2018 (7) TMI 469 - HC - Income Tax

Deduction u/s.10A - directing the Assessing Officer include traveling expenses incurred in foreign currency in export turnover as well as in total turnover - Held that - The issue raised in the present appeal with regard to the deduction of expenditure incurred for Export Turn Over is also required to be deducted from Total Turn Over for the purpose of computing the deduction u/s.10A of the Act, the controversy is no longer res integra and is covered by the decision of the Division Bench of this Court in the case of M/s.Tata Elxsi Ltd., vs. Asst.Commissioner of Income Tax 2015 (10) TMI 634 - KARNATAKA HIGH COURT which has been affirmed by the Hon ble Supreme Court in the case of Commissioner of Income-tax, Central III vs. HCL Technologies Ltd., 2018 (5) TMI 357 - SUPREME COURT . - Decided against revenue

Summary

Issues:
1. Whether the Tribunal was justified in including traveling expenses in export turnover and total turnover for computing deduction u/s.10A of the Income Tax Act?
2. Whether the Tribunal was justified in treating foreign exchange gain/loss as operating in nature for the assessment year when the decision had not reached finality?

Issue 1:
The appeal involved a dispute over the deduction of traveling expenses from 'Export Turn Over' and 'Total Turn Over' for calculating the deduction under section 10A of the Income Tax Act. The Revenue raised substantial questions of law regarding the inclusion of traveling expenses in both turnovers, citing a previous judgment. The High Court referred to the decision in the case of M/s. Tata Elxsi Ltd. and Commissioner of Income-tax vs. HCL Technologies Ltd. The Court emphasized that expenses excluded from export turnover must also be excluded from total turnover to align with legislative intent. The judgment highlighted the need for consistency in deductions to avoid illogical outcomes. The Tribunal's decision favored the Assessee, citing previous orders, and found no reason to take a contrary view. The High Court, in line with previous rulings, concluded that no substantial question of law arose in this case, leading to the dismissal of the Revenue's appeal.

Issue 2:
The second issue pertained to the treatment of foreign exchange gain/loss as operating in nature by the Tribunal for the relevant assessment year. The High Court noted that the controversy was no longer res integra based on previous decisions. The judgment referred to a specific case where the Tribunal had confirmed the nature of foreign exchange gain/loss as operating in a different assessment year for the same Assessee. The Court found no reason to deviate from this view as the Revenue failed to demonstrate any factual differences. The High Court emphasized the importance of consistent application of legal principles and cited a previous judgment to support its decision. Consequently, the Court concluded that the Revenue's appeal did not raise any substantial question of law, leading to its dismissal.

In conclusion, the High Court dismissed the Revenue's appeal, stating that no substantial question of law arose in the case. The judgment highlighted the significance of consistent application of legal principles and previous decisions in tax matters. The Court emphasized the need for adherence to established norms in computing deductions under the Income Tax Act to avoid illogical outcomes. The decision underscored the importance of maintaining consistency in interpreting tax laws to ensure fair and just outcomes in tax disputes.