Johnson Controls Automotive Ltd.,, Pune v. Assistant Commissioner of Income-tax,,

CO 5/PUN/2014 | 2005-2006
Pronouncement Date: 29-04-2015 | Result: Dismissed

Appeal Details

RSA Number 524523 RSA 2014
Assessee PAN AAACT6342D
Bench Pune
Appeal Number CO 5/PUN/2014
Duration Of Justice 1 year(s) 3 month(s) 13 day(s)
Appellant Johnson Controls Automotive Ltd.,, Pune
Respondent Assistant Commissioner of Income-tax,,
Appeal Type Cross Objection
Pronouncement Date 29-04-2015
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 29-04-2015
Date Of Final Hearing 08-04-2015
Next Hearing Date 08-04-2015
Assessment Year 2005-2006
Appeal Filed On 16-01-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE MS SUSHMA CHOWLA JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO.255/PN/2013 ASSESSMENT YEAR: 2005-06 THE ADDL. COMMISSIONER OF INCOME TAX RANGE-7 PUNE . APPELLANT VS. TATA JOHNSON CONTROLS AUTOMOTIVE LTD. HINJEWADI TAL. MULSHI PUNE 411027 . RESPONDENT PAN: AAACT6342D CO NO.05/PN/2014 ASSESSMENT YEAR: 2005-06 TATA JOHNSON CONTROLS AUTOMOTIVE LTD. HINJEWADI TAL. MULSHI PUNE 411027 . CROSS OBJECTOR PAN: AAACT6342D VS. THE ADDL. COMMISSIONER OF INCOME TAX RANGE-7 PUNE . RESPONDENT ASSESSEE BY : SHRI P.J. PARDIWALA REVENUE BY : SHRI MUKULESH DUBE CIT DATE OF HEARING : 08-04-2015 DATE OF PRONOUNCEMENT : 29-04-2015 ORDER PER SUSHMA CHOWLA JM: THE CAPTIONED APPEAL FILED BY THE REVENUE IS AGAINS T THE ORDER OF CIT(A)-III PUNE DATED 09.11.2012 RELATING TO ASSE SSMENT YEAR 2005-06 PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION AGAINST THE APPEAL OF THE REVENUE. ITA NO.255/PN/2013 CO NO.05/PN/2014 TATA JOHNSON CONTROLS AUTOMOTIVE LTD. 2 2. BOTH THE APPEAL AND CROSS OBJECTION RELATING TO THE SAME ASSESSEE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CO NSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3. THE REVENUE IN ITA NO.255/PN/2013 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- THE HONBLE CIT(A)-III PUNE ERRED IN DIRECTING THE ASSESSING OFFICER TO EXCLUDE THE TELECOM EXPENSES AND OTHER EXPENSES SPE NT IN FOREIGN CURRENCY FROM THE TOTAL TURNOVER AND IN RE-COMPUTI NG THE DEDUCTION ALLOWANCE U/S.10A. 4. THE ASSESSEE IN CO NO.05/PN/2014 HAS RAISED THE FOLLOWING GROUNDS OF CROSS OBJECTION:- 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE REDUC TION OF TELECOMMUNICATION EXPENSES AND EXPENSES ATTRIBUTABL E TO TECHNICAL SERVICES FROM THE EXPORT TURNOVER AS WELL AS FROM T HE TOTAL TURNOVER WHILE COMPUTING DEDUCTION UNDER SECTION 10A OF THE INCOME-TAX ACT 1961. 2. THE APPELLANT CRAVES LEAVE TO ADD TO AMEND TO ALTER TO SUBSTITUTE AND TO WITHDRAW THE ABOVE GROUNDS OF APPEAL. 5. THE ONLY ISSUE RAISED IN THE REVENUES APPEAL IS AGAINST THE DIRECTION OF CIT(A) IN EXCLUDING THE TELECOM EXPENSES AND OTHER EXPENSES SPENT IN FOREIGN CURRENCY FROM THE TOTAL TURNOVER WHILE COMPUTING T HE DEDUCTION ALLOWABLE UNDER SECTION 10A OF THE ACT. 6. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE FOR THE YEAR UNDER CONSIDERATION HAD CLAIMED DEDUCTION UNDER SECTION 1 0A OF THE ACT AT RS.7 99 42 875/-. THE WORKING OF THE SAID DEDUCTIO N UNDER SECTION 10A OF THE ACT IS REPRODUCED BY THE ASSESSING OFFICER UNDER PA RA 4.1 AT PAGE 2 OF THE ASSESSMENT ORDER. WHILE COMPUTING THE ELIGIBLE EXP ORT TURNOVER OF THE STP UNIT THE ASSESSEE HAD EXCLUDED THE FOREX SPENT ON TECHNI CAL SERVICES RENDERED OUTSIDE INDIA AT RS.25 91 07 094/-; AND TELEPHONE COST AT RS.61 35 717/- FROM THE EXPORT TURNOVER. SIMILARLY THESE ITEMS WERE A LSO EXCLUDED FROM THE TOTAL TURNOVER OF THE STP UNIT AND THEREAFTER THE DEDUCTI ON WAS COMPUTED WHICH WAS ELIGIBLE UNDER SECTION 10A OF THE ACT. THE ASSESSI NG OFFICER SHOW-CAUSED THE ITA NO.255/PN/2013 CO NO.05/PN/2014 TATA JOHNSON CONTROLS AUTOMOTIVE LTD. 3 ASSESSEE TO EXPLAIN AS TO HOW THE SAID EXPENSES COU LD BE EXCLUDED FROM THE EXPORT TURNOVER AND THE TOTAL TURNOVER. IN REPLY THE ASSESSEE CLAIMED THAT FREIGHT TELECOMMUNICATION CHARGES AND FOREIGN EXCH ANGE SPENT IN EARNING OF SUCH INCOME WAS TO BE REDUCED FROM BOTH EXPORT AND TOTAL TURNOVER IN TURN RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE H ONBLE SUPREME COURT IN CIT VS. LAKSHMI MACHINE WORKS LTD. 290 ITR 667 (SC) AN D THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN CIT VS. SUDARSHAN CHEM ICALS INDUSTRIES LTD. 245 ITR 769 (BOM). THE LD. AUTHORIZED REPRESENTATIVE F OR THE ASSESSEE POINTED OUT THAT IN THE SAID DECISION IT WAS HELD THAT SALES-TA X AND EXCISE DUTY WERE NOT PART OF EXPORT TURNOVER OR TOTAL TURNOVER AND CONSEQUENT LY THE EXPENDITURE INCURRED BY THE ASSESSEE IN FOREIGN EXCHANGE ALSO HAS TO BE EXC LUDED FROM BOTH EXPORT TURNOVER AND TOTAL TURNOVER BY COMPUTING THE DEDUCT ION UNDER SECTION 10A OF THE ACT. THE ASSESSING OFFICER VIDE PARA 4.3 AT PAGE 4 OF THE ASSESSMENT ORDER ACCEPTED THE PLEA OF THE ASSESSEE THAT FOREIGN EXCH ANGE EXPENSES AND TELECOMMUNICATION CHARGES WERE TO BE EXCLUDED FROM TOTAL TURNOVER IN VIEW OF CLAUSE (IV) OF EXPLANATION 2 OF SECTION 10A OF THE ACT WHICH DEFINES EXPORT TURNOVER. HOWEVER THE ASSESSING OFFICER FURTHER N OTED THAT THE AUDITOR IN THE AUDIT REPORT IN FORM NO.56F HAD DECLARED THAT SUM O F RS.2 90 88 530/- HAD NOT BEEN RECEIVED WITHIN SIX MONTHS AND SINCE THE SALE PROCEEDINGS WERE NOT BROUGHT IN INDIA WITHIN EXTENDED TIME. THE ASSESSI NG OFFICER HELD THAT SUM OF RS.2 90 88 530/- WAS TO BE REDUCED FROM THE EXPORT TURNOVER IN RESPECT OF THE SECOND PART OF EXCLUSION FROM THE TOTAL TURNOVER WH ILE COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE ACT. THE ASSESSING OFFICE R WAS OF THE VIEW THAT THE SAID EXPENSES COULD NOT BE EXCLUDED FROM THE TOTAL TURNOVER. THE ASSESSING OFFICER NOTED THE PROVISIONS OF SECTION 10A OF THE ACT AND THE EXPLANATION THEREUNDER AND POINTED OUT THAT EXPLANATION 2 OF SE CTION 10A OF THE ACT DEFINES EXPORT TURNOVER IN CLAUSE (IV) HOWEVER THE DEFINI TION OF THE TURNOVER WAS ABSENT IN THE SAID SECTION. THE ASSESSING OFFICER ALSO OB SERVED THAT THE TOTAL TURNOVER WAS NOT DEFINED ELSEWHERE IN THE INCOME-TAX ACT AND HENCE TOTAL TURNOVER HAD TO BE UNDERSTOOD AS IT MEANS IN THE COMMON PARLANCE. THE ASSESSING OFFICER THUS ITA NO.255/PN/2013 CO NO.05/PN/2014 TATA JOHNSON CONTROLS AUTOMOTIVE LTD. 4 HELD THAT EXPENSES OF ANY NATURE WERE NOT TO BE RED UCED FROM THE TOTAL TURNOVER AND RECOMPUTED THE DEDUCTION UNDER SECTION 10A OF T HE ACT BY NOT EXCLUDING THE FOREIGN EXCHANGE EXPENSES AND TELECOMMUNICATION COS T BOTH FROM THE EXPORT TURNOVER AND THE TOTAL TURNOVER. 