Jataayu Software Limited, Bangalore v. ACIT, Bangalore

ITA 1061/BANG/2010 | 2006-2007
Pronouncement Date: 16-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 106121114 RSA 2010
Bench Bangalore
Appeal Number ITA 1061/BANG/2010
Duration Of Justice 6 month(s) 9 day(s)
Appellant Jataayu Software Limited, Bangalore
Respondent ACIT, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 16-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 16-03-2011
Assessment Year 2006-2007
Appeal Filed On 06-09-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE DR. O.K. NARAYANAN VICE PRESIDENT AND SMT. P. MADHAVI DEVI JUDICIAL MEMBER ITA NO.1061/BANG/2010 ASSESSMENT YEAR : 2006-07 JATAAYU SOFTWARE LTD. ( KNOWN AS COMVIVA TECHNOLOGIES LTD. ) #4 12 TH K.M. BELLARY ROAD JAKKUR BANGALORE 560 064. : APPELLANT VS. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 11(5) BANGALORE. : RESPONDENT APPELLANT BY : SHRI CHAVALI NARAYAN C.A. RESPONDENT BY : SHRI MANOJ KUMAR ADDL.CIT(DR) O R D E R PER SMT. P. MADHAVI DEVI JUDICIAL MEMBER THIS IS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2006- 07. 2. IN THIS APPEAL THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE CIT(APPEALS) IN CONFIRMING THE DISALLOWANCES MADE B Y THE ASSESSING OFFICER. ITA NO.1061/BANG/10 PAGE 2 OF 5 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT SER VICES SALE OF SOFTWARE PRODUCTS AND INTEGRATED SOLUTIONS. 4. FOR THE RELEVANT ASSESSMENT YEAR THE ASSESSEE F ILED RETURN OF INCOME WHICH WAS SUBSEQUENTLY REVISED DECLARING TOT AL INCOME AT RS. 51 63 450. 5. DURING THE ASSESSMENT PROCEEDINGS U/S. 143(3) T HE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CLAIMED DEDU CTION U/S. 10A FOR AN AMOUNT OF RS.3 51 93 497. ON PERUSAL OF CALCULATIO N GIVEN BY THE ASSESSEE WHICH IS PRODUCED AT PAGE 2 OF THE ASSESS MENT ORDER THE AO CAME TO THE CONCLUSION THAT CERTAIN AMOUNTS WHICH WERE NOT ALLOWABLE TO BE PART OF EXPORT TURNOVER HAVE NOT BEEN EXCLUDED. HE FOUND THAT THE EXPORT TURNOVER FOR 10A DEDUCTION HAS BEEN TAKEN AT RS.26 11 14 620 WHICH INCLUDES THE AMOUNT OF RS.2 89 43 010 BEING C ONVERTIBLE FOREIGN EXCHANGE THAT WAS NOT RECEIVED WITHIN SIX MONTHS FR OM THE END OF PREVIOUS YEAR AND THAT THERE WAS NO APPROVAL GIVEN BY THE CO MPETENT AUTHORITY FOR RECEIVING THE AMOUNT BEYOND THE STIPULATED TIME. A CCORDINGLY HE REDUCED THIS AMOUNT FROM THE EXPORT TURNOVER FOR THE PURPOS E OF CALCULATING DEDUCTION U/S. 10A. 6. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE HAD EXCLUDED RS.82 47 747 FROM EXPORT TURNOVER ON ACCOU NT OF THE SAME BEING IN THE NATURE OF DEEMED EXPORT BUT HOWEVER ON EXA MINATION OF THE SALES DETAILS IT WAS FOUND THAT DEEMED EXPORTS WERE OF R S.96 42 496. HE THEREFORE EXCLUDED THE DIFFERENTIAL AMOUNT OF RS.13 94 749 ALSO FROM THE EXPORT TURNOVER. SIMILARLY HE EXCLUDED THE EXPENSE S INCURRED ON ITA NO.1061/BANG/10 PAGE 3 OF 5 TELECOMMUNICATION CHARGES AND ALSO ON INTERNET POS TAGE COURIER AND TELEPHONE BY APPLYING THE PROVISIONS OF EXPLANATION 2(IV) TO SECTION 10A OF THE INCOME-TAX ACT. 7. THE ASSESSEE HAD ALSO CLAIMED THAT THE ASSESSEE WAS INVOLVED IN SITE DEVELOPMENT OF SOFTWARE FOR WHICH IT HAS INCUR RED AN AMOUNT OF RS.1 89 29 994 IN FOREIGN CURRENCY TOWARDS TRAVEL A ND CONVEYANCE. THE AO HOWEVER HELD THESE EXPENSES ARE FOR PROVIDING T ECHNICAL SERVICES OUTSIDE INDIA. 8. TAKING INTO CONSIDERATION THE FACT THAT THE TOTA L OF SOFTWARE SERVICES EXPORTS AND AMC EXPORTS TOGETHER FORMS ABOUT 28% OF THE TOTAL TURNOVER HE DISALLOWED 28% OF TOTAL FOREIGN CURRENCY EXPENSE S AS EXPENSES FOR PROVIDING TECHNICAL SERVICES OUTSIDE INDIA. HE ALS O RESTRICTED DEPRECIATION TO 50% AND TREATED THE SOFTWARE PURCHASES AS CAPITA L EXPENDITURE AND THEREAFTER COMPUTED THE INCOME OF THE ASSESSEE COMP ANY AND ALLOWED THE DEDUCTION U/S. 10A OF THE INCOME-TAX ACT. 9. