Income Tax Appellate Tribunal - Bangalore
Slk Software Services Pvt. Limited , ... vs Department Of Income Tax on 1 March, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
"B" BENCH : BANGALORE
BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER
AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER
ITA No. 700/Bang/2011
Assessment year : 2006-07
The Deputy Commissioner of Vs. M/s. SLK Software Services
Income Tax, Pvt. Ltd.,
Circle 12(3), 563/564, Niran Arcade,
Bangalore. New BEL Road,
Sanjaynagar,
Bangalore - 560 094.
PAN: AAECS 7548E
APPELLANT RESPONDENT
Appellant by : Smt. Susan Thomas Jose, Jt.CIT(DR)
Respondent by : None
Date of hearing : 01.03.2012
Date of Pronouncement : 01.03.2012
ORDER
Per N.K. Saini, Accountant Member
This is an appeal by the department against the order dated 23.02.2011 of the CIT(Appeals)-III, Bangalore.
2. The only effective ground raised in this appeal reads as under: ITA No.700/Bang/2011 Page 2 of 5
"2. The CIT(A) erred in law in directing the AO to exclude telecommunication charges of Rs.53,95822/-, and foreign travel expenses incurred in foreign currency amounting to Rs.57,59,182 from total turnover for the purpose of computation of deduction u/s. 10A of the I.T. Act."
3. The facts of the case relating to the issue under consideration in brief are that the assessee was engaged in the business of Development of Software, providing geographical information services and related activities. The assessee filed its return of income on 28.11.2006 declaring total income of Rs.14,75,386 and book profit of Rs.32,39,705 u/s. 115JB of the Income-tax Act, 1961 [hereinafter referred to as "the Act" in short"]. Later on the case was selected for scrutiny. During the course of assessment proceedings, the Assessing Officer noticed that the assessee while working out deduction u/s. 10A of the Act, had considered entire turnover of Rs.30,32,48,843 after reducing Rs.53,95,822 towards freight/ telecommunication charges/insurance and Rs.57,59,182 towards foreign travel and technical services attributable to the delivery of software outside India. The AO, however, by reducing the above said expenses from "export turnover", determined the total income at Rs.32,55,067 by restricting the claim of deduction u/s 10A to the extent of Rs.5,02,60,950 as against Rs.5,20,40,631 claimed by the assessee.
4. The assessee carried the matter to the ld. CIT(Appeals), who directed the AO to reduce the expenses in question from the export turnover as well as from the total turnover and the relevant findings given by him in para 9 & 10 of the impugned order read as under: ITA No.700/Bang/2011 Page 3 of 5
"9. Respectfully following the above mentioned decisions and the decision of the jurisdictional ITAT (Supra), the Special Bench decision in the case of M/s. Sak Soft Ltd. and the High Court of Bombay in Gem Plus Jewellery India Ltd. any expense which is reduced from the export turnover should also be reduced from the total turnover of the undertaking, I direct the Assessing Officer to exclude the expenditure of Rs.1,11,55,004 incurred by the appellant towards telecommunication charges [Rs.53,95,822] and the expenses incurred in foreign currency [Rs.57,59,182] from both export turnover and total turnover while computing deduction u/s 10A of the Act.
10. Following the rationale of the said decisions, I direct the AO to exclude the expenses [which are excluded from Export Turnover] from the Total Turnover also in computing the deduction under section 10A of the Income Tax Act, 1961, therefore the grounds raised by the appellant are ALLOWED."
Now the department is in appeal.
5. Nobody was present on behalf of the assessee. We have considered the submissions of the ld. DR and carefully gone through the material available on record. It is noticed that an identical issue has been decided in favour of the assessee by the Special Bench of ITAT Chennai in the case of ITO v. Sak Soft Ltd. 313 ITR (AT) 353 (Chennai)(SB) wherein it has been held as under:
" To say that in the absence of any definition of "total turnover" for the purpose of section 10B, there is no authority to exclude anything from the expression as understood in general parlance would be wrong, as there has to be an element of turnover in the receipt if it has to be included in the total turnover. That element is missing in the case of freight, telecom charges or insurance attributable to the delivery of the goods outside India and expenses incurred in foreign exchange in connection with the providing of technical services outside India. These receipts can only be received by the assessee as reimbursement of such expenses incurred by him. Mere reimbursement of expenses cannot have an element of turnover. It is only in recognition of this position that in the definition of ITA No.700/Bang/2011 Page 4 of 5 "export turnover" in section 10B, the aforesaid two items have been directed to be excluded. Secondly, the definition of export turnover contemplates that the amount received by the assessee in convertible foreign exchange should represent "consideration" in respect of the export. Any reimbursement of the two items of expenses mentioned in the definition can under no circumstances be considered to represent "consideration" for the export of the computer software or articles or things. Thus, the expression "total turnover" which is not defined in section 10B should also be interpreted in the same manner. Thus, the two items of expenses referred to in the definition of "export turnover" cannot form part of the total turnover since the receipts by way of recovery of such expenses cannot be said to represent consideration for the goods exported since total turnover is nothing but the aggregate of the domestic turnover and the export turnover. In the formula prescribed by section 10B(4) the figure of export turnover has to be the same both in the numerator and in the denominator of the formula. It follows that the total turnover cannot include the two items of expenses recovered by the assessee and referred to in the definition of "export turnover"."
6. The aforesaid decision had been considered and affirmed by the Hon'ble jurisdictional High Court in the case of Tata Elxsi Ltd. & Ors. 2011- TIOL-684-HC-KAR-II wherein it has been held that for the purpose of computation of deduction u/s. 10A of the Act, if any expenditure is excluded from the export turnover, the same has to be excluded from the total turnover also. A similar view has also been taken by the Hon'ble Bombay High Court in the case of Gem Plus Jewellery India Ltd. 2010-TIOL-456- HC-MUM-IT. We, therefore, by considering the totality of the facts as discussed hereinabove, are of the view that the ld. CIT(Appeals) was justified in allowing the claim of the assessee and directing the AO to exclude the expenses both from export turnover as well as total turnover ITA No.700/Bang/2011 Page 5 of 5 while calculating the deduction u/s. 10A of the Act. We therefore find no infirmity in the impugned order of the ld. CIT(Appeals) on this issue.
7. In the result, the appeal of the department is dismissed.
Pronounced in the open court on this 1st day of March, 2012.
Sd/- Sd/-
( GEORGE GEORGE K. ) ( N.K. SAINI )
Judicial Member Accountant Member
Bangalore,
Dated, the 1st March, 2012.
Ds/-
Copy to:
1. Appellant 2. Respondent 3. CIT 4. CIT(A)
5. DR, ITAT, Bangalore. 6. Guard file
By order
Assistant Registrar
ITAT, Bangalore.