COMMISSIONER OF INCOME TAX Vs. INFOSYS TECHNOLOGIES LTD

JUDGEMENT

(1.) THIS appeal is filed by the revenue being aggrieved by the order passed by the Income-tax Appellate Tribunal, Bangalore Bench 3" in ITA.No.627/Bang/2003, dated 9.9,2005. wherein the appeal filed by the assessee has been allowed.

(2.) THE material facts leading up to this appeal for considering the substantial questions of law that would arise 'for consideration in this appeal are as follows:- The assessee is an exporter of software. It filed its return of income on 22.12.1999 admitting a total income of Rs.8.45.80 130/-. The return was processed under Section 143(1) on 27.11.2002 accepting the income returned. Thereafter, on scrutiny, a notice was issued under Section 143(2) on various occasions. In response to the notice, the representative of the respondent appeared and it was proposed that a sum of Rs. 1.62.74,62,818/- had been excluded in the expenditure in foreign currency from export turnover when rendering technical services outside India while computing deducting under Section 80HHE of the Income-Tax Act, 1961 (hereinafter referred to as the. 'Act'). Having regard to the contention of the assessee and the material on record, the assessing officer disallowed the claim of the assessee under Section 80HHE of the Act. Being aggrieved by the order of assessment the assessee preferred an appeal before the Commissioner of Income-tax, Appeals- 1, Bangalore in ITA.No.l03/R-11/CIT(A) I/02-03.

(3.) THE FIAT by the impugned order dated 9.9.2005 held that the reasoning given by the first appellate authority for not making deduction under Section 195(1) of the Act without obtaining an exemption certificate under Section 195(2) of the Act or a declaration obtained that no income is chargeable to tax in India, the deduction is ought to have been made, is erroneous. The Tribunal further held that payments were made to overseas consultants for the professional services rendered by them and these payments were made from the permanent establishment outside India and such payments were made out of sources of income generated outside India. Hence, the same income could not be deemed to accrue in India and wherefore, riot chargeable to tax in India and the assessee is justified in not making deductions under Section 195 of the. Act. ,Since the tribunal held that the expenditure in foreign currency from export turnover and total turnover has to be excluded when rendering technical services outside India while computing deduction under Section 80HHE of the Act the revenue being aggrieved by the said order of the tribunal filed this appeal.