1/6 IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 13th DAY OF AUGUST 2018 PRESENT THE HON'BLE Dr.JUSTICE VINEET KOTHARI AND THE HON'BLE Mrs.JUSTICE S.SUJATHA [CASE NUMBER] BETWEEN: 1. THE COMMISSIONER OF INCOME-TAX LTU, JSS TOWERS, BSK III STAGE BENGALURU-560 085. 2. THE DEPUTY COMMISSIONER OF INCOME TAX LTU, JSS TOWERS, BSK III STAGE BENGALURU-560 085. APPELLANTS (By Mr. K.V. ARAVIND, ADV.) AND: M/S. INTEL TECHNOLOGY INDIA PVT. LTD., No.23-56P, DEVARABEESANAHALLI OUTER RING ROAD, VARTHUR HOBLI BENGALURU-560 103 PAN: AAACI 1539J. RESPONDENT THIS I.T.A. IS FILED UNDER SECTION 260-A OF THE IT ACT, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW. ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE [ACT] IN [CASE NUMBER]BANG/2011 DATED 30-06-2017 VIDE ANNEXURE-D, AND CONFIRM THE ORDER OF THE DRP Date of Judgment 13-08-2018 [CASE NUMBER] The [ENTITY]. Vs. M/s. [ENTITY], 2/6 CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, LTU, BENGALURU & ETC. THIS I.T.A. COMING ON FOR ADMISSION THIS DAY, [ENTITY] J. DELIVERED THE FOLLOWING:- JUDGMENT
Mr. [ENTITY], Adv. for Appellants- Revenue
1. The Appellants-Revenue have filed this appeal u/[SECTION] of the [ACT], raising purportedly certain substantial questions of law arising from the order of the ITAT, 'A' Bench, Bangalore, dated 30.06.2017 passed in [CASE NUMBER]Bang/2011 (M/s.[ENTITY], vs. Deputy Commissioner of Income-tax ) for A.Y.2006-
2. The proposed substantial questions of law framed in the Memorandum of appeal by the Appellants-Revenue are quoted below for ready reference:-
"1. Whether on the facts and in the circumstances of the case, the Tribunal is right in Date of Judgment 13-08-2018 [CASE NUMBER] The [ENTITY]. Vs. M/s. [ENTITY], law holding that professional and consultancy charges are not liable to be reduced from export turnover and while computing deduction under [SECTION] of the Act by following its earlier orders passed in case of assessee itself which has not reached finality and even when the said expenses are reduced by assessing authority from export as well as total turnover while computing 10A deduction as per the parameters of [SECTION] of the Act?
2. Whether on the facts and in the circumstances of the case, Tribunal is right in law in setting aside the recomputation of 10A deduction made by assessing authority by following the judgment of this Hon'ble High Court in the case of [PRECEDENT] eventhough the said decision has not reached finality and the assessing authority recomputed the 10A deduction as per the provisions of the Act?"
3. Learned counsel for the Appellants-Revenue Mr.[ENTITY] submits that in so far as the aforesaid substantial questions of law are concerned, the same are covered by the decision of the Hon'ble Apex Court in Date of Judgment 13-08-2018 [CASE NUMBER] The [ENTITY]. Vs. M/s. [ENTITY], the case of [PRECEDENT].
The relevant portion of the judgment of the Hon'ble Supreme Court in the case of HCL Technologies Ltd. (supra), is quoted below for ready reference:-
"17. The similar nature of controversy, akin this case, arose before the Karnataka High Court in [PRECEDENT] [PRECEDENT]. The issue before the Karnataka High Court was whether the Tribunal was correct in holding that while computing relief under [SECTION] of the [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 context in which it is used. Hence, what is excluded from 'export turnover' must also be excluded from 'total Date of Judgment 13-08-2018 [CASE NUMBER] The [ENTITY]. Vs. M/s. [ENTITY], 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.
18. XXXXXX
19. In the instant case, if the deductions on freight, telecommunication and insurance attributable to the delivery of computer software under [SECTION] of the [ACT] are allowed only in Export Turnover but not from the Total Turnover then, it would give rise to inadvertent, unlawful, meaningless and illogical 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 object of the formula is to arrive at the profit from export business, 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".
Date of Judgment 13-08-2018 [CASE NUMBER] The [ENTITY]. Vs. M/s. [ENTITY],
4. Having heard the learned counsel for the Appellants-Revenue, we are therefore of the opinion 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.
JUDGE Sd/-
JUDGE Srl.