Think 3 Designs India Private Limited, Bangalore v. ACIT, Bangalore

ITA 875/BANG/2010 | 2005-2006
Pronouncement Date: 23-12-2010 | Result: Partly Allowed

Appeal Details

RSA Number 87521114 RSA 2010
Assessee PAN MARCH2005O
Bench Bangalore
Appeal Number ITA 875/BANG/2010
Duration Of Justice 5 month(s) 17 day(s)
Appellant Think 3 Designs India Private Limited, Bangalore
Respondent ACIT, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 23-12-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 23-12-2010
Date Of Final Hearing 13-12-2010
Next Hearing Date 13-12-2010
Assessment Year 2005-2006
Appeal Filed On 06-07-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE SMT. P.MADHAVI DEVI JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY ACCOUNTANT MEMBER ITA NOS.692 TO 694(BANG)/2010 (ASSESSMENT YEARS: 2004-05 TO 2006-07) DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE 12(4) BANGALORE. VS. APPELLANT M/S. THINK 3 DESIGNS INDIA PVT. LTD. 3 RD FLOOR AKEMPS NO.28 3 RD MAIN 1 ST CROSS ASHWINI LAYOUT EJIPURA BANGALORE-47. RESPONDENT AND ITA NOS.875 & 876(BANG)/2010 (ASSESSMENT YEARS: 2005-06 & 2006-07) M/S. THINK 3 DESIGNS INDIA PVT. LTD. BANGALORE. VS. APPELLANT ASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE 12(4) BANGALORE. RESPONDENT REVENUE BY: SMT. JACINTA ZIMIK VASHAI. ASSESSEE BY : SHRI KAUSHIK MUKERJEE. O R D E R PER SMT. P.MADHAVI DEVI JM : THE ISSUES RAISED IN THE ASSESSEES APPEALS FOR ASSESSMENT YEAR 2005-06 AND 2006-07 ARE COMMON AND THE ISSUES RAISED IN THE REVENUES APPEAL FOR ASSESSMEN T YEARS ITA 692 TO 694 875 & 876(BANG)/2010 PAGE 2 OF 12 2004-05 TO 2006-07 ARE ALSO COMMON AND THEREFORE TH E APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS CONSOLIDATED AND COMMON ORDER FOR THE SAKE OF CONVE NIENCE. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITS APPEAL FOR ASSESSMENT YEAR 2005-06: THE GROUNDS MENTIONED HEREIN BELOW ARE WITHOUT PREJUDICE TO EACH OTHER 1(A) THAT THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN NOT ALLOWING DEDUCTION UNDER SECTION 10A OF THE INCOME-TAX ACT 1961 (THE ACT) ON EXCHANGE FLUCTUATION GAIN OF RS.27 44 387 ARISING ON ACCOUNT OF EXPORT SALES MADE FROM THE SOFTWARE TECHNOLOGY PARK OF INDIA (STPI) UNIT AND TREATING THE SAME AS SEPARATE INCOME. 1(B) THAT THE LEARNED CIT(A) ERRED IN OBSERVING THAT THE APPELLANT FAILED TO ESTABLISH THAT THE FOREIGN EXCHANGE FLUCTUATION GAIN IS IN CONJUNCTION WITH THE DEVELOPMENT OF SOFTWARE CHARGES. 1(C) THAT THE LEARNED CIT(A) ERRED IN NOT DELETING ADD BACK OF THE EXCHANGE GAIN OF RS.27 44 387 EVEN AFTER THE AO HAVING HELD THAT SUCH GAIN WAS NOT REAL BUT NOTIONAL. 2. THAT THE LEARNED CIT(A) ERRED IN NOT HOLDING THAT THE APPELLANT IS NOT ENGAGED IN THE BUSINESS OF RENDERING TECHNICAL SERVICES OUTSIDE INDIA AND THE EXPENDITURE ON PER DIEM EXPENSES OF RS.37 17 059 TOWARDS EMPLOYEES GOING ABROAD FOR TRAINING PURPOSES IS NOT REQUIRED TO BE REDUCED FROM EITHER EXPORT TURNOVER OR TOTAL TURNOVER FOR COMPUTING DEDUCTION U/S 10A OF THE ACT. