2020 (12) TMI 52 - HC - Income Tax

Computation of section 10A deduction - whether section 10A does not permit the assessee to reduce expenses incurred in foreign currency from both from export and total turnover? - HELD THAT - Assessee submitted that the first substantial question of law, which has been framed by this Court has already been answered by the Hon ble Supreme Court in COMMISSIONER OF INCOME TAX CENTRAL-III NEW DELHI VS. HCL TECHNOLOGIES LTD. 2018 (5) TMI 357 - SUPREME COURT The aforesaid legal position could not be disputed by learned counsel for the revenue. First substantial question of law is answered against the revenue and in favour of the assessee. Set of losses of 10A unit and non 10A units - HELD THAT - Second substantial question of law is also answered in favour of the assessee by the decision of Hon ble Supreme Court in CIT vs. Yokogawa India Ltd. 2016 (12) TMI 881 - SUPREME COURT . The aforesaid fact could not be rebutted by the learned counsel for the revenue. In view of the decision of the Hon ble Supreme Court in the Yokogawa India Ltd. (supra), the second substantial question of law framed by a bench of this Court is also answered against the revenue and in favour of the assessee. Disallowance u/s 14A - whether no expenses under section 14A of the Act could be attributed for maintenance/monitoring the investment in mutual funds? - Non appreciation of Notification in S.O.547(E) dated 24/3/2008 - HELD THAT - Tribunal on the basis of meticulous appreciation of evidence held that no expenditure was incurred by the assessee directly or indirectly to earn the dividend and therefore, the claim of the assessee under Section 14A of the Act is allowed. The aforesaid finding is a finding of fact, which is based on meticulous appreciation of evidence on record. The aforesaid finding could not be demonstrated to be perverse. It is well settled principle of law that unless and until a finding of fact is demonstrated to be perverse, this Court in exercise of power under Section 260-A of the Act, would not interfere with the findings of the Court - HERO VINOTH (MINOR) VERSUS SESHAMMAL 2006 (5) TMI 478 - SUPREME COURT - Third substantial question of law is also answered against the revenue and in favour of the assessee.

Summary

Issues:
1. Interpretation of Section 10A deduction and treatment of foreign currency expenses.
2. Treatment of losses of 10A unit and non-10A units.
3. Disallowance under Section 14A of the Income Tax Act.

Interpretation of Section 10A deduction and treatment of foreign currency expenses:
The appeal under Section 260-A of the Income Tax Act, 1961 was filed by the revenue concerning the Assessment Year 2006-07. The substantial questions of law included the computation of Section 10A deduction and the treatment of expenses incurred in foreign currency from both export and total turnover. The Tribunal had set aside the computation of Section 10A deduction made by the assessing authority. The Court noted that the judgment in a previous case had not reached finality, and it was argued that Section 10A does not permit reducing expenses incurred in foreign currency from both export and total turnover. The Court referred to relevant legal principles and ultimately answered this substantial question of law against the revenue and in favor of the assessee.

Treatment of losses of 10A unit and non-10A units:
The Tribunal had also set aside the findings of the assessing officer regarding the set of losses of 10A unit and non-10A units. This decision was based on placing reliance on a previous court decision that had been challenged before the Apex Court. The Court considered the decision of the Hon’ble Supreme Court in a related case and found that the second substantial question of law was also answered against the revenue and in favor of the assessee. This aspect of the judgment highlighted the importance of legal precedents and how they influence the interpretation of tax laws.

Disallowance under Section 14A of the Income Tax Act:
Another substantial question of law related to the disallowance of a specific amount under Section 14A of the Act. The Tribunal had allowed the claim of the assessee under Section 14A after a meticulous appreciation of evidence on record, determining that no expenditure was incurred to earn the dividend. The Court emphasized that this finding was based on a meticulous analysis of evidence and was not demonstrated to be perverse. Citing established legal principles, the Court concluded that unless a finding of fact is proven to be perverse, the Court would not interfere with such findings. Consequently, the third substantial question of law was answered against the revenue and in favor of the assessee, leading to the dismissal of the appeal.

In conclusion, the judgment addressed various issues concerning the interpretation and application of tax laws, highlighting the significance of legal precedents, meticulous analysis of evidence, and adherence to established legal principles in determining tax liabilities and deductions.