ITO 2(1)(3), MUMBAI v. E-CLERX SERVICES LTD, MUMBAI

ITA 5797/MUM/2009 | 2006-2007
Pronouncement Date: 22-10-2010 | Result: Dismissed

Appeal Details

RSA Number 579719914 RSA 2009
Assessee PAN AAACE7932L
Bench Mumbai
Appeal Number ITA 5797/MUM/2009
Duration Of Justice 11 month(s) 23 day(s)
Appellant ITO 2(1)(3), MUMBAI
Respondent E-CLERX SERVICES LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 22-10-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted I
Tribunal Order Date 22-10-2010
Date Of Final Hearing 20-10-2010
Next Hearing Date 20-10-2010
Assessment Year 2006-2007
Appeal Filed On 30-10-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH MUMBAI. BEFORE SHRI R.V.EASWAR PRESIDENT AND SHRI A.L. GEH LOT AM I.T.A.NO.5797/MUM/2009 (ASSESSMENT YEAR: 2006-07) THE INCOME TAX OFFICER 2(1)(3) R.NO.553 5 TH FLOOR AAYAKAR BHAVAN M.K.MARG MUMBAI-400 020. VS. E-CLERX SERVICES LTD. 29 BANK STREET 1 ST FLOOR FORT MUMBAI-400 023. PAN:AAACE7932L (APPELLANT) (RESPONDENT) APPELLANT BY : MR. A.P.SINGH CIT DR RESPONDENT BY : MR. BIRON GABHAWALA O R D E R PER R.V.EASWAR PRESIDENT: THE FOLLOWING GROUNDS HAVE BEEN RAISED BY THE DEPARTMENT IN THIS APPEAL:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN ALLOWING R ELIEF TO THE ASSESSEE TO THE EXTENT IMPUGNED ON THE GROUNDS THAT - 1. THE ORDER OF THE CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN DIRECTING TO INCLUDE THE EXPENSES OF RS.4 84 98 022/- BEING EXPENSES ON ACCOUNT OF INSURANCE EXPENSES TELECOMMUNICATION CHARGES AND PROFESSIONAL EXPENSES FROM THE EXPORT TURNOVER WHICH IS IN CONTRAVENTION OF THE PROVISIONS OF THE CLAUSE (IV) OF EXPLANATION 2 TO SECTION 10A. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN DELETING THE EXCLUSION OF THE AFOREMENTIONED EXPENSES FROM THE TOTAL TURNOVER BY RELYING UPON THE DECISION IN THE CASE OF SUDERSHAN CHEMICAL INDUSTRIES LTD. 245 ITR 769(BOM) WHICH IS ON THE ISSUE OF DEDUCTION U/S.80HHC WHILE AS THE CASE OF THE ASSESSEE IS WITH REFERENCE TO THE EXEMPTION OF PROFITS U/S.10A AND CANNOT BE TAKEN AS A COROLLARY OF PROVISIONS OF SECTION 10A. ITA NO.5797/M/09 2 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN RELYING UPON THE DECISION OF ITAT CHENNAI D SPECIAL BENCH IN THE CASE OF SAK SOFT LTD. AS REPORTED IN 20 DTR 514 IN VIEW OF THE FACT THAT THE DEPARTMENT HAS NOT ACCEPTED THE SAID DECISION WHICH IS IN CONTRAVENTION OF THE IDENTICAL DEFINITION OF EXPORT TURNOVER IN SECTION 10B OF THE I.T.ACT AND HAS FILED AN APPEAL UNDER SECTION 260A AGAINST THE DECISION BEFORE THE HIGH COURT. 2. THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGE D IN INFORMATION TECHNOLOGY BUSINESS. IT CLAIMED EXEMPTI ON OF THE BUSINESS INCOME UNDER SECTION 10A OF THE INCOME TAX ACT. WHILE EXAMINING THE CLAIM THE ASSESSING OFFICER IN VOKED EXPLANATION 2(IV) TO THE SECTION WHICH DEFINED EX PORT TURNOVER AND EXCLUDED THE FOLLOWING ITEMS FROM THE EXPORT TU RNOVER:- I) INSURANCE EXPENSES RS. 6 25 265 II) INTERNET CHARGES RS. 45 99 876 III)PROFESSIONAL FEES RS.3 87 27 803 IV)TELEPHONE EXPENSES RS. 45 45 078 AFTER EXCLUDING THE AFORESAID ITEMS FROM THE EXPORT TURNOVER THE ASSESSING OFFICER COMPUTED THE EXPORT TURNOVER AT RS.39 27 70 774/- AND THE TOTAL TURNOVER AT RS.44 1 2 68 796/- AND RECOMPUTED THE CLAIM FOR EXEMPTION UNDER SECTIO N 10A AT RS.21 38 98 380/- AS AGAINST THE ASSESSEES CLAIM O F RS.24 03 09 837/-. THE ASSESSEES CLAIM WAS BASED O N THE PREMISE THAT SINCE IT IS A 100% EXPORTER OF COMPUTE R SOFTWARE BOTH THE EXPORT TURNOVER AND THE TOTAL TURNOVER FIG URES ARE THE SAME. HOWEVER THE ASSESSING