Income Tax Appellate Tribunal - Bangalore
Infosys Technologies Ltd.,, Bangalore vs Assessee on 5 October, 2009
Page 1 of 21 1 ITA No.1140/Bang/2009
IN THE INCOME TAX APPELLATE TRIBUNAL,
BANGALORE BENCH 'A'
BEFORE SHRI GEORGE GEORGE K, J.M. AND
SHRI A MOHAN ALANKAMONY, A.M.
ITA No.1140/Bang/2009
[ASSESSMENT YEAR 2004-05]
M/s Infosys Technologies Ltd.,
No.44 & 97A, 3rd Cross, Electronic City,
Hosur Road, Bangalore-560100. - Appellant
vs
The Deputy Commissioner of Income-tax,
Circle-11(4), Bangalore. - Respondent
Appellant by : Shri Padam Chand Khincha, C.A.
Respondent by : Shri G V Gopal Rao
ORDER
PER GEORGE GEORGE K :
This appeal instituted by the assessee is directed against the order of the learned CIT(A)-I, Bangalore dated 5/10/2009. The relevant asst. year is 2004-05.
2. Ground no.1.1 and 10.1 are general in nature and no specific adjudication is called for. Hence, the same are dismissed.
3. Ground no.8.1 and 9.1 are regarding levy of interest u/s 234B, and 234D of the Act.
Page 2 of 21 2 ITA No.1140/Bang/20093.1 The levy of interest u/s 234B and 234D of the Act is mandatory and consequential. Hence, these grounds are dismissed.
4. The rest of the grounds shall be dealt with in chronological order. Ground No.2.1 to 2.3 (payment made towards bandwidth charges) :
4.1 Brief facts in relation to the above grounds are as follows:-
The assessee is a public limited company. It is engaged in the business of software development. Assessment for the concerned year was completed vide order dated 29.12.2006 u/s 143(3) of the Act. The assessee in the return of income had claimed a sum of Rs.10,37,42,694/-
being bandwidth charges paid to foreign companies for data communication. The details of payment are as follows:-
1) AT & T Rs.8,68,44,524/-
2) MCI Telecommunications Rs.1,68,98,170/-
Total = Rs.10,37,42,694
The contention of the assessee before the A.O. that the impugned payments made to AT&T and MCI Telecommunications are not in the nature of royalty, fees for technical services or relate to any item of expenditure covered u/s 40(a)(i) of the Act, was rejected by the AO. The A.O. held that the assessee was required to deduct tax at source in respect of the said amount u/s 195 of the Act and having not done so, disallowance u/s 40(a)(i) was attracted. In this regard, the A.O. referred to the earlier assessment orders in the case of the assessee relating to asst. years 1998-99, 1999-2000 and 2002-03, wherein it was held that the impugned amounts fall within the provisions of section 195 of the Act and Page 3 of 21 3 ITA No.1140/Bang/2009 therefore, the assessee was liable to deduct the tax at source in respect of such payments.
4.2 Aggrieved, the assessee carried the matter in appeal before the first appellate authority.
4.3 The CIT(A) affirmed the action of the A.O. for two reasons, namely, (i) if the payer (assessee) was of the opinion that there was no tax deductible at source with reference to payment made to the foreign company, the only way out was to get a no deduction certificate from the A.O. (TDS). It was held by the CIT(A) that the assessee cannot be allowed to sit in place of AO (TDS) and decide that the sum payable/paid to the non-resident, in this case AT&T and M/s MCIT Telecommunications, had no element of income sufferable to tax. (ii) On merits, the CIT(A) took notice of the Tribunal decision directly on the point which was in favour of assessee. However, he followed the order of Authority for Advance Ruling (AAR) in the case of Cargo Community Network Pvt. Ltd.
reported in 289 ITR 355. According to the CIT(A), the Hon'ble Authority for Advance Ruling had held that fees/charges paid for internet access is royalty.
