2022 (10) TMI 1124 - HC - Income Tax

Deduction u/s 10A - incidental income of the assessee in the form of interest income - HELD THAT - Having heard learned counsel for the Appellant, this Court finds that the issue raised in the present appeal is no longer res integra. In Principal Commissioner of Income Tax-1 vs. American Express India Pvt. Ltd. 2018 (2) TMI 1811 - DELHI HIGH COURT held that Section 10A/10B of the Act is a complete code providing the mechanism for computing the profits of the business‟ eligible for deduction u/s 10B of the Act. Once an income forms part of the business of the income of the eligible undertaking of the assessee, the same cannot be excluded from the eligible profits for the purpose of computing deduction u/s 10B - No substantial question of law arises

Summary

Issues:
1. Challenge to ITAT order regarding eligibility of interest income for deduction under Section 10A of the Income Tax Act, 1961.
2. Consideration of Karnataka High Court decision and pending Supreme Court appeal.
3. Interpretation of provisions under Section 10A and Section 80A of the Income Tax Act.

Analysis:

1. The High Court considered an Income Tax Appeal challenging the ITAT order regarding the eligibility of interest income for deduction under Section 10A of the Income Tax Act, 1961. The Appellant argued that only profits derived from the eligible undertaking should be entitled to deduction under Section 10A. The Court noted that a similar issue was addressed in a previous case where the ITAT had erred in deleting the addition of income from other sources for the purpose of calculation of deductions under Sections 10A and 10B of the Act. The Court referred to the Supreme Court's ruling in Liberty India v. CIT and emphasized the independence of Section 80A from Sections 10A and 10B. The Court dismissed the appeal based on the previous judgment's interpretation of the law.

2. The Appellant also raised concerns about the ITAT's reliance on the Karnataka High Court decision in Commissioner of Income Tax vs Hewlett Packard Global Soft Ltd, which was challenged before the Supreme Court. The Court acknowledged the pending adjudication of the issue in Civil Appeal No.9175 of 2018. However, the Court found that the issue raised in the present appeal was no longer res integra based on a previous Division Bench judgment in Principal Commissioner of Income Tax-1 vs. American Express India Pvt. Ltd. The Court concurred with the previous ruling and dismissed the appeal accordingly.

3. The Court delved into the interpretation of provisions under Section 10A and Section 80A of the Income Tax Act. It highlighted the misconception regarding the true purport of Chapter VIA of the Act and the independence of Section 80A from Sections 10A and 10B. The Court emphasized that the intention was not to deny relief under Section 10B or to restrict the ambit of those provisions. The Court referred to previous judgments and concluded that once an income forms part of the business of the eligible undertaking of the assessee, it cannot be excluded from the eligible profits for the purpose of computing deductions under Section 10B. Consequently, the Court answered the question of law in favor of the assessee and against the Revenue, ultimately dismissing the appeal based on this interpretation of the law.