SIEMENS INFORMATION SYSTEMS LTD, MUMBAI v. CIT 7, MUMBAI

ITA 2272/MUM/2009 | 2004-2005
Pronouncement Date: 04-03-2010 | Result: Allowed

Appeal Details

RSA Number 227219914 RSA 2009
Assessee PAN AAACS9788E
Bench Mumbai
Appeal Number ITA 2272/MUM/2009
Duration Of Justice 10 month(s) 25 day(s)
Appellant SIEMENS INFORMATION SYSTEMS LTD, MUMBAI
Respondent CIT 7, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 04-03-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted I
Tribunal Order Date 04-03-2010
Date Of Final Hearing 17-02-2010
Next Hearing Date 17-02-2010
Assessment Year 2004-2005
Appeal Filed On 09-04-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI B. RAMAKO TAIAH (AM) ITA NO.2272/MUM/2009 ASSESSMENT YEAR : 2004-05 SIEMENS INFORMATION SYSTEMS LTD. 130 PANDURANG BUDHKAR MARG WORLI MUMBAI-400 018. ..( APPELLANT ) P.A. NO. (AAACS 9788 E) VS. ADDL. COMMISSIONER OF INCOME TAX RANGE 7(2) AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. ..( RESPONDENT ) APPELLANT BY : SHRI R.C. PATIL AND MS. NISHA GOPALANI RESPONDENT BY : SHRI AJAY KUMAR SRIVASTAVA O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DT.17.3.2009 PASSED BY THE LD. CIT U/S.263 OF TH E IT ACT 1961(THE ACT). 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COM PANY IS ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT AND CON SULTANCY. THE RETURN WAS FILED DECLARING TOTAL LOSS OF RS. NIL. HOW EVER THE ASSESSMENT WAS COMPLETED AT RS. NIL UNDER THE NORMAL PROVI SIONS OF ITA NO.2272/M/09 A.Y:04-05 2 THE ACT AND BOOK PROFIT U/S.115JB AT RS.62 71 28 736/- VIDE ORDER DT. 29.12.2006 PASSED U/S.143(3) OF THE ACT. SUBSEQUENTLY T HE LD. CIT IN EXERCISE OF HIS POWERS U/S.263 OF THE ACT OBSERVED THAT TH E ASSESSEE HAS CLAIMED DEDUCTION U/S.10A AMOUNTING TO RS.23 93 12 934/- IN RESPECT OF ITS EIGHT STP UNITS SITUATED AT VARIOUS PLACE S WHICH HAS BEEN ALLOWED BY THE AO. THE ASSESSEE COMPANY IN ITS SUBM ISSION DATED 10.10.2006 HAS DISCLOSED THE UNIT-WISE P&L A/C. I N RESPECT OF ITS STP UNITS ACCORDING TO WHICH THE ASSESSEE COMPANY HAD INCURR ED EXPENDITURE RELATING TO POST & COMMUNICATION AND INSUR ANCE CHARGES. HOWEVER THESE WERE NOT DEDUCTED FROM THE TOTAL TURNOV ER TO ARRIVE AT THE EXPORT TURNOVER AS PER PROVISIONS CITED SUPRA. ACCOR DING TO THE LD. CIT THE ADMISSIBLE DEDUCTION U/S.10A IS WORKED OUT TO RS.23 55 81 173/- AS AGAINST DEDUCTION ALLOWED RS.23 93 12 934/- AND HENCE EXCESS DEDUCTION OF RS.37 31 761/- WAS ALLOWED. ON BEING ASKED IT WAS INTERALIA SUBMITTED BY THE ASSESSEE THAT POST & COMMUNICATION AND INSURANCE EXPENSES WERE NOT SEPARATELY RECOVERED IN THE INVOICES. HENCE THE QUESTION OF EXCLUDI NG THESE EXPENSES TO WORK OUT THE EXPORT TURNOVER DOES NOT ARISE AND IN SUPPORT SAMPLE COPIES OF INVOICES WERE ALSO PRODUCED. HOWEV ER THE LD. CIT AFTER CONSIDERING THE ASSESSEES SUBMISSION WAS OF T HE VIEW THAT IN ORDER TO PROPERLY EXAMINE THE ASSESSEE'S CASE OUT OF THE PURVIEW OF CLAUSE(4) OF EXPLANATION 2 TO SEC. 10A OF T HE ACT SCRUTINY ITA NO.2272/M/09 A.Y:04-05 3 OF THE BASIC RECORDS MAINTAINED BY THE ASSESSEE WAS REQUIRED AND ACCORDINGLY HE SET ASIDE THE ASSESSMENT WITH THE DIRECTION T O THE AO TO EXAMINE THE FACTS IN THE AFORESAID RESPECT AND TAKE DECI SION AS PER LAW AFTER PROVIDING OPPORTUNITY OF BEING HEARD TO THE A SSESSEE. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT THE ASSESSEE IS IN APPEAL BEFORE US CHALLENGING IN ALL THE GROUNDS THAT T HE ORDER PASSED BY THE LD. CIT U/S.263 DESERVES TO BE SET ASIDE AND THE ORDER PASSED BY THE AO BE RESTORED. 4. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSE SSEE AT THE OUTSET SUBMITS THAT IT HAS BEEN STATED BY THE ASSESSEE BEFO RE THE LD. CIT THAT THE POST & COMMUNICATION EXPENSES AND INSURANCE E XPENSES ARE NOT SEPARATELY RECOVERED IN THE INVOICES THEREFORE THE QUESTION OF EXCLUDING POST & COMMUNICATION EXPENSES AND INSURANCE EXPE NSES FROM EXPORT TURNOVER DOES NOT ARISE. HE FURTHER SUBMIT S THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE SPECIA L BENCH OF THE TRIBUNAL IN ITO VS. SAK SOFT LTD. (2009) 313 ITR (AT ) 353 (CHENNAI) (SB)WHEREIN IT HAS BEEN HELD THAT :- EXPENSES ON FREIGHT TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE AR TICLES OR THINGS OR COMPUTER SOFTWARE OUTSIDE INDIA OR EXPENS ES INCURRED IN FOREIGN EXCHANGE IN PROVIDING TECHNICAL SERVICES OUTSIDE INDIA WHICH ARE REQUIRED TO BE E XCLUDED FROM THE EXPORT TURNOVER AS DEFINED IN EXPLANATION 2(III) BELOW SECTION 10B OF THE INCOME TAX ACT 1961 SHOU LD ALSO BE EXCLUDED FROM THE FIGURE OF TOTAL TURNOVER WHILE ITA NO.2272/M/09 A.Y:04-05 4 APPLYING THE FORMULA PRESCRIBED BY SUB-SECTION(4) O F SECTION 10B OF THE ACT. THE RELIANCE WAS ALSO PLACED ON THE DECISION IN CIT VS. LA KSHMI MACHINE WORKS(2007) 290 ITR 667(SC). HE THEREFORE SU BMITS THAT THE ORDER PASSED BY THE LD. CIT BE CANCELLED AND THE OR DER PASSED BY THE AO BE RESTORED. 5. ON THE OTHER HAND THE LD. DR SUPPORTS THE ORDER OF THE LD. CIT. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN MALA BAR INDUSTRIAL CO. LTD. VS CIT (2000)243 ITR 83 (SC) THEIR LORDSHIP S HAVE TAKEN THE VIEW AT PAGE 88 OF 243 ITR THAT THE PHRASE PREJUD ICIAL TO THE INTERESTS OF THE REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED A PREJUD ICIAL TO THE INTERESTS OF THE REVENUE. FOR EXAMPLE WHEN AN INCOME TAX OFFICER A DOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN L OSS OF REVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME TAX OFFICER H AS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME TAX OFFICER IS UNSUSTAINABLE IN LAW. ACCORDING TO THE LD. CIT THE EXPENDITURE RELATING TO POST & COMMUN ICATION AND INSURANCE CHARGES WERE NOT DEDUCTED FROM THE TOTAL TURNO VER TO ARRIVE ITA NO.2272/M/09 A.Y:04-05 5 AT THE EXPORT TURNOVER AS PER PROVISIONS OF SEC.10A. PE R CONTRA THE CLAIM OF THE ASSESSEE IS THAT THE POST & COMMUNICATION AND INSURANCE EXPENSES WERE NOT SEPARATELY RECOVERED IN THE INVOICES A ND HENCE THE QUESTION OF EXCLUDING THESE EXPENSES TO WORK OUT THE EXP ORT TURNOVER DOES NOT ARISE AND IN SUPPORT HE ALSO PLACED SAMPLE COPIE S OF INVOICES BEFORE THE LD. CIT. IN THE ABSENCE OF ANY CONTRARY MA TERIAL PLACED ON RECORD BY THE REVENUE AGAINST THE FACTUAL MATRIX OF T HE CASE SHOWN BY THE ASSESSEE BEFORE THE LD. CIT AND ALSO AT THIS STAGE AN D RESPECTFULLY FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRI BUNAL IN ITO VS. SAK SOFT LTD. (SUPRA) WHEREIN IT HAS BEEN HELD (AT PL ACITUM 53 APPEARING AT PAGE 398 OF THE REPORT) THAT FOR THE ABOVE REASONS WE HOLD THAT FOR THE PURPOSE OF APPLYING THE FORMULA UN DER SUB-SECTION (4) OF SECTION 10B THE FREIGHT TELECOM CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF ARTICLES OR THINGS OR COMPUTER SOFTW ARE OUTSIDE INDIA OR THE EXPENSES IF ANY INCURRED IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICE OUTSIDE INDIA ARE TO BE EXCLUDED BOTH F ROM THE EXPORT TURNOVER AND FROM THE TOTAL TURNOVER WHICH ARE THE NUMERATOR AND DENOMINATOR RESPECTIVELY IN THE FORMULA. THE APPEAL S FILED BY THE DEPARTMENT ARE THUS DISMISSED. WE ARE OF THE VIEW THAT THE ISSUE IS SQUARELY COVERED BY THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL(SUPRA) AND HENCE THE ORDER PASSED BY THE AO IS NOT FOUND TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE I NTERESTS OF THE ITA NO.2272/M/09 A.Y:04-05 6 REVENUE AND ACCORDINGLY WE CANCEL THE ORDER PASSED BY THE LD. CIT U/S.263 AND UPHOLD THE ORDER PASSED BY THE AO. THE GRO UNDS TAKEN BY THE ASSESSEE ARE THEREFORE ALLOWED. 7. IN THE RESULT ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 4.3.2010. SD/- SD/- ( B. RAMAKOTAIAH ) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 4.3.2010. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI. ITA NO.2272/M/09 A.Y:04-05 7 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 17.2.10 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 18.2.10 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 4.3.10 SR.PS/PS 7. FILE SENT TO THE BENCH CLERK 5.3.10 SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER