The order of the Bench was delivered by
S.S. Godara, Judicial Member - This Revenue's appeal for the assessment year 2006-07 ; emanates from the order dated October 31, 2013 passed by the Commissioner of Income-tax (Appeals)-III, Chennai in I. T. A. No. 1560/2013-14 in proceedings under section 143(3) of the Income-tax Act, 1961 (in short the "Act").
2. The Revenue pleads its grievance in the present appeal as under :
"2.1 The learned Commissioner of Income-tax (Appeals) erred in directing the Assessing Officer to reduce telecommunication charges, insurance and expenses incurred in foreign exchange in providing the technical services outside India both from the export turnover and also from the total turnover for the purpose of calculation of deduction under section 10A.
2.2 It is submitted that the decision of the Special Bench of the jurisdictional Income-tax Appellate Tribunal in the case of ITO v. Sak Soft Ltd. [2009] 313 ITR (AT) 353 (Chennai) (SB) relied upon by the Commissioner of Income-tax (Appeals) has not become final and the Department has preferred an appeal under section 260A before the Madras High Court."
3. The assessee-company is engaged in the business of software development. It had filed its "return" on November 17, 2006 declaring income of Rs. 60,44,219 followed by "revised" one dated November 27, 2007 admitting income of Rs. 40,03,372. The Assessing Officer completed "scrutiny" assessment on November 28, 2008. In course thereof, he noticed the assessee to have included in its export turnover of Rs. 25,42,49,015, telecommunication expenses of Rs. 32,16,462, insurance sum of Rs. 9,84,751 totalling Rs. 42,01,213. He held in the assessment order that as per section 10A(8) Explanation 2(iv) of the Act, expenses attributed to delivery of computer software outside India had to be reduced from the export turnover. The Assessing Officer also came across expenditure on travel expenses, marketing and selling, professional fees, rent, salary and "other" heads of Rs. 2,38,89,080, Rs. 24,76,390, Rs. 50,72,372, Rs. 12,06,621, Rs. 3,60,53,390 and Rs. 76,40,386 totalling Rs. 7,63,38,238 forming part of the export turnover. The Assessing Officer was of the view that as per the very statutory provision, these expenses attributable towards providing technical services outside India deserved to be excluded from the export turnover.
4. In the assessee's appeal, the Commissioner of Income-tax (Appeals) has held that whatever expenses incurred in foreign exchange is excluded from the export turnover, the same are also to be excluded from the total turnover as under :
"8.3 The next issue in the grounds of appeal is regarding the exclusion of expenditure incurred in foreign currency both from the export turnover in the numerator and also from the total turnover in the denominator. The Assessing Officer while completing the assessment under section 143(3) and also while passing the rectification order under section 154 has reduced the quantum of telecommunication charges of Rs. 32,16,462 and insurance expenses of Rs. 9,84,751 and also expenditure incurred in foreign currency outside India of Rs.7,63,38,238 from the export turnover only and for calculating the total turnover, the expenses reduced from export turnover were not considered.
8.4 The authorised representative of the appellant has argued that if the expenses in question are so excluded from the export turnover, the same should also be reduced from the total turnover while computing the deduction. In this regard, the appellant has relied on the decision of the hon'ble Income-tax Appellate Tribunal, Bangalore in the case of Mphasis Bfi Ltd v. ITO [I. T. A. No. 120/Bang/2011] and the decision of the jurisdictional Income-tax Appellate Tribunal in the case of ITO v. Sak Soft Ltd.[2009] 313 ITR (AT) 353 (Chennai) (SB) in support of its contention.
8.5 I have carefully gone through the assessment order, considered the statement of facts and the grounds of appeal. After going though the written submissions, decision relied upon by the appellant, I am of the opinion that relief for excluding certain expenses and expenses incurred in foreign currency from the total turnover without corresponding reduction from the total turnover for the claim of benefit available under section 10A of the Act is squarely covered by the order of the Income-tax Appellate Tribunal, Chennai Special Bench's hearing in the case of ITO v. Sak Soft Ltd. [2009] 313 ITR (AT) 353 (Chennai) (SB). The decision highlighted in the said case is reproduced as under (page 398) :
' . . . we hold that for the purpose of applying the formula under sub-section (4) of section 10B, the freight, telecom charges or insurance attributable to the delivery of articles or things or computer software outside India or the expenses, if any incurred in foreign exchange in proving the technical services outside India are to be excluded both from the export turnover and from the total turnover, which are the numerator and the denominator respectively in the formula.'
8.5.1 Respectfully following the decision of the jurisdictional Bench of the hon'ble Tribunal in the case ofITO v. Sak Soft Ltd. [2009] 313 ITR (AT) 353 (Chennai) (SB) and also on the decision of the hon'ble Income-tax Appellate Tribunal 'C' Bench, Chennai in I.T. A. Nos. 54 and 1197(Mds)/2010 in the appellant's own case for the assessment years 2002-03 and 2003-04 cited supra, accordingly, I direct the Assessing Officer to reduce telecommunication expenses, insurance and expenses incurred in foreign exchange in providing the technical services outside India both from the export turnover and also from the total turnover. This ground of the appellant is allowed.
In the result, the appeal is partly allowed."
Therefore, the Revenue is in appeal.
5. We have heard both parties and gone through the case file. The sole issue is as to whether the expenditure on telecommunication and other heads incurred in foreign exchange excluded from the export turnover has also to be reduced from the total turnover or not. We find that a Special Bench of the "Tribunal" in the case ofITO v. Sak Soft Ltd. [2009] 30 SOT 55 (Chennai)(SB) had already decided this question against the Revenue. On being granted opportunity, the appellant/Revenue fails to point out any distinguishing features. In these circumstances, we reject the Revenue's grounds.
6. The Revenue's appeal is dismissed.
The order pronounced in the open court on Friday, the 8th of August, 2014, at Chennai.