Jaipuria Silk Mills (P) Ltd.,, Bangalore v. ACIT, Bangalore

ITA 1112/BANG/2009 | 2006-2007
Pronouncement Date: 12-04-2010 | Result: Allowed

Appeal Details

RSA Number 111221114 RSA 2009
Bench Bangalore
Appeal Number ITA 1112/BANG/2009
Duration Of Justice 4 month(s) 19 day(s)
Appellant Jaipuria Silk Mills (P) Ltd.,, Bangalore
Respondent ACIT, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 12-04-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 12-04-2010
Date Of Final Hearing 05-04-2010
Next Hearing Date 05-04-2010
Assessment Year 2006-2007
Appeal Filed On 23-11-2009
Judgment Text
PAGE 1 OF 8 ITA NO.1112/BANG/2009 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B' BEFORE SHRI GEORGE GEORGE K J.M. AND SHRI A MOHAN ALANKAMONY ITA NO.1112/BANG/09 (ASST. YEAR 2006-07) M/S JAIPURIA SILK MILLS (P) LTD. GUDAHATTI MAIN ROAD NERALUR POST VIA ATTIBELE BANGALORE-562 107. - APPELLANT VS THE ASST. COMMISSIONER OF INCOME TAX CIRCLE-11(5) BANGALORE. - RESPONDENT APPELLANT BY : SHRI R K GANERIWALA C.A. RESPONDENT BY : SMT. V S SREELEKHA ADDL.CIT O R D E R PER GEORGE GEORGE : THE ASSESSEE HAS FILED THIS APPEAL AGAINST THE O RDER OF CIT(A) BANGALORE DATED 10.9.2009. THE RELEVANT AS ST. YEAR IS 2006-07. THE ORDER OF THE CIT(A) EMANATES FROM THE ORDER OF THE ASST. COMMISSIONER OF INCOME TAX PASSED U/S 143(3) OF THE ACT. 2. THE ASSESSEE HAS RAISED EIGHT GROUNDS AND THEY R ELATE TO SOLITARY ISSUE NAMELY WHETHER THE CIT(A) IS JUSTIFI ED IN CONFIRMING AO'S ACTION IN NOT EXCLUDING RS.96 39 523/- AND RS.2 43 763/- TOWARDS FREIGHT AND INSURANCE FROM THE TOTAL TURNOVER WHEN THE SAME WAS EXCLUDED FROM PAGE 2 OF 8 ITA NO.1112/BANG/2009 2 THE EXPORT TURNOVER WHILE CALCULATING THE DEDUCTION U/S 10B OF THE I T ACT. 3. FACTS IN BRIEF ARE AS FOLLOWS:- ASSESSEE IS A COMPANY FILED ITS RETURN OF INCOME ON 29.11.2006 DECLARING INCOME FROM BUSINESS AT NIL AF TER CLAIMING DEDUCTION U/S 10B OF THE ACT AMOUNTING TO RS.6 00 0 0 624/-. THE DEDUCTION U/S 10B OF THE ACT WAS COMPUTED BY THE ASS ESSEE BY TAKING BOTH EXPORT TURNOVER AND THE TOTAL TURNOVER AT RS.2 1 96 08 918/-. THE ASSESSMENT U/S 143(3) OF THE I T ACT WAS COMPLETED ON 29.12.2008 BY REDUCING THE ASSESSEE'S CLAIM OF DEDUCTION U/S 10B OF THE ACT FROM RS.6 00 00 624/- TO RS.5 80 77 094/-. THE ASSESSIN G OFFICER REDUCED FROM THE EXPORT TURNOVER A SUM OF RS.96 39 523/- AN D RS.2 43 763/- BEING CHARGES PAID TOWARDS FREIGHT AND INSURANCE RE SPECTIVELY. IN DOING SO THE ASSESSING OFFICER RELIED ON EXPLANATION 2 T O SECTION 10B(9) WHICH DEFINES 'EXPORT TURNOVER'. THE SAME READS AS FOLLO WS:- '(III) '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'. PAGE 3 OF 8 ITA NO.1112/BANG/2009 3 4. THE ASSESSING OFFICER HOWEVER DID NOT EXCLUDE THE ABOVE FREIGHT AND INSURANCE CHARGES FROM THE TOTAL TURNOV ER. CONSEQUENTLY