Dy. Commissioner of Income-tax, Circle-12(1), Bangalore v. M/s. Mphasis Limited
[Citation -2016-LL-0930-190]

Citation 2016-LL-0930-190
Appellant Name Dy. Commissioner of Income-tax, Circle-12(1), Bangalore
Respondent Name M/s. Mphasis Limited
Court ITAT-Bangalore
Relevant Act Income-tax
Date of Order 30/09/2016
Assessment Year 2009-10
Judgment View Judgment
Keyword Tags convertible foreign exchange • telecommunication charges • export business • export turnover • total turnover
Bot Summary: Interpreting sub-section of section 10A, it is held as under : Under sub-section the proportion between the export turnover in respect of the articles or things, or as the case may be, computer software exported, to the total turnover of the business carried over by the undertaking is applied to the profits of the business of the undertaking in computing the profits of the business of the undertaking in computing the profits derived from export. Total turnover of the business carried on by the undertaking The total turnover of the business carried on by the undertaking would consist of the turnover from export and the turnover from local sales. The export turnover, in the numerator must have the same meaning as the export turnover which is constituent element of the total turnover in the denominator. Since export turnover has been defined by Parliament and there is a specific exclusion of freight and insurance, the expression export turnover cannot have a different meaning when it forms a constituent part of the total turnover for the purposes of the application of the formula. The submission of the Revenue would lead to a situation where freight and insurance, though these have been specifically excluded from export turnover for the purposes of the numerator would be brought in as part of the export turnover when it forms an element of the total turnover as a denominator in the formula. When the statute prescribes a formula and in the said formula, export turnover is defined, and when the total turnover includes export turnover, the very same meaning given to the export turnover by the legislature is to be adopted while understanding the meaning of the total turnover, when the total turnover includes export turnover. If what is excluded in computing the export turnover is included while arriving at the total turnover, when the export turnover is a component of total turnover, such an interpretation would run counter to the legislative intent and impermissible.


IN INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER IT(T.P)A No. & Appellant Respondent Asst. Year 235/Bang/2014 Dy. Commissioner of Income M/s. Mphasis Limited, 2009-10 Tax, 6th Floor, Block, Circle 12(1), Bangalore. Bagmane Technology Park, Byrasandra, C.V.Raman Nagar, Bangalore-560 093 242/Bang/2014 M/s. Mphasis Limited, Addl. Commissioner of 2009-10 Bangalore-560 093 Income Tax, Range 12, Bangalore. Assessee By : None. Revenue By : Shri Kamaladhar, Standing Counsel. Date of Hearing : 28.09.2016. Date of Pronouncement : 30.09.2016. ORDER Per Shri Vijay Pal Rao, J.M. : These cross appeals are directed against assessment order dt.31.1.2014 passed under Section 143(3) r.w.s. 144C of Income Tax Act, 1961 (in short 'the Act') in pursuant to directions of Dispute Resolution Panel ( DRP ) dt.30.12.2013 for Assessment Year 2009-10. 2 IT(T.P)A Nos.235 & 242/Bang/2014 2. revenue has raised only issue regarding exclusion of reimbursement of specific expenses both from export turnover as well as from total turnover for purpose of computation of deduction under Section 10A/10B of Act. 3. None has appeared on behalf of assessee when these appeals were called for hearing despite assessee caused his appearance on earlier date of hearing. Accordingly, we propose to hear and dispose of appeals ex-parte. 4. We have heard learned Departmental Representative and perused relevant material on record. On perusal thereof we find that issue before us for adjudication i.e. if expenditure incurred for purpose of reimbursement of expenses is to be reduced from export turnover equal amount should also be reduced from total turnover while computing deduction under section 10A of Act, is covered in favour of assessee by decision of Hon ble Karnataka High Court in case of Tata Elxsi Ltd. (supra). In this order, Hon ble Court held 3 IT(T.P)A Nos.235 & 242/Bang/2014 Bombay High Court had occasion to consider earning of word total turnover in context of section 10A, in case of CIT Vs. Gem Plus Jewellery India Ltd. (2011) [330 ITR P. 175 (Bom)] (2010-TIOL-456- HC-MUM-IT). Interpreting sub-section (4) of section 10A, it is held as under : Under sub-section (4) proportion between export turnover in respect of articles or things, or as case may