Date Of Judgment 16-08-2018, Ita v. M/S Mcafee Software (India) Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU| DATED THIS THE 16 DAY OF AUGUST 2018. PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS.JUSTICEK S.SUJATHA I.T.A. No.907/2017 BETWEEN : 1.|PRINCIPAL COMMISSIONBR OF INCOME TAX-4 BMTC COMPLEX, KORMANGALA, BENGALURU. «|THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-4(1)(2) BENGALURU.... APPELLANTS| (BY SRI E.L.SANMATHI, ADV.) AND:| M/s MCAFEE SOFTWARE (INDIA) PVT. LTD.,HMBASSY GOLD LINKBUSINESS PARK, PINE VALLEY|~ FLOOR, OFF. INDIRANAGARINTERMEDIDATE RING ROAD,|BANGALORBE-560071PAN: AABCN 3175H.... RESPONDENT (BY SRI ANKUR PAI, ADV.) THIS INCOME TAX APPEAL IS FILED UNDER SEC.260-A|OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED07.04.2017 PASSED IN IT(TP)A NO.422/BANG/2016, FOR THE.ASSEHKSSMENT YEBEAR 2011-2012 PRAYING TO DECIDE Date of Judgment 16-08-2018, ITA No.907/2017 Principal Commissioner of Income Tax-4 & another Vs. M/s Mcafee Software (India) Pvt. Ltd. FOREGOING QUESTION OF LAW AND/OR SUCH OTHER,QUESTIONS OF LAW AS MAY BE FORMULATED BY THE)HON’BLKE COURT AS DEEMED FIT AND SEI ASIDE THEAPPBRLLATEK ORDER IMPUGNEBED AND B THIS APPEAL COMING ON FOR ADMISSION, THIS DAY,S SUJATHAJ., DELIVERED THE FOLLOWING: JU DGMENT Mr. E.I. Sanmathi, Adv. for Appellant — Revenue_Mr. Ankur Pai,Adv. for Respondent — Assessee. This Appeal is filed by the Revenue purportedlyraising substantial question of law arising from theOrder of the Income Tax Appellate Tribunal, °Bench,Bangalore,1nIT/TP|ANo.422/Bang/2016dated 07.04.2017,relating to the Assessment Year|2011-12. ? The proposed substantial question of lawframed by the Revenue in the Memorandum of Appeal is"as under: | “Whether on the facts and in thecircumstances of the case, the Tribunal 1iscorrect in applying the ratio in the decision ofthe Hon’ble High Court of Karnataka in the| Date of Judgment 16-08-2018, ITA No.907/2017 Principal Commissioner of Income Tax-4 & another Vs. M/s Mcafee Software (India) Pvt. Ltd. 3/5 case of M/s Tata Elxsi Ltd., 349 ITR 98 (Kar.)| when department has filed SLP before the|Hon’ble Apex Court has been filed which is.pending ? 3. Learned counsel for the Appellants-Revenuesubmits that insofar as the aforesaid substantial|question of law is concerned, the same is covered by thedecision of the Hon’ble Apex Court in the case ofCommissioner of Income-tax, Central - III vs. HCLTechnologies Ltd., [2018] 93 Taxmann.com 33(SC). The relevant portion of the judgment of theHon’ble|SupremeCourt1nthe.CaSE€ot HCL|Technologies Ltd. (supra),is quoted below for readyreterence:- “17. The simular nature of controversy, akin|this case, arose before the Karnataka High CourtinCIT v. Tata Elxsi Ltd[2012] 204 Taxman321/17/taxman.com 100/349 ITR 98.The.issue before the Karnataka High Court waswhether the Tribunal was correct in holding that Date of Judgment 16-08-2018, ITA No.907/2017 Principal Commissioner of Income Tax-4 & another Vs. M/s Mcafee Software (India) Pvt. Ltd. while computing relief under Section 10A of the ITAct, the amount of communication expensesShould be excluded from the total turnover if thesame are reduced from the export turnover?|While gwing the answer to the issue, the HighCourt, inter-alia, held that when a particular word|is not defined by the legislature and an ordinarymeaning is to be attributed to it, the said ordinarymeaning is to be in conformity with the context inwhich it is used. Hence, what is excluded from‘export turnover’ must also be excludedfrom ‘totalturnover’, since one of the components of ‘totalturnover’1Sexportturnover.Anyotherinterpretation would run counter to the legislativeintent and would be impermissible. | LSE, XXXXXX while computing relief under Section 10A of the ITAct, the amount of communication expensesShould be excluded from the total turnover if thesame are reduced from the export turnover?|While gwing the answer to the issue, the HighCourt, inter-alia, held that when a particular word|is not defined by the legislature and an ordinarymeaning is to be attributed to it, the said ordinarymeaning is to be in conformity with the context inwhich it is used. Hence, what is excluded from‘export turnover’ must also be excludedfrom ‘totalturnover’, since one of the components of ‘totalturnover’1Sexportturnover.Anyotherinterpretation would run counter to the legislativeintent and would be impermissible. | LSE, XXXXXX 19. In the instant case, if the deductions on|freight,telecommunicationand|insuranceattributable to the delivery of computer softwareunder Section 10A of the IT Act are allowed onlyin Export Turnover but not from the TotalTurnover then, it would give rise to inadvertent,unlawful, meaningless and illogical result whichwould cause grave injustice to the Respondentwhich could have never been the intention of thelegislature. Date of Judgment 16-08-2018, ITA No.907/2017 Principal Commissioner of Income Tax-4 & another Vs. M/s Mcafee Software (India) Pvt. Ltd. 20. Even in common parlance, when theobject of the formula ts to arrive at the profit fromexport business, expenses excluded from exportturnover have to be excluded from total turnoveralso. Otherwise, any other interpretation makesthe formula unworkable and absurd. Hence, weare satisfied that such deduction shall be allowedfrom the total turnover in same proportion aswell”. 4. Having heard the learned counsel for theparties, we are therefore of the opinion that nosubstantial question of law arises in the present case.The appeal filed by the Appellant-Revenue is liable to bedismissed and it isdismissedaccordinglyNo costs. Sd/-.JUDGE. Sd/-.JUDGE.