2014 (10) TMI 915 - HC - Income Tax

Technical services outside India in connection with the export of computer software - whether the Appellate Tribunal is erred in confirming the order of the Assessing Authority that the marketing expenses incurred by the appellant outside India to prospect its business also form part of export turnover within the meaning of Explanation 2 to Section 10-A of the Income Tax Act 1961? - Held that - As in the case of The Commissioner of Income Tax & another v/s. Motor Industries Co. Ltd. 2015 (7) TMI 876 - KARNATAKA HIGH COURT wherein the substantial questions of law were answered in favour of the assessee and against the revenue.

Summary

Issues involved:
1. Deduction of technical expenses from export turnover.
2. Inclusion of marketing expenses in export turnover.

Analysis:
1. The appellant appealed against the Tribunal's decision regarding the deduction of technical expenses from profits earned from the export turnover. The substantial question of law raised was whether the Tribunal was correct in considering the appellant as providing 'technical services' outside India in connection with the export of computer software. The Court referred to a similar case where the questions were resolved in favor of the assessee. Following that judgment, the Court ruled in favor of the appellant, setting aside the impugned order and allowing the appeal, entitling the assessee to the benefit.

2. Another issue raised was the inclusion of marketing expenses incurred outside India in the export turnover. The Court noted the similar questions of law in a previous case where the decision favored the assessee. Consequently, the Court ruled in favor of the appellant, directing that the substantial questions of law in this appeal be answered in favor of the assessee and against the revenue. The impugned order passed by the authorities was set aside, granting the assessee the entitled benefit. The learned counsel was permitted to file a Memo of Appearance within four weeks.

In summary, the High Court of Karnataka, in a judgment delivered by Mr. N Kumar and Mr. B Manohar JJ., allowed the appeal filed by the appellant against the Tribunal's decision. The Court ruled in favor of the appellant on both issues, namely the deduction of technical expenses and the inclusion of marketing expenses in the export turnover, setting aside the impugned order and granting the assessee the entitled benefit. The judgment was based on the precedent set in a similar case where the questions of law were resolved in favor of the assessee, guiding the Court's decision in this appeal.