Madras High Court
The Commissioner Of Income-Tax-I vs M/S.Poaris Software Lab Limited on 25 January, 2022
TC(A).Nos.160 and 161 of 2010
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 25.01.2022
CORAM:
THE HONOURABLE MR.JUSTICE R. MAHADEVAN
AND
THE HONOURABLE MR.JUSTICE MOHAMMED SHAFFIQ
Tax Case (Appeal) Nos.160 and 161 of 2010
The Commissioner of Income-Tax-I
Chennai ..Appellant
in both T.C.(Appeals)
Vs
M/s.Poaris Software Lab Limited
No.713, Anna Salai
Chennai-600 002 ..Respondent
in both T.C.(Appeals)
Prayer: Tax Case Appeals filed against the order of the Income-tax
Appellate Tribunal “B” Bench Chennai dated 03.07.2009 passed in
I.T.A.Nos.2156/Mds/2007 and 2146/Mds/2007 for the assessment year
2003-04.
For Appellant : Mrs.R.Hemalatha, Senior Panel Counsel
For Respondent : Mr.N.V.Balaji
https://www.mhc.tn.gov.in/judis
TC(A).Nos.160 and 161 of 2010
COMMON JUDGMENT
[Judgment of the Court was delivered by R. MAHADEVAN, J.]
The above tax case appeals have been filed by the appellant / Revenue,
challenging the order dated 03.07.2009 passed in I.T.A.Nos.2156/Mds/2007
and 2146/Mds/2007 for the assessment year 2003-04.
2. By order dated 22.02.2010, this court admitted the aforesaid tax
case appeals on the following substantial questions of law:
T.C.(A).No.160 of 2010 :-
”Whether on the facts and in the circumstances of the case,
the Income Tax Appellate Tribunal was right in holding that the
interest under Section 234D was not leviable in the assesee's case
for the Assessment Year 2003-04 on the ground that the section
had no retrospective operation and was not applicable for the
Assessment Year 2003-04 ignoring the Explanation to the Section
?”
T.C.(A).No.161 of 2010:-
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TC(A).Nos.160 and 161 of 2010
”Whether on the facts and in the circumstances of the case,
the Tribunal was right in holding that the expenditure incurred in
foreign exchange which have been specifically excluded from
export turnover by explanation 2(iv) to section 10A would also
not form part of the total turnover for the purpose of section 10A
of the Act ?”
3. The learned counsel appearing for the appellant/Revenue as well
as the respondent/assessee jointly submitted that the substantial question of
law raised in TC(A).No.160 of 2010 is covered by the decision of the Hon'ble
Supreme Court in Commissioner of Income-tax Vs. Reliance Energy Ltd.
[358 ITR 371 (SC)] and hence, the same has to be answered in favour of the
Revenue and against the assessee. They further submitted that the substantial
question of law raised in T.C.A.No.161 of 2010 is covered in favour of the
assessee and against the Revenue as per the unreported decision of a Division
Bench of this court in T.C.A.Nos.1193 and 1194 of 2008 dated 12.10.2018.
4.1 The Honourable Supreme Court in Reliance Energy Limited
(supra), while dealing with the question of retrospectivity of Section 234D,
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TC(A).Nos.160 and 161 of 2010
held as follows:-
“3. Learned counsel for the assessee places reliance on
Expln.2 inserted in S.234SD of the Act by the Finance Act, 2012
w.e.f. 1st June, 2003.
4. Explanation 2 which has been inserted in S.234D of the
Act reads as under:
“Explanation 2. - For the removal of doubts, it is hereby
declared that the provisions of this section shall also apply to an
assessment year commencing before the 1st day of June, 2003 if the
proceedings in respect of such assessment year is completed after
the said date”.
5. The High Court was concerned with the appeal relating to
the assessment year 1998-99. It is admitted case that the
assessment of that year was completed prior to 1st June, 2003.
6. Having regard to the legal position which has been
clarified by the Parliament by insertion of Expln.2 in s.234D of the
Act, in the present case, retrospectively of S.234D does not arise.”
