Date Of Judgment 30-08-2018, Ita v. M/S.mccreade Software (Asia) P. Ltd

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.38/2018 BETWEEN : 1.PRINCIPAL COMMISSIONER ©OF INCOME TAX-4|BMTC COMPLEX.KORAMANGALA|BENGALURU|OF INCOME TAX-4|BMTC COMPLEX.KORAMANGALA|BENGALURU| 2.THRE DEPUTY COMMISSIONEROF INCOME TAX, CIRCLE 4(1) (2).BMTC COMPLEX, KORMANGALA|BENGALURU.OF INCOME TAX, CIRCLE 4(1) (2).BMTC COMPLEX, KORMANGALA|BENGALURU. _ APPKRLLANTS (BY SRI E.LSANMATHI, ADV.) | AND : M/s. McCREADE SOFTWARE(ASIA) P. LTD.,NO.811, 23 MAIN, 12 “A?CROSS, 2 PHASEJ.P. NAGARBENGALURU — 560 O78PAN: AAACM 1978R| _ RBSPONDENT RREKEK THIS INCOME TAX APPEAL IS FILED UNDER SECTION2600-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDERDATED: 11.08.2017 PASSED IN ITA NO. 2084/BANG/2016,| Date of Judgment 30-08-2018, ITA No.38/2018 Principal Commissioner of Income Tax-4 & Another Vs. M/s.McCreade Software (Asia) P. Ltd., FOR THE ASSESSMENT YEAR: 2010-2011, PRAYING THISHON BLE COURT TO: DECIDE THE FOREGOING QUESTION|OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW AS MAY|BE FORMULATED BY THR HON BLE COURT AS DEEMED FIT.(B) SET ASIDE THE APPELLATE ORDER DATED: 11.08.2017|PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, ‘'B'BENCH, BANGALORE, IN APPEAL PROCEEDINGS NO. ITA NO.2084/BANG/2016 FOR THE ASSESSMENT YEAR 2010-11 ASSOUGHT FOR IN THIS APPEAL; AND TO GRANT SUCH OTHER|RELIEF AS DEEMED FIT, IN THE INTEREST OF JUSTICE. THIS APPEAL COMING ON FOR ADMISSION, THIS|DAY,S. SUJATHA, J., DELIVERED THE FOLLOWING: JU DGMENT Mr. E.I.Sanmathi,Adv. for 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,B>IT(TPIANo.2084/Bang/2016dated11.08.2017, relating to the Assessment Year201Q-1 1 2 The substantial question of law tramed by theRevenue in the Memorandum of Appeal is as under: “Whether on the facts and circumstances of thecase, the Tribunal is justified in directing theassessing officer to exclude the expenditure in|foreign currency and telecommunication charges both| from the export turnover and the total turnover when|there is no provision in Section 1O0A which requiresthe said expenses to be reduced form the_ totalturnover also?” 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’ble Supreme Court in the case of|HCL TechnologiesLtd. (supra),is quoted below for ready reference:- “17. The similar nature of controversy, akinthis case, arose before the Karnataka High Court in| CIT vp. Tata Elxst 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 computingrelief 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 turnover? While giving the answer to the|issue, the High Court, inter-alia, held that when a|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| 4/5 context in which it is used. Hence, what ts 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. — IS. XXXXXX 4/5 context in which it is used. Hence, what ts 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. — IS. 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,|itwouldgiveTISEtoinadvertent,unlawful,meaningless and tulogical result which would cause|grave 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 the|formula unworkable and absurd. Hence, we are)Satisfied that such deduction shall be allowed from)the total turnover in same proportion as well”, 5]Having heard the learned counsel appearing for the Appellants-Revenue, we are therefore of the opinion| Date of Judgment 30-08-2018, ITA No.38/2018 Principal Commissioner of Income Tax-4 & Another Vs. M/s.McCreade Software (Asia) P. Ltd., 5/5 that no substantial question of law arises in the present) case. The Appeal filed by the Appellants-Revenue is lable|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