Income Tax Appellate Tribunal - Hyderabad
Xilinx India Technology Services ... vs Assessee on 3 June, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD "B" BENCH, HYDERABAD
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND
SHRI SAKTIJIT DEY, JUDICIAL MEMBER
ITA No.1813/Hyd/2012
Assessment year 2008-09
Xilinx India Technology Vs DCIT, Cir-3(3),
Services Pvt. Ltd., Hyderabad.
Hyderabad.
PAN:AAACD7214J
{Appellant) (Respondent)
Appellant by : Sri S. Venkateswarlu & Laxmi Pavan
Respondent by: Shri Phani Raju
Date of hearing : 03-6-2013
Date of Pronouncement : 07-6-2013
ORDER
PER SAKTIJIT DEY, JUDICIAL MEMBER.
This appeal filed by the assessee is directed against the draft assessment order passed by the Assessing Officer u/s 143(3) read with section 144C of the Act on the direction of the Dispute Resolution Panel (DRP) and it pertains to the assessment year 2008-09.
2. The assessee has raised four grounds in this appeal. Ground Nos. 1 and 4 are general in nature hence, do not require any adjudication.
2 ITA No.1813 of 2012M/s Xilinx India Technology Services Pvt. Ltd., Hyd.
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3. In ground No.2, the assessee has raised the issue of exclusion of certain expenses from export turnover while computing deduction u/s 10A of the Act.
4. Briefly, the facts are while framing the draft assessment order, the Assessing Officer noticed that while computing deduction u/s 10A of the Act, the assessee has included the following expenditure.
i) Communication charges Rs.19,83,324
ii) Insurance Rs. 70,146
iii) Professional charges Rs.1,91,63,731 The Assessing Officer opined that in view of the definition of export turnover under Explanation-2(iv) of section 10A the aforesaid expenditure cannot form part of the export turnover for computing the deduction u/s 10A of the Act.
Accordingly, he excluded the aforesaid expenditure while computing the deduction u/s 10A of the Act without reducing the same from total turnover. The assessee challenged such action of the Assessing Officer in the objections filed before the DRP.
5. Before the DRP, it was contended by the assessee relying upon Special Bench decision of the Income-tax Appellate Tribunal in case of Saks soft Limited (313 ITR 353 (AT) that communication charges and other expenses should be reduced from the export turnover as well as total turnover while computing deduction u/s 10A of the Act.
3 ITA No.1813 of 2012M/s Xilinx India Technology Services Pvt. Ltd., Hyd.
================== The DRP however did not accept the contention of the assessee by observing that the department is contesting the matter before the Apex Court.
6. Having considered the submissions of the parties on this issue, we fully agree with the contention of the assessee that while computing deduction u/s 10A of the Act communication charges, insurance etc., has to be reduced from both the export turnover as well as total turnover. This view is in consonance with the ratio laid down by the Hon'ble Bombay High Court in case of CIT vs. Gem Plus Jewellery India Ltd. (330 ITR 175). The decision of Karnataka High Court in case of CIT vs Tata Elxsi Limited (349 ITR 90) and Income-tax Appellate Tribunal Chennai Special Bench in case of ITO vs. Saks Soft Ltd., (313 ITR 353 (AT). Merely because the department has carried the dispute to the Hon'ble Supreme Court the ratio laid down in the aforesaid decision of the Hon'ble High Court and Special Bench of Income-tax Appellate Tribunal would not become inapplicable. In aforesaid view of the matter, respectfully following the decision of the Hon'ble Bombay High Court in case of CIT vs. Gem Plus Jewellery (I) Ltd., decision of Hon'ble Karnataka High Court in case of CIT vs. Tata Elxsi Ltd., (349 ITR 98) and of the Income-tax Appellate Tribunal Special Bench in case of ITO vs. Saks Soft Limited, we direct the Assessing Officer to re-compute the deduction u/s 10A of the Act after reducing the expenses towards communication charges, insurance professional charges etc., from the export turnover as well as total turnover.
