Karnataka High Court
Infosys Limited vs The Commissioner Of Income Tax on 19 March, 2012
Bench: N.Kumar, Ravi Malimath
IN THE HIGH COURT OF KARNATAKA AT BANGALQRVE-Ll'-..v
DATED THIS THE 19"' DAY OF MARCH 20.112'f'5.I;[f
PRESENT
THE HON'BLE MR.JusTICE NgKFLliVlAR_' I
AND'
THE HON'BLE MR.JUSTICE*RVAVVI MALIMATH 5
R.P No.14/2012 IN I'FA.fNOES.2972"/'Z0O5T._ 2973/2005
&2974g20_05
R.P.NO.15/2.0121IN_IjfA.NO.'3232"OF 2005
R.P.sNO.:75]'~2'€l_12'-Ifl_ITA§'NOI.:539 OF 2006
RP.NQ.:1'4%["l2'Qig_:_ 3
BETWEENI.' 7 '
Infosys Limited _ V _ . I' _
(formerly known aslnfosys Technologies Limited)
Plot i.\!os.4'4 & 974,'.-\.,_3"' 'Cross,
"E.leci:r.o'nii<;-5 City, Hosu'r"Road,
Bangalore': -561 229,
"IR.e"pre'serjte_d»Fbyitg Principal --CAG
MnP.--9rakash.._ " ...PETITIONER
V -- (By K';Vl3..KtjV'mar, Senior Counsel for M/s.King & Patridge,
Advocates)
The Commissioner of Income Tax
C.R.Bui|ding, Queens Road,
Bangalore -- 560 001.
~" v .M r' P.i"PT.a '
2. The Deputy/Joint Commissioner
of Income Tax (Assessment),
Special Range--6, C.R.Building,
Queens Road,
Bangalore -- 560 001. «.,R~EsPoi}iDEi\iiTsh
(By Sri E.Sanmathi Indrakumar, Advo'c.at'e)
*****,"«
This RP filed under"'Q_rderl'4'7' of Cl'--'"C,'"praying
for review the order'*--.da_ted :j_O4.11s].~2n'O:l,s1 passed in
ITA.Nos.2972, 2973 and 29:14'/2005". ~
RP.N .1 2
BETWEEN: 1 I
Infosys _
(formerly knowrijasp Infosys~.Technologies Limited)
Plot Nosj44 '-8: 97-)?-.,f'3s4"'* »Cro.ss','- '
Electronics City, Hos'u--r*Ro'a._d
Bangalore --"561,,229, "
Represented b"y..its 'Principal --CAG
I 4
...PETITIONER
A"x_V(By"Sri lf.:._P'..Ku:n'ia__r, Senior Counsel for M/s.King & Patridge,
Ad V.o-cates 2 " . V V
AND?
I. ~T.h__e Commissioner of Income Tax
,C.R_..Bui|ding, Queens Road,
Q Bangalore -- 560 001.
I 2-{The Joint Commissioner Of Income Tax (Assessment),
Special Range--6, C.R.Bui|ding,
Queens Road,
R'/,
.ANDfig*
Bangalore -- 560 001.
(By Sri E.Sanmathi Indrakumar, Advocate)
>l<*>l<*>l<
This RP filed under Order 47 vR4u|e~_j1..of"iCPC,j"'plrayi~3g»::_'A
for review the order dated O4.'1_1;?,_O11 _passe~d '=,i'rafl
ITA.N0.3232/2005.
RP.NQ.7§[2Q12:
BETWEEN:
Infosys Limited 2
(formerly known as Infosys'vTe'chnologie's ljnfiited)
Plot Nos.44 & 9,7a=«.._, '3'" C¥Z_ros,s,....' V "
Electronics City;.VHofsu._i-Road,' 3'
Bangalore -- ,
Represented by 'i'ts1'l;Rrin:ip~aV|"«----CAG
Mr.P.Prak'aslh';,}i( ...PETITIONER
(By Sri K_.P}K.umar,"Vsenior Counsel for M/s.King &
Patridge, Advolcates) . B
Th_e Comm.is'si_oner of Income Tax
' V' C-€|'1"t!'.:EV4!li'v.'.C:ll'ClSV.:*-I, C.R.Bui|ding,
'- Queens -Road,
b-a_ngaloreI=-- 560 001.
The "Assistant Commissioner Of Income Tax
Central Circ|e--I, C.R.Building,
_ ' "Queens Road,
Bangalore -- 560 001. ...RESPONDENTS
gay Sri E.Sanmathi Indrakumar, Advocate) >l<>l<>l<>l<>l< LX This RP filed under Order 47 Rule 1 of CPC.,~pfr_ay_in'gyVV"
for review the order dated 08.12.2011 pa.ssed--.f"i---n;"~~----.x'1- ITA.No.539/2006.