be, computer software exported, to total turnover of business carried over by undertaking is applied to profits of business of undertaking in computing profits of business of undertaking in computing profits derived from export. In other words profits of business of undertaking are multiplied by export turnover in respect of articles, things or, as case may be, computer software and divided by total turnover of business carried on by undertaking. formula which is prescribed by sub-section (4) of section 10A is as follows : Profits derived Profits of Export from export of business of turnover in articles or undertaking. respect of things or articles or computer things or software. computer software. Total turnover of business carried on by undertaking total turnover of business carried on by undertaking would consist of turnover from export and turnover from local sales. export turnover constitutes numerator in formula prescribed by 4 IT(T.P)A Nos.235 & 242/Bang/2014 sub-section (4). Export turnover also forms constituent element of denominator in as much as export turnover is part of total turnover. export turnover, in numerator must have same meaning as export turnover which is constituent element of total turnover in denominator. legislature has provided definition of expression export turnover in Expln.2 to s.10A which expression is defined to mean consideration in respect of export by undertaking of articles, things or computer software received in or brought into India by assessee in convertible foreign exchange but so as not to include inter alia freight, telecommunication charges or insurance attributable to delivery of articles, things or software outside India. Therefore in computing export turnover legislature has made specific exclusion of freight and insurance charges. submission which has been urged on behalf of revenue is that while freight and insurance charges are liable to be excluded in computing export turnover, similar exclusion has not been provided in regard to total turnover. submission of revenue, however, misses point that expression total turnover has not been defined at all by Parliament for purposes of s.10A. However, expression export turnover has been defined. definition of export turnover excludes freight and insurance. Since export turnover has been defined by Parliament and there is specific exclusion of freight and insurance, expression export turnover cannot have different meaning when it forms constituent part of total turnover for purposes of application of formula. Undoubtedly, it was open to Parliament to make provision which has been enunciated earlier must prevail as matter of correct statutory interpretation. Any other interpretation would lead to absurdity. If contention of Revenue 5 IT(T.P)A Nos.235 & 242/Bang/2014 were to be accepted, same expression viz. export turnover would have different connotation in application of same formula. submission of Revenue would lead to situation where freight and insurance, though these have been specifically excluded from export turnover for purposes of numerator would be brought in as part of export turnover when it forms element of total turnover as denominator in formula. construction of statutory provision which would lead to absurdity must be avoided. Special Bench of Tribunal, in case of ITO Vs. Sak Soft Ltd. (2009) 313 ITR (AT) 353 (Chennai) (SB) (2009-TIOL-187-ITAT-MAD-SB) also had occasion to consider meaning of word total turnover . After referring to various judgments of High Court as well as Supreme Court held as under : 53. For above reasons, we hold that for purpose of applying formula under sub-section (4) of section 10-B, freight, telecom charges or insurance attributable to delivery of articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing technical services outside India are to be excluded, both from export turnover and from total turnover, which are numerator and denominator respectively in formula .. formula for computation of deduction under section 10A would be as under : Profits of business x export turnover / Total turnover From aforesaid judgments, what emerges is that, there should be uniformity in ingredients of both numerator and denominator of formula, since 6 IT(T.P)A Nos.235 & 242/Bang/2014 otherwise it would produce anomalies or absurd results. Section 10A is beneficial section. It is intended to provide incentives to promote exports. incentive is to exempt profits relatable to exports. In case of combined business of assessee, having export business and domestic business, legislature intended to have formula to ascertain profits from export business and domestic business, legislature intended to have formula to ascertain profits from export