2015 (4) TMI 1104 - HC - Income Tax

Deduction under section 10A - whether an amount received by way of a subsidy from the parent company of the assessee ought to be included in the export turnover or not? - Held that - The Tribunal found on facts that the amount could not be taken as a total turnover in any event on the parity of reasoning, namely, that the amount of about ₹ 3.36 crores had nothing to do with the rendering of services or export of services of the software. In that event, the amount could not be taken as a part of total turnover either.There is nothing to indicate that the finding of fact in this regard is perverse.

Summary

Issues:
1. Interpretation of deduction under section 10A of the Income-tax Act, 1961.
2. Inclusion of corporate subsidy in total turnover for deduction computation.
3. Exclusion of communication charges from turnover calculation.
4. Applicability of Supreme Court decision in CIT v. Lakshmi Machine Works [2007] 290 ITR 667.
5. Assessment of export turnover for deduction under section 10A.

Analysis:
1. The appeal concerned the interpretation of deduction under section 10A of the Income-tax Act, 1961. The appellant disputed the exclusion of a corporate subsidy received for reimbursement of expenses from the total turnover for deduction computation. The Tribunal found that the subsidy amount was not related to the rendering or export of services and thus could not be considered as part of the total turnover. The Commissioner of Income-tax (Appeals) similarly held that the subsidy amount could not be included in the total turnover. The Tribunal's decision was based on factual findings and not deemed perverse.

2. The dispute also involved the exclusion of communication charges from the turnover calculation for deduction under section 10A. The Tribunal directed the exclusion of a specific amount of communication charges from the total turnover for deduction computation purposes. The appellant contested this exclusion, arguing that the entire subsidy amount should be considered part of the total turnover. However, the Tribunal's decision was upheld based on the reasoning that the communication charges were not directly related to the services provided or exports made.

3. The Tribunal's decision was further supported by the applicability of the Supreme Court decision in CIT v. Lakshmi Machine Works [2007] 290 ITR 667. The Tribunal relied on this precedent to justify the exclusion of the subsidy and communication charges from the total turnover calculation. The appellant raised concerns regarding the nature of the issues in the referred case compared to the instant case, but the Tribunal's decision was maintained.

4. In summary, the High Court dismissed the appeal as it found no substantial questions of law arising from the case. The dispute primarily revolved around the inclusion of the corporate subsidy and communication charges in the total turnover for deduction computation under section 10A. The Tribunal's decision to exclude these amounts was upheld based on factual findings and the application of relevant legal precedents, including the Supreme Court decision in CIT v. Lakshmi Machine Works [2007] 290 ITR 667.