Date Of Judgment 31-08-2018, Ita v. M/S. Arm Embedded Technologies Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 31[ST|]DAY OF AUGUST 2018. PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS.JUSTICEK S.SUJATHA I.T.A. No.142/2018 BETWEEN : 1.THE PR. COMMISSIONEROF INCOME-TAX,OF INCOME-TAX, "[‘T]FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANGALA, BENGALURU 560 O95.) «|THERE DEPUTLY COMMISSIONEOF INCOME-TAX.CIRCLE-11(1), PRESENT ADDRESS—CIRCLE-1(1)(1), 2 FLOOR, ©BMTC BUILDING, 80 FEET ROAD,KORMANGALA,BBENGALURU 560 095._ APPBLLANTS|OF INCOME-TAX.CIRCLE-11(1), PRESENT ADDRESS—CIRCLE-1(1)(1), 2 FLOOR, ©BMTC BUILDING, 80 FEET ROAD,KORMANGALA,BBENGALURU 560 095._ APPBLLANTS| (BY SRI DILIP, ADV. FOR SRI K.V.ARAVIND, ADV.) AND ; M/s. ARM EMBEDDED TECHNOLOGIES PVT. LTD.,.SALARPURIA HALLMARK, BLOCK-B,LEVEL-IT, MARATHALLI, SARJAPUR.BBENGALURU 560 029.PAN: AAACA 1582E.._. RESPONDENT. THIS INCOMB TAX APPBAL IS FILED UNDER SECTION|2600-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDERDATED 24/08/2017, PASSED IN C.O.No.19/BANG/2016, FOR: Date of Judgment 31-08-2018, ITA No.142/2018 The Pr. Commissioner of Income-tax & Another Vs. M/s. ARM Embedded Technologies Pvt. Ltd., 2/5 THE ASSESSMENT YEAR 2008-2009 VIDE ANNEXURE-D,|PRAYING TO: 1. FORMULATE THE SUBSTANTIAL QUESTIONS|OF LAW SIAITBKD ABOVE. 2. ALLOW THER APPEAL AND SASIDE THR ORDERS PASSED BY THR INCOME TAX APPELLATETRIBUNAL, BENGALURU IN C.O.No.19/BANG/2016 DATED24/08/2017 VIDE ANNEXURE-D, CONFIRM THE ORDER OF THEAPPBERELLATK COMMISSIONBR AND CONFIRM THR ORDPASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX,CIRCLE-1(1)(1), BENGALURU. THIS APPEAL COMING ON FOR ORDERS, THIS DAY,|S. SUATHA, J., DELIVERED THE FOLLOWING: JU DGMENT Mr. Dilip,Adv. for Mr. K.V.Aravind,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, Bangalore Bench ‘B’, Bangalore, inC.0O.No.19/BANG/2016=8ITA| No.624/Bang/2013dated24.08.2017, relating to the|Assessment Year.2008-09. ?)The substantial question of law framed bythe Revenue in the Memorandum of Appeal is as under: “Whether, on the facts and circumstances|of the case and in law, the Tribunal was right inallowing relief to assessee on the issue of Date of Judgment 31-08-2018, ITA No.142/2018 The Pr. Commissioner of Income-tax & Another Vs. M/s. ARM Embedded Technologies Pvt. Ltd., 3/5 deduction under section 10A of the Income TaxAct, 1961 by relying upon the decision of thisHon’ble Court in the case of CIT V/s. Tata Elxs1Ltd., [reported in 349 ITR page 98/?”| 3.The issue is covered by the decision of theHon’ble Supreme Court in the case ofCommissioner of Income-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 whetherthe Tribunal was correct in holding that whilecomputing relief under Section IOA of the IT Act,the amount of communication expenses should beexcluded from the total turnover tf the same are.reduced from the export turnoverPr While giving Date of Judgment 31-08-2018, ITA No.142/2018 The Pr. Commissioner of Income-tax & Another Vs. M/s. ARM Embedded Technologies Pvt. Ltd., 4/5 the answer to the issue, the High Court, inter-alia,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. | Date of Judgment 31-08-2018, ITA No.142/2018 The Pr. Commissioner of Income-tax & Another Vs. M/s. ARM Embedded Technologies Pvt. Ltd., 4/5 the answer to the issue, the High Court, inter-alia,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 onfreight,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. 20. Even in common parlance, when theobject of the formula ts to arrive at the profit fromexport business, expenses excluded from export Date of Judgment 31-08-2018, ITA No.142/2018 The Pr. Commissioner of Income-tax & Another Vs. M/s. ARM Embedded Technologies Pvt. Ltd., 5/5 turnover 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.Having heard the learned counsel appearing for the Appellants-Revenue, we are therefore of theopinion that no substantial question of law arises in thepresent 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. NC, Sd/-.JUDGE| Sd/-.JUDGE|