These RP's coming on for acin»1WiVssion"thi-SA Court made the fo||owing:--
ORDE3 These three reviews petitioyn4_s":Aa:p'e.'file round that there is an error aVp"pareyn'tg_o§n' of the record and therefore, it requiresito"be":revi.ewed;
2. The on the business of developnnent salleof software packages. The assesseels the Assessing Authority was that nofexpendi-tur-e was incurred towards rendering ""'t.echni_ca| ._serv.ices ou't's'i*de India. The data communication only expenditure incurred by them towards of software package. The expenditure of chores refers to travelling expenses of the staff and also their maintenance expenditure ..__"V"abr'oad. If the said expenditure is to be excluded from the "total turnover, it should also be excluded from export L/i turnover. The Assessing Authority though accept_ed.V_y"thle.V case of the assessee that the assessee is involved"i'n5.'og'nly-'.._._" . software exports nevertheless held__tha_t th.e"'e;<.'p_g'*.n'dVitVure incurred towards services to sell software is t'o._bre:"redu'ced*i;j from export turnover and total'tu--r_nover.. 'AggriievAe§c.'....l_3y the said order, the assessee pre_f:erred--.._v_an iappeal _to the Commissioner of The Appellate Commissioner heldvythat.-'itv:..is~A with the argument __sOjftw'are";technicians sent abroad site is not providing technical >co_nn.ecti-on with development or productionxof~softwa're.. unbelievable that activities such_gas" studying operating system of limited number understand the configurations and to which the software is to be created, V . or testin~.g:.an:d installation of the software at the client's apiece', and providing back up facilities during the initial p'ha'se: of work by themselves require stay and work of T "large number of employees for several months, at the work site necessitating huge fees as part of turnover and V also huge expenses. These services after supply software is also development of software supp|ie'd;V--.to4's'u.ij:- I- to the particular conditions of the c|i__en.t,_and _-wou'i'd_';valsoV'_b.e covered b the ex ression " rovidin 1ft'ecl'1ni"ca|'*serv'ices"*¥f for development of computer sovft-warellanid the % term "providing technical service_s:V":<A3»1:J_ts~ide I.nd'i:a:'?._'AanVrJ thus, the order of the Assesslifiwg confirmed.
Aggrieved by the 'same, an appeal to the Tribuna.l.§'...ThAe:';:Tri iicéféfu'ii'l appraisal of the material "tl1::égVVVVa'l.?;sessee company had only ma:rVl<et_ingVVVoffices India. The annual report clearly indficates that.VAthe"=company has only marketing _ officeVs_;j'C>'utside I'n~d'ia. The approvals from RBI and other re'g'u.|_a'toryK:auith.orities also indicate that the company had onl.y"-Tinarl{e'_tilVngV.:;'offices outside India. Looking at the I I _overal'l piaiture'; based on the facts of the case, it was held Vwhere a person is involved in computer programme 4'_pr__:'re.Vétio'n, he should be regarded as being engaged in the I jqdevelopment of computer software so as to fall within "8OHHE(1)(i). Such a person should not be held as l/ engaged in the business of rendering of technical services_ covered by 8OHHE(1)(ii). Therefore, they assessee was not involved in the business"'of----.::p~r,o'V'.idi--ng if technical services outside India in ccmnectrioni. witllif-st_he::Vax development of computer sicfityvarex.'-._ There:fo_re.,_:, directed that in computing export turnover and total turnvovser_rcfillevtiant'"for:t'he application of the formula in su.bfsectAionn.:3, 8OHHE, no exclusion be in foreign currency__other{t~h1a,n_ by the assessee. Therefore, by the assessee for all the years were4_'ail|o'wed';"..:' Aig-grieved by the said order, the revergiue preferredwlappeials before this Court. 'Iiflthese three appeals, this Court set aside the order pa,ssei;l7by the Tribunal on the ground that it is °'*~..«.,_V.,errone'ous. In coming to the said conclusion, this Court "«l:"rield""",_that though it is true that particulars have been furnished by the assessee regarding expenditure incurred in foreign currency during the relevant assessment years, V, the certificate is required to be given by the Cha'rtered-_ Accountant under Section 8OHHE(4) of the Rule 18 BBA(7) of the Income Ta.x.....R_u|es._VMAs:'_';per~ the certificate issued for the above said :asse'ssrnent years} clear that the income that i'§_'~:¢ceive-dfi frQFI'i.1$§$vp.Qrjt _}of computer software or its transrnfission_V_tto 'plancetgvvvoutside India is shown as Nil assn«oV:"figu_re?~:is:,i'.m'eai'it:lbofled against the said column andautndeiry.~-5l...|$jo.V3(gII,)_ providing technical ifilitcdfnfnection with the development software, the amount amount of eligible deduction under Section i8O'H'HVE'"is at after including the said _ expenses and therefore': the said certificate issued by the CV:havrtiere_d'i:tgAcco.untant of the assessee itself would show tha_t"-fort said assessment years, the amount was I _received V-.for'vp;roviding technical services outside India in Mu""'.""'connection: with the development of computer software '_'_r'~'an.d"':1ot in connection with the export of computer I --«'..:"sof'tware or its transmission to a place in India. The U Tribunal has failed to consider the said relevant documents l./ which would clearly show that the expenses incurred..._'IiIn_ foreign exchange was towards technical services3V__ren'd.ered¥-,.___" . outside India and not for development of softwa-rev ,o"uts'ide.._:4 TV India. The said certificate would is'-:.,how'athat'aon.lv"fo'rft_he::Va_ré assessment year 1997-98, thea--mount».incurred" i.n'..foVre.l3gnA exchange is shown towards --t»urnove.rIre|ating to transmission to a place amount has been shown towards pr.ov'ivd.ijng'itegchnficayliLfservices outside India in of software.
