2016 (3) TMI 830 - HC - Income Tax

Revenue's Appeal Dismissed on Technical Service Expenses Exclusion

The High Court dismissed the Revenue's appeal challenging the Tribunal's order for Assessment Year 2004-05 under Section 260A of the Income Tax Act, 1961. ... Computation of total turnover for Section 10A exemption - treatment of foreign exchange expenses for technical services provided outside India - treatment of communication charges in export turnover/total turnover - interpretative effect of High Court decision in Gem Plus Jewellery India Ltd. - finality of High Court decision absent stay by the Supreme CourtComputation of total turnover for Section 10A exemption - treatment of foreign exchange expenses for technical services provided outside India - interpretative effect of High Court decision in Gem Plus Jewellery India Ltd. - Whether expenses in foreign exchange for providing technical services outside India are to be excluded from 'total turnover' while computing income exempt under section 10A. - HELD THAT: - The Tribunal excluded foreign exchange expenses for technical services provided outside India from the 'total turnover' by following this Court's decision in Gem Plus Jewellery India Ltd. The Revenue accepted that the issue is concluded against it by the Gem Plus decision and did not show that the Gem Plus decision has been stayed by the Supreme Court. In that factual and legal posture the questions framed do not raise a substantial question of law warranting interference with the Tribunal's order. [Paras 3, 4, 5]The Tribunal's exclusion of foreign exchange expenses from 'total turnover' is left undisturbed; the question is not entertained and the appeal is dismissed.Computation of total turnover for Section 10A exemption - treatment of communication charges in export turnover/total turnover - interpretative effect of High Court decision in Gem Plus Jewellery India Ltd. - Whether communication charges should be excluded from the 'total turnover' while computing income exempt under section 10A. - HELD THAT: - The Tribunal excluded communication charges from 'total turnover' in accordance with this Court's Gem Plus decision. The Revenue candidly accepted that Gem Plus conclusively addresses the matter and has not shown any stay of that decision by the Supreme Court. Given that the Tribunal applied the binding High Court precedent, the question does not present a substantial question of law for this Court to entertain. [Paras 3, 4, 5]The Tribunal's treatment excluding communication charges from 'total turnover' is sustained; the question is not entertained and the appeal is dismissed.Computation of total turnover for Section 10A exemption - definition and scope of export turnover under Explanation to section 10A - finality of High Court decision absent stay by the Supreme Court - Whether the Explanation to section 10A, which defines 'export turnover', precludes exclusion of communication charges and foreign exchange expenses from 'total turnover'. - HELD THAT: - The Tribunal's conclusion followed this Court's ruling in Gem Plus, which the Revenue accepts binds the present controversy. The Revenue's contention that the Explanation unambiguously excludes those items from 'export turnover' but not from 'total turnover' was not held sufficient to displace the binding precedent. As the Gem Plus decision has not been shown to be stayed, the Court declined to entertain the questions framed since they are concluded by existing High Court authority. [Paras 3, 4, 5]The Tribunal's approach is sustained; the legal questions are not entertained and the appeal is dismissed.Final Conclusion: The appeal under Section 260A is dismissed. The Tribunal's order for Assessment Year 2004-05, which followed this Court's decision in Gem Plus Jewellery India Ltd., is left undisturbed; the questions raised do not give rise to any substantial question of law and the Gem Plus decision stands operative in the absence of a stay by the Supreme Court. Issues:1. Challenge to the Tribunal's order under Section 260A of the Income Tax Act, 1961 for Assessment Year 2004-05.2. Exclusion of expenses for providing technical services and communication charges from 'total turnover' under section 10A of the Income Tax Act, 1961.Analysis:1. The High Court considered the appeal filed by the Revenue challenging the Tribunal's order for Assessment Year 2004-05 under Section 260A of the Income Tax Act, 1961. The Revenue raised questions regarding the exclusion of expenses for providing technical services and communication charges from the 'total turnover' while computing income exempt under section 10A of the Act. The Tribunal had relied on a decision by the Special Bench of the ITAT in the case of Sak Soft Ltd. and the decision of the Bombay High Court in the case of Gem Plus Jewellery India Ltd.2. The High Court noted that the impugned order of the Tribunal had dismissed the Revenue's appeal by following the decision of the Bombay High Court in Gem Plus Jewellery India Ltd. The Revenue's counsel acknowledged that the issue raised was concluded against the Revenue by the decision in Gem Plus Jewellery India Ltd. However, he mentioned that the Revenue had appealed to the Apex Court from the order in Gem Plus Jewellery India Ltd. The High Court held that since the questions raised were already decided by the Bombay High Court and not stayed by the Apex Court, they did not give rise to any substantial question of law and thus were not entertained.3. Consequently, the High Court dismissed the appeal, stating that the questions raised were concluded by the decision in Gem Plus Jewellery India Ltd. The court held that the questions did not merit further consideration, leading to the dismissal of the appeal without any order as to costs.