2015 (11) TMI 981 - AT - Income Tax

Eligibility for deduction under section 10B - AO excluded freight charges and handling/clearing and forwarding charges attributable to delivery of article or a thing outside India from the export turnover, however the same was not excluded from the total turnover resulting in the additions - Held that - What should be excluded from the purpose of export turnover, the same should be excluded from the total turnover also. See Income-Tax Officer. Versus Sak Soft Limited. 2009 (3) TMI 243 - ITAT MADRAS-D and CIT v. Gem Plus Jewellery India Ltd. 2010 (6) TMI 65 - BOMBAY HIGH COURT - Decided in favour of assessee.

Summary

Issues:
1. Appeal filed by Revenue against order of Commissioner of Income-tax (Appeals) regarding deduction under section 10B of the Income-tax Act, 1961.

Analysis:
1. The Revenue contested the order of the Commissioner of Income-tax (Appeals) challenging the exclusion of certain charges from export turnover while computing the deduction under section 10B of the Act. Specifically, the Revenue objected to the exclusion of port handling/clearing charges and lorry freight from factory to port from the export turnover and total turnover. The crux of the issue revolved around the interpretation of the Special Bench decision in the case of ITO v. Sak Soft Ltd. [2009] 313 ITR (AT) 353 (Chennai) [SB].

2. The case involved an assessee, a 100% export-oriented company, which excluded freight charges and handling/clearing charges from the export turnover but not from the total turnover, leading to additions in the assessment. The Commissioner of Income-tax (Appeals) ruled in favor of the assessee, directing the Assessing Officer to rework the deduction under section 10B of the Act. The Commissioner relied on various case laws, including CIT v. Gem Plus Jewellery India Ltd. [2011] 330 ITR 175 (Bom) and ITO v. Sak Soft Ltd. [2009] 313 ITR (AT) 353 (Chennai) [SB] to support the decision.

3. During the appeal, the Departmental representative supported the Assessing Officer's decision, citing caution due to a pending matter before the High Court of Madras. The authorized representative of the assessee reiterated arguments made before the Commissioner of Income-tax (Appeals) and relied on the Special Bench decision in ITO v. Sak Soft Ltd. [2009] 313 ITR (AT) 353 (Chennai) [SB] and the High Court of Bombay decision in CIT v. Gem Plus Jewellery India Ltd. [2011] 330 ITR 175 (Bom) [SB]. The Tribunal upheld the order of the Commissioner of Income-tax (Appeals) based on the precedents cited and confirmed the decision in favor of the assessee.

4. The Tribunal concluded that since the Commissioner of Income-tax (Appeals) had correctly followed the Special Bench decision and other relevant case laws, there was no need to interfere with the order. Consequently, the appeal of the Revenue was dismissed, and the order of the Commissioner of Income-tax (Appeals) was upheld. The judgment was pronounced on June 26, 2015, in Chennai.