2016 (3) TMI 460 - HC - Income Tax

Computing deduction U/s.10A - non exclusion of expenses incurred in foreign currency from export turnover for the purpose of computation of deduction under Section 10A - Held that - Question raised in the present appeals are covered by the decision of Commissioner of Income Tax vs. Tata Elxsi Ltd. 2014 (9) TMI 1013 - KARNATAKA HIGH COURT held that any exclusion from the export turnover, it should also be excluded from the total turnover for the purpose of computation of deduction under S.10A of the Act.

Summary

Issues:
1. Whether the Tribunal correctly directed the assessing authority not to exclude expenses incurred in foreign currency from export turnover for deduction under Section 10A of the Income Tax Act.
2. The impact of the decision in the case of Commissioner of Income Tax vs. Tata Elxsi Ltd. on the present appeals.

Analysis:
1. The primary issue in this judgment revolves around the correctness of the Tribunal's direction regarding the exclusion of expenses in foreign currency from export turnover for the purpose of deduction under Section 10A of the Income Tax Act. The appellant's counsel raised the question of whether the Tribunal was right in law to exclude such expenses, arguing that the development and creation of software programs outside India involved rendering technical services abroad. However, the High Court found that the question raised was already addressed in a previous decision involving Commissioner of Income Tax vs. Tata Elxsi Ltd. The Court noted that the issue was similar to the one in the earlier case where the per diem allowance was not to be reduced from export turnover for computing deductions under Section 80HHE of the Income Tax Act. Consequently, the High Court dismissed the appeal, stating that the substantial questions of law had already been settled in previous judgments.

2. The judgment also delves into the impact of the decision in the case of Commissioner of Income Tax vs. Tata Elxsi Ltd. on the present appeals. The Court highlighted that the issue raised in the current appeals was already addressed in the earlier case involving MICO, where the substantial questions of law were resolved in favor of the assessee and against the revenue. Given the existing legal precedents, the High Court concluded that no substantial questions of law would arise for consideration in the present appeals. The Court further clarified that the Assessing Officer should give effect to the order of the Court, with the provision that if the Apex Court rules in favor of the Revenue in the pending Special Leave Petitions (SLPs) against the decision in Tata Elxsi Ltd., the Assessing Officer would be allowed to pass further consequential orders based on the Apex Court's decision.

In summary, the High Court's judgment in this case addressed the issues related to the exclusion of expenses in foreign currency from export turnover for deduction under the Income Tax Act and the impact of previous decisions on the present appeals. The Court relied on established legal precedents to dismiss the appeals and provided guidance on the Assessing Officer's actions based on potential outcomes of pending cases before the Apex Court.