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD TO AND/OR TO ALTER AMEND RESCIND MODIFY THE GROUNDS HEREIN ABOVE OR PRODUCE FURTHER DOCUMENTS BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL. ITA 692 TO 694 875 & 876(BANG)/2010 PAGE 3 OF 12 3. AS REGARDS GROUND NO.1 FACTS OF THE CASE ARE TH AT THE ASSESSEE IS AN INDIAN COMPANY WHICH IS ENGAGED IN T HE BUSINESS OF DEVELOPMENT OF SOFTWARE CARRIED OUT FR OM AN UNDERTAKING REGISTERED WITH SOFTWARE TECHNOLOGICAL PARK OF INDIA (STPI) AUTHORITIES OF INDIA AND THE INCOME FR OM THE SAID UNDERTAKING WAS ELIGIBLE FOR DEDUCTION U/S 10A OF T HE INCOME- TAX ACT 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' ]. IN THE RETURN OF INCOME FILED BY THE ASSESSEE THE ASSESSE E HAD CLAIMED DEDUCTION U/S 10A. DURING THE ASSESSMENT P ROCEEDINGS U/S 143(3) THE AO OBSERVED THAT THE ASSESSEE HAS C REDITED AN AMOUNT OF RS.27 44 387/- AS FOREIGN EXCHANGE GAIN. ON VERIFICATION OF RECORDS HE FOUND THAT THIS CLAIM W AS DUE TO FOREIGN EXCHANGE FLUCTUATION IN RELATION TO PROVISI ON. HE FURTHER OBSERVED THAT THE FOREIGN EXCHANGE GAIN ON VALUE OF PAYMENTS TO BE MADE HAS ONLY BEEN RE-STATED BY THE ASSESSEE AS ON 31- 3-2005 BUT NO ACTUAL PAYMENTS OF ANY GAIN HAS BEEN RECEIVED AND THEREFORE HE HELD THAT THE AMOUNT OF FOREIGN EX CHANGE GAIN OF RS.27 44 387/- IS NOT ALLOWABLE AS THERE HAS BEE N NO PAYMENT WHICH HAS BEEN RECEIVED AS ON THE DATE OF R E- STATEMENT OF RECEIPT WHICH IS DUE BUT CONTINUED TO BE REFLECTED IN THE BOOKS OF ACCOUNT OF THE COMPANY. HE HELD THA T THE ASSESSEE-COMPANY HAS RE-VALUED PAYMENT TO BE RECEIV ED IN FOREIGN EXCHANGE AND CLAIMED THE GAIN ON NOTIONAL B ASIS AND THEREFORE IT IS NOT JUSTIFIABLE TO BE INCLUDED IN T HE EXPORT TURNOVER. HE ACCORDINGLY DISALLOWED THE SAME AND R EDUCED IT FROM THE EXEMPT INCOME COMPUTED U/S 10A OF THE ACT. ITA 692 TO 694 875 & 876(BANG)/2010 PAGE 4 OF 12 AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) STATING THAT THE EXCHANGE GAIN IS ON ACCOUNT OF EXP ORTS MADE BY THE ASSESSEE AND THEREFORE IT HAS DIRECT NEXUS WITH THE EXPORT ACTIVITY AND IT SHOULD BE CONSIDERED AS EXPO RT TURNOVER. IN SUPPORT OF HIS CONTENTION HE ALSO PLACED RELIAN CE UPON THE FOLLOWING DECISIONS OF THE TRIBUNAL: I. RENAISSANCE JEWELLERY (P) LTD. VS. ITO (289 ITR 65) II. CHANGEPOND TECHNOLOGIES P LTD. VS. ACIT (119 TTJ 18) III. PRIYANKA GEMS VS. ACIT (94 TTJ 557) IV. SUJATA GROVER VS. DCIT (74 TTJ 347)(DEL) V DISCOVER INDIA TOURS (P) LTD. VS. AO (104 TTJ 298)(DEL) 4. ON APPEAL AFTER CONSIDERING THE ASSESSEES SUBM ISSIONS THE CIT(A) HELD THAT THERE IS NO NEXUS BETWEEN THE ASSESSEES SOFTWARE BUSINESS DEVELOPMENT OF THE ELIGIBLE UNDER TAKING AND THE EARNING OF FOREIGN EXCHANGE GAIN. PLACING RELIA NCE UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F PANDIAN CHEMICALS LTD. VS. CIT (129 TAXMAN 539) HE HELD THAT THE ASSESSEE HAS FAILED TO ESTABLISH THAT THE FOREIGN E XCHANGE FLUCTUATION GAIN IS IN CONJUNCTION WITH THE DEVELOP MENT OF SOFTWARE BUSINESS. HE THEREFORE HELD THAT THE AOS ACTION IN TAXING THE FOREIGN EXCHANGE FLUCTUATION GAIN AMOUNT ING TO RS.27 44 387/- AS PART OF TAXABLE INCOME IS UPHELD. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 5. SHRI KAUSHIK MUKHERJEE LEARNED COUNSEL FOR ASS ESSEE WHILE REITERATING THE SUBMISSIONS MADE BY THE ASSES SEE BEFORE ITA 692 TO 694 875 & 876(BANG)/2010 PAGE 5 OF 12 THE AUTHORITIES BELOW SUBMITTED THAT THE FOREIGN EX CHANGE GAIN IS ONLY ON ACCOUNT OF EXPORT RECEIPT OF THE ASSESSE E FROM THE EXPORT OF SOFTWARE AND THEREFORE IT IS PART OF THE EXPORT TURNOVER. HE PLACED RELIANCE UPON THE DECISIONS CIT ED BY HIM BEFORE THE CIT(A). SMT. JACINTA ZIMIK VASHAI LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND SUPPORTED THE OR DERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE INCOME TO BE EXEMPT U/S 10A SHOULD HAVE BEEN DERIVED DIRECTLY FROM THE BUSINESS OF THE UNDERTAKING AND AS THE FOREIGN EXCHANGE GAIN IS NOT FROM THE BUSINESS OF EXPORT OF COMPUTER SOFTWARE IT IS NOT TO BE INCLUDED IN THE EXPORT TURNOVER AND IS NOT EXEMPT U /S 10A OF THE ACT. 6. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD W E FIND THAT THE AO HAS DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE AMOUNT HAS NOT BEEN RECEIVED BY THE ASSESS EE IN FOREIGN EXCHANGE AND THE ASSESSEE HAS ONLY REVALUED THE PROBABLE RECEIPTS AS ON 31 ST MARCH 2005 ON A NOTIONAL BASIS WITHOUT ACTUAL RECEIPT. WE FIND THAT THE CIT(A) HA S NOT CONSIDERED THIS ISSUE AT ALL. HE WENT ON THE PRESUM PTION THAT THE ASSESSEE IS CHALLENGING THE ORDER OF THE AO ON THE GROUND THAT HE HAS NOT ACCEPTED THE FOREIGN EXCHANGE GAIN AS PART OF EXPORT TURNOVER. THE CIT(A) HAS HOWEVER UPHELD THE FINDING OF THE AO. ALL THE DECISIONS RELIED UPON BY THE ASSES SEE ARE TO THE EFFECT THAT THE FOREIGN EXCHANGE GAIN ON EXPORT OF GOODS AND ITA 692 TO 694 875 & 876(BANG)/2010 PAGE 6 OF 12 ARTICLES IS ALSO PART OF THE EXPORT TURNOVER. THE FACTOR TO BE CONSIDERED BY US IN THIS APPEAL IS WHETHER THE GAIN ON REVALUATION OF THE RECEIVABLE FOREIGN EXCHANGE ALSO FORMS PART OF THE EXPORT TURNOVER WITHOUT ACTUAL RECEIPT. THE LEARNED COUNSEL FOR ASSESSEE HAS NOT MADE ANY SUBMISSIONS O N THIS ISSUE NOR HAS HE BROUGHT ANY EVIDENCE ON RECORD TO SHOW THAT THIS FOREIGN EXCHANGE GAIN IS ON ACTUAL RECEIPT OF EXPORT PROCEEDS. AS DEFINED UNDER CLAUSE (IV) TO EXPLANATION 2 TO SE CTION 10A OF THE ACT EXPORT TURNOVER MEANS THE CONSIDE RATION IN RESPECT OF EXPORT BY THE UNDERTAKING OF ARTICLES OR THINGS OR COMPUTER SOFTWARE RECEIVED IN OR BROUGHT INTO IND IA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE IN ACCORDA NCE WITH SUB-SECTION (3) BUT DOES NOT INCLUDE FREIGHT TELE COMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY O F THE ARTICLES OR THINGS OR COMPUTER SOFTWARE OUTSIDE INDIA OR EXP ENSES IF ANY INCURRED IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICES OUTSIDE INDIA. THUS IT CAN BE SEEN THAT T HE CONSIDERATION HAS TO BE RECEIVED OR BROUGHT INTO IN DIA TO BE INCLUDED IN THE EXPORT TURNOVER. BUT IN THE CASE BE FORE US THE AO HAS CLEARLY BROUGHT OUT THAT THIS GAIN HAS NOT B EEN RECEIVED OR BROUGHT INTO INDIA. IN VIEW OF THE SAME WE RES TORE THE ORDER OF THE AO TO THE EFFECT THAT IT IS NOT INCLUD IBLE IN THE EXPORT TURNOVER. 