Delhi High Court
The Commissioner Of Income Tax, ... vs Ksa Technopak (India) (Pvt.) Ltd. on 4 November, 2009
Author: A.K.Sikri
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA 318/2007
Date of decision: 4th November, 2009
THE COMMISSIONER OF INCOME TAX, DELHI-II
..... Appellant
Through: Mr. Sanjeev Sabharwal, Adv.
versus
KSA TECHNOPAK (INDIA) (PVT.) LTD. ...... Respondent
Through: Mr. P.K. Sahu, Adv. with
Mr. Prashant Shukla, Adv.
% CORAM:
HON'BLE MR. JUSTICE A.K.SIKRI
HON'BLE MR. JUSTICE SIDDHARTH MRIDUL
1. Whether reporters of local papers may be allowed to see
the judgment?
2. To be referred to the Reporter or not?
3. Whether the judgment should be reported in
the Digest?
JUDGMENT
A.K.SIKRI, J. (ORAL)
1. In the income tax return filed by the assessee for the
assessment year 1997-98, the assessee had shown income received
from two sources i.e. domestic income as well as receipts of
consultancy from foreign clients earned as foreign exchange. Insofar
as, latter category of income is concerned, the assessee also claimed
benefit of Section 80-O of the Income Tax Act namely exemption to
the extent of 50% of such receipts from tax as per this provision
existing. The Assessing Officer while processing the return for
assessment noticed that the expenses shown by the assessee in
earning the foreign exchange on account of consultancy receipts were
much less.
2. We may note that the assessee had shown consultancy
receipts in foreign exchange convertible to Indian Rs.1,11,63,213/-
and claiming deduction of Rs.48,28,471/- under Section 80-O of the
Income Tax Act. The expenses on the foreign income on account of
bank charges, foreign travelling expenses, salaries etc. were shown at
a figure of Rs.14,37,643/-. According to the Assessing Officer the
expenses stated to have been incurred on the foreign business were
much less as compared to the receipts since the exemption under
Section 80-O is allowed after deduction of the expenditure over the
receipts, the Assessing Officer was of the opinion that the expenses
incurred are suppressed to claim higher exemption. In these
circumstances, the Assessing Officer was of the opinion that the
entire expenditure incurred, whether domestic or foreign earnings,
should be proportionately apportioned to the foreign earnings as well.
To arrive at a figure of expenditure to be attributed to foreign
earnings, he adopted the following formula:
"Total profit from business x Related receipts brought
profession into India in convertible
foreign exchange
total receipts from
business/profession ......A"
3. The assessee challenged this order by filing appeal before
the CIT(A). The assessee in this appeal itself accepted that some of
the expenses incurred in India could be attributed to the foreign
receipts and conceded that the assessee will have no objection if such
expenses are apportioned. However, the plea of the assessee was that
the approach of the Assessing Officer in taking into consideration the
total expenditure incurred and apportioning the same by applying the
aforesaid formula was not correct. As per the assessee, the expenses
which were exclusively incurred on domestic business, as well as
foreign receipts were to be apportioned in entirety respectively and it
is only in respect of other expenses which should be treated as
common expenses for foreign exchange as well as domestic earning
had to be apportioned. This method was accepted by the CIT(A). The
CIT(A) found that the total expenses incurred by the assessee were
Rs.2,09,33,800/- and the bifurcation thereof is as under:-
Recovered from the Indian customers: 37,24,318
Recovered from the foreign customers: 16,42,963
Indian projects relocation expenses: 60,08,752
Other expenses: 95,57,767
____________
2,09,33,800
____________
4. He treated the expenses recovered from Indian customers
as well as expenses incurred on Indian projects to be the domestic
expenses. Other expenses to the tune of Rs.95,57,767/- were treated
as common expenses and it is these expenses which were divided
between the foreign business receipts and Indian business receipts by
applying the same formula as devised by the Assessing Officer.
5. The Revenue filed appeal against this order, which has
been rejected by the Tribunal.
6. Mr. Sabharwal, learned counsel appearing for the
Revenue could not find fault with the approach of the CIT(A) in
separating the expenses which were exclusively incurred on Indian
business and foreign business respectively and only those expenses
which were common in objection. His submission, however, was that
no detail was given in respect of the Indian projects relocation
expenses which were treated as domestic expenses.
7. After reading the order of the CIT(A), we can safely infer
that the CIT(A) has taken these figures from the books of accounts of
the assessee. Secondly, if there was any objection to the aforesaid
Indian projects relocation expenses or to the justification and
genuineness of the Indian projects relocation expenses, it was for the
Revenue to challenge the same especially in the appeal preferred
before the Income Tax Appellate Tribunal. However, no such ground
was raised before the Tribunal.
8. We, therefore, are of the opinion that it is a pure finding of
fact recorded by the CIT(A), which has been accepted by the Income
Tax Appellate Tribunal (ITAT) as well (since it was un-challenged that
Indian projects relocation expenses to the tune of Rs.60,08,752/- were
incurred by the assessee which could be treated exclusively as
domestic expenses and were, therefore, not to be taken into account
for apportioning the same between the foreign expenses and domestic
expenses).
9. We thus find that no question of law arises and
accordingly this appeal is dismissed.
A.K. SIKRI, J.
SIDDHARTH MRIDUL, J.
November 04, 2009
dn