4.4 The assesee, being aggrieved, is in appeal before us. 4.5 It was contended that the CIT(A) has erred in holding that the assessee should have applied for and obtained a certificate u/s 195(2) of the Act before making the payment of bandwidth charges. The learned AR relied on the latest decision of the Hon'ble Supreme Court in the case Page 4 of 21 4 ITA No.1140/Bang/2009 of GE India Technology Centre P. Ltd. v CIT 327 ITR 456. It was contended that the remittance to the foreign party has to be of a trading receipt, the whole or part of which is liable to be taxed in India. If it is not so assessable, it was submitted, there was no question deduction of tax at source. It was further submitted that the CIT(A) erred in relying on the decisions of the AAR which is distinguishable both on facts and law. It was further submitted that in the subsequent decision of the AAR in the case of Dell International Services India (P) Ltd. V CIT (2008) 305 ITR 37 and in the case of ISRO Satellite Centre (ISAC) v DIT (2008) 307 ITR 59, the AAR has held that the payment for two-way transmission of voice and data through telecommunication bandwidth is neither royalty nor fees for technical services.
4.6 The learned DR, on the other hand, supported the finding/conclusion of the CIT(A).
4.7 We have heard the rival submission and perused the material on record. The recent decision of the Hon'ble Supreme Court in the case of GE India Technology Centre P. Ltd. V CIT 327 ITR 456 has held the following:-
"The expression "chargeable under the provisions of the Act" in section 195(1) shows that the remittance has got to be of a trading receipt, the whole or part of which is liable to tax in India. If tax is not so assessable, there is no question of tax at source being deducted".
In the light of the above decision of the Hon'ble Supreme Court, the CIT(A)'s reasoning that the only way out is to get a no-deduction Page 5 of 21 5 ITA No.1140/Bang/2009 certificate from the AO (TDS), is lacked merit in substance and this reasoning of the CIT(A) is to be outrightly rejected. 4.8 Software developed by companies in India is exported either in physical mode (i.e. through floppy disks) or through wireless communication using satellite links. When an Indian Company exports software to companies outside India using satellite communication facilities, the digital signals are converted into analog signals through earth stations and are transmitted to one of the geo-stationery satellites using the required bandwidth provided by Videsh Sanchar Nigal Ltd. (VSNL) or Software Technology Parks of India (STPI). The signals that have been beamed to the satellite will be downlinked to the earth station in the United States and sent to the client locations using the bandwidth and downlinking facility provided by international service providers such as AT&T, MCI Telecommunications etc. The assessee shares the bandwidth provided by the international service providers. Bandwidth in 'normal parlance' refers to the amount of traffic that could be carried on the internet. Greater the bandwidth, greater would be the ability to transmit, data and other communication.
4.9 The payments made to service providers such as AT&T or MCI Telecommunications are for the use of bandwidth provided for downlinking signals in the United States. The payments made are not in the nature of managerial, consultancy or technical services nor is it for the use of or right to use industrial, commercial or scientific equipment. The service provides such as MCI Telecommunications or AT&T only ensure Page 6 of 21 6 ITA No.1140/Bang/2009 that the sufficient bandwidth is available on an ongoing basis to the ultimate users to uplink and downlink the signals. 4.10 The Madras High Court in the case of Skycell Communication Services Ltd. V DCIT 251 ITR 53 has held that payment for use of mobile phone services would not constitute royalties or fees for technical services. Payments made for bandwidth are akin to the payment made for use of mobile phone services.
4.11 The Bangalore Bench of the ITAT in the case of Wipro Ltd. V ITO 80 TTJ 191 has held that payment for bandwidth would constitute neither royalties nor fees for technical services either under the Act or under the agreement for Avoidance of Double Taxation with USA. This decision was followed the Tribunal in the assessee's own case (ITA No.532 & 533/Bang/2002 & ITA No.365 & 367/Bang/2003 & ITA No.365 & 367/Bang/2005 dated 12.8.2005). Moreover, the recent decisions of the AAR in the following cases have decided the issue in favour of the assessee:-
• Dell International Services India (P) Ltd. v CIT 305 ITR 37; • ISRO Satellite Centre (ISAC) v DIT 307 ITR 59; & • Cable and Wireless Networks India (P) Ltd. v DIT 315 ITR 72.
