Income Tax Appellate Tribunal - Chennai
Htc Global Services (India) Pvt Ltd., ... vs Dcit Corporate Circle 2(2), Chennai on 25 February, 2018
आयकर अपील य अ धकरण, 'ए' यायपीठ, चे नई।
IN THE INCOME TAX APPELLATE TRIBUNAL
'A' BENCH: CHENNAI
ी एन.आर.एस. गणेशन, या यक सद य एवं ी इंटूर रामा राव, लेखा सद य के सम$
BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND
SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER
आयकर अपील सं./ITA No.1293/Chny/2018
नधा%रण वष% /Assessment Year: 2011-12
M/s. HTC Global Services (India) Pvt. Vs. Dy. Commissioner of Income
Ltd., Tax,
Unit 25, SDF II, Phase-II, Corporate Circle-2(2),
MEPZ, Tambaram, Chennai.
Chennai - 600 045.
[PAN: AAACH 9921J]
(अपीलाथ(/Appellant) ()*यथ(/Respondent)
अपीलाथ( क+ ओर से/ Appellant by : Shri K.M. Mohandass, CA
)*यथ( क+ ओर से /Respondent by : Shri ARV Sreenivasan, JCIT
सन
ु वाई क+ तार ख/Date of Hearing : 19.02.2019
घोषणा क+ तार ख /Date of pronouncement : 25.02.2019
आदे श / O R D E R
PER INTURI RAMA RAO, ACCOUNTANT MEMBER:
This is an appeal filed by the Assessee directed against the Order of the Learned Commissioner of Income Tax (Appeals)-13, Chennai (hereinafter called as 'CIT(A)') dated 01.12.2017 for the Assessment Year (AY) 2011-12.
2. The Appellant raised the following grounds of appeal:
"1.0 The order of the Learned Commissioner of Income tax (Appeals) -- 13, Chennai, upholding the disallowance made by the Assessing Officer under Section 14A and confirming the deduction made under Section lOB of the ITA No.1293/Chny/2018 :- 2 -:
Act at Rs.25,99,86,847/- as against the amount claimed by the appellant at Rs.26,52,90,688/-, is contrary to the law and facts of the case.
2.1 The Learned Commissioner of Income-tax (Appeals) -- 13, erred in confirming the action of the Assessing Officer in invoking the provisions of Section 1 4A of the Act read with Rule 8D of the Income-tax Rules, 1962 for computing the disallowance of Indirect expenditure at 0.50% of the average value of total investments under Rule 8D(2)(iii) even after the appellant has disallowed a sum of Rs.8,36,388/- under the provisions of Section 14A read with rule 8D in respect of investments earning exempt Income.
2.2 The Learned Commissioner of Income tax (Appeals) -- 13, erred in not following the decision of the Hon 'ble Kolkata Bench of ITA T in the case of REI Agro Ltd., vs. DCIT in ITA No. 1331/Kol/2011 and the Hon 'ble Special Bench of Delhi ITAT in the case of ACIT vs. Vireet Investment Pvt.
Ltd. 12017] 82 taxmann.com 415 (ITAT-DeL)(SB) (para 11.17) wherein it was held that for the purpose of computing of disallowance under Section 8D(2)(iii), the investments, income from which does not form part of total income during the year should be considered instead of aggregate of all the investments.
2.3 The Learned Commissioner of Income tax (Appeals) -- 13, erred in not following the jurisdictional bench of hAT in the case of M/s.EIH Associated Hotels Limited in ITA No.1503 of 2012 wherein it was held that the disallowance under section 14A is to be deleted in the case of investments made in the subsidiary company on account of business expediency and for the purpose of holding controlling interest but not for the purposes of earning any capital gains or dividend income. 3.1 It is submitted that the Learned Commissioner of Income Tax (Appeals)-13, Chennai erred in confirming the exclusion of the overseas travel expenses ofRs. 1,04,43,186/-, communication expenses of Rs.61,40,965/- and Exchange fluctuation loss of Rs. 40,05,907/- from export turnover by the Assessing Officer for computing the deduction under Section lOB of the Act, as the amounts are incurred by the Appellant in the regular course of its business and not directly attributable to the delivery of computer software outside India.
