2019 (6) TMI 546 - HC - Income Tax

Deduction u/s 10A - Exclusion from the export turnover as well as the total turnover - telecommunication charges and the expenditure incurred towards technical services rendered outside the India - HELD THAT - Expenditure incurred towards technical services rendered outside the India, is already covered against the revenue by a judgment of the Supreme Court in C.I.T v. HCL Technologies Ltd . 2018 (5) TMI 357 - SUPREME COURT . As held therein that if deductions on certain services were allowed only in respect of export turnover but not from the total turnover, it would give raise to an inadvertent, unlawful, meaningless and illogical result, causing grave injustice to the assessee. Therefore, following the same, the first question of law is answered against the revenue.

Summary

Issues:
1. Whether telecommunication charges and expenditure on technical services outside India should be excluded from export turnover and total turnover.
2. Whether the Tribunal's decision is liable to be set aside as being perverse and not based on due reasoning.

Issue 1: Telecommunication Charges and Expenditure on Technical Services Outside India

The appeal under Section 260-A of the Income Tax Act, 1961 raised the question of whether telecommunication charges and expenditure on technical services outside India should be excluded from export turnover and total turnover. The court referred to a judgment of the Supreme Court in C.I.T v. HCL Technologies Ltd., (2018) 404 ITR 719 (SC), which held that allowing deductions only in respect of export turnover and not from total turnover would result in an inadvertent, unlawful, meaningless, and illogical outcome, causing injustice to the assessee. Following this precedent, the court ruled against the revenue on this issue, stating that such deductions should not be excluded from turnover calculations.

Issue 2: Tribunal's Decision

The court examined whether the Tribunal's decision was perverse and lacked due reasoning. After reviewing the order of the Tribunal, the court found no perversity in its findings. Consequently, the court determined that the second substantial question of law, regarding the validity of the Tribunal's decision, did not warrant consideration. As a result, the court dismissed the appeal with no order as to costs, thereby closing any pending miscellaneous petitions related to the case.

In conclusion, the High Court of Telangana and Andhra Pradesh ruled against excluding telecommunication charges and expenditure on technical services outside India from turnover calculations. The court also found no fault in the Tribunal's decision, leading to the dismissal of the appeal.