Date Of Judgment 27-08-2018, Ita v. M/S. Mercedes-Benz Research & Development India Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 27 DAY OF AUGUST 2018. PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI AND THR HON’BLE MRS.JUSTICK S.SUJATHA I.T.A. No.247/2017 BETWEEN : 1.|PR. COMMISSIONER OF | INCOME TAX-lIV BMIC COMPLEX KORAMANGALA, BANGALORE. «|THER DEBEPUTY COMMISSIONOF INCOME TAX, CIRCLE 2(1)OF INCOME TAX, CIRCLE 2(1) BANGALORE. _ APPBLLANTS| (BY SRI. SANMATHI.E.I, ADV.). AND : M/S. MERCEDES-BENZRBSBARCH & DBEVBELOPMENINDIA PVT. LTD.,.(EARLIER KNOWN AS DAIMLERCHRYSLER RESBARCH TRCH.IND. PVT. LTD..,)PINE VALLEY, 3 KFLOOR|AUGUSTA, 5[‘L]KFLOORHMBASSY GOLF LINKSBUSINESS PARKSOFF INTERMEDIATE RING.ROAD, BANGLORE-560 071PAN: AAACD 62618.) _ RBSPONDENT(BY SRI. MALLAHA RAO.K, ADV. FOR SRI.LNAGESWAR RAO,ADV..,) Date of Judgment 27-08-2018, ITA No.247/2017 Pr. Commissioner of Income Tax-IV & Another Vs. M/s. Mercedes-Benz Research & Development India Pvt. Ltd., 2/5 THIS INCOMB TAX APPBAL IS FILED UNDER SECTION|2600-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDERDATED 27.07.2016 PASSSED IN IT(TP)A No.1393/BANG/2013,.FOR THE ASSESSMENT YEAR 2005-06, PRAYING TO DECIDE|THE FOREGOING QUESTION OF LAW AND / OR SUCH OTHER,QUESTIONS OF LAW AS MAY BE FORMULATED BY THE)HON’BLE COURT AS DEEMED FIT. (A) SET ASIDE THE.APPBRLLATEORDERDATHD:27.07.2016PASSED|BYTHEINCOME TAX APPELLATE TRIBUNAL, ‘B’ BENCH, BENGALURU,IN APPEAL PROCEEDINGS NO.IT(TP)A NO.1393/BANG/2013>FOR ASSESSMENT YEAR 2005-06 AS SOUGHIT FOR IN THISAPPEAL; AND TO GRANT SUCH OTHER RELIEF AS DEEMED FIT,IN THER INTBREBST OF JUSTICE THIS APPEAL COMING ON FOR ADMISSION, THIS DAY,S. SUJATHA, J., DELIVERED THE FOLLOWING: JU DGMENT Mr. Sanmathi E.I.,|Adv. for Appellants — Revenue.Mr. Mallaharao K,Adv. forMr. Nageswar Rao,Adv. forRespondent — Assessee. This Appeal is filed by the Revenue purportedlyraising substantial questions of law arising from theOrder of the Income Tax Appellate Tribunal, Bangalore Bench ‘B’, Bangalore, inIT[TP|A No.1393/Bang/2013 dated|2'7.07.201, relating to the Assessment Year2005-06. Date of Judgment 27-08-2018, ITA No.247/2017 Pr. Commissioner of Income Tax-IV & Another Vs. M/s. Mercedes-Benz Research & Development India Pvt. Ltd., 3/5 a2The substantial question of law framed by the Revenue in the Memorandum of Appeal is as under: “Whether, on the facts and circumstances of thecase, the Tribunal is right in law in setting asidethe re-computation of deduction under section1OA of the Act by following the decision of thisHon'ble High Court in the case of CIT v/s. TataElxsi which has not reachedfinality?”| 3.The issue is covered by the decision of theHon’ble Supreme Court in the case ofCommissioner ofIncome-tax, Central -— III vs. HCL Technologies Ltd.,[2018] 93 Taxmann.com 33(SC). 4The relevant portion of the judgment of theHon'blesupremeCourtin.theCaSE€oT|HCL|Technologies Ltd. (supra),is quoted below for readyreference:-. “17. The similar nature of controversy, akinthis case, arose before the Karnataka High CourtinCIT v. Tata Elxsi Ltd. [2012] 204 Taxman|3S21/17/taxman.com 100/349 ITR 98. The issuebefore the Karnataka High Court was whether| Date of Judgment 27-08-2018, ITA No.247/2017 Pr. Commissioner of Income Tax-IV & Another Vs. M/s. Mercedes-Benz Research & Development India Pvt. Ltd., 4/5 the Tribunal was correct in holding that whilecomputing relief under Section 1OA of the IT Act,the amount of communication expenses should beexcluded from the total turnover tf the same arereduced from the export turnoverP While givingthe answer to the issue, the High Court, inter-alia,held that when a particular word is not definedby the legislature and an ordinary meaning is tobe attributed to it, the said ordinary meaning is tobe in conformity with the context in which it isused. Hence, what is excluded from ‘exportturnover’ must also be excluded from ‘totalturnover’, since one of the components of ‘totalturnover’1Sexportturnover.Anyotherinterpretation would run counter to the legislativeintent and would be impermissible. | 1S. XXXXXX 4/5 the Tribunal was correct in holding that whilecomputing relief under Section 1OA of the IT Act,the amount of communication expenses should beexcluded from the total turnover tf the same arereduced from the export turnoverP While givingthe answer to the issue, the High Court, inter-alia,held that when a particular word is not definedby the legislature and an ordinary meaning is tobe attributed to it, the said ordinary meaning is tobe in conformity with the context in which it isused. Hence, what is excluded from ‘exportturnover’ must also be excluded from ‘totalturnover’, since one of the components of ‘totalturnover’1Sexportturnover.Anyotherinterpretation would run counter to the legislativeintent and would be impermissible. | 1S. 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 Respondent Date of Judgment 27-08-2018, ITA No.247/2017 Pr. Commissioner of Income Tax-IV & Another Vs. M/s. Mercedes-Benz Research & Development India Pvt. Ltd., 5/5 which could have never been the intention of thelegislature. 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”. 5.Havingheard|the.learnedcounsels. appearing for the parties, we are therefore of the opinionthat no substantial question of law arises in the presentcase also. The Appeal filed by the Appellants-Revenueis liable to be dismissed and it is dismissed accordingly. —No costs. is liable to be dismissed and it is dismissed accordingly. — PMR Sd/-.JUDGE. Sd/-.JUDGE|