Income Tax Appellate Tribunal - Bangalore
Iteamic Private Limited , Bangalore vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
BANGALORE BENCH 'B'
BEFORE SMT. P.MADHAVI DEVI, JUDICIAL MEMBER
and
SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER
ITA No.882(Bang)/2010
(Assessment year: 2006-07)
M/s.Iteamic Pvt.Ltd.
C/o CIBER sites India Pvt. Ltd.
5th floor, Tower D, IBC Knowledge Park
Bannerghatta Road,
Bangalore. ... Appellant
Vs.
Asst. Commissioner of Income-tax,
Circle 11(4),
Bangalore. ... Respondent
Appellant by: Shri Dinesh Daga.
Respondent by : Smt. Swati S. Patel.
O R D E R
Per Smt. P.MADHAVI DEVI, JM:
This is an assessee's appeal directed against the order of the Commissioner of Income-tax (Appeals)-I [CIT(A)], Bangalore, dated 9-4-2010 for the assessment year 2006-07.
2. The assessee has raised the following grounds of appeal:
"1. On the facts and circumstances of the case, the learned CIT(A) erred in excluding telecommunication expenditure of Rs.76,556 which were not attributable to delivery of computer software outside India, from the export turnover.
ITA No.882(Bang)/2010 Page 2 of 5
2. On facts and circumstances of the case, the learned CIT(A) erred in concluding that the appellant is engaged in the business of providing technical services and thereby excluding expenditure incurred in foreign currency of Rs.33,925,057 from the export turnover.
3. Without prejudice to ground 1 and 2 above, having excluded the telecommunication expenses and the foreign currency expenditure from the 'export turnover' the learned CIT(A) erred in not excluding such expenditure from the 'total turnover' as well.
The learned CIT(A) erred in not applying the decision of the Chennai Bench of the Income-tax Appellate Tribunal in Sak Soft Ltd. (2009) 313 ITR
353)(SB) and decisions of the Bangalore bench of the Income-tax Appellate tribunal in the case of Mphasis Ltd (ITA No.884/Bang/2007) and Infosys Technologies Ltd. (ITA Nos.50, 793 to 795, 742 and 7432 to 734/Bang/2001) to the appellant's case.
4. The CIT(A) erred in not stating the reasons for his decisions, as required under section 250(6) of the Act and passing the order by merely citing his order in the case of M/s.Jaipuria Silk Mills (P) Ltd.
vide ITA No.101/ACIT-11(5)/A-1/08-09 dated 10 Sep 2009 (copy of which has not been made available to the appellant)
5. Without prejudice to the above grounds, after having held that the assessee was liable to tax in India, the CIT(A) erred in not providing double taxation relief of the taxes paid by the appellant in the United States of America.
6. The appellant therefore prays that the order passed by the CIT(A) under section 250 of the Act and the consequential effect thereof, including under section 234D of the Act is bad in law, and should be annulled.
7. The appellant submits that the above grounds are independent and without prejudice to one another.
ITA No.882(Bang)/2010 Page 3 of 5
3. Brief facts of the case are that the assessee is a 100% EOU providing software development and consultancy outside India. It filed its return of income on 30-11-2006 declaring an income of Rs.63,790/- after claiming deduction of Rs.2,58,30,024/- u/s 10B of the Income-tax Act, 1961 [hereinafter referred to as "the Act"]. The Assessing Officer [AO] reduced the on-site software development expenses incurred in foreign currency from the export turnover and also 20% of internet charges as relating to telecommunication charges.
4. Aggrieved by the same, the assessee preferred an appeal before the CIT(A) stating that internet charges do not relate to telecommunication charges attributable to the delivery of articles or things or computer software outside India and, therefore, they are not included in the export turnover and they cannot therefore be excluded from the export turnover. As regards the expenditure relating to on-site software development abroad, he submitted that the same are for on- site development of software and therefore are part of the export turnover and cannot be excluded from the same. The CIT(A), however, confirmed the order of the AO and the assessee is in second appeal before us.
5. Shri Dinesh Data, the learned counsel for the assessee, while re-iterating the submissions made before the authorities below submitted an alternative plea that if the above expenditure is reduced from the export turnover the same ITA No.882(Bang)/2010 Page 4 of 5 proposition, he placed reliance upon the decision of the Special Bench (Chennai) of the Tribunal in the case of ITO vs. Sak Soft Ltd. (313 ITR (AT) 353).
Smt.Swati S.Patel, the learned Departmental Representative, on the other hand, supported the orders of the CIT(A).
6. Having heard both the parties and have considered the rival contentions, we find that internet charges are part of telecommunication charges which are attributable to the delivery of an article or thing or software outside India and therefore have to be necessarily reduced from the export turnover. As held by the Special Bench of the Tribunal in the case of Sak Soft Ltd. (cited supra), the same has also to be reduced from the total turnover for the purpose of arriving at the correct profits and gains of business. We, accordingly, allow the alternative plea of the assessee.
7. As regards the expenditure incurred by the assessee in foreign currency for provision of technical services at its branch outside India, we find that the AO as well as the CIT(A) have held that the assessee has provided technical services outside India and, therefore, the same has to be reduced from the export turnover. Except stating that this is for on-site development of software, the assessee has not been able to produce any evidence before us to rebut this finding of the authorities below. In view of the same, we uphold the order of the CIT(A) as far as exclusion from the export turnover is ITA No.882(Bang)/2010 Page 5 of 5 concerned but following the decision of the Special Bench of the Tribunal in the case of Sak Soft (supra), we direct that the same should also be reduced from the total turnover. In view of the same, ground No.2 is rejected and ground No.3 is allowed.
8. The ground no.4 being general in nature needs no adjudication and, therefore, is rejected.
9. The ground No.5 is also rejected as not pressed by the assessee.
10. In the result, the assessee's appeal is partly allowed. Order pronounced in the open court on 24th January, 2011.
Sd/- sd/-
(A. Mohan Alankamony) (Smt. P.Madhavi Devi)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Eks
Copy to :
1. Appellant
2. Respondent
3. CIT(A) concerned
4. CIT
5. DR, ITAT, Bangalore
6. Guard file
By Order
Assistant Registrar, ITAT, Bangalore