow the decision of the Hon’ble Karnataka High Court. In view of the above reasoning, we see no reason to interfere with the order of the learned CIT(A) and we confirm the same. It is ordered accordingly.
In the result, the appeal filed by the revenue is dismissed.
Order pronounced in the open Court on the 12th August, 2015.