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TMI Blog2021 (7) TMI 311X X X X Extracts X X X X X X X X Extracts X X X X ..... 21 - Hon'ble Mr.Justice M. Duraiswamy And Hon'ble Mrs.Justice R. Hemalatha For the Appellant : Mr.T.Ravi Kumar Senior Standing Counsel And Mrs.R.Hemalatha Standing Counsel For the Respondent : Mr.R.Venkata Narayanan for M/s.Subbaraya Aiyar Padmanabhan JUDGMENT M.DURAISWAMY, J. Challenging the order passed in I.T.A.No.1710/Mds/2013 in respect of the assessment year 2006-07, on the file of the Income Tax Appellate Tribunal B Bench, the Revenue has filed the above appeal. 2.The assessee is a domestic company engaged in the business of data and call center operation, filed its return of income on 30.11.2006, after claiming deduction u/s.10A of the Income Tax Act, 1961. Subsequently, the assessee had revised its return of income on 28.03.2008. Subsequently, the case was taken up for scrutiny and assessment was made u/s.143(3) of the Act on 28.11.2008 and the Assessing Officer had set off the brought forward losses and unabsorbed depreciation from the current year profit of the eligible 10A unit of the assessee u/s.72 of the Act, and thereafter, granted deduction u/s.10A of the Act for the remaining profit. The Assessing Officer had also exclud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC) [Commissioner of Income Tax v. HCL Technologies Ltd.] , wherein, the Hon'ble Supreme Court held as follows : 8.The whole controversy revolves around the claim of certain expenses attributable to the delivery of software outside India or in providing technical services from 'total turnover' by the Respondent under Section 10A of the IT Act. It is an undisputed fact that neither Section 10A nor Section 2 of the IT Act define the term 'total turnover'. However, the term 'total turnover' is given in clause (ba) of the Explanation to Section 80 HHC of the IT Act which defines the meaning of total turnover as follows: (ba) 'total turnover' shall not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs stations as defined in the Customs Act, 1962 (52 of 1962). Provided that in relation to any assessment year commencing on or after the 1st day of April, 1991, the expression total turnover shall have effect as if it also included any sum referred to in clauses (iiia), (iiib), (iiic), (iiid) and (iiie) of section 28; 9.It is also pertinent to mention here the relevant te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed. Undisputedly, it is a matter of record that the Respondent is engaged in the activity of trading of generic software and providing customized software development services for domestic as well as for foreign clients through its two units situated in Software Technology Park, Gurgaon (Now Gurugram) which falls under definition of the Section 10A of the IT Act. The contention of the Respondent is that it incurred expenditure in foreign exchange in sending professionals abroad as per the agreements with the foreign constituents. 11.On an analysis of the Respondent's activity taken from its website, Assessing Officer arrived at a conclusion that Respondent has been rendering technical services outside India and, therefore, expenses incurred on such activity are required to be excluded from the export turnover while working out the deduction admissible under Section 10A of the IT Act. The Assessing Officer estimated 60% of the software development charges required to be attributed towards expenses incurred for providing technical services outside India. On appeal, learned CIT (Appeals) again made a detailed analysis of the activity of the Respondent and arrived at a conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 10A. When the meaning is clear, there is no necessity of importing the meaning of total turnover from the other provisions. If a term is defined under Section 2 of the IT Act, then the definition would be applicable to all the provisions wherein the same term appears. As the term 'total turnover' has been defined in the Explanation to Section 80HHC and 80HHE, wherein it has been clearly stated that for the purposes of this Section only , it would be applicable only for the purposes of that Sections and not for the purpose of Section 10A. If denominator includes certain amount of certain type which numerator does not include, the formula would render undesirable results. 15.A Statute is the intention of the legislature who enacts it after having regard to various facts and circumstances. It is a cardinal principle of law that the interpretation by the Court shall be done in such a way that the intention of the legislature shall prevail and no injustice occurred with the parties. The rule of harmonious construction is the thumb rule to interpretation of any statute. An interpretation which makes the enactment a consistent whole, should be the aim of the Courts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary meaning is to be attributed to it, the said ordinary meaning is to be in conformity with the context in which it is used. Hence, what is excluded from 'export turnover' must also be excluded from 'total turnover, since one of the components of 'total turnover' is export turnover. Any other interpretation would run counter to the legislative intent and would be impermissible. 18.Accordingly, the formula for computation of the deduction under Section 10A of the Act would be as follows: Export Profit = total Profit of the Business X Export turnover as defined in Explanation 2 (IV) of Section 10A of IT Act / Export turnover as defined in Explanation 2(IV) of Section 10A of the IT Act + domestic sale proceeds 19.In the instant case, if the deductions on freight, telecommunication and insurance attributable to the delivery of computer software under Section 10A of the IT Act are allowed only in Export Turnover but not from the Total Turnover then, it would give rise to inadvertent, unlawful, meaningless and illogical result which would cause grave injustice to the Respondent which could have never been the intention of the legislature. 20.Even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 2019 dated 06.7.2020], to which, one of us (TSSJ) was a party, the above mentioned substantial question of law was decided against the Revenue following the said decision in TCA. No.228 of 2011 dated 18.3.2020, which judgment answered the only substantial question of law against the Revenue. 5.Following the above decisions, the above tax case appeal is dismissed and the substantial question of law is answered against the Revenue. No costs. 8.The learned Senior Standing Counsel submitted that, in view of the ratio laid down by the Hon'ble Supreme Court of India and Division Bench of this Court, the questions of law may be decided against the Revenue and in favour of the assessee. 9.Mr.R.Venkata Narayanan for M/s.Subbaraya Aiyar Padmanabhan, learned counsel for the respondent/assessee, submitted that, in view of the judgment of the Hon'ble Supreme Court and the Division Bench of this Court cited supra , the appeal may be dismissed. 10.Having regard to the submissions made by the learned counsel on either side and following the ratio laid down by the Hon'ble Supreme Court of India, the questions of law 1 and 2 are decided against the appellant/Revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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