7. AS REGARDS THE SECOND GROUND OF APPEAL BRIEF FA CTS OF THE CASE ARE THAT THE ASSESSEE HAS INCURRED AN EXPE NDITURE OF ITA 692 TO 694 875 & 876(BANG)/2010 PAGE 7 OF 12 RS.37 17 059/- FOR THE ASSESSMENT YEAR 2005-06 AND AN AMOUNT OF RS.40 42 696/- FOR THE ASSESSMENT YEAR 20 06-07 IN FOREIGN CURRENCY ON ACCOUNT OF PER DIEM EXPENSES IN RELATION TO EMPLOYEES SENT ABROAD TO THE HOLDING COMPANY FOR TH E PURPOSE OF THEIR TRAINING. THE AO DISALLOWED THE SAME HOLDI NG IT TO BE EXPENDITURE INCURRED TOWARDS PROVIDING TECHNICAL SE RVICES OUTSIDE INDIA INCURRED IN FOREIGN EXCHANGE AND HE R EDUCED IT FROM THE EXPORT TURNOVER. 8. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(A) SUBMITTING THAT ITS BUSINESS COMPRISES O F DEVELOPING SOFTWARE IN INDIA ON BEHALF OF ITS HOLDING COMPANY ABROAD AND THEREFORE THE ASSESSEES EMPLOYEES WERE REQUIRED TO BE TRAINED IN THE HOLDING COMPANY AND THEY WERE NOT CARRYING O UT ANY TECHNICAL SERVICES DURING THEIR VISIT OUTSIDE INDIA . THUS ACCORDING TO HIM THE EXPENDITURE INCURRED ON THEIR TRAINING NEED NOT BE REDUCED FROM THE EXPORT TURNOVER. IN S UPPORT OF HIS CONTENTION HE PLACED RELIANCE UPON THE FOLLOWIN G DECISIONS: I. INFOSYS TECHNOLOGIES LTD . (ITA NOS.50 793 TO 795 742 AND 732 TO 734/BANG/2001) II. MPHASIS LTD. VS. ACIT (ITA NO.884/BANG/2007) 9. THE CIT(A) HOWEVER HELD THAT THIS EXPENDITURE IS TO BE REDUCED FROM THE TOTAL TURNOVER ALSO. AGGRIEVED T HE ASSESSEE IS IN APPEAL BEFORE US. 10. LEARNED COUNSEL FOR ASSESSEE WHILE REIT ERATING THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AUTHORI TIES BELOW ITA 692 TO 694 875 & 876(BANG)/2010 PAGE 8 OF 12 SUBMITTED THAT THE EMPLOYEES HAVE BEEN SENT FOR TRA INING ABROAD AND THE EXPENDITURE INCURRED ON THEIR TRAINI NG IN FOREIGN EXCHANGE IS TO BE INCLUDED IN THE EXPORT TURNOVER. IN THE ALTERNATIVE LEARNED COUNSEL FOR ASSESSEE SUBMITTED THAT EVEN IF THE FINDING OF THE AO IS TO BE ACCEPTED THAT THE EM PLOYEES OF THE ASSESSEE WERE RENDERING TECHNICAL SERVICES OUTS IDE INDIA THEN THE SAME ALSO IS ALLOWABLE IN VIEW OF EXPLANAT ION 3 TO SUB- SECTION (8) OF SECTION 10A ACCORDING TO WHICH TECH NICAL SERVICES PROVIDED BY THE ASSESSEE OUTSIDE INDIA FOR DEVELOPM ENT OF COMPUTER SOFTWARE AS SUBSCRIPTIONS OF THE CLIENTS C OME UNDER THE DEFINITION OF ONSITE DEVELOPMENT OF COMPUTER IN CLUDING SERVICES FOR DEVELOPMENT OF SOFTWARE OUTSIDE INDIA AND HENCE EXPENSES INCURRED ON SALARY TRAINING AND OTHER PER QUISITES OF STAFF SHALL BE INCLUDED IN THE EXPORT TURNOVER OF T HE ASSESSEE. IN SUPPORT OF HIS CONTENTION HE PLACED RELIANCE UPON THE DECISION OF THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF CHANGEPOND TECHNOLOGIES (P) LTD. VS. ACIT (119 TTJ (CHENNAI)18). A COPY OF THE SAID ORDER IS ALSO PLACED BEFORE US. LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND SUBMITTED THAT THE ASSESSEE HAS STATED THAT THIS IS EXPENDITURE INCURRED BY THE ASSESSEE ON TRAINING OF ITS EMPLOYE ES ABROAD AND THEREFORE IT IS CLEAR THAT THE EXPENDITURE IS I NCURRED IN FOREIGN EXCHANGE OUTSIDE INDIA AND THEREFORE DOES N OT FALL WITHIN THE NATURE OF TURNOVER. SHE SUBMITTED THAT THE CLA IM OF THE ASSESSEE THAT THE EXPORT TURNOVER IS COMPUTED ON TH E COST + ITA 692 TO 694 875 & 876(BANG)/2010 PAGE 9 OF 12 MARK UP BASIS CANNOT BE ACCEPTED WITHOUT THERE BEIN G ANY PROPER PROOF AND EVIDENCE TO THIS EFFECT. 11. HAVING HEARD BOTH THE PARTIES AND HAVING CONSI DERED THE RIVAL CONTENTIONS WE FIND THAT THE ASSESSEES CLAIM HAS ALWAYS BEEN THAT THE EXPENDITURE IS INCURRED ON TRA INING OF ITS PERSONNEL ABROAD. IT IS THE FINDING OF THE AO THAT THESE EMPLOYEES HAVE RENDERED TECHNICAL SERVICES OUTSIDE INDIA AND THE CIT(A) HAS ALSO UPHELD THIS FINDING OF THE AO B UT HE HAS ONLY DIRECTED THE AO TO EXCLUDE THE SAME FROM THE TOTAL TURNOVER ALSO. AS IS EVIDENT FROM THE INVITATION LETTER FIL ED BY THE ASSESSEE AT PAGES 7 TO 10 OF THE PAPER BOOK THE EM PLOYEES HAVE BEEN INVITED TO VISIT THE FOREIGN COMPANY ONLY TO UNDERGO ADVANCED TRAINING ON USE OF THEIR SOFTWARE AND ALSO HAVE DISCUSSIONS WITH THEIR RESEARCH AND DEVELOPMENT ENG INEERS ON THE PROJECTS THAT ARE TO BE SUPPORTED IN BANGALORE. THEREFORE IT COULD BE SAID WITHOUT ANY DOUBT THAT THE EMPLOYEES HAVE NOT RENDERED ANY TECHNICAL SERVICES OUTSIDE INDIA AND T HEREFORE WE ARE OF THE OPINION THAT THE FINDING OF THE AO AS WE LL AS THE CIT(A) ON THIS ISSUE IS NOT CORRECT. COMING TO THE ARGUMENT OF THE ASSESSEE THAT THE EXPENDITURE ON THE TRAINING O F ITS EMPLOYEES IS PART OF THE COST OF DEVELOPMENT OF SOF TWARE AND THEREFORE IT HAS TO BE INCLUDED IN THE EXPORT TURNO VER IS CONCERNED WE FIND THAT THIS IS THE EXPENDITURE INC URRED BY THE ASSESSEE AND THE ASSESSEE BEING 100% EOU WITH NO IN DIGENOUS DEVELOPMENT OF SOFTWARE IT COULD BE SAID THAT THIS EXPENDITURE IS TOWARDS THE DEVELOPMENT OF SOFTWARE AND ITS EXPO RT. SUCH ITA 692 TO 694 875 & 876(BANG)/2010 PAGE 10 OF 12 BEING THE CASE IT HAS TO BE INCLUDED AS PART OF TH E EXPORT TURNOVER PROVIDED THE ASSESSEE IS COMPUTING THE EXP ORT TURNOVER ON THE COST + MARK UP BASIS. THEREFORE W E DEEM IT FIT AND PROPER TO REMIT THIS ISSUE TO THE FILE OF THE A O ONLY FOR THE PURPOSE OF VERIFYING AS TO HOW THE ASSESSEE IS COMP UTING EXPORT TURNOVER. IF IT IS FOUND THAT THE EXPORT TURNOVER IS COMPUTED ON THE BASIS OF COST + MARK UP THEN THIS AMOUNT IS TO BE INCLUDED AS PART OF THE COST AND CONSEQUENTLY AS PART OF EXP ORT TURNOVER AND ALSO TOTAL TURN OVER. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 12. IN THE RESULT THE ASSESSEES APPEAL IS PARTLY ALLOWED. 13. AS THE GROUNDS OF APPEAL FOR ASSESSMENT YEAR 2 006- 07 ARE ALSO THE SAME THE APPEAL FOR ASSESSMENT YEA R 2006-07 IS ALSO PARTLY ALLOWED. 