4.2 Applying the ratio laid down in the aforesaid decision to the
facts of the present case, wherein, admittedly, the refund was granted to the
assessee on 28.04.2005 i.e., on or after 01.06.2003 and in such event, interest
is leviable under Section 234D. In view of the same, we answer the
substantial question of law in TCA.No.160 of 2010 relating to interest under
Section 234D in favour of the Revenue and against the assessee.
https://www.mhc.tn.gov.in/judis
TC(A).Nos.160 and 161 of 2010
5.1 As regards the substantial question of law framed in
T.C.A.No.161 of 2010, the Division Bench of this court, in T.C.A.Nos.1193
and 1194 of 2008 by order dated 12.10.2018, after following the decision of
the Hon'ble Supreme court in CIT, Central III Vs. HCL Technologies
Limited [(2018) 404 ITR 719], dealt with the same question and answered
the same in favour of the assessee, the relevant passage of which, is usefully
extracted hereunder:-
“3. The question of law framed above has been
answered by the Honourable Supreme Court in the case of
CIT, Central III Vs. HCL Technologies Limited [reported in
(2018) 404 ITR 719] wherein it has been held as follows :
“18. Accordingly, the formula for computation
of the deduction under Section 10A of the Act would
be as follows:
Export Profit = total Profit of the Business X
___________Export turnover as defined in
Explanation 2(IV) of Section 10A of the IT Act +
domestic sale proceeds
19. In the instant case, if the deductions on
freight, telecommunication and insurance attributable
to the delivery of computer software under Section10A
of the IT Act are allowed only in Export Turnover but
not from the Total Turnover, then, it would give rise to
inadvertent, unlawful, meaningless and illogical result
which would cause grave injustice to the respondent
which could have never been the intention of the
https://www.mhc.tn.gov.in/judis
TC(A).Nos.160 and 161 of 2010
Legislature.
20. Even in common parlance, when the object
of the formula is to arrive at the profit from export
business, expenses excluded from export turnover have
to be excluded from total turnover also. Otherwise, any
other interpretation makes the formula unworkable and
absurd. Hence, we are satisfied that such deduction
shall be allowed from the total turnover in same
proportion as well.
21. On the issue of expenses on technical
services provided outside, we have to follow the same
principle of interpretation as followed in the case of
expenses of freight, telecommunication etc., otherwise
the formula of calculation would be futile. Hence, in
the same way, expenses incurred in foreign exchange
for providing the technical services outside shall be
allowed to exclude from the total turnover.
22. In view of above discussion, we are of the
considered view that these instant appeals are devoid
of merits and deserve to be dismissed. Accordingly, all
the connected matters and interlocutory applications, if
any, are disposed of with no order as to costs.?”
4. Following the above, these tax case appeals are
dismissed and the substantial questions of law framed for
consideration are answered in favour of the assessee and
against the Revenue. No costs.”
5.2 In the light of the aforesaid judgment, we answer the substantial
question of law involved in T.C.A.No.161 of 2010 in favour of the assessee
and against the Revenue.
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TC(A).Nos.160 and 161 of 2010
6. In fine, TCA.No.160 of 2010 is allowed. TCA.No.161 of 2010 is
dismissed. No costs.
[R.M.D., J.] [M.S.Q., J.]
25.01.2022
Index:Yes/No
Speaking/Non-speaking order
nvsri
To
1.The Commissioner of Income-Tax-I
Chennai.
2.The Income-tax Appellate Tribunal “B” Bench Chennai.
3.The Income Tax Officer (OSD), Company Circle V(2), Chennai.
4.The Commissioner of Income-Tax (Appeals)-V, 121, Mahatma Gandhi
Road, Chennai-600 034.
https://www.mhc.tn.gov.in/judis
TC(A).Nos.160 and 161 of 2010
R. MAHADEVAN, J.
and
MOHAMMED SHAFFIQ, J.
nvsri
TC(A).No.160 and 161 of 2010
25.01.2022
https://www.mhc.tn.gov.in/judis
