2018 (7) TMI 486 - HC - Income Tax

High Court Upholds ITAT Order on Export Turnover Deductions for Section 10A

Pr. Commissioner Of Income Tax And The Deputy Commissioner Of Income Tax Officer, Circle-12 (2) Versus M/s Nvidia Graphics Pvt. Ltd.

The High Court dismissed the Revenue's appeal challenging the ITAT Order for AY 2009-10 regarding the deduction of expenses from Export Turnover for ... Deduction u/s 10A - computation of claim - Held that:- Issue regarding deduction of expenditure incurred for ‘Export Turn Over’ is also required to be deducted from ‘Total Turn Over’ for the purpose of computing the deduction u/s.10A of the Act, the controversy is no longer resintegra and is covered by the decision of the Division Bench of this Court in the case of M/s.Tata Elxsi Ltd., vs. Asst. Commissioner of Income Tax, [2015 (10) TMI 634 - KARNATAKA HIGH COUR] which has been affirmed by the Hon’ble Supreme Court in the case of Commissioner of Income-tax, Central – III vs. HCL Technologies Ltd., [2018 (5) TMI 357 - SUPREME COURT]. Issues:Appeal by Revenue challenging ITAT Order for AY 2009-10 - Deduction of expenses from Export Turnover for Section 10A computation - Interpretation of legislative intent on deduction from Total Turnover.Analysis:The judgment pertains to an appeal filed by the Revenue against the Order of the Income Tax Appellate Tribunal for the Assessment Year 2009-10. The main issue raised was whether expenses reduced from Export Turnover should also be deducted from Total Turnover for computing deduction under Section 10A of the Income Tax Act. The Revenue argued that such deduction is necessary, relying on a decision by the Division Bench of the Karnataka High Court in the case of M/s.Tata Elxsi Ltd., which was affirmed by the Supreme Court in the case of Commissioner of Income-tax, Central - III vs. HCL Technologies Ltd.The Supreme Court, in the case of HCL Technologies Ltd., emphasized that expenses excluded from Export Turnover must also be excluded from Total Turnover to maintain legislative intent and avoid illogical results. The Court highlighted that any other interpretation would be impermissible and lead to unjust outcomes. It was noted that for the formula to work effectively in determining profit from export business, deductions should be allowed from Total Turnover in the same proportion as from Export Turnover.After considering the arguments and legal precedents, the High Court concluded that no substantial question of law arose in the present case. Therefore, the appeal filed by the Revenue was dismissed, and no costs were awarded. The judgment reaffirmed the principle that deductions from Export Turnover should also apply to Total Turnover for computing deductions under Section 10A, in line with the legislative intent and to prevent illogical outcomes.