3.2 Even assuming but not accepting that overseas travel expenses, communication expenses and exchange fluctuation loss fall within the scope of clause (iii) of Explanation (2) to sub-section 9A of 1 OB of the Act, but for computing the deduction under Section lOB, the Commissioner of income Tax (Appeals) 13, Chennai, erred in confirming the action of the Assessing Officer in excluding the overseas travel expenses, communication expenses and exchange fluctuation loss from export turnover in the numerator field alone instead of both from export turnover and the total turnover which are in the numerator and denominator fields respectively.
3.3 The Commissioner of Income Tax (Appeals) -- 13, Chennai erred in holding that the facts in the case of ITO vs. Saksoft Ltd. reported in [2009] 313 ITR (AT) 353 are distinguishable to the facts of the appellant, as the Jurisdictional Special Bench in the said case has expressly held that any expenditure 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.
ITA No.1293/Chny/2018
:- 3 -:
3.4 The Commissioner of Income-tax (Appeals) -- 13, Chennai erred in not following the decision rendered by the Hon'ble ITAT Chennai Bench in the appellant's own case for the Asst. Years 2008-09 to 2010-11 in ITA Nos.
58/Mds/2014, 2021/Mds/2014 and l703/Mds/201 5, following the decision of Special Bench in the case of Saksoft supra."
3. The brief facts of the case are as under:
The appellant is a company incorporated under the provisions of the Companies Act, 1956, it is engaged in the business of software development. The return of income for the AY 2011-12 was filed on 21.11.2011 at a total income of Rs. 2,14,87,279/-. Against the said return of income, the assessment was completed by the Dy. CIT, Corporate Circle-2(2), Chennai vide order dated 02.03.2015. While doing so, the Assessing Officer (AO) had reduced the foreign exchange fluctuation loss from the export turnover for the purpose of calculating deduction u/s.
10AA of the Act without reducing the same from total turnover also. On appeal before ld. CIT(A) the same came to be confirmed.
4. Being aggrieved, the appellant is in appeal before us in the present appeal.
5. The ld. Authorized Representative stated that when a particular item has been reduced from the export turnover the same should also be reduced from the total turnover for the purpose of calculating the deduction u/s. 10AA of the Act. In this connection, he had relied upon the CBDT Circular No.4 of 2018 dated 18.08.2018 and the decision of ITA No.1293/Chny/2018 :- 4 -:
Hon'ble Supreme Court in the case of CIT v. M/s. HCL Technologies Ltd. [2013] 93 taxmann.com 33 (SC). On the other hand, the ld. Sr. Departmental Representative placed reliance on the orders of lower authorities.
6. We heard the rival submissions and perused the material on record. The controversy In the present appeal is settled by the Hon'ble Supreme Court in the case of M/s. HCL Technologies Ltd. (supra), wherein the Hon'ble Supreme Court had confirmed the decision of Hon'ble High Court of Karnataka in the case of CIT v. Tata Elxsi Ltd. [2012] 204 Taxman 321 (Kar.), wherein it was held that a item of expenditure which are excluded from the export turnover also required to the reduced from the total turnover while working out the deduction admissible u/s. 10 of the Act. In the light of the above settled law, the appeal filed by the assessee is allowed.
7. In the result, the appeal filed by the assessee is allowed.
Order pronounced on the 25th day of February, 2019 in Chennai.
Sd/- Sd/-
(एन.आर.एस. गणेशन) (इंटूर रामा राव)
(N.R.S. GANESAN) (INTURI RAMA RAO)
या यक सद य/JUDICIAL MEMBER लेखा सद य/ACCOUNTANT MEMBER
चे नई/Chennai,
1दनांक/Dated: 25th February, 2019.
EDN, Sr. P.S
ITA No.1293/Chny/2018
:- 5 -:
आदे श क+ ) त2ल3प अ4े3षत/Copy to:
1. अपीलाथ(/Appellant 4. आयकर आयु5त/CIT
2. )*यथ(/Respondent 5. 3वभागीय ) त न ध/DR
3. आयकर आय5
ु त (अपील)/CIT(A) 6. गाड% फाईल/GF