7. WITH REGARD TO THE NON-EXCLUSION OF THE SAID EXP ENSES FROM THE TOTAL TURNOVER THE CIT(A) HELD THAT THE ISSUE WAS COVERE D IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL I N ITO VS. SAK SOFT LTD. 121 TTJ 865 (SB-CHENNAI). THE CIT(A) FURTHER RELIED UPON T HE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. GEM PLUS JEWEL LERY INDIA LTD. REPORTED IN 330 ITR 175 (BOM) AND DIRECTED THE ASSESSING OFFICE R TO EXCLUDE THE SAID EXPENSES FROM THE TOTAL TURNOVER FOR COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE ACT. THE CIT(A) ALSO UPHELD THE ORDER OF TH E ASSESSING OFFICER IN EXCLUDING SUCH EXPENSES FROM EXPORT TURNOVER WHILE COMPUTING THE EXEMPTION UNDER SECTION 10A OF THE ACT. THE CIT(A) ALSO ALLO WED THE CLAIM IN HANDS OF THE ASSESSEE VIS--VIS EXPORT PROCEEDS BEING BROUGHT IN TO INDIA WITHIN STIPULATED PERIOD. 8. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF TH E CIT(A) IN EXCLUDING THE TELECOM EXPENSES AND OTHER EXPENSES IN FOREIGN CURR ENCY FROM TOTAL TURNOVER WHILE COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE ACT. 9. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE POINTED OUT THAT THE ISSUE IS SQUARELY COVERED BY THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GEM PLUS JEWELLERY IND IA LTD. (SUPRA). 10. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REV ENUE RELIED UPON THE ORDER OF THE ASSESSING OFFICER. ITA NO.255/PN/2013 CO NO.05/PN/2014 TATA JOHNSON CONTROLS AUTOMOTIVE LTD. 5 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING BEFORE US IS IN RELATION TO THE COMPUTATION OF TOTAL TURNOVER WHILE COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE AC T. THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD INCURRED CERTAIN EXPEN SES IN FOREIGN EXCHANGE AND HAD ALSO INCURRED EXPENSES ON TELECOMMUNICATION COS T WHICH WAS EXCLUDED FROM THE EXPORT TURNOVER AND THE TOTAL TURNOVER WHILE CO MPUTING THE DEDUCTION UNDER SECTION 10A OF THE ACT. HOWEVER THE ASSESSING OFF ICER HELD THE CLAIM OF THE ASSESSEE JUSTIFIABLY VIS--VIS EXCLUSION FROM EXPOR T TURNOVER BUT THE SAID EXPENSES ON THE OTHER HAND WERE HELD TO BE NON-EXCL UDIBLE FROM THE TOTAL TURNOVER WHILE COMPUTING THE DEDUCTION UNDER SECTIO N 10A OF THE ACT. WE FIND THAT THE SIMILAR ISSUE OF EXCLUSION OF FREIGHT TEL ECOMMUNICATION CHARGES OR INSURANCE EXPENSES IF ANY INCURRED IN FOREIGN EXCHA NGE FROM EXPORT TURNOVER AND TOTAL TURNOVER AROSE BEFORE THE HONBLE BOMBAY HIGH COURT IN GEM PLUS JEWELLERY INDIA LTD. AND IT WAS HELD AS UNDER :- UNDER SUB-SECTION (1) OF SECTION 10A OF THE INCOME -TAX ACT 1961 A DEDUCTION IS ALLOWED FROM THE TOTAL INCOME OF THE A SSESSEE OF SUCH PROFITS AND GAINS AS ARE DERIVED BY AN UNDERTAKING FROM THE EXP ORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE FOR A PERIOD OF TEN CONSECUTIVE A SSESSMENT YEARS COMMENCING FROM THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING BEGINS MANUFACTURE OR PRODUCTION. SUB- SECTION (4) OF SECTION 10A PROVIDES THE MANNER IN WHICH THE PROFITS DERIVED FR OM THE EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE SHALL BE COMPUTED. UND ER SUB-SECTION (4) THE PROPORTION BETWEEN THE EXPORT TURNOVER IN RESPECT O F THE ARTICLES OR THINGS OR AS THE CASE MAY BE COMPUTER SOFTWARE EXPORTED TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED OVER BY THE UNDERTAKING IS APPLIED TO THE PROFITS OF THE BUSINESS OF THE UNDERTAKING IN COMPUTING THE PROFITS DERIVED FROM EXPORT. IN OTHER WORDS THE PROFITS OF THE BUSINESS OF THE UNDERTAKING ARE MULTIPLIED BY THE EXPORT TURNOVER IN RESPECT OF THE ARTICLES THINGS OR AS THE CASE MAY BE COMPUTER SOFTWARE AND DIVIDED BY THE TOTAL TURNOVER OF THE BUSINESS CARRI ED ON BY THE UNDERTAKING. THE EXPRESSION TOTAL TURNOVER HAS NOT BEEN DEFINED AT ALL BY PARLIAMENT FOR THE PURPOSES OF SECTION 10A. HOWEVER THE EXPRESSION EXPORT TURNOVER HAS BEEN DEFINED. THE DEFINITION OF EXPORT TURNOVER EXCLU DES FREIGHT AND INSURANCE. SINCE EXPORT TURNOVER HAS BEEN DEFINED BY PARLIAMEN T AND THERE IS A SPECIFIC EXCLUSION OF FREIGHT AND INSURANCE THE EXPRESSION EXPORT TURNOVER CANNOT HAVE A DIFFERENT MEANING WHEN IT FORMS A CONSTITUENT PAR T OF THE TOTAL TURNOVER FOR THE PURPOSES OF THE APPLICATION OF THE FORMULA. A CONS TRUCTION 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 ELEME NT OF PROFIT CANNOT BE INCLUDED IN THE TOTAL TURNOVER. FREIGHT AND INSURA NCE DO NOT HAVE AN ELEMENT OF TURNOVER. FOR THIS REASON IN ADDITION THESE TWO I TEMS WOULD HAVE TO BE EXCLUDED FROM THE TOTAL TURNOVER PARTICULARLY IN THE ABSENCE OF A LEGISLATIVE PRESCRIPTION TO THE CONTRARY. ITA NO.255/PN/2013 CO NO.05/PN/2014 TATA JOHNSON CONTROLS AUTOMOTIVE LTD. 6 12. THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION H AD ALSO INCURRED SIMILAR EXPENDITURE IN FOREIGN EXCHANGE AND ON TELECOM EXPE NSES. FOLLOWING THE SAME PARITY OF REASONING AS LAID DOWN BY THE HONBLE BOM BAY HIGH COURT IN GEM PLUS JEWELLERY INDIA LTD. WE UPHOLD THAT THE ORDER OF T HE CIT(A) IN DIRECTING THE ASSESSING OFFICER TO EXCLUDE THE SAID EXPENSES FROM TOTAL TURNOVER WHILE COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE AC T. THE GROUND OF APPEAL RAISED BY THE REVENUE IS THUS DISMISSED. 13. IN THE CROSS OBJECTION GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE IN SUPPORT OF THE ORDER OF THE CIT(A) AND HENCE THE SA ME BECOMES ACADEMIC. 14. IN THE RESULT THE APPEAL OF THE REVENUE AS WEL L AS THE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON THIS 29 TH DAY OF APRIL 2015. SD/- SD /- (R.K. PANDA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED: 29 TH APRIL 2015 SUJEET COPY OF THE ORDER IS FORWARDED TO: - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-III PUNE; 4) THE CIT-IV PUNE; 5) THE DR A BENCH I.T.A.T. PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T. PUNE