14. COMING TO THE REVENUES APPEALS WE FIND THAT THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL FOR THE ASSESSMENT YEAR 2004-05(ITA NO.692/BANG/2010): 1. THE ORDER OF THE LD.CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. THE CIT(A) HAS ERRED IN LAW IN DIRECTING THE ASSESSING OFFICER TO EXCLUDE TELECOMMUNICATION EXPENSES OF RS.35 47 840/- FOR DELIVERY OF SOFTWARE FROM TOTAL TURNOVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 10A OF THE INCOME- TAX ACT 1961. ITA 692 TO 694 875 & 876(BANG)/2010 PAGE 11 OF 12 3. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING IT IS PRAYED THAT THE ORDER OF THE CIT(A) IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 15. BRIEF FACTS OF THE CASE ARE THAT WHILE EXAMININ G THE COMPUTATION OF EXPORT TURNOVER AND THE TOTAL TURNOV ER FOR THE PURPOSE OF ALLOWING DEDUCTION U/S 10A OF THE ACT T HE AO OBSERVED THAT THE TELECOMMUNICATION CHARGES AND THE INSURANCE EXPENSES HAVE NOT BEEN REDUCED FROM THE EXPORT TURN OVER. HE ACCORDINGLY REDUCED THE SAME BY APPLYING THE PROVI SIONS OF EXPLANATION 2(IV) TO SECTION 10A OF THE ACT. ON APP EAL THE CIT(A) CONFIRMED THE ORDER OF THE AO. BUT HOWEVER FOLLOWING VARIOUS JUDICIAL DECISIONS DIRECTED THE AO TO REDU CE THE SAME FROM THE TOTAL TURNOVER ALSO. AGGRIEVED BY THE REL IEF GIVEN BY THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 16. HAVING HEARD BOTH THE PARTIES AND HAVING GONE THROUGH THE MATERIAL ON RECORDS WE FIND THAT THE I SSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY VARIOUS DECISI ONS WHICH HAVE BEEN FOLLOWED BY THE CIT(A) INCLUDING THE DECI SION OF THE SPECIAL BENCH IN THE CASE OF ITO VS. SAK SOFT LTD. (313 ITR 353). LEARNED DEPARTMENTAL REPRESENTATIVE HAD SUBM ITTED THAT THE DEPARTMENT HAS NOT ACCEPTED THIS DECISION AND H AS FILED FURTHER APPEAL BEFORE THE HONBLE HIGH COURT OF MAD RAS. HOWEVER HAVING REGARD TO THE FACT THAT THIS DECISI ON HAS NOT BEEN SET ASIDE BY THE HIGHER JUDICIARY WE ARE BOUN D TO FOLLOW THE DECISION OF THE SPECIAL BENCH AND ALSO OTHER CO -ORDINATE ITA 692 TO 694 875 & 876(BANG)/2010 PAGE 12 OF 12 BENCHES. THEREFORE AS THE CIT(A)S ORDER IS CONSO NANCE WITH THE JUDICIAL DECISIONS ON THE ISSUE WE DO NOT SEE ANY REASON TO INTERFERE WITH THE SAME. 17. IN THE RESULT THE REVENUES APPEAL IS DISMISS ED. 18. AS THE GROUNDS OF APPEAL FOR ASSESSMENT YEARS 2005- 06 AND 2006-07 IN THE REVENUES APPEALS (ITA NOS.69 3 & 694/BANG/2010) ARE ALSO ON THE SAME ISSUE FOR THE DETAILED REASONS GIVEN ABOVE THE APPEALS OF THE REVENUE FOR THESE YEARS ARE ALSO DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD DECEMBER 2010 SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (SMT.P.MADHAVI DEVI) JUDICIAL MEMBER PLACE : BANGALORE DATED: 23 RD DECEMBER 2010 EKS COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) CONCERNED 4. CIT 5. DR ITAT BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT BANGALORE