Income Tax Appellate Tribunal - Hyderabad
Xilinx India Technology Services P. ... vs Department Of Income Tax on 15 June, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "A", HYDERABAD
BEFORE SHRI J. SUDHAKARA REDDY, ACCOUNTANT MEMBER
AND
SMT. P. MADHAVI DEVI, JUDICIAL MEMBER
I.T.A. No. 288/HYD/2016
Assessment Year: 2009-10
The Deputy Commissioner M/s. Xilinx India Technology
of Income Tax, Vs Services Pvt. Ltd.,
Circle-17(2), HYDERABAD
HYDERABAD [PAN: AAACX0450C]
(Appellant) (Respondent)
For Revenue : Shri M. Sitaram, DR
For Assessee : Shri Sistla Venkateswarlu &
Shri Surya Kiran Motamarri, ARs
Date of Hearing : 13-06-2016
Date of Pronouncement : 15-06-2016
ORDER
PER J. SUDHAKARA REDDY, A.M. :
This is an appeal filed by the assessee directed against the order of the Commissioner of Income Tax (Appeals)-5, Hyderabad, dated 31-12-2015 for the AY. 2009-10.
2. After hearing the rival contentions, we find that similar issue has come up before the Hyderabad Bench of the Tribunal in assessee's own case in ITA No. 1813/Hyd/2012 for the AY. 2008- 09 and that the issues have been adjudicated in favour of the assessee. We dispose-off the case ground-wise.
I.T.A. No. 288/Hyd/2016 :- 2 -: M/s. Xilinx India Technology Services Pvt. Ltd., "Ground No.1: The Ld. CIT(A) erred in directing the Assessing Officer to reduce the communication expenses of Rs. 22,17,592/- both from export turn over as well as total turnover though such an adjustment is not contemplated under section 10A of the Act".
The Ld. CIT(A) at Page No. 7 para 6.3 and 6.4 held as follows:
"6.3 Since the statute clearly defines the Export Turnover for the purpose of exemption u/s. 10A, it has to be followed strictly. The communication expenses amounting to Rs. 22,17,592/- which is debited to the Profit & Loss A/ c is to be reduced from the Export Turnover. In this respect, the action of the Assessing Officer is justified. Hence, Ground Nos. 3.1 and 3.2 are dismissed.
6.4 At the same time, the Hon'ble Mumbai High Court in the case of Gem Plus Jewellery India Ltd. (supra), held that since the export turnover forms a part of the total turnover, if an item is excluded from the export turnover, the same should also be reduced from the total turnover to maintain parity between numerator and denominator while calculating deduction u/s 10A of the Act. In the case of Sak Soft Ltd. 313 ITR 353 (AT), the assessee was engaged in the business of exporting computer software and claimed deduction u/s. 10B of the Act. In completing the assessment u/s 143(3) of the Act, the AO reduced the expenditure incurred in foreign exchange in providing the technical services outside India, from the export turnover without corresponding reduction from total turnover, thereby reducing the deduction claimed by the assessment u/s 10B of the Act. In light of the above facts, the Special Bench held as under:-
"For the above reasons, we hold that for the purpose of applying the formula under sub-section (4) of section 10B, the freight, telecom charges or insurance attributable to the delivery of articles or things or computer software outside India or the expenses, if any, incurred in foreign exchange in providing the technical services outside India are to be excluded both from the export turnover and from the total turnover, which are the numerator and the denominator respectively in the formula. The appeals filed by the department are thus dismissed".
In the light of the above reasoning and respectfully following the decision of the Hon'ble Karnataka High Court in the case of CIT v Tata Elxsi Ltd. and others (2011) 247 CTR 334 (Karnataka), I am also directing the AO to exclude the above mentioned expenses both from the export turnover as well as from the total turnover while calculating deduction u/s. 10A of the Act. While drawing this conclusion I rely on following judgments.
I.T.A. No. 288/Hyd/2016 :- 3 -: M/s. Xilinx India Technology Services Pvt. Ltd.,
(i) ITAT, Hyderabad in the case of Income Tax Officer Vs. D.E. Block India Software (P) Ltd. in ITA No.s 983 & 984/Hyd/2006 dated 31.01.2007
(ii) ITAT, Hyderabad in the case of ITO Vs. Virtusa (India) Limited in ITA No.757 /H/06 dated 29.02.2008
(iii) Delhi Tribunal in the case of DCIT Vs. Binary Semantics Ltd. (109 TTJ
556)
(iv) Hyderabad Tribunal IN the case of ACIT Vs. Alliance IT Consulting India (P) Ltd. in ITA No.581/Hyd/08
(v) Hyderabad Tribunal in the case of DCIT Vs. Siana Informatics Pvt. Ltd. in ITA No.938/Hyd/08.
Hence, the Assessing Officer is directed to reduce the communication expenses, both from the Export Turnover and the Total Turnover to determine the quantum of exemption u/s. 10A of the LT. Act. Hence, Ground No. 3.3 is allowed.
We find no infirmity in this order of the Ld. CIT(A).
"Ground No. 2: The Ld. CIT(A) erred in holding that the addition made on account of disallowance of statutory deductions of Rs. 33,46,347/- is eligible for deduction u/s. 10A of the Act".
The Ld. CIT(A) at para 6.7 held as follows:
"6.7 The identical issue has come up for appeal before the ITAT in assessee's own case for assessment year 2008-09 (ITA No.1813/Hyd/2012 Assessment year 2008-09 Xilinx India Technology Services Pvt. Ltd Vs DCIT, Cir-3(3), in which it is held that:
"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 1OA, 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 1OA 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 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/20l0 dated 31-3-2011.
I.T.A. No. 288/Hyd/2016 :- 4 -: M/s. Xilinx India Technology Services Pvt. Ltd., 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 1OA of the Act. Accordingly, we direct the Assessing Officer to re-compute the deduction u/s 1OA 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".
Respectfully, following the decision of ITAT and judgments in the case of CIT Vs. Gem Plus Jewellery India Ltd. (330 ITR 175) (MUM), Progress Software Development (P) Ltd. vs. ITO ITA No.397/Hyd/2010 for A.Y. 2006-07, Virinchi Technologies Ltd. ITA No.209/Hyd/2010 for A.Y. 2006-07; I allow the grounds raised by the assessee on this issue. Hence, Ground No. 2 is allowed and the AO is directed to re-compute the deduction u/s. 10A".
3. We find no infirmity in this order of the Ld. CIT(A). The Hon'ble jurisdictional High Court in ITTA No. 531/2014 order dt. 05-08-2014 had upheld the order of the ITAT. Respectfully following the same, we uphold the order of the CIT(A) and dismiss and appeal of the Revenue.
4. In the result, appeal of the Revenue is dismissed.
Order pronounced in the open Court on 15th June, 2016 Sd/- Sd/-
(P. MADHAVI DEVI) (J. SUDHAKARA REDDY)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, Dated 15th June, 2016
TNMM
I.T.A. No. 288/Hyd/2016
:- 5 -: M/s. Xilinx India Technology Services Pvt. Ltd., Copy to :
1. The Dy. Commissioner of Income Tax, Circle-17(2), Hyderabad.
2. M/s. Xilinx India Technology Services Pvt. Ltd., Unit No. 04-01, 4th Floor, Block-I, Cyber Pearl, Hitechcity, Madhapur, Hyderabad.
3. Commissioner of Income Tax(Appeals)-5, Hyderabad.
4. The Pr. Commissioner of Income Tax-5, Hyderabad.
5. D.R. ITAT, Hyderabad.
6. Guard File.