Income Tax Appellate Tribunal - Chennai
Bally Technologies India Pvt. Ltd., ... vs Assessee on 16 February, 2012
IN THE INCOME-TAX APPELLATE TRIBUNAL
CHENNAI 'C' BENCH, CHENNAI.
Before Shri N.S. Saini, Accountant Member &
Shri George Mathan, Judicial Member
I.T.A. No. 1912/Mds/2011
Assessment Year: 2007-08
M/s. Bally Technologies India Pvt. The Assistant Commissioner of
Ltd., Unit 1, 11th Floor, Crest Vs. Income Tax,
Building, International Tech Park, Company Circle I(2),
CSIR Road, Taramani, Chennai 600 034.
Chennai 600113
[PAN:AACCB6575A ]
(Appellant) (Respondent)
Assessee by : Shri R. Vijayaraghavan, Advocate
Revenue by : Shri Omkareshwar Chidra, CIT
Date of Hearing : 16.02.2012
Date of pronouncement : 16.02.2012
ORDER
PER N.S. Saini, Accountant Member
This is an appeal filed by the assessee against the order of the Dispute Resolution Panel, Chennai dated 19.08.2011 in assessment year 2008-09. Shri R. Vijayaraghavan, Advocate represented on behalf of the assessee and Shri Omkareshwar Chidra, CIT represented on behalf of the Revenue.
2. The ld. AR for the assessee submitted that the assessee has taken 5 grounds of appeal and the sole issue involved is that the DRP erred in confirming the order of the Assessing Officer excluding the 2 I.T.A. No.1 No.1912/M/11 912/M/11 telecommunication charges amounting to `.27,95,811/- and foreign travel expenses incurred in foreign currency amounting to `.93,45,790/- from the export turnover without excluding the same from the total turnover while computing the deduction under section 10A of the Act. He argued that the issue is now covered in favour of the assessee by the decision of the Hon'ble Bombay High Court in the case of Gem Plus Jewellery India Ltd. [2011] 330 ITR 175 (Bom.), wherein it has been held that the freight and insurance charges do not have an element of turnover and therefore, the same has to be excluded from the total turnover when it is excluded from the export turnover of the assessee.
3. The ld. DR conceded to the above submissions of the ld. AR of the assessee that the issue is covered in favour of the assessee by the aforesaid decision.
4. We have heard the rival submissions, perused the orders of lower authorities and materials available on record. In the instant case, the Assessing Officer, while making the assessment, computed deduction allowable under section 10A to the assessee by excluding the telecommunication charges of `.27,95,811/- and expenses incurred in foreign currency in providing technical services outside India `.93,45,790/- from the export turnover. The assessee before the DRP argued that the telecommunication charges and expenses incurred in foreign currency in providing technical services outside India should also be reduced from the 3 I.T.A. No.1 No.1912/M/11 912/M/11 total turnover of the assessee while computing the deduction under section 10A of the Act. The same was rejected by the DRP on the ground that the assessee was involved in many other cases and similar reasoning was given by other assessees also on the basis of various decisions of the Tribunal and the Department has not accepted these decisions and gone in further appeal.
5. The expression "export turnover" has been defined in clause (iv) of Explanation 2 to section 10A is as under:
"(iv) "export turnover" means the consideration in respect of export [by the undertaking] of articles or things or computer software received in, or brought into, India by the assessee in convertible foreign exchange in accordance with sub-section (3), but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India;"
6. We find that as pointed out by the ld. AR of the assessee that the issue now stands decided by the Hon'ble Bombay High Court in the case of Gem Plus Jewellery India Ltd. (supra), wherein it was held as under:
"........The expression "total turnover" 'has not been defined at all by Parliament for the purposes of section l0A. However, the expression "export turnover" has been defined. The definition of "export turnover" excludes freight and insurance. Since export turnover has been defined by Parliament and there is a specific exclusion of freight and insurance, the expression "export turnover" cannot have a different meaning when it forms a constituent part of the total turnover for the purposes of the application of the formula. A construction of a statutory provision which would lead to an absurdity must be avoided. Moreover, a receipt such as freight and insurance which does not have any element of profit cannot be included in the total turnover. Freight and insurance do not have an element of turnover. For this reason in addition, these two items would have to be excluded from the total turnover particularly in the absence of a legislative prescription to the 4 I.T.A. No.1 No.1912/M/11 912/M/11 contrary."
7. Further, we find that the Hon'ble Karnataka High Court in the case of CIT vs. Flowsearve Microfinish Valves P. Ltd. [2012] 204 Taxmann 133 (Kar.) (Mag.) has held that when the expenses are reduced from the export turnover for the purposes of computing deduction under section 10A, the same has to be reduced from the total turnover as well.
8. Therefore, respectfully following the above quoted decisions of the Hon'ble Bombay High Court and the Hon'ble Karnataka High Court, we set aside the order of DRP on this issue and direct the Assessing Officer to compute the deduction under section 10A by reducing the expenses from the total turnover, which has been reduced for computing export turnover. Thus, the grounds of appeal of the assessee are allowed.
9. No other point has been urged by the assessee except the above point.
10. In the result, the appeal of the assessee is allowed.
Order pronounced at the close of the hearing in the presence of the parties on 16.02.2012.
Sd/- Sd/- (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Chennai, Dated, the 16.02.2012 Vm/- To: The assessee//A.O./CIT(A)/CIT/D.R.