4.12 In the light of above reasoning, the ground nos.2.1 to 2.3 are allowed.
5. Ground No.3.1 to 3.3 - Payment made to Gartner Group and Other entities u/s 40(a)(i) of the I T Act.
Brief facts in relation to the above grounds are as follows:- Page 7 of 21 7 ITA No.1140/Bang/2009
During the year, the assessee made certain payments towards subscription charges. The assessee company paid the following amounts as subscription amount to various international organizations:-
Particulars Amount (Rs.)
Subscription to Gartner Group 4,52,08,557.00
Subscription to Forrester Research Inc 1,96,97,148.00 Subscription to Meta Group 92,86,484.00 Subscription to Giga Group 33,95,700.00 Total 7,75,87,889.00 The A.O., while completing the assessment as in the last year, held that the assessee company has got the benefit of technical consultation and it was concluded by the AO that the payment falls within the ambit of section 195 of the I T Act. Therefore, the AO was of the view that the assessee company was liable to deduct tax at source and hence, the subscription charges, claimed as deduction, was disallowed u/s 40(a)(i) of the I T Act.
5.1 The above view of the AO was affirmed by the CIT(A) in his impugned order vide paragraph 7.14 to 7.17.
5.2 We have heard the rival submission and perused the material on record. The issue in question is covered by various orders of the Tribunal in assessee's own case. The orders of the Tribunal, which are in assessee's own case, are as follows:-
• Infosys Technologies Ltd. V ITO (In ITA Nos.145 to 148/Bang/ 2004 - AY 2000-01, 2001-02, 2002-03 and 2003-04 dated 11.11.2005).Page 8 of 21 8 ITA No.1140/Bang/2009
• ACIT v Infosys Technologies Ltd. (In ITA Nos.653 & 969/ Bang/2006 AY 2002-03 and 2003-04 dated 17.10.2007) • ACIT v Infosys Technologies Ltd. (In ITA No.635/Bang/2006 AY 2001-02 dated 2.11.2007) The relevant finding of the Tribunal in ITA Nos.145 to 148/Bang/2004 concerning asst. years 2000-01, 2001-02, 2002-03 and 2003-04 are as follows:-
2. Identical issue arose before this Tribunal in the case of Wipro Ltd. (94 ITD 9) (Bang.) wherein it was held that payment made to Gartner Group for providing access to information available in data base maintained by said company in foreign country is not subject to deduction of tax at source u/s 195 of the Act. The facts in the present case are identical wherein it was held thus:-
"It was undisputed that the GG was web based publishing house giving access to the data base to all those who were willing to pay. Those payments were towards obtaining of market data and client's strategy details, etc. Those were publications and not an information or advice given individually.
The information was available on subscription to anyone willing to pay. Further, it was copyrighted information and could not be passed on to anyone else. There was no license granted to the assessee to use in any manner or quote to anyone else. Even the access was restricted to specific individuals named by the assessee and did not extend to anyone wanting to use. Annual subscription was an access fee to Gartner database maintained outside India. Fee was payable even if no service was utilized. It was like a gate pass or entry fee and could not be treated as imparting of information. The payment was for obtaining data and use in the way assessee wanted it to be used. It was for use of a Page 9 of 21 9 ITA No.1140/Bang/2009 copyrighted article and not for transfer of right in the copyright in the article. Just as a book it is a copyright article. Purchase of the book allows use of information contained therein but does not transfer of the copyright therein. Even if the payment for use of any copyright is covered the copyright should be of a literary, artistic or scientific work and no other. Since in the instant case, the copyright was not of a literary, artistic or scientific work the payment was not covered as royalties under article 12(3)(a) of the Double Taxation Avoidance Agreement between India and USA. The data server was indisputably located outside India. Consequently the provision of services of offering the data base to its customers was an event outside the taxable territories of India. It was also an accepted fact that GG did not have any permanent establishment in India. Further such an access to data base could not fall within the scope of Article 12(3)(a), as found in the DTAA with USA.
