Income Tax Appellate Tribunal - Chennai
Scientific Publishing Services Pvt ... vs Department Of Income Tax on 21 March, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
'C' BENCH, CHENNAI
BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER
AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER
ITA No.1023/Mds/2011
(Assessment Year: 2006-07)
The Assistant Commissioner of M/s. Scientific Publishing Services
Income Tax, Com.Circle VI(1), Pvt. Ltd.,
Aayakar Bhavan, New Block, Vs. No.6 & 7, V Street,
7th floor, 121, M.G. Road, Dr.Radhakrishnan Salai, Mylapore,
Nungambakkam, Chennai-600 004.
Chennai-600 034. PAN:AAACS6707R
(Appellant) (Respondent)
Appellant by : Dr. Yogesh Kamat, JCIT
Respondent by : Mr. R.Vijayaraghavan, Advocate
Date of Hearing : 21st March, 2012
Date of Pronouncement : 21st March, 2012
ORDER
PER VIKAS AWASTHY, JUDICIAL MEMBER:
The present appeal has been filed by the department impugning order dated 22nd March, 2011 passed by CIT(A).
2. The brief facts of the case are that the assessee is a company engaged in the business of providing typesetting and prepress services and solution provider for the publishing industry. The assessee filed its return for the assessment year 2006-07 declaring total income of ` 1,41,223/-. The assessee in its return declared business income of ` 2 ITA No.1023/Mds/2011 59,65,07,993/- and claimed entire income as deduction under section 10B of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). The case of the assessee was taken up for scrutiny under CASS and notice under section 143(2) was issued on 8.10.2007. The case of the assessee was also referred to the Transfer Pricing Officer under section 92CA of the Act for computation of Arms Length Price in relation to International transactions.
3. The Assessing Officer completed the assessment under section 143(3) and vide order dated 18.12.2009 assessed total of the assessee as ` 17,60,890/- by making the following adjustments/disallowances:-
1. Reducing the internet charges amounting to `.
26,04,839/- from the export turnover while computing the deduction u/s.10B of the Act.
2. Disallowance of expenditure incurred for earning the dividend income u/s.14A amounting to `1,26,379/-.
4. Aggrieved against the assessment order, the assessee preferred an appeal before the CIT(A) impugning the adjustments/disallowances made by the Assessing Officer. 3 ITA No.1023/Mds/2011
5. The learned CIT(A) after taking into consideration the grounds of appeal, written submissions, documents furnished and the case laws cited by the parties, remitted the issue no.1 to the Assessing Officer to recompute the deduction under section 10B by excluding the amount of ` 26,04,839/- as telecommunication expenditure from the export turnover and total turnover as well. The CIT(A) while remitting the issue to the Assessing Officer relied upon the decision of the Special Bench of the ITAT., Chennai in the case of SAK Soft Ltd. reported as 20 DTR 514. As regards issue no.2 relating to disallowance of expenditure under section 14A of the Act, the learned CIT(A) partly allowed the appeal of the assessee by restricting the disallowance made by the Assessing Officer under section 14A to 2% of the exempted income
6. Learned D.R. submitted that the CIT(A) has erred in directing the Assessing Officer to recompute the deduction under section 10B by excluding telecommunication expenditure both from the export turnover and total turnover. He further submitted that the decision of the Special bench of the Tribunal in the case of M/s. Sak Soft Ltd. has not become 4 ITA No.1023/Mds/2011 final and the department has preferred an appeal under section 260A. He also impugned the finding of the learned CIT(A) in restricting the disallowance made by the Assessing Officer under section 14A to 2% of the exempted income.
7. On the other hand, Shri R.Vijayaraghavan, Advocate appearing on behalf of the assessee submitted that learned CIT(A) has passed well reasoned and detailed order. He submitted that as far as the issue regarding exclusion of telecommunication charges from export turnover while computing deduction under section 10B is concerned, there is no infirmity in the order of the learned CIT(A) in remitting back the issue to the Assessing Officer to recompute the deduction under section 10B of the Act by excluding the amount of ` 26,04,839/- as telecommunication expenditure from export turnover and total turnover. Learned counsel for the assessee further submitted that learned CIT(A) after relying upon the decision of the Hon'ble Bombay High Court in the case of Godrej & Boyce Manufacturing Co.Ltd., Vs. DCIT., has held that Rule 8D is not applicable for the assessment 5 ITA No.1023/Mds/2011 year 2006-07 as Rule 8D was notified on 24.03.2008 and can be applied to the prospective assessment year.
8. We have heard the submissions of the parties, perused the documents on record, the orders passed by the lower authorities and the case laws referred to. We are of the considered opinion that the issue no.1 relating to exclusion of telecommunication charges from export turnover has been rightly remitted back to the Assessing Officer by the first appellate authority to recompute the deduction under section 10B of the Act. The learned CIT(A) has remitted the matter back to the Assessing Officer after relying upon the decision of the Special Bench of the Tribunal in the case of M/s. SAK Soft Ltd.(supra) wherein it has been specifically held 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 6 ITA No.1023/Mds/2011 from the total turnover, which are the numerator and the denominator respectively in the formula".
9. As regards issue no.2 relating to expenditure under section 14A is concerned, we deem it appropriate to remit this issue back to the Assessing Officer to recompute the amount after taking all the relevant factors into consideration and the well settled law. Before parting with the order, we would like to clarify that the provisions of Rule 8D will not be applicable in the assessment year under reference in view of the law laid down by the Hon'ble Bombay High Court in the case of Godrej & Boyce Manufacturing Co.Ltd., reported as 328 ITR
81.
10. In the result, the appeal of the Revenue is partly allowed for statistical purposes.
Order pronounced in the open court on 21st March, 2012.
Sd/- Sd/-
(Abraham P.George) (Vikas Awasthy)
Accountant Member Judicial Member
Chennai,
Dated the 21st March, 2012.
somu
7 ITA No.1023/Mds/2011
Copy to: (1) Appellant (2) Respondent (3) CIT
(4) CIT(A) (5) D.R. (6) G.F.