4 ITA No.1813 of 2012M/s Xilinx India Technology Services Pvt. Ltd., Hyd.
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7. In ground No.3 and in its sub-grounds, the assessee has raised the issue of exclusion of statutory disallowance from the income derived for the purpose of computation of deduction u/s 10A of the Act. In the draft assessment order, the Assessing Officer made the following additions on account of statutory disallowances:-
1) Delay in remittance of employees Contribution to PF Rs.3,32,071/-
2) Provision for leave encashment Rs.19,83,324
3) Provision for gratuity Rs. 6,08,181
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Total Rs.29,23,576
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It was noticed by the Assessing Officer that the assessee has claimed deduction u/s 10A by including the statutory disallowances in the profit of the undertaking. The Assessing Officer however opined that the statutory disallowances cannot form profit of the undertaking for the purpose of computation of deduction u/s 10A of the Act and accordingly excluded the same from the income derived for the purpose of computing the deduction u/s 10A of the Act.
The assessee challenged such action of the Assessing Officer before the DRP.
8. It was contended by the assessee before the DRP that in computing the income u/s 28 of the Act, the provisions of section 36(1)(va),40A(7) and 43B of the Act have to be 5 ITA No.1813 of 2012 M/s Xilinx India Technology Services Pvt. Ltd., Hyd.
================== considered. It was submitted that profits and gains referred to in section 10A should be computed in accordance with the provisions of section 43B of the Act. Hence the profits and gains eligible for deduction u/s 10A shall be after considering the disallowances provided in sections 36(1)(va),40A(7) and 43B of the Act. In support of such contention, the assessee relied upon decision of Hon'ble Bombay High Court in case of Gem Plus Jewellery India Ltd. (supra) ad also orders passed by the different benches of the Tribunal. The assessee also brought to the notice of the DRP that in assessee's own case for asst. Year 2008-09 the DRP has decided the issue in favour of the assessee. The DRP however did not accept the contention of the assessee by observing that the department is contesting the issue before the Hon'ble High Court.
9. We have considered rival submissions of the parties and perused the material on record. It is the contention of the assessee that the disallowance made has increased the business profit of the assessee. Hence while computing the deduction u/s 10A, the disallowance made could not be ignored and should be considered as part of profit. In case of CIT vs. Gem Plus Jewellery India Ltd (supra), the Hon'ble Bombay High Court held that the net consequence of statutory disallowance is that the business profits to that extent has been enhanced. Hence, the assessee is entitled for deduction u/s 10A of the Act on such enhanced income due to statutory disallowance. We find that similar view has also been taken by the co-ordinate benches of this Tribunal 6 ITA No.1813 of 2012 M/s Xilinx India Technology Services Pvt. Ltd., Hyd.
================== in the case of M/s Progressive Software Development (P) Ltd., Hyderabad (ITA No.397/Hyd/2010 dated 30-9-2010 and in case of DCIT vs. Virinchi Technologies L:imited (ITA No.209/Hyd/2010 dated 31-3-2011. Respectfully following the ratios laid down by the Hon'ble Bombay High Court in case of CIT vs. Gem Plus Jewellery (I) Ltd (supra), we hold that the statutory disallowance cannot be excluded from the income of the undertaking for computing deduction u/s 10A of the Act. Accordingly, we direct the Assessing Officer to re-compute the deduction u/s 10A of the Act without excluding the statutory disallowance from the income derived from the undertaking. Therefore, we allow the grounds raised by the assessee on this issue.
10. In the result, the appeal filed by the assessee is allowed.
Order was pronounced in the open Court on 7-06-2013.
Sd/- Sd/-
(CHANDRA POOJARI) (SAKTIJIT DEY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: the 7th June, 2013.
Copy forwarded to:
1. Xilinx India Technology Services Private Limited, Unit No.03.03, 3rd Floor, Block 1, Cyber Pearl, Hitech City, Madhapur, Hyderabad.
2. DCIT, Cir-3(3), Hyderabad.
3. Dispute Resolution Panel (DRP), Hyderabad.
4. The DR, ITAT, Hyderabad Jmr* 7 ITA No.1813 of 2012 M/s Xilinx India Technology Services Pvt. Ltd., Hyd.
================== 8 ITA No.1813 of 2012 M/s Xilinx India Technology Services Pvt. Ltd., Hyd.
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