Madras High Court
Commissioner Of Income Tax-I vs M/S. Zylog Systems Ltd on 24 February, 2021
Tax Case Appeal Nos.382 and 384 of 2011
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED :24.02.2021
CORAM
THE HON'BLE MR. JUSTICE M. DURAISWAMY
AND
THE HON'BLE MRS. JUSTICE T.V. THAMILSELVI
Tax Case Appeal Nos.382 and 384 of 2011
Commissioner of Income Tax-I,
Chennai. ... Appellant in both TCAs
v.
M/s. Zylog Systems Ltd.,
No.155, Thiruvalluvar Salai,
Kumaran Nagar,
Chennai - 600 119. ... Respondent in both TCAs
Tax Case Appeals in T.C.A.Nos.382 and 384 of 2011 filed under Section
260A of the Income Tax Act, 1961 against the common order of the Income
Tax Appellate Tribunal, Chennai “D” Bench, dated 28.02.2011, passed in
I.T.A.Nos.2299/Mds/2008, and 284 /Mds/2009 for the Assessment Year
2004-05
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Tax Case Appeal Nos.382 and 384 of 2011
For Appellant : Mrs.V.Pushpa
in both TCAs Standing Counsel
For Respondent : Mr. Bavishetty Sridhar
in both TCAs Deputy Official Liquidator
High Court of Madras
COMMON JUDGMENT
(Judgment was delivered by M.DURAISWAMY, J.)
These appeals, filed by the Revenue under Section 260A of the Income
Tax Act, 1961 (for short, the Act) are directed against the common order dated
28.02.2011 made in I.T.A .Nos.2299/Mds/2008 and 284/ Mds/2009 on the
file of the Income Tax Appellate Tribunal, Chennai “D” Bench, (for brevity,
the Tribunal) for the Assessment Year 2004-05.
2. Since the issue involved in both the appeals are identical, both the
appeals are disposed of by this Common Judgment.
3.1 The assessee company is engaged in the business of Software
Analysis, Design and Development and claims deduction under Section 10B
for the Assessment Year 2004-05. The assessee had total export turnover of
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Tax Case Appeal Nos.382 and 384 of 2011
Rs.22,89,02,985/-. Out of the same, the assessee had utilised the export profits
to the tune of Rs.6,00,07,757/- in U.S.A. for the purpose of carrying on export
activities. The Assessing Officer held that the said amount had not been
received in convertible foreign exchange in India within the prescribed time
under section 10B(3) and the said amount could not be treated as part of export
turnover for the purpose of computation of deduction under section 10B. The
assessee contended that as per Circular No.54, dated 26.06.2004 of the RBI,
the Overseas Branch of the Software Exporter may repatriate to India 100% of
the contract value of each off-site contract as also atleast 30% of the contract
value of each onsite contract and may utilise the balance 70% of the contract
value of onsite contract for contract related expenses including branch
expenses abroad. The Assessing Officer held that the RBI's Guideline for
remittance under the FEMA was not applicable in interpreting the term "export
turnover" as defined in section 10B. The Assessing Officer also held that the
total turnover of Rs.14,73,76,574/- to be considered including the expenses
irrespective of whether such expenses were incurred in Indian currency or
foreign currency.
3.2 . Regarding the disallowance of export proceeds to the extent of
Rs.6,00,07,757/- on the ground of "unrealized onsite contract, the assessee
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Tax Case Appeal Nos.382 and 384 of 2011
relied on the RBI's Circular dated 26.06.2002. The assessee relied on certain
decisions rendered in the context of section 80-O.
3.3 . The next dispute before the Commissioner of Income Tax (Appeals)
was regarding the disallowance of foreign exchange loss to the tune of
Rs.1,25,42,287/-. The Assessing Officer held that this was not an ascertained
liability.
3.4 Regarding the issue relating to expenditure incurred in foreign
exchange on onsite development of computer software, the Tribunal following
the Special Bench's decision in the assessee's case for the assessment year
2003-04, decided the issue in favour of the assessee.
3.5 . Challenging the Common orders passed by the Income Tax
Appellate Tribunal the Revenue has filed the above appeals.