The 'experience' mentioned in the DTAA should be one's own experience in the realm of industrial, commercial and scientific and not compilation of somebody else's experience. Such experience should give rise to some known form of Intellectual Property rights. In the instant case, no such thing existed and consequently receipt of web based material offered by GG, outside India was not amenable for taxation in India. It is trite law that provision of Sec. 195 can be invoked only if the payment is otherwise taxable in India. The only provision invoked is sec. 9(1)(vi) to bring the payment as chargeable to tax in India. Since said section was not attracted, payment made was not subject to deduction of tax at source u/s
195. The law is very clear that the payments to GG were not liable for taxation in India, Page 10 of 21 10 ITA No.1140/Bang/2009 and consequently, the assessee had no obligation to deduct tax u/s 195. When the law is clear and unambiguous on the liability to tax, it is not possible to confirm the liability on emotional plea of national interest.
The order of the authorities below was to be cancelled as unsustainable. Accordingly, both the tax liability u/s 201(1) and interest levied u/s 201(1A) were deleted".
5.3 Moreover, in the case of Gartner, the Bombay Tribunal in the case of Gartner Ireland Limited in ITA No.1452/Mum/08 dated 30th July, 2010 has held that the subscription amount received from Infosys Gartner is not liable for tax in India. Since the amounts for subscription to foreign entities mentioned above are not chargeable to tax in India, the assessee is not liable for tax deduction at source. Hence, disallowance of these expenses cannot be made under the provisions of section 40(a)(i) of the Act. It is ordered accordingly. Therefore, ground nos.3.1 to 3.3 are allowed.
6. Ground No.4.1 - Provision for warranty for post sales customer support The A.O., while completing the assessment, had disallowed the deduction claimed in respect of provision for warranty amounting to Rs.29,87,075/-. According to A.O., provision for warranty is not required or the same is in excess of requirement.
6.1 The view of the AO was affirmed by the CIT(A) in paragraph 8.4 of his impugned order.
Page 11 of 21 11 ITA No.1140/Bang/20096.2 The assessee, being aggrieved, is in appeal before us. 6.3 The learned counsel for the assessee reiterated the submission, made before the Income Tax authorities.
6.4 The learned DR, on the other hand, supported the finding/ conclusion of the first appellate authority.
6.5 On identical issue in assessee's own case, the Tribunal has held that the provision for warranty at the rate of 2% of the sales turnover is justifiable. The following are the details of the Tribunal Orders:-
• ACIT v Infosys Technologies Ltd. (In ITA No.471/ Bang/ 2003
- AY 1999-00 dt.9.9.2005);
• Infosys Technologies Ltd. V JCIT (In ITA No.1022/Bang/ 2003
- AY 1998-99 dt.7.4.2006);
• ACIT v Infosys Technologies Ltd. (In ITA No.653/Bang/ 2006
- AY 2002-03 dt.17.10.2007); & • ACIT v Infosys Technologies Ltd. (In ITA No.635/Bang/ 2006
- AY 2001-02 dt.2.11.2007) 6.6 The relevant finding of the Tribunal in the case of Infosys Technologies Ltd. V JCIT (In ITA No.1022/Bang/ 2003 - AY 1998-99 dt.7.4.2006) reads as follows:-
"We have carefully considered the relevant facts, arguments advanced and the decisions cited. In respect of sales effected during the year, the assessee collects entire sale proceeds. Such sale proceeds are part of income charged to tax. The assessee is also required to render post sales customer services in the nature of claims within the warranty period. Thus, though such Page 12 of 21 12 ITA No.1140/Bang/2009 warranty claims may or may not arise, the assessee is under obligation to fulfill such claim, if claim is made. The provision is made at the rate of 2% of sale price. Though no precise base is indicated by the assessee, yet it can be considered to be reasonable having regard to the claim made in the part. The provision is made on "matching principle" i.e. matching cost with revenue. Such matching principle has been recognized in the case of Taparia Tools Ltd. v JCIT (260 ITR 102). Thus, the provision represents a liability in prasenti though discharged at a later date. In following cases, it has been held that the provision for warranty liability or provision for post sales customer support is not a contingent liability but an accrued liability and hence allowable:-
• Inland Revenue v Mitsuibush Motors, New Zealand 222 ITR 697) • Singhal & Co. v ITAT (1 ITD 477) (Chd.) • Wanson (India) Ltd. v ITO (5 ITD 102) (Pune) • Majestic Auto v ITO (47 ITD 1) • Voltas Ltd. v DCIT (64 ITD 232) (Mum.) • Jaybee Industries v DCIT (1998) (61 TTJ 403) • CIT v Brema Mfrs. (P) Ltd. (2003) 130 Taxman 400 • Wipro GE Medical Systems (2003) (81 TTJ 457) (Bang.) • Hamilton Research & Technology v ITO (88 TTJ 891) Later on Hon'ble Kerala High Court in the case of CIT v Indian Transformers Ltd. (270 ITR 259) and Hon'ble Delhi High Court in the case of CIT v Vinitec Corporation Pvt. Ltd. (278 ITR 337) held that provision made for the warranty liability was an ascertained liability and that it could not be treated as a contingent liability.
