THE COMMISSIONER OF INCOME vs. M/S. THINK SOFT GLOBAL

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TCA/67/2015HC Madras26 August 2022Bench: Hon`ble Mr Justice R. MAHADEVAN4 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court noted that the Revenue's counsel brought to its attention CBDT Circular No. 17/2019, which stipulates that appeals shall not be filed or pursued before the High Court if the tax effect does not exceed Rs. 1,00,00,000/-. The counsel submitted that the tax effect in the present appeal was less than this threshold limit. Consequently, the High Court, in light of the submission regarding the tax effect being below the monetary limit, dismissed the appeal as withdrawn. The Court explicitly stated that the substantial questions of law were kept open for determination in an appropriate case. No costs were awarded.

What were the facts?

The Commissioner of Income Tax, Chennai (the Revenue) filed a Tax Case Appeal before the High Court of Judicature at Madras, challenging an order dated 08.08.2014 passed by the Income Tax Appellate Tribunal (ITAT), Madras 'B' Bench. The appeal pertained to Assessment Year 2006-07 and concerned the computation of deduction under Section 10A of the Income Tax Act, 1961. The ITAT's order directed the assessing officer to recompute the income by excluding freight and insurance expenses from both export turnover and total turnover. The High Court admitted the appeal on substantial questions of law.

What were the issues?

The High Court had to decide the following substantial questions of law: 1. Whether the Tribunal was correct in directing the assessing officer to recompute income by excluding freight and insurance expenses from both export turnover and total turnover for computing deduction under Section 10A, in light of the decision in Sak Soft. 2. Whether the Tribunal's finding was incorrect, given that Explanation 2(iv) to Section 10A defines 'Export Turnover' to exclude freight, telecommunication charges, and foreign exchange expenses related to delivery of articles or computer software outside India. 3. Whether the Tribunal was right in holding that for Section 10B(4) formula, freight, telecommunication charges, or insurance attributable to delivery outside India, or foreign exchange expenses for technical services outside India, should be excluded from both export turnover and total turnover, even though the statute only provides for exclusion from export turnover. The Revenue argued that Explanation 2(iv) to Section 10A clearly states what should be excluded from export turnover. The assessee's contentions are not explicitly recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 10A,Section 10B,Section 260-A

AI-generated summary — verify with the full judgment below

TCA.No.67 of 2015 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 26.08.2022 CORAM

THE HONOURABLE MR. JUSTICE R. MAHADEVAN and THE HONOURABLE MR. JUSTICE MOHAMMED SHAFFIQ T.C.A.No. 67 of 2015 The Commissioner of Income Tax, Chennai

.. Appellant Versus M/s.Think Soft Global Services P Ltd., Type-II, Unit S.Vikram Sarabhai Indl. Estate, Thiruvanmiyur, Chennai 600 041.

.. Respondent Tax Case Appeal filed under Section 260-A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal Madras 'B' Bench, Chennai dated 08.08.2014 passed in ITA.No.454/Mds/2014 in respect of Assessment Year 2006-07. For Appellant : Mr.M. Swaminathan Standing Counsel 1/4 https://www.mhc.tn.gov.in/judis TCA.No.67 of 2015 JUDGMENT (Judgment of the Court was delivered by