Date Of Judgment 30-08-2018, Ita v. M/S Arm Embedded Technologies Pvt. Ltd., 2/5

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATHKD THIS THR 3 DAY OF AUGUST 2018 PRESENT THR HON’BLE DR.JUSTICKHK VINBET KOTHAR ANT THR HON’BLE MRS.JUSTICE S.SUJATHA| I.T.A. No.140/2018 BETWEEN : 1.THR PR. COMMISSIONEROF INCOME TAX,! FLOOR, BMTC BUILDING|SO KEKIT ROADKORAMANGALA|BBENGALURU — 560 O95.OF INCOME TAX,! FLOOR, BMTC BUILDING|SO KEKIT ROADKORAMANGALA|BBENGALURU — 560 O95. 2.THRE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-11(1), PRESENT ADDRESSCIRCLE-1(1)(1)CIRCLE-1(1)(1) 2 FLOOR, BMTC BUILDING|SO KEKIT ROADKORAMANGALA|BBENGALURU — 560 O95.SO KEKIT ROADKORAMANGALA|BBENGALURU — 560 O95. _ APPBRELLANTS (BY SRI DILIP ADV. FOR SRI.K.V.ARAVIND, ADV.) AND : M/s. ARM EMBEDDED TECHNOLOGIES PVT. LTD.,SALARPURIA HALLMARK, BLOCK-B_LEVEL-HTIM MARATHALLI, SARJAPURBENGALURU — 560 O29.PAN: AAACA 15825. _ RBSPONDENT Date of Judgment 30-08-2018, ITA No.140/2018 The Pr. Commissioner of Income Tax & Another Vs. M/s ARM Embedded Technologies Pvt. Ltd., 2/5 THIS INCOME TAX APPBAL IS FILED UNDER SBKCTION260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER|DATED:24/08/2017 PASSED IN ITA NO.624/BANG/2013, FOR|THE ASSHKHSSMENT YEAR QJOO&8B-2JOO9 VIDE ANNBEXURE-A PRAYER TO 1. FORMULATE THE SUBSTANTIAL QUESTIONSOF LAW STATED ABOVE. 2. ALLOW THE APPEAL AND SET)ASIDE.THREORDERSPASSED,BY|THEINCOME,TAXAPPELLATETRIBUNAL,BENGALURU|IN.ITANO.624/BANG/2013 DATED:24/08/2017 VIDE ANNEXURE-D,CONFIRMINGTHEORDEROFTHRAPPRLLATECOMMISSIONER AND CONFIRM THER ORDER PASSED BY THEDEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1),|BENGALURU. 3. TO PASS SUCH OTHER SUITABLE ORDERS|AS THIS HON'BLKE COURT DBEMS FIT TO GRANT IN THEFACTS AND CIRCUMSTANCES OF THR CASK [IN THEINTEREST OF JUSTICE AND EQUITY. THIS APPEAL COMING ON FORORDERS, LHIS DAY,»s. SUJATHA, ., DELIVERED THE FOLLOWING: JU DGMENT Mr.Dilip Adv. for Mr.K.V.Aravind,Adv. tor Appellants —Revenue. This Appeal is filed by the Revenue purportedly|raising substantial questions of law arising from the Order|of the Income Tax Appellate Tribunal, Bangalore Bench ‘B’,Bangalore,>:IT(TPIANo.624/Bang/2013dated 24.08.2017, relating to the Assessment Year2008-09. oDThe substantial question of law framed by the Revenue in the Memorandum of Appeal is as under: Date of Judgment 30-08-2018, ITA No.140/2018 The Pr. Commissioner of Income Tax & Another Vs. M/s ARM Embedded Technologies Pvt. Ltd., 3/5 “Whether, on the facts and circumstances ofthe case and in law, the Tribunal was right in|allowing relief to assessee on the issue of deduction|under Section IOA of the Income Tax Act, 1961 by|relying upon the decision of this Hon’ble Court in the|case of CIT vs. Tata Elxsi Ltd., (reported in 349 ITR|page 98)P”” 3.The issue is covered by the decision of the)Hon’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’ble Supreme Court in the case of|HCL Technologies Ltd. (supra),1s quoted below for ready reference:-_ “17. The similar nature of controversy, akinthis case, arose before the Karnataka High Court in|CIT v. Tata Elxsit Lt. (2012) 204 Taxman321/17/taxman.com 100/349 ITR 98. The issuebefore the Karnataka High Court was whether the|Tribunal was correct in holding that while computing|relief under Section 10A of the IT Act, the amount ofcommunication expenses should be excluded from)the total turnover if the same are reduced from the|export turnoverr While giving the answer to the|issue, the High Court, inter-alia, held that when a| 4/5 particular word is not defined by the legislature and|an ordinary meaning is to be attributed to it, the said|ordinary meaning is to be in conformity with the|context in which tt is used. Hence, what its excludedfrom ‘export turnover’ must also be excluded from)‘total turnover’, since one of the components of ‘total!turnover’ is export turnover. Any other interpretation|would run counter to the legislative intent and would|be impermissible. — 4/5 particular word is not defined by the legislature and|an ordinary meaning is to be attributed to it, the said|ordinary meaning is to be in conformity with the|context in which tt is used. Hence, what its excludedfrom ‘export turnover’ must also be excluded from)‘total turnover’, since one of the components of ‘total!turnover’ is export turnover. Any other interpretation|would run counter to the legislative intent and would|be impermissible. — TSB. XXXXXX 19. In the instant case, if the deductions onfreight,telecommunicationandInsuranceattributable to the delivery of computer software|under Section 10A of the IT Act are allowed only in|Export Turnover but notfrom the Total Turnover then,|itWould|giveTISEtoinadvertent,unlawful, meaningless and illogical result which would causegrave injustice to the Respondent which could have|never been the intention of the legislature. 20. Even in common parlance, when the objectof the formula is to arrive at the profit from exportbusiness, expenses excluded from export turnover|have to be excluded from total turnover also.Otherwise, any other interpretation makes_ theformula unworkable and absurd. Hence, we aresatisfied that such deduction shall be allowed from|the total turnover in same proportion as well”, Date of Judgment 30-08-2018, ITA No.140/2018 The Pr. Commissioner of Income Tax & Another Vs. M/s ARM Embedded Technologies Pvt. Ltd., 5/5 5)Having heard the learned counsel appearing for|the Appellants-Revenue, we are therefore of the opinion|that no substantial question of law arises in the present)case. 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. SS Sd/-|JUDGE Sd/-|JUDGE