2019 (4) TMI 1439 - HC - Income Tax

Software Exporters Eligible for Tax Deduction Under Section 10A Ruling

Commissioner of Income Tax LTU Versus M/s. Tata Consultancy Services

Commissioner of Income Tax LTU Versus M/s. Tata Consultancy Services - TMI Issues:1. Claim under section 10A of the Income Tax Act on units claiming deduction under section 80HHE and computation method.2. Whether the benefit of section 10A is available to existing industries engaged in manufacturing computer software for export prior to 1st April 2001.3. Computation of deduction under section 10A regarding exclusion of freight and insurance expenditure from export turnover for computing total turnover.Analysis:1. The main issue in this case was the claim under section 10A of the Income Tax Act on units that were also claiming deduction under section 80HHE, and the method of computation of such deduction. The appellant revenue challenged the ITAT's decision upholding the CIT (A)'s order allowing the claim under section 10A. The revenue contended that the assessee could not claim deduction under section 10A due to section 80HHE restrictions and that the benefit of section 10A was not available to existing industries. However, the court found that the provisions of section 80HHE did not prohibit the assessee from claiming deduction under section 10A and that the benefit of section 10A was not limited to new industries post 1/4/2001.2. The court analyzed the provisions of section 10A and the first proviso to subsection (1) of section 10A. The proviso stated that if the profits and gains of an undertaking had not been included before the amendment by the Finance Act of 2000, the undertaking would be entitled to deduction for the unexpired period of ten consecutive assessment years. This provision ensured that existing industries engaged in manufacturing and export of computer software could claim the deduction under section 10A for the remaining period of ten assessment years post the amendment.3. The court also addressed the computation issue raised by the revenue regarding the exclusion of freight and insurance expenditure from the export turnover for computing the total turnover under section 10A. Referring to the Supreme Court judgment in Commissioner of Income Tax Vs. HCL Technologies, the court held that the total turnover for section 10A cannot be equated with that for section 80HHE. It was established that expenses excluded from export turnover must also be excluded from the computation of total turnover for section 10A. Consequently, the court dismissed the appeal, stating that no question of law arose in the case.