OFFICER DID NOT ACCEP T THE CLAIM AND AS NOTED ABOVE EXCLUDED THE AFORESAID FOUR ITEM S FROM THE EXPORT TURNOVER BY INVOKING EXPLANATION 2(IV) BELO W SECTION 10A. 3. THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) A ND CONTENDED THAT AFTER THE AFORESAID FOUR ITEMS ARE E XCLUDED FROM ITA NO.5797/M/09 3 THE EXPORT TURNOVER THEY WILL ALSO HAVE TO BE EXCL UDED FROM THE TOTAL TURNOVER ON THE BASIS OF THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SUDARSHAN CHEMICALS INDUSTRIES LTD. (2000) 245 ITR 769. IN OTHER WORDS IT WAS CONTENDED BY THE ASSESSEE THAT WHILE ASCERTAINING T HE PROFITS DERIVED FROM THE EXPORT OF COMPUTER SOFTWARE AS PER SUB-SECTION 4 OF SECTION 10A IF CERTAIN ITEMS ARE TO BE EXCLUD ED FROM THE EXPORT TURNOVER BY VIRTUE OF EXPLANATION 2(IV) THO SE ITEMS HAVE ALSO TO BE EXCLUDED FROM THE TOTAL TURNOVER SINCE B OTH THE NUMERATOR AND DENOMINATOR IN THE FORMULA PRESCRIBED BY SUB- SECTION (IV) SHOULD CONTAIN ONLY THE SAME ELEMENTS. 4. THE CIT(A) ACCEPTED THE ASSESSEES CONTENTION IN THE FOLLOWING WORDS:- 4. I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE AND I FIND FORCE IN THE ARGUMENT OF THE AUTHORISED REPRESENTATIVE THAT THE TOTAL TURNOVER OF THE APPELLANT IS TO BE EXCLUDED BY THE EXPENSES OF INSURANCE INTEREST PROFESSIONAL FEES AND TELEPHONE EXPENSES AS DECIDED IN THE CASE OF CIT VS . SUDARSHAN CHEMICAL INDUSTRIES LTD. 245 ITR 769 AND CONFIRMED BY THE SUPREME COURT IN THE CASE OF LAKSH MI MACHINE WORKS 290 ITR 667(SC). EVEN THE SPECIAL BENCH OF ITAT. CHENNAI IN THE CASE OF SAK SOFT LTD . REPORTED IN ITA NO.691 OF 1953/MAD/2007 DATED 6 TH MARCH 2009 HAS HELD THAT IF CERTAIN EXPENSES ARE EXCLUDED FROM EXPORT TURNOVER THEN THE SAME SHOULD ALSO BE EXCLUDED FROM TOTAL TURNOVER. HENCE THE ASSESSING OFFICER IS DIRECTED TO EXCLUDE THE EXPENS ES MENTIONED ABOVE FOR COMPUTATION OF EXPORT TURNOVER AND TOTAL TURNOVER FOR THE PURPOSE OF DEDUCTION U/S.10A. THIS GROUND OF APPEAL IS ALLOWED. HENCE THE PRESENT APPEAL. 5. WE HAVE CONSIDERED THE FACTS AND THE RIVAL CONTE NTIONS. THE LEARNED CIT DR WHILE AGREEING THAT THE ISSUE N OW STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF T HE SPECIAL BENCH CHENNAI IN THE CASE OF SAK SOFT LTD. REPORT ED IN (2009) ITA NO.5797/M/09 4 20 DTR 514 SUBMITTED THAT THE DEPARTMENT HAS NOT A CCEPTED THE SAID ORDER AND HAS FILED AN APPEAL UNDER SECTIO N 260A BEFORE THE HIGH COURT. THE SPECIAL BENCH DECISION H AS BEEN FOLLOWED BY THE CIT(A) WHICH IS TO THE EFFECT THAT FOR PURPOSES OF SECTION 10B WHICH IS SUBSTANTIALLY SIMILAR TO SECT ION 10A WHATEVER ITEMS ARE EXCLUDED FROM THE EXPORT TURNOV ER BECAUSE OF THE DEFINITION IN EXPLANATION 2(IV) HAVE ALSO T O BE EXCLUDED FROM THE TOTAL TURNOVER WHICH EXPRESSION HAS NOT B EEN DEFINED IN THE SECTION. THE SPECIAL BENCH HAS CONSIDERED TH E RELEVANT STATUTORY PROVISIONS AND THE AUTHORITIES AND HAS CO ME TO THIS CONCLUSION. RESPECTFULLY FOLLOWING THE ORDER OF TH E SPECIAL BENCH WE UPHOLD THE DECISION OF THE CIT(A) DIRECTI NG THE ASSESSING OFFICER TO EXCLUDE THE FOUR ITEMS OF EXPE NSES FROM THE COMPUTATION OF BOTH THE EXPORT TURNOVER AND THE TOT AL TURNOVER FOR THE PURPOSE OF ALLOWING DEDUCTION UNDER SECTION 10A. 6. THE APPEAL OF THE DEPARTMENT IS ACCORDINGLY DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF OCTOBER 2010. SD/- ( A.L. GEHLOT ) SD/- ( R.V.EASWAR ) ACCOUNTANT MEMBER PRESIDENT MUMBAI DATED 22 ND OCTOBER 2010. SOMU COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-MC-II MUMBAI. 4. THE CIT(A)-II MUMBAI 5. THE DR I BENCH /TRUE COPY/ BY ORDE R ASSTT. REGISTRAR I.T.A.T MUMBAI