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(APPEALS) WHO CONFIRMED THE ORDER OF THE AO AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 10. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASS ESSEE SHRI CHAVALI NARAYAN SUBMITTED THAT GROUNDS 1 TO 3 RELATE TO TH E COMPUTATION OF EXPORT TURNOVER AND CITED THE DECISION OF THE SPECIAL BENC H OF THE TRIBUNAL AT CHENNAI IN THE CASE OF SAKSOFT LTD. REPORTED IN 313 ITR 35 (AT) WHEREIN IT HAS BEEN HELD THAT IF ANY AMOUNT IS REDUCED FROM TH E EXPORT TURNOVER THE SAME IS ALSO TO BE REDUCED FROM THE TOTAL TURNOVER. HE ACCORDINGLY PRAYED ITA NO.1061/BANG/10 PAGE 4 OF 5 THAT THE SAME MAY BE APPLIED TO THE ASSESSEES CASE ALSO. THE LD. DR HOWEVER SUPPORTED THE ORDERS OF THE AUTHORITIES BE LOW. 11. HAVING GONE THROUGH THE MATERIAL ON RECORD WE FIND THAT THE ISSUE NEEDS TO BE RECONSIDERED IN THE LIGHT OF THE DECISI ON OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF SAKSOFT LTD. (CITED SUPRA) AND DISALLOWANCES WHICH ARE REDUCED FROM THE EXPORT TURNOVER HAVE TO BE REDUCED FROM THE TOTAL TURNOVER ALSO FOR ARRIVING AT THE ELIGIBLE DE DUCTION U/S. 10A OF THE I.T. ACT. THEREFORE GROUNDS 1 TO 3 ARE ALLOWED FOR STA TISTICAL PURPOSES WITH THE ABOVE DIRECTION. 12. AS REGARDS GROUND NOS. 4 5 & 6 RELATING TO REDUCTI ON OF EXPORT TURNOVER BY DEEMED EXPORT PROCEEDS UNREALIZED EXPO RT PROFITS AND THE SOFTWARE EXPENSES BEING CONSIDERED AS CAPITAL IN NA TURE THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS FILED ALL THE DETAILS BEFORE THE AO AND CIT(APPEALS) BUT THEY HAVE NOT CONSIDER ED THE SAME IN THE PROPER PERSPECTIVE AND THEREFORE OPPORTUNITY OF BEI NG HEARD MAY BE GIVEN. 13. HAVING GONE THROUGH THE RECORDS WE FIND THAT THE A SSESSEE HAS SUBMITTED THAT THE UNREALIZED EXPORT PROCEEDS HAVE BEEN REALIZED WITHIN SIX MONTHS FROM THE END OF RELEVANT PREVIOUS YEAR AND A LSO THAT THE ASSESSEE IS EXPORTING THE SOFTWARE ON BEHALF OF ANOTHER EXPO RTER AND IT IS SUBMITTED THAT THE OTHER PARTY IS NOT SEEKING ANY DEDUCTION U /S. 10A OF THE I.T. ACT. IN VIEW OF THE SAME THE LD. COUNSEL FOR THE ASSESSEE HAD PRAYED THAT THE ASSESSEE IS REAL EXPORTER AND IS ENTITLED FOR DEDUC TION U/S. 10A OF THE ACT. IT IS FURTHER SEEN THAT THE AO HAS DISALLOWED THE S OFTWARE EXPENSES AMOUNTING TO RS.3 43 034 AS BEING CAPITAL IN NATURE WHILE THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE PURCHA SES SOFTWARE AS A RAW ITA NO.1061/BANG/10 PAGE 5 OF 5 MATERIAL AND AFTER MAKING NECESSARY CHANGES OR MODI FICATIONS THE SAME IS SOLD AS A FINAL PRODUCT. THUS WE FIND THAT THE AO AND THE CIT(APPEALS) HAVE NOT CONSIDERED THESE CONTENTIONS IN THE PROPER PERSPECTIVE. THE ASSESSEE ALSO HAS TO PRESENT ALL THE DETAILS BEFORE THE AO. IN VIEW OF THE SAME WE DEEM IT FIT AND PROPER TO REMAND GROUNDS 4 5 & 6 TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO DISPOSE O F THE ISSUES IN ACCORDANCE WITH LAW TAKING INTO CONSIDERATION OUR O BSERVATIONS ABOVE. THESE GROUNDS ARE THUS ALLOWED FOR STATISTICAL PURP OSES. 14. IN THE RESULT THE ASSESSEES APPEAL IS PARTLY ALLO WED. PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF MARCH 2011. SD/- SD/- ( DR. O.K. NARAYANAN ) ( SMT. P. MADHAVI DEVI ) VICE PRESIDENT JUDICIAL M EMBER BANGALORE DATED THE 16 TH MARCH 2011. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. C IT(A) 5. DR ITAT BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT BANGALORE.