THE TOTAL TURNOVER WAS FIXED AT RS.21 35 91 088/- WHERE AS THE EXPORT TURNOVER WAS FIXED AT RS.20 37 07 802/- AND 10B DED UCTION WAS CALCULATED AS FOLLOWS:- DEDUCTION U/S 10B = PROFIT OF BUSINESS X EXPORT T URNOVER TOTAL TURNOVER = 6 09 00 624 X 20 37 07 802 21 35 91 088 = 5 80 77 094 ============== 5. BEFORE THE FIRST APPELLATE AUTHORITY THE ASSESS EE MADE THE FOLLOWING SUBMISSIONS:- THE ASSESSEE MOST HUMBLY SUBMITS THAT THE WORD 'TOTAL TURNOVER' IS NOT DEFINED U/S 10B. HOWEVER IT HAS BEEN DEFINED UNDER SUB-SECTION 4C EXPLANATION (BA) OF SECTION 80HHC WHICH GIVES SIMILAR DEDUCTION FROM PROFITS DERIVED FROM EXPORT OF GOODS. IT STATES THAT 'TOTAL TURNOVER' SHALL NO T INCLUDE FREIGHT OR INSURANCE ATTRIBUTABLE TO THE TRANSPORT OF THE GOODS OR MERCHANDISE BEYOND THE CUSTOMS STATION AS DEFINED IN THE CUSTOMS ACT 1962. SINCE DEDUCTION OR INCENTIVE TO EXPORTS PROVIDES IN BOTH SECTIONS 80HHC AND 10B ARE SIMILAR IN NATURE THE ABOVE CITED DEFINITION SQUARELY APPLIES TO THIS INSTANT CASE ALSO. PAGE 4 OF 8 ITA NO.1112/BANG/2009 4 THE BANGALORE BENCH OF THE INCOME TAX APPELLATE TRIBUNAL HAS HELD IN CASE OF ISEVA SYSTEMS PVT. LTD. (ITA NO.401/BANG/2007 DATED 17.12.2007) FOLLOWING ITS EARLIER DECISION IN THE CASE OF M/S I - GATE GLOBAL SOLUTIONS LTD. V ACIT CIRCLE-11(3) BANGALORE (ITA NO.248 & 249/BANG/2007 DATED 27.11.2007) THAT TELECOMMUNICATION CHARGES WHICH WERE REDUCED FOR ASCERTAINING THE EXPORT TURNOVER ARE NOT TO BE CONSIDERED FOR THE PURPOSE OF TOTAL TURNOVER IN VIEW OF THE FACT THAT THE TOTAL TURNOVER IS SUM TOTAL OF EXPORT TURNOVER AND INTERNAL TURNOVER. FROM ABOVE IT ALSO MEANS THAT WHATEVER IS NOT INCLUDED IN EXPORT TURNOVER CANNOT BE INCLUDED IN THAT PORTION OF TOTAL TURNOVER WHICH RELATES TO EXPORT OF GOODS. THEREFORE THE ASSESSEE HAS LAWFULLY EXCLUDED THE CONCERNED EXPENDITURE FROM TOTAL TURNOVER SINCE IT IS SPECIFICALLY EXCLUDED FROM EXPORT TURNOVER IT IS ALSO TO BE EXCLUDED FROM THAT PART OF TOTAL TURNOVER (WHICH IS NOTHING BUT EXPORT TURNOVER + INTERNAL TURNOVER) WHICH IS RELATING TO EXPORT TURNOVER. BASED ON THE ABOVE CITED DECISIONS AND THE DECISION OF SPECIAL BENCH OF ITAT CHENNAI IN CASE OF ITO V SAK SOFT LTD. 313 ITR (AT) 353 DATED 6.3.2009 THE HON'BLE ITAT BENCH 'B' AT BANGALORE IN ITS DECISION IN APPEAL NO.ITA/406/B/09 AY 2005-06 OF THE SAME ASSESSEE HAS HELD THAT FREIGHT AND INSURANCE NEED TO BE EXCLUDED FROM TOTAL TURNOVER FOR APPLICATION OF THE FORMULA TO ARRIVE AT DEDUCTIONS U/S 10B. A COPY OF JUDGEMENT IS BEING SUBMITTED FOR YOUR KIND PERUSAL. SINCE THE FACTS AND CIRCUMSTANCES OF THE CASE ARE TOTALLY SIMILAR THE JUDGEMENT IS SQUARELY APPLICABLE TO THIS CASE TOO. PAGE 5 OF 8 ITA NO.1112/BANG/2009 5 6. THE CIT(A) HOWEVER DEVIATED FROM THE STAND T AKEN BY THE SPECIAL BENCH DECISION OF THE TRIBUNAL CITED SUPRA FOR THE REASON THAT