In view of the above, we hold that the liability cannot be considered as contingent liability as held in the case by ITAT, Pune. Since the liability is a accrued liability and the estimate is on sound accounting principle, the liability is allowable. The disallowance of Rs.46,77,452/- is deleted".Page 13 of 21 13 ITA No.1140/Bang/2009
6.7 The concept of 'provision' is integral to the principle of prudence. The term 'provision' is defined in paragraph 7(1)(a) of Part III of Schedule VI to the Companies Act to mean "any amount written off or retained by way of providing for depreciation, renewals or diminution in the value of assets or retained by way of providing for any known liability of which the amount cannot be determined with substantial accuracy".
6.8 The Hon'ble Supreme Court in the case of Rotork Control India (P) Ltd. v CIT (314 ITR 62) held "A provision is a liability which can be measured only by using a substantial degree of estimation. A provision is recognized when: (a) an enterprise has a present obligation as a result of a past event; (b) it is probable that an outflow of resources will be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the obligation. If these conditions are not met, no provision can be recognized". 6.9 Therefore, the estimation is implicit in the concept of provision and if the estimation is on reliable basis, it is to be accepted. In the case of Rotork Controls India (P) Ltd. v CIT 314 ITR 62, it was held by the Hon'ble Supreme Court that provision for warranty at the rate of 2% of turnover based on past experience was found to be acceptable.
6.10 In the light of the above reasoning, ground no.4.1 is allowed.
7. Ground No.5.1 - Reduction of telecommunication charges from the total turnover while calculating deduction u/s 10A of the Act. The assessee, while computing deduction u/s 10A of the Act had reduced telecommunication charges of Rs.10,37,42,694/- from both export Page 14 of 21 14 ITA No.1140/Bang/2009 turnover as well as total turnover. The A.O. recomputed the deduction u/s 10A of the Act by reducing from the export turnover the following items of expenditure:-
Particulars Rs.
Travel expenses 41,39,49,711
Professional charges 2,42,98,265
Data Communication charges 10,37,42,694
Employee related expenses 9,97,34,56,911
Total 10,51,54,47,581
According to the A.O., as per the definition of export turnover contained in clause (iv) of Explanation 2 to section 10A of the Act, the telecommunication charges (i.e. data communication charges) being attributable to the delivery of computer software outside India and other expenses in foreign exchange incurred for providing technical services outside India are required to be reduced from the export turnover.
7.1 On further appeal, the CIT(A) followed his order in the case of M/s Jaipuria Silk Mills (P) Ltd. in ITA No.1112/Bang/2009 dated 12.4.2010 and affirmed the computation made by the A.O. for the purpose of deduction u/s 10A of the Act.