business by apportioning total profits of business on basis of turnovers. Apportionment of profits on basis of turnover was accepted as method of arriving at export profits. In case of section 80HHC, export profit is to be derived from total business income of assessee, whereas in section 10A, export profit is to be derived form total business of undertaking. Even in case of business of undertaking, it may include export business and domestic business, in other words, export turnover and domestic turnover. export turnover would be component or part of denominator, other component being domestic turnover. In other words, to extent of export turnover, there would be commonality between numerator and denominator of formula. In view of commonality, understanding should also be same. In other words, if export turnover in numerator is to be arrived at after excluding certain expenses, same should also be excluded in computing export turnover as component of total turnover in denominator. reason being total turnover includes export turnover cannot be different. Therefore, though there is no definition of term total turnover in section 10A, there is nothing in said section to mandate that, what is excluded from numerator that is export turnover would nevertheless 7 IT(T.P)A Nos.235 & 242/Bang/2014 form part of denominator. Though when particular word is not defined by legislature and ordinary meaning is to be attributed to same, said ordinary meaning to be attributed to such word is to be in conformity with context in which it is used. When statute prescribes formula and in said formula, export turnover is defined, and when total turnover includes export turnover, very same meaning given to export turnover by legislature is to be adopted while understanding meaning of total turnover, when total turnover includes export turnover. If what is excluded in computing export turnover is included while arriving at total turnover, when export turnover is component of total turnover, such interpretation would run counter to legislative intent and impermissible. If that were intention of legislature, they would have expressly stated so. If they have not chosen to expressly define what total turnover means, then, when total turnover includes export turnover, meaning assigned by legislature to export turnover is to be respected and given effect to, while interpreting total turnover which is inclusive of export turnover. Therefore formula for computation of deduction under section 10A, would be as under : Profits of business of undertaking x Export turn over (Export turnover + domestic turn over) Total Turnover 11. In that view of matter, we do not see any error committed by Tribunal in following judgments rendered in context of section 80HHC in interpreting section 10A when principle underlying both these provisions is one and same. Therefore, we do not see 8 IT(T.P)A Nos.235 & 242/Bang/2014 any merit in these appeals. substantial question of law framed is answered in favour of assessee and against revenue. Respectfully following aforementioned decision of Hon ble High Court of Karnataka in case of Tata Elxsi Ltd. (supra), we uphold order of learned CIT (Appeals) in directing Assessing Officer to reduce expenditure incurred from both export turnover and total turnover for purpose of computing deduction under section 10A of Act in case on hand. Consequently this ground raised by revenue is dismissed. IT(TP)A No.242/Bang/2014 5. None has appeared on behalf of assessee when this appeal was called for hearing despite assessee caused his appearance on earlier hearing. Thus it is apparent that assessee is not interested in prosecuting present appeal. 6. In view of above, we are of opinion that assessee is not seriously interested in pursuing appeal in case on hand. law aids those who are vigilant, not those who sleep upon their rights. This principle is embodied in well known dictum, VIGILANTIBUS ET NON 9 IT(T.P)A Nos.235 & 242/Bang/2014 DORMIENTIBUS SERVIUNT LEGES . Considering facts and circumstances of case and keeping in view provisions of Rule 19(2) of Income Tax Appellate Tribunal Rules as were considered in case of CIT Vs. Multiplan India Ltd. (38 ITD 320) (Del), we dismiss appeal for non-prosecution. 7. In result, appeals of revenue as well as assessee are dismissed. Order pronounced in open court on 30th Sept., 2016. Sd/- Sd/- (S. JAYARAMAN) (VIJAY PAL RAO) Accountant Member Judicial Member *Reddy gp Copy to : 1. Appellant 2. Respondent 3. C.I.T. 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard File. By Order Asst. Registrar, ITAT, Bangalore Dy. Commissioner of Income-tax, Circle-12(1), Bangalore v. M/s. Mphasis Limited
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