THE SPECIAL BENCH HAS NOT CONSIDERED THE ISSUE IN THE C ORRECT PERSPECTIVE AND CONFIRMED THE ASSESSING OFFICER'S CALCULATION OF DE DUCTION U/S 10B OF THE ACT. 7. THE LEARNED AR REITERATED THE SUBMISSIONS MADE B EFORE THE AUTHORITIES BELOW. PER CONTRA THE LEARNED DR STRON GLY RELIED ON THE FINDINGS AND CONCLUSION OF THE CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL PLACED ON RECORD. THE ISSUE IN QUESTION STANDS COV ERED DIRECTLY IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSE SSEE'S OWN CASE FOR THE ASST.YEAR 2005-06 (ITA NO.406/BANG/2008 DATED 10 .7.2009) WHICH IN TURN FOLLOWED THE DECISION OF THE SPECIAL BENCH CITED SUPRA. THE RELEVANT PORTION OF THE TRIBUNAL'S ORDER IN ASSESSE E'S OWN CASE CITED SUPRA READS AS FOLLOWS:- 'WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON OUR CAREFUL PERUSAL OF THE FACTS AND CIRCUMSTANCES OF THE ASSESSEE'S CASE OUR CONSIDERED OPINION IS THAT NOW THE ISSUE STANDS SETTLED BY THE SPECIAL BENCH DECISION OF THE ITAT CHENNAI IN THE CASE OF ITO V SAK SOFT LTD. REPORTED IN 313 ITR (AT) 353 DATED 6.3.09 THEREFORE DOES NOT REQUIRE ANY FURTHER DELIBERATION. THE ISSUE STANDS COVERED AS ALSO HEL D BY THE LEARNED CIT(A) WHICH DOES NOT CALL FOR ANY FURTHER INTERFERENCE'. PAGE 6 OF 8 ITA NO.1112/BANG/2009 6 9. THE SPECIAL BENCH OF TRIBUNAL IN THE CASE OF IT O V SAK SOFT LTD. REPORTED IN 313 ITR (AT) 353 WAS CONSIDERING A N IDENTICAL SITUATION WHEREIN IT WAS HELD AS FOLLOWS:- 'THE COMMON THREAD RUNNING THROUGH SECTIONS 80HHC 80HHE AND 80HHF IS THAT THEY ARE ALL PROVISIONS GRANTING RELIEF TO THE ASSESSEES IN RESPECT OF PROFITS DERIVED FROM EXPORT. THE DIFFERENCE BETWEEN CHAPTER III IN WHICH SECTION 10B FALLS AND CHAPTER VI-A IN WHICH THESE SECTIONS FALL IS THAT WHILE THE FORMER EXCLUDES TH E INCOME IN QUESTION TOTALLY FROM THE PURVIEW OF TOTAL INCOME AND GIVES TOTAL EXEMPTION FROM TAX THE LATTER GIVES DEDUCTION OF A PART OF THE PROFITS AND GAINS OF THE CONCERNED BUSINESS FROM THE GROSS TOTAL INCOME. BOTH HOWEVER ARE CHAPTERS WHICH GIVE RELIEF TO ASSESSEES FROM TAXATION SUBJECT TO THE CONDITIONS BEING FULFILLED AND IN THAT SENSE THEY ARE OF THE SAME GENRE. THE OBJECT OF THESE SECTIONS IS TO ENCOURAGE THE EARNING OF FOREIGN EXCHANGE AND PROVIDE INCENTIVE TO PROMOTE EXPORTS. IF SOME OF THE SECTIONS SUCH AS SECTIONS 80HHE AND 80HHF PROVIDE FOR A FORMULA FOR CALCULATING THE DEDUCTION WHICH IS IDENTICAL WITH THE FORMULA PRESCRIBED BY SECTION 10B IT WOULD BE INCONGRUOUS TO INTERPRET SECTION 10B IN A MANNER DIFFERENT FROM THOSE TWO SECTIONS MERELY BECAUSE THERE IS NO DEFINITION OF 'TOTAL TURNOVER' IN THAT SECTION. 