Madras High Court
Appellant In The Above T.C.(A)S vs The Assistant Commissioner Of Income ... on 7 November, 2024
Author: Anita Sumanth
Bench: Anita Sumanth
2024:MHC:3791
Tax Case (Appeal) No.2430 to 2432 of 2008
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 07.11.2024
CORAM :
THE HONOURABLE DR.JUSTICE ANITA SUMANTH
and
THE HONOURABLE MR.JUSTICE G. ARUL MURUGAN
Tax Case (Appeal) Nos.2430 to 2432 of 2008
M/s/Newgen Digital Works Pvt. Limited
2/579, Singaravelan Street,
Chinna Neelankarai,
Chennai – 600 041.
India.
(cause title accepted vide order dt.26.7.22
in CMP Nos.13717, 13718
and 13719 of 2017)
.. Appellant in the above T.C.(A)s
Vs
The Assistant Commissioner of Income Tax
Central Circle IV (4), Chennai – 600 034.
.. Respondent in the above T.C.(A)s.
COMMON PRAYER :APPEALS filed under Section 260A of the
Income Tax Act, 1961 against order dated 08.02.2008 in ITA Nos.570,
1955 and 1956/Mds/2007 for assessment years 2003-04, 2001-02 and
2004-05 on the file of the Income Tax Appellate Tribunal, Chennai Bench
'B”.
https://www.mhc.tn.gov.in/judis
1
Tax Case (Appeal) No.2430 to 2432 of 2008
In all T.C.(A)s
For Appellant : Mr.A.S.Sriraman
For Respondents : Mrs.V.Pushpa
Senior Standing Counsel
COMMON JUDGMENT
(Judgment of the Court was delivered by Dr.ANITA SUMANTH.,J)
We have heard Mr.A.S.Sriraman, learned counsel for the appellant
and Ms.V.Pushpa, learned Senior Standing Counsel for the respondent.
2. Though the appeal has been admitted on two questions of law,
the arguments that are advanced touch on the first substantial question of
law alone, reading thus:
1. Whether, on the facts and in the circumstances of the
case, the Income Tax Appellate Tribunal is right in reducing the
claim of exemption under Section 10B of the Income Tax Act,
1961?
3. Learned counsel for the appellant makes an endorsement, on
instructions, that the following substantial question of law is not pressed
by the assessee/appellant.
'Whether on the facts and in the circumstances of the
case, the Income Tax Appellate Tribunal is right in reducing
the exemption under Section 10B of the Act, when, in fact, there
is no specific finding in the assessment order and the order of
the Tribunal that the appellant provides technical service?'
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Tax Case (Appeal) No.2430 to 2432 of 2008
4. The appeals relate to the assessment years 2001-02, 2003-04 and
2004-05. In the returns of income, the appellant had made claims for
exemption under Section 10B of the Income Tax Act, 1961 (in short 'Act')
in regard to the expenditures incurred in foreign currency which, according
to the petitioner, are liable to be included in the ambit of 'export turnover'
in the computation of such exemption.
5. The assessing authority did not accept the submission and in the
first appeal the appellant had raised an alternate contention that if at all the
expenditure was to be excluded from the component of 'export turnover',
the same should be excluded from total turnover also.
6. The above submission found favour with the first appellate
authority, who accepted the same. At the instance of the revenue, the
matter was carried to the Income Tax Appellate Tribunal, which reversed
the order of the first appellate authority, assailing which, the present
appeals have been filed.
7. Both learned counsel would concur on the position that the issue
in question is covered by a judgment of the Supreme Court in
Commissioner of Income Tax Central-III V. HCL Technologies Ltd. (404
ITR 719), the operative portion of which reads as follows:
17) The similar nature of controversy, akin this case, arose before
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Tax Case (Appeal) No.2430 to 2432 of 2008
the Karnataka High Court in CIT vs. Tata Elxsi Ltd. (2012) 204
Taxman 321/17. The issue before the Karnataka High Court was
whether the Tribunal was correct in holding that while computing
relief under Section10A of the IT Act, the amount of communication
expenses should be excluded from the total turnover if the same are
reduced from the export turnover? While giving the answer to the
issue, the High Court, inter-alia, held that when a particular word
is not defined by the legislature and an ordinary meaning is to be
attributed to it, the said ordinary meaning is to be in conformity
with the context in which it is used. Hence, what is excluded from
‘export turnover’ must also be excluded from ‘total turnover’, since
one of the components of ‘total turnover’ is export turnover. Any
other interpretation would run counter to the legislative intent and
would be impermissible.
18) Accordingly, the formula for computation of the deduction
under Section10A of the Act would be as follows:
Export turnover as defined in Explanation 2 (IV)
of Section 10A of IT Act
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 proceed
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 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
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Tax Case (Appeal) No.2430 to 2432 of 2008
same way, expenses incurred in foreign exchange for providing the
technical services outside shall be allowed to exclude from the total
turnover..
8. In light of the aforesaid, these Tax Case (Appeals) are allowed.
No costs.
[A.S.M., J] [G.A.M., J]
sl 07.11.2024
Index:Yes/No
Speaking order
Neutral Citation:Yes
To
The Assistant Commissioner of Income Tax
Central Circle IV (4), Chennai – 600 034.
https://www.mhc.tn.gov.in/judis
Tax Case (Appeal) No.2430 to 2432 of 2008
Dr.ANITA SUMANTH,J.
AND
G.ARUL MURUGAN,J.
sl
Tax Case (Appeal) Nos.2430 to 2432 of 2008
07.11.2024
https://www.mhc.tn.gov.in/judis
