2014 (6) TMI 886 - AT - Income Tax

Deduction u/s 10B - whether expenditure incurred towards travel expenses and communication charges in foreign currency for the purpose of section 10B deduction are liable to be excluded only from export turnover as per the Assessing Officer or from the total turnover as well as held by the Commissioner of Income-tax (Appeals) - Held that - it is to be seen from the Revenue s grounds that its only plea is that though the Commissioner of Income-tax (Appeals) has followed the Special Bench decision of ITO v. Sak Soft Ltd. 2009 (3) TMI 243 - ITAT MADRAS-D its appeal under section 260A against the same is pending before the jurisdictional High Court. In our considered opinion mere pendency of such an appeal does not form a justifiable reason to adopt a different approach without any distinction on facts. Hence we hold that the Commissioner of Income-tax (Appeals) has rightly directed the Assessing Officer to deduct travel expenses incurred in foreign currency and communication charges both from export as well as the total turnover in view of the Special Bench s decision (supra). - Decided against Revenue.

Summary

Issues:
Whether travel expenses and communication charges in foreign currency for the purpose of section 10B deduction should be excluded only from export turnover or from total turnover as well.

Analysis:

1. Background of the Case: The appeals by the Revenue for various assessment years emanate from orders passed by the Commissioner of Income-tax (Appeals)-III, Chennai under section 143(3) read with section 147 of the Income-tax Act, 1961.

2. Identical Grounds Raised by Revenue: The Revenue raised grounds challenging the direction of the Commissioner of Income-tax (Appeals) to deduct travel expenses and communication charges from both export turnover and total turnover while computing exemption under section 10B.

3. Sole Issue Involved: The primary issue in all cases was whether expenditure on travel and communication charges in foreign currency for section 10B deduction should be excluded solely from export turnover or from both export and total turnover.

4. Assessing Officer's Decision: The Assessing Officer initially excluded these expenses only from export turnover, not from total turnover, based on section 10B(2)(iii) of the Act.

5. Commissioner of Income-tax (Appeals) Decision: The Commissioner directed the Assessing Officer to deduct these expenses from both export and total turnover, citing the absence of a definition of 'total turnover' in section 10B and relying on relevant case laws.

6. Judgment and Reasoning: The Tribunal held that the Commissioner's decision to deduct the expenses from both turnovers was correct, following the Special Bench decision of ITO v. Sak Soft Ltd. The Tribunal emphasized that the pendency of an appeal by the Revenue did not justify a different approach without factual distinction, affirming the Commissioner's directive.

7. Outcome: The Tribunal dismissed all Revenue's appeals, upholding the Commissioner's decision to deduct travel expenses and communication charges from both export and total turnover for section 10B deduction.

8. Final Decision: The Tribunal's order was pronounced on June 26, 2014, in Chennai, affirming the Commissioner's directive and rejecting the Revenue's appeals across multiple assessment years.

This comprehensive analysis highlights the key aspects and reasoning behind the judgment, emphasizing the interpretation of provisions and the application of relevant case laws in determining the treatment of expenses for section 10B deduction.