'EXPORT TURNOVER' AS DEFINED IN THESE SECTIONS EXCLUDES FREIGHT TELECOM CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE COMPUTER SOFTWARE OUTSIDE INDIA OR EXPENSES IF ANY INCURRED IN FOREIGN EXCHANGE IN PROVIDING TECHNICAL SERVICES OUTSIDE INDIA. THUS STATUTORILY PARITY IS MAINTAINED BETWEEN EXPORT TURNOVER AND TOTAL TURNOVER IN THESE SECTIONS. THERE IS NO PAGE 7 OF 8 ITA NO.1112/BANG/2009 7 REASON WHY SUCH PARITY CANNOT BE MAINTAINED BETWEEN EXPORT TURNOVER AND TOTAL TURNOVER IN SECTION 10B JUST BECAUSE 'TOTAL TURNOVER' HAS NOT BEEN DEFINED IN THAT SECTION'. 10. THE FIRST APPELLATE AUTHORITY HAS ATTEMPTED TO DISTINGUISH THE CASES CITED ON THE BASIS THAT THE WORD 'TOTAL T URNOVER' OR 'GROSS RECEIPT' AS IT APPEARS IN SECTION 44AB OF THE I T A CT 1961 BASED ON ICAI GUIDANCE NOTE INCLUDES ALL RECEIPTS INCLUDING REIMBURSEMENT OF EXPENSES. THE CONTEXT IN WHICH THE WORDS 'TOTAL TU RNOVER' AND 'GROSS RECEIPTS' APPEAR IN SECTION 44AB OF THE I T ACT 19 61 IS TOTALLY DIFFERENT TO THAT OF THIS CASE. THERE THE WORD 'TOTAL TURNOV ER' IS USED TO BRING IN AMBIT OF TAX AUDIT ALL THE TRANSACTIONS OF SALES AN D SERVICES. THE DEFINITION IS REPRODUCED HEREIN BELOW:- 'THE AGGREGATE AMOUNT FOR WHICH SALES ARE EFFECTED OR SERVICES RENDERED BY AN ENTERPRISE. THE TERM 'GROSS TURNOVER' AND 'NET TURNOVER' (OR 'GROSS SALES' AND 'NET SALES') ARE SOMETIMES USED TO DISTINGUISH THE SALES AGGREGATE BEFORE AND AFTER DEDUCTION OF RETURNS AND TRADE DISCOUNTS'. THE WORD 'TOTAL TURNOVER' IS NOT DEFINED U/S 44AB O F THE I T ACT 1961. HENCE THIS DEFINITION IS BEING CONSIDERED AS GUIDI NG DEFINITION TO DETERMINE TURNOVER FOR TAX AUDIT. THE FIRST APPELL ATE AUTHORITY HAS ADOPTED THE MEANING OF WORDS STATED IN SECTION 44AB WHICH IS WHOLLY UNNECESSARY IN THE INSTANT CASE AND HAS CONCLUDED TH AT TURNOVER AND GROSS RECEIPTS ARE SYNONYM AND CAN BE USED INTERCHANGEABLY. THIS LINE OF ANALYSIS CANNOT BE APPLIED IN THIS CASE BECAUSE GROS S RECEIPT IS USED FOR SERVICES RENDERED BY BUSINESS ENTERPRISE OR FOR PROF ESSIONAL INCOME AND PAGE 8 OF 8 ITA NO.1112/BANG/2009 8 WORD 'TURNOVER' FOR SALES EFFECTED OR FOR BUSINESS INCOME. THE ASSESSEE'S BUSINESS IS WHOLLY OF EXPORT OF MANUFACTU RED SILK FABRIC AND HENCE WORD 'GROSS RECEIPT' CANNOT BE APPLIED TO EXP ORT TURNOVER HERE. 11. FOR THE ABOVE SAID REASONS WE REVERSE THE ORD ER OF THE AUTHORITIES BELOW AND DIRECT THE ASSESSING OFFICER TO EXCLUDE FROM THE EXPORT TURNOVER AS WELL AS FROM THE TOTAL TURNOVER A SUM OF RS.96 39 523/- AND RS.2 43 763/- BEING FREIGHT AND INSURANCE EXPENSES RESPECTIVELY WHILE CALCULATING DEDUCTION U/S 10B OF THE ACT. 12. IN THE RESULT THE APPEAL FILED BY THE ASSESSE E IS ALLOWED. THE ORDER IS PRONOUNCED ON ..12TH....APRIL 2010 SD/- SD/- (A MOHAN ALANKAMONY) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE DTD.12/4/2010 COPY TO : 1. THE ASSESSEE 2.THE REVENUE 3. THE CIT (A) CONCERNED. 4. THE CIT CONCERNED. 5. THE DR 6. GUARD FILE. 7. GF ITAT NEW DELHI. MSP/7.4. BY ORDER ASST. REGISTRAR ITAT BANGALORE.