7.2 We have heard the rival submission and perused the material on record. The decision relied on by the CIT(A) has been reversed by the Tribunal by its order dated 12.4.2010, in ITA No.1112/Bang/2009. No contrary decision has been brought to our notice. The relevant finding of the Tribunal in M/s Jaipuria Silk Mills (P) Ltd. is reproduced below:- Page 15 of 21 15 ITA No.1140/Bang/2009
"8. We have heard the rival submission and perused the material placed on record. The issue in question stands covered directly in favour of the assessee by the order of the Tribunal in assessee's own case for the asst. year 2005-06 (ITA No.406/Bang/2008 dated 10.7.2009), which in turn, followed the decision of the Special Bench cited supra. The relevant portion of the Tribunal's order in assessee's own case cited supra reads as follows:-
"We have heard the rival contentions and perused the material available on record. On our careful perusal of the facts and circumstances of the assessee's case, our considered opinion is that now the issue stands settled by the Special Bench decision of the ITAT, Chennai in the case of ITO v Sak Soft Ltd. reported in 313 ITR (AT) 353 dated 6.3.09, therefore, does not require any further deliberation. The issue stands covered as also held by the learned CIT(A) which does not call for any further interference".
9. The Special Bench of Tribunal in the case of ITO v Sak Soft Ltd. reported in 313 ITR (AT) 353 was considering an identical situation wherein it was held as follows:-
"The common thread running through sections 80HHC, 80HHE and 80HHF is that they are all provisions granting relief to the assessees in respect of profits derived from export. The difference between Chapter III in which section 10B falls, and Chapter VI-A in which these sections fall, is that while the former excludes the income in question totally from the purview of total Page 16 of 21 16 ITA No.1140/Bang/2009 income and gives total exemption from tax, the latter gives deduction of a part of the profits and gains of the concerned business from the gross total income. Both, however, are chapters which give relief to assessees from taxation subject to the conditions being fulfilled and in that sense they are of the same genre. The object of these sections is to encourage the earning of foreign exchange and provide incentive to promote exports. If some of the sections such as sections 80HHE and 80HHF provide for a formula for calculating the deduction which is identical with the formula prescribed by section 10B, it would be incongruous to interpret section 10B in a manner different from those two sections merely because there is no definition of "total turnover" in that section. "Export turnover" as defined in these sections excludes freight, telecom charges or insurance attributable to the delivery of the computer software outside India or expenses, if any, incurred in foreign exchange in providing technical services outside India. Thus statutorily parity is maintained between export turnover and total turnover in these sections. There is no reason why such parity cannot be maintained between export turnover and total turnover in section 10B just because "total turnover"
has not been defined in that section".
10. The first appellate authority has attempted to distinguish the cases cited on the basis that the word "total turnover" or "gross receipt" as it appears in section 44AB of the I T Act, 1961, based on ICAI guidance note includes all receipts including reimbursement of expenses. The context in which the Page 17 of 21 17 ITA No.1140/Bang/2009 words "total turnover" and "gross receipts" appear in section 44AB of the I T Act, 1961 is totally different to that of this case. There the word 'total turnover' is used to bring in ambit of tax audit all the transactions of sales and services. The definition is reproduced herein below:-
"The aggregate amount for which sales are effected or services rendered by an enterprise. The term 'gross turnover' and 'net turnover' (or 'gross sales' and 'net sales') are sometimes used to distinguish the sales aggregate before and after deduction of returns and trade discounts".
The Word 'total turnover' is not defined u/s 44AB of the I T Act, 1961. Hence, this definition is being considered as guiding definition to determine turnover for tax audit. The first appellate authority has adopted the meaning of words stated in section 44AB, which is wholly unnecessary in the instant case and has concluded that turnover and gross receipts are synonym and can be used interchangeably. This line of analysis cannot be applied in this case because gross receipt is used for services rendered by business enterprise or for professional income and word 'turnover' for sales effected or for business income. The assessee's business is wholly of export of manufactured silk fabric and hence word 'gross receipt' cannot be applied to export turnover here.
11. For the above said reasons, we reverse the order of the authorities below and direct the Assessing Officer to exclude from the export turnover as well as from the total turnover a sum of Rs.96,39,523/- and Rs.2,43,763/- being freight and insurance expenses respectively, while calculating deduction u/s 10B of the Act".
Page 18 of 21 18 ITA No.1140/Bang/20097.3 In the light of the above, we hold this ground in favour of the assessee. Therefore, ground no.5.1 is allowed.
