Date Of Judgment 27-08-2018, Ita v. M/S. Scancafe Digital Solutions 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 ANT) THR HON’BLE MRS.JUSTICEK S.SUJATHA I.T.A. No.885/2017 BETWEEN : 1.PR. COMMISSIONER OFINCOME TAX-6BMTC COMPLEX.INCOME TAX-6BMTC COMPLEX. KORMANGALA BANGALORE.» «|INCOME TAX OFFICIER>WARD-6(1)(1), BANGALORE. _ APPBLLANTS| (BY SRI. SANMATHI.E.I, ADV.) AND : M/s. SCANCAFEDIGITAL SOLUTIONS PVT. LTD.GROUND FLOOR, NELLRAO TOWERS, PLOTNo.1138, ROAD No.03HPIP PHASE-1WHITERFIELD MAIN ROADBBRENGALURU-560 06PAN: AAKCS5398BE. _ RBSPONDENT THIS INCOMB TAX APPBAL IS FILED UNDER SECTION|2600-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDERDATED 12.04.2017 PASSSED IN IT(TP)A No.450/BANG/2015,_ Date of Judgment 27-08-2018, ITA No.885/2017 Pr. Commissioner of Income Tax-6 & Another Vs. M/s. Scancafe Digital Solutions Pvt. Ltd., 2/5 FOR THE ASSKHSSMENT YEAR 2010-2011 PRAYING TO DECIDETHE FOREGOING QUESTION OF LAW AND / OR SUCH OTHER,QUESTIONS OF LAW AS MAY BE FORMULATED BY THEHON’BLKEK COURT AS DBBMBD FIT AND SBT ASIDKBR APPBRLLATEORDERDATED: 12.04.2017PASSED)BYTHEINCOME TAX APPELLATE TRIBUNAL, ‘B’ BENCH, BENGALURU,IN APPEAL PROCEEDINGS NO.IT(TPJA NO.490/BANG/2015 FOR:ASSESSMENT YEAR 2010-11, AS SOUGHT FOR IN THIS APPEAL;AND TO GRANT SUCH OTHER RELIEF AS DEEMED FIT, IN THEINTKBREST OF JUSTICE. THIS APPEAL COMING ON FOR ADMISSION, THIS DAY,S. SUJATHA, J., DELIVERED THE FOLLOWING: JU DBiGMENT Mr. Sanmathi E.I.,|Adv. for Appellants — Revenue. This Appeal is filed by the Revenue purportedlyraising substantial questions of law arising from theOrder of the Income Tax Appellate Tribunal, BangaloreBench ‘B’, Bangalore, inIT[TP|A No.450/Bang/2015 dated|12.04.2017, relating to the Assessment Year2010-11. 2.The substantial question of law framed by the Revenue in the Memorandum of Appeal is as under: “Whether on the facts and in the circumstancesof the case, the Tribunal is right in law indirecting the assessing officer to exclude the Date of Judgment 27-08-2018, ITA No.885/2017 Pr. Commissioner of Income Tax-6 & Another Vs. M/s. Scancafe Digital Solutions Pvt. Ltd., 3/5 expenses deducted from export turnover and fromtotal turnover also where as there is no suchexplicit provision of the Act to do soP””| 3.The issue is covered by the decision of theHon’ble Supreme Court in the case of|Commissioner ofIncome-tax, Central -— III vs. HCL Technologies Ltd.,[2018] 93 Taxmann.com 33(SC). 4The relevant portion of the judgment of theHon ’bleSupremeCourt1nthe.CASEoT HCL|Technologies Ltd. (supra),is quoted below for readyreference: - “17. The simular nature of controversy, akin|this 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 whetherthe Tribunal was correct in holding that while|computing relief under Section 10A of the IT Act,the amount of communication expenses should be|excluded from the total turnover if the same are.reduced from the export turnoverP While gwing|the answer to the issue, the High Court, inter-alia, Date of Judgment 27-08-2018, ITA No.885/2017 Pr. Commissioner of Income Tax-6 & Another Vs. M/s. Scancafe Digital Solutions Pvt. Ltd., 4/5 held that when a particular word is not definedby the legislature and an ordinary meaning 1s 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. | LSE, XXXXXX Date of Judgment 27-08-2018, ITA No.885/2017 Pr. Commissioner of Income Tax-6 & Another Vs. M/s. Scancafe Digital Solutions Pvt. Ltd., 4/5 held that when a particular word is not definedby the legislature and an ordinary meaning 1s 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. | 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 wulogical result whichwould cause grave injustice to the Respondentwhich could have never been the intention of thelegislature. 20. Even in common parlance, when the|object of the formula is to arrive at the profit fromexport business, expenses excluded from exportturnover have to be excluded from total turnover Date of Judgment 27-08-2018, ITA No.885/2017 Pr. Commissioner of Income Tax-6 & Another Vs. M/s. Scancafe Digital Solutions Pvt. Ltd., 5/5 also. 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.Having heard the learned counsel appearing for the Appellants-Revenue, we are therefore of theopinion that no substantial question of law arises in the present case also. The Appeal filed by the Appellants-|Revenue is liable to be dismissed and it is dismissed|accordingly. No costs. Copy of this Order be sent to the Respondent-Assessee forthwith. PMR Sd/-.JUDGE. Sd/-.JUDGE|