Income Tax Appellate Tribunal - Bangalore
M/S Sunquest Information Systems P. ... vs Department Of Income Tax on 7 March, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
BANGALORE BENCH 'A'
BEFORE SHRI N.BARATHVAJA SANKAR, VICE-PRESIDENT
and
SMT. P.MADHAVI DEVI, JUDICIAL MEMBER
ITA No.697(Bang)/2011
(Assessment year: 2006-07)
Income-tax Officer,
Ward 12(2),
Bangalore. ... Appellant
Vs.
M/s.Sunquest Information Systems P.Ltd.
I Floor, Eagle Ridge, EGL Business Park,
Off Intermediate Ring Road
Bangalore-560071 ... Respondent
PAN:AAECS 2754 E
Appellant by: Shri B.Saravanan, JCIT
Respondent by : Shri Amit Kumar, C.A.
Date of hearing: 07-03-2012
Date of pronouncement: 07-03-2012
O R D E R
Per N.BARATHVAJA SANKAR, VP:
This is an appeal by the revenue against the order of the CIT(A)-III, Bangalore, dated 22-2-2011 in the case of M/s.Sunquest Information Systems (India) P.Ltd. for the assessment year 2006-07.
2. The only point at issue brought before us for adjudication is whether the CIT(A) is erred in law in directing the AO to exclude data uplinking charges of `69,52,623/- from ITA 697(Bang)/2011 Page 2 of 5 the total turnover also for the purpose of computing deduction u/s 10A of the Income-tax Act, 1961 [hereinafter referred to as "the Act"] .
3. Brief facts of the case are that the assessee filed its return of income for the assessment year under consideration declaring a total income of `41,893/- after claiming deduction u/s10A of the Act. The AO recomputed the deduction u/s 10A after excluding data uplinking charges from the 'export turnover' and not from the total turnover of the assessee. As a result of such re-computation, the assessee's claim for deduction u/s 10A amounting to `4,90,38,846/- was reduced to `4,79,28,394/-. Being aggrieved, assessee preferred an appeal before the first appellate authority. The first appellate authority following the decision of the Special Bench of the Tribunal in the case of M/s.Sak Soft Ltd., and also the decision of the Bombay High Court in the case of Gem Plus Jewellery India Ltd., directed the AO to exclude the expenditure incurred by the assessee towards data uplinking charges of `69,52,623/- from both export turnover and total turnover for the purpose of computation of deduction u/s 10A of the Act. Being aggrieved, the revenue is in appeal before this Tribunal.
4. Though it is revenue's appeal, learned Chartered Accountant appearing for the assessee, submitted that the point at issue is now squarely covered in favour of the assessee by the decision of the jurisdictional High Court in the case CIT vs. M/s.Tata Elxsi Ltd. & others (2011-TIOL-684-HC-Kar-II). Learned Departmental Representative has also admitted that ITA 697(Bang)/2011 Page 3 of 5 the issue is covered by the decision of the jurisdictional High Court.
5. We have heard the parties and gone through the decision of the jurisdictional High Court in the case of CIT vs. M/s.Tata Elxsi Ltd. & others (supra) wherein the Hon'ble Karnataka High Court had held that while computing the exemption u/s 10A, 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. The relevant finding of the Hon'ble jurisdictional High Court reads as follows:-
"...........Section 10A is enacted as an incentive to exporters to enable their products to be competitive in the global market and consequently earn precious foreign exchange for the country. This aspect has to be borne in mind. While computing the consideration received from such export turnover, the expenses incurred towards freight, telecommunication charges, or insurance attributable to the delivery of the articles or things or computer software outside India, or expenses if any incurred in foreign exchange, in providing the technical services outside India should not be included. However, the word total turnover is not defined for the purpose of this section. It is because of this omission to define 'total turnover', the word 'total turnover' falls for interpretation by this Court;
........In section 10A, not only the word 'total turnover' is not defined, there is no clue regarding what is to be excluded ITA 697(Bang)/2011 Page 4 of 5 while arriving at the total turnover. However, while interpreting the provisions of section 80HHC, the courts have laid down various principles, which are independent of the statutory provisions. 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 which intends to provide incentives to promote 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 10-A, 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. To the extent of export turnover, there would be a commonality between the numerator and the denominator of the formula. 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. The reason being the total turnover includes export turnover. The components of the export turnover in the numerator and the denominator cannot be different. Therefore, though there is no definition of the term 'total turnover' in section 10A, there is nothing in the said section to mandate that, what is excluded from the numerator that is export turnover would nevertheless form part of the denominator. When the statute ITA 697(Bang)/2011 Page 5 of 5 prescribed a formula and in the said formula, 'export turnover' is defined, and when the 'total turnover' includes export turnover, the very same meaning given to the export turnover by the legislature is to be adopted while understanding the meaning of the total turnover, when the total turnover includes export turnover. If what is excluded in computing the export turnover is included while arriving at the total turnover, when the export turnover is a component of total turnover, such an interpretation would run counter to the legislative intent and impermissible. Thus, there is no error committed by the Tribunal in following the judgments rendered in the context of section 80HHC in interpreting section 10A when the principle underlying both these provisions is one and same."
Respectfully following the same, we dismiss the appeal of the revenue.
Order pronounced in the open court on 7th March, 2012.
Sd/- Sd/- (Smt. P.Madhavi Devi) (N.Barathvaja Sankar) JUDICIAL MEMBER VICE-PRESIDENT