8. Ground No.6.1 to 6.3 - Deduction u/s 80HHE of the Act.
Brief facts in relation to the above grounds are as follows:-
The assessee, while claiming deduction u/s 80HHE, considered the 'total turnover' of only those units, which were eligible for deduction u/s 80HHE. The A.O. completed the assessment and adopted the entire turnover as per the P&L account in allowing deduction u/s 80HHE.
8.1 The assessee carried the matter in appeal before the first appellate authority.
8.2 It was contended by the assessee that the AO has erred in adopting the total turnover of the company as a whole in applying the formula u/s 80HHE, further submitting that once the components of profits or export turnover and total turnover have been considered for computing the deduction u/s 10A the same cannot again form part of the formula for computing the deduction u/s 80HHE. It was also submitted that assuming without admitting that the total turnover of the assessee as a whole is to be considered for the purposes of section 80HHE by the same logic it should be the entire profits of the assessee as a whole as well as the export turnover of the assessee as a whole that should be taken into account in applying the formula u/s 80HHE, further contending that picking and choosing or modifying only one of the limbs of the formula and not maintaining consistency in understanding the various Page 19 of 21 19 ITA No.1140/Bang/2009 terms of the formula would be contrary to law and to the principles governing deduction u/s 80HHE.
8.3 The first appellate authority at para (e) at page 45 of his impugned order decided the matter against the assessee. He followed his order in the case of M/s Jaipuria Silk Mills (P) Ltd.
8.4 We have heard the rival submissions and perused the material on record. The above issue has been decided in favour of the assessee in the following orders of the Tribunal:-
• Wipro Ltd. v ITO 96 TTJ 211, ITAT,Bang.
• ACIT v Infosys Technologies Ltd. (In ITA Nos.653 & 969/ Bang/2006 - AY 2002-03 and 2003-04 dated 17.10.2007. • ACIT v Infosys Technologies Ltd. (In ITA No.635 /Bang/2006 AY 2001-02 dt.2.11.2007) The relevant finding of the Tribunal in the case of Wipro Ltd. reads as follows:-
"What essentially section 80HHE is dealing with is with reference to the turnover of computer software. The total turnover for the purpose of section 80HHE can only mean the total turnover of the computer software both in India and outside India. Under the scheme of the said section, it is not correct to include any other turnover not connected with the computer software business. We are, therefore, of the opinion that the denominator adopted by the department is wrong and is not in accordance with the scheme of deduction u/s 80HHE of the Act. If we approve the calculation of the department, the very object of intending and giving deduction u/s 80HHE is likely to be defeated if the assessee is having other turnover not connected with the computer software".Page 20 of 21 20 ITA No.1140/Bang/2009
8.5 In the light of the above, we decide the ground nos.6.1 to 6.3 in favour of assessee.
9. Ground No.7 - levy of surcharge before granting relief under Double Taxation In the return of income, the assessee first claimed double taxation relief and thereafter, computed surcharge on the amount of tax remaining after claiming such relief. However, in the assessment completed, the A.O. first computed surcharge and thereafter allowed double taxation relief.
9.1 On further appeal, the CIT(A), following the Tribunal order in assessee's own case in ITA No.140/Bang/2001 & C.O.No.25/Bang/2001 dated 5th July, 2005 decided the matter against the assessee. 9.2 We have heard the rival submission and perused the material on record. The learned counsel for the assessee has fairly admitted that the above issue is squarely covered by the order of the Tribunal referred supra. The relevant finding of the Tribunal is extracted at para 11.3 of the CIT(A)'s order and hence, the same is not reiterated here. Therefore, this ground is dismissed.
10. In the result, the appeal filed by the assessee is partly allowed as indicated above.
The order pronounced on Friday, the 21st day of January, 2011 at Bangalore.
Sd/- Sd/-
(A MOHAN ALANKAMONY) (GEORGE GEORGE K)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Page 21 of 21 21 ITA No.1140/Bang/2009
Copy to :-
1. The Assessee
2. The Revenue
3. The CIT(A) concerned.
4. The CIT, concerned.
5. The DR
6. GF
By Order
MSP/19/1/ Assistant Registrar, ITAT,Bangalore.