Therefore,'theV1".;§:ub'st'a*n'tialI of law about admissi:'b_i|it3,'-AAof',d.eiductio'n..__under Section 8OHHE was answered min~favour.:'o.f:""~tVh'e revenue and against the _ assegsgseeavin a||"th_e three appeals. The correctness of this Vfiriding subject matter of these three review The learned Senior Counsel points out that all ffh.egi'"tAhree authorities have concurrently held that the asésessee is not in the business of providing technical services. It is in the business of sale of computer V, _10_ software. The dispute was whether after sale of cor;'i'p,ute'r--,V software when the technician of the assessee were A ~ the customer's place, which was |oca_ted,__in fore'i'gnQ'_cou'nt'i*~V, the services rendered by them :'~anc£f_"cthe\ic».expendit'u-re'?i incurred therein has to be exC;lu"d.,ed from total turnover. At no point is case that the assessee was"-..zV.i'n_, _ of providing technical services.» In fact,*vth:e a*s_se_sséeV,:h'.as".produced 12 certificates thejciharterefdf2Accountant in this regard from: V Except in three certificates placed while passing the impugnedféorlders other 9 certificates, the V turnover" is shown against the entry export of computer sVoftwal'e i_tsg_transmission to a place outside India. In th'ree'__certvifi'cate.s'issued by the Chartered Accountant by a _typog'r.aph'i'ca!terror instead of mentioning the amount at 3(1), it is mentioned against Clause 3(ii). By a.re'a:d'ing the said three certificates, this Court came to the if .:'_4"'COl"l:C|uSiOn that the assessee is in the business of providing it " A' technical services and therefore, the finding of the Tribunal l/c
-11..
was erroneous. The said error is purely a typogr4aVp_h-ice-l error and therefore, he submits that the _ require to be recalled and the appealis to"be~-:hea'rdv'*onI if merits keeping in mind the questiori'a..involved"
appeals.
5. Per contra.,'"~..the2illearnediCounsel' the revenue submits that the findliircj :'of___th--e§Ho_~n'b|e Court is based on the. 'ce;rti.ficates€ the assessee's themselves and_,.'therefotre,{jjno"'ca':se"forreview is made out. ._ not the Bench, which has passed thev.salid'o~rdér; . Jlnot possible for the Court to find_cjut what exactly was in the mind of the Judge when thevorder. But nonetheless in Para 9 of the is clearly held as under:-
' 'v"ft is not in dispute that the assessee is engaged in the business of production and .V:ff_export of software from India to foreign countries. It is well settled that to arrive at the deduction, formula to be adopted is Profits of the business x export turnover = Total turnover"
l/ -12-
7. That gives an indication that it is not between the parties that the assessee is eng_a"g._edviginlthe' business of production and export of Vsoftware-:fro_rn_Indi'a to foreign countries and they [care notin the .:,b_us:i'nesnsv.4.o'fifif providing technical services 'outside only producing and exportingf'so_ftw'are.".iv,.jjife"c'materi'aVl"on record clearly shows that exceptfbofr rest of the certificates are the amount involved in of the software at Clause 3'('i)]" years certificates as against the is typed and it is typed against _C|auis'e 3(i,i)V.}_ we are satisfied that there is tygpogiraphical error. The Chartered Accountant "ca:reful:ly'*-looking into those entries has issued the certificate_s,'VwV_h.i:;ch has resulted in confusion. A. C. In that view of the matter, there is an error apparent on the face of the order passed by this Court, C which calls for review. Accordingly, we pass the following Vt
i) The Review Petitions are allowed.
ii) The impugned orders are .he_reby_'set"aside)
iii) The appeals are restored.' file, to be heard on me';'~iV_t'v.;:,4-..'a..|on'gA'with. theic:o._n'nect;ed appeals, which are____listed=__Vwith "th,eAsefi?review petitions.