4.The above appeals were admitted on the following substantial
questions of law :
TCA No.382 of 2011
"(i) Whether on the facts and in the circumstances of the
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Tax Case Appeal Nos.382 and 384 of 2011
case, the Income Tax Appellate Tribunal was right in holding
that the expenditure of Rs.2,15,18,654/- incurred in foreign
exchange for providing technical services outside India should
not be excluded from the export turnover for the purpose of
computing deduction under section 10B without properly
applying the provisions of Explanation 2(iii) to section 10B?
(ii) Whether on the facts and in the circumstances of the
case, the Income Tax Appellate Tribunal was right in holding
that even if the expenditure referred to in the prescribed ground
was to be excluded from the export turnover, the same should be
excluded form the total turnover also?"
TCA No.382 of 2011
"(i) Whether on the facts and in the circumstances of the
case, the Income Tax Appellate Tribunal was right in holding
that loss on foreign exchange fluctuation should be allowed as
claimed by the assessee contrary to the decision of the Hon'ble
Jurisdictional High Court in the case of Indian Overseas Bank
(250ITR 146)?
(ii) Whether on the facts and in the circumstances of the
case, the Income Tax Appellate Tribunal was right in not dealing
with the ground raised by the Revenue that unrealised onsite
development revenue should be excluded from the export
turnover?"
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Tax Case Appeal Nos.382 and 384 of 2011
5. When the appeals were taken up for hearing, Mr. Bavishetty Sridhar,
learned Deputy Official Liquidator, appearing for the respondent submitted
that the issue involved in the present appeals is covered by the decision of the
Hon'ble Supreme Court of India reported in 2020 (113) Taxmann.com 74 (SC)
[Commissioner of Income-Tax III v. Mphasis Ltd.], wherein, the Hon'ble
Supreme Court of India held as follows :
“1. The instant petition is filed by the petitioner-Revenue
assailing the judgment dated 01.08.2014 passed by the High
Court of Karnataka at Bangalore in I.T.A. No. 1075 of 2008.
2. When the petition is taken up for consideration Mr.
Vikramjit Banerjee, learned Additional Solicitor General
appearing for the petitioner-Revenue and Mr. Parcy Pardiwala,
learned senior counsel appearing for the respondent, are in
agreement that SLP(C)No.2373/2015 preferred by the Revenue in
respect of connected ITA NO.196 of 2009 which was disposed of
by the very same common Order dated 01.08.2014, was dismissed
by this Court on 28.01.2019 having taken note similar grounds
raised in the special leave petition.
3. Hence taking note of the fact that in respect of common
judgment this Court has already dismissed SLP(C)No.2373 of
2015 relating to the Assessment Year 2004-2005 and in the
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Tax Case Appeal Nos.382 and 384 of 2011
present case except that issue relates to Assessment year 2003-
2004 all other aspects are on the very same point, we are not
inclined to entertain the instant petition.
4. Accordingly, the special leave petition shall stand
dismissed. Pending applications, if any, shall also stand disposed
of.”
6. The learned Deputy Official Liquidator submitted that the issue
involved in the present appeals had already been decided by this Court in Tax
Case Appeal Nos. 255 to 257 of 2011[Commissioner of Income
Tax-I,Chennai v. M/s.Tata Consultancy Services Ltd., Chennai] by
Common Judgment dated 19.02.2021 wherein this Bench, following the
Judgment reported in 2020 (113) Taxmann.com 74 (SC) [cited supra.] and
the Judgment reported in 2016 (74) Taxmann.com 274 (Karnataka)
[Commissioner of Income-Tax, Bangalore v. Mphasis Ltd.], decided the
issue in favour of the assessee. The learned Deputy Official Liquidator
further submitted that in view of the Judgments of the Hon'ble Supreme Court
and this Court, the appeals are liable to be dismissed.
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Tax Case Appeal Nos.382 and 384 of 2011
7.We do not find any contra Judgment in support of the Revenue on the
issue involved in the present appeals. Following the Judgments of the Hon'ble
Supreme Court and this Court, he questions of law raised in the above appeals
are decided in favour of the assessee and the appeals are dismissed. No costs.
[M.D., J.] [T.V.T.S., J.]
24.02.2021
Index : Yes / No
Internet : Yes
Rj
To
The Income Tax Appellate Tribunal,
Chennai “D” Bench
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Tax Case Appeal Nos.382 and 384 of 2011
M. DURAISWAMY, J.
and
T.V. THAMILSELVI, J.
Rj
Tax Case Appeal Nos.382 and 384 of 2011
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Tax Case Appeal Nos.382 and 384 of 2011
24.02.2021
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