2020 (6) TMI 508 - HC - Income Tax

Deduction u/s 10A - HELD THAT - This court need not detain us as it is no longer res integra and is squarely covered by decision of the supreme court in COMMISSIONER OF INCOME-TAX V. HCL TECHNOLOGIES LTD. 2018 (5) TMI 357 - SUPREME COURT . In view of aforesaid enunciation of law, the tribunal was justified in directing the assessing officer to exclude telecommunication expense, per diem expenses. It is pertinent to note that in case expenses are incurred on insurance in respect of the employees of the assessee on visit to their clients premises, the same also deserves to be excluded. However, in the instant case, there is a dispute with regard to claim of the assessee with regard to expenditure incurred on insurance to the tune which requires adjudication. Accordingly, the first substantial question of law framed by a bench of this court is answered against the revenue insofar as it pertains to exclusion of expenses under the head of telecommunication and per diem expenses. Allowable business expenditure - Whether the assessee has incurred an amount on account of medical insurance of the employees of the assessee on visit to their clients premises or the same is not relatable to medical insurance? - HELD THAT - We find from the order passed by the tribunal that tribunal has remitted the claim of the assessee that insurance expenditure is not relatable to export of computer software but it relates to medical insurance of the employees of the assessee on the visit to their clients premises. While issuing the aforesaid direction, the tribunal has followed the decision rendered by it in INFOSYS TECHNOLOGIES LTD. 2013 (7) TMI 451 - KARNATAKA HIGH COURT . Therefore, it is not necessary to answer the second substantial question of law.

Summary

Issues:
1. Whether certain expenses should be excluded from total turnover for the purpose of computation of deduction under Section 10A of the Income Tax Act, 1961?
2. Whether medical insurance expenses incurred on employees sent abroad for onsite computer development should be excluded from export turnover?

Analysis:

Issue 1:
The appeal pertains to the exclusion of telecommunication expenses, insurance expenses, and per diem expenses on employees in foreign currency from total turnover for the purpose of deduction under Section 10A of the Income Tax Act, 1961. The assessing officer had reopened the case under Section 147 of the Act, claiming excess deduction under Section 10A due to the inclusion of certain expenses in the total turnover. The Commissioner of Income Tax (Appeals) directed the assessing officer to exclude specific expenses from both export turnover and total turnover. The Income Tax Appellate Tribunal upheld the decision, citing relevant case laws. The High Court affirmed the Tribunal's decision, stating that expenses relatable to export of computer software should be excluded from both turnovers. The court also noted a dispute regarding insurance expenses that required further adjudication.

Issue 2:
The second issue concerns the medical insurance expenses amounting to a specific sum incurred on employees sent abroad for onsite computer development. The Tribunal remitted this issue to the assessing officer for verification, following the decision in a related case. The High Court acknowledged the ongoing dispute and the previous appeal by the revenue on a similar matter. The court directed the assessing officer to reconsider the claim of the assessee in light of the relevant legal precedents. Consequently, the court did not provide a specific answer to the second substantial question of law, leaving it for the assessing officer to decide based on the applicable legal principles.

In conclusion, the High Court disposed of the appeal, upholding the exclusion of certain expenses from total turnover for deduction purposes under Section 10A of the Income Tax Act, 1961. The court emphasized the need for verifying the nature of insurance expenses and left the decision on medical insurance expenses for further adjudication by the assessing officer.