2013 (2) TMI 901 - AT - Income Tax

Summary

Issues Involved:
The judgment involves the interpretation of export turnover for the purpose of deduction u/s 10A of the Income Tax Act, 1961, and the exercise of powers u/s 263 of the Act by the Commissioner of Income-tax (CIT) regarding certain expenses incurred in foreign currency by the assessee.

Interpretation of Export Turnover:
The assessee, a software development company, filed a return of income for A.Y. 2005-06. The Assessing Officer (AO) considered the computation of export turnover for deduction u/s 10A of the Act. The AO excluded satellite link charges from export turnover, leading to an appeal by the assessee. The CIT, u/s 263, found the AO's order erroneous and prejudicial to revenue, directing exclusion of certain expenses incurred in foreign currency from export turnover. The assessee contended that as a software services provider, not engaged in providing technical services outside India, these expenses should not be excluded. The CIT held that providing software development services constituted providing technical services, thus the expenses were to be excluded.

Debatable Issue and Two Views:
The CIT's order was challenged before the Tribunal. The assessee argued that two views existed on the issue, citing decisions supporting their position. The Tribunal noted conflicting views and decisions, including a Special Bench ruling and a Bangalore Bench decision, supporting the assessee's stance. The Departmental Representative (DR) referred to a Karnataka High Court decision for exclusion of expenses from total turnover. The Tribunal observed that the AO's decision was based on a plausible view, as per Tribunal precedents, and when two views are possible, no action u/s 263 can be taken.

Quashing of CIT's Order:
The Tribunal quashed the CIT's order u/s 263, citing that the AO's decision was not erroneous or prejudicial to revenue. Referring to legal precedents, including Supreme Court and High Court decisions, the Tribunal emphasized that when two views are possible and the AO has taken one, jurisdiction u/s 263 cannot be exercised. The Tribunal upheld the AO's decision on the interpretation of export turnover, leading to the allowance of the assessee's appeal.

This judgment highlights the importance of considering different views on legal interpretations, especially in tax matters, and the significance of established legal principles in determining the validity of administrative actions.