Appellate Tribunal excludes bandwidth charges from turnover for tax deductions

The Appellate Tribunal upheld the CIT(Appeals) decision to exclude bandwidth charges from the total turnover for computing deductions under Section 10A of the Income-tax Act, 1961. This decision was based on the precedent set by the Special Bench in the case of ITO v. Sak Soft Ltd., supported by judgments from the Karnataka and Delhi High Courts. The Revenue's appeals were dismissed, affirming the exclusion of communication expenses from the total turnover.

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Issues involved:
The issue in this case revolves around whether communication expenses in the nature of bandwidth charges should be excluded from the total turnover while computing the deduction claimed by the assessee under Section 10A of the Income-tax Act, 1961.

Summary:

1. The Revenue filed appeals challenging the direction of the CIT(Appeals) to exclude bandwidth expenses from total turnover for computing the deduction under Section 10A of the Act, citing the decision of the Special Bench in the case of ITO v. Sak Soft Ltd. The Revenue contended that the Special Bench decision had not become final as an appeal was pending before the jurisdictional High Court.

2. The Assessing Officer curtailed the assessee's claim for deduction under Section 10A by excluding communication expenses, specifically bandwidth charges, from the export turnover but did not deduct this amount from the total turnover.

3. The CIT(Appeals) upheld the exclusion of communication expenses from the export turnover but held that it should also be excluded from the total turnover based on the decision of the Special Bench in the case of Sak Soft Ltd.

4. The Revenue strongly opposed the CIT(Appeals) order, arguing that communication expenses, even if excluded from export turnover, should still be included in the total turnover.

5. The Appellate Tribunal noted that the Special Bench decision in the case of Sak Soft Ltd. was supported by the judgments of the Hon'ble Karnataka High Court in cases involving Samsung Electronics Co. Ltd. and Tata Elxsi Ltd., as well as the Hon'ble Delhi High Court in the case of Genpact India. The Tribunal found no reason to deviate from the Special Bench's interpretation and upheld the CIT(Appeals) decision.

6. Consequently, all appeals filed by the Revenue were dismissed, affirming the exclusion of bandwidth expenses from the total turnover for computing the deduction under Section 10A of the Income-tax Act, 1961.

(Order pronounced on Thursday, the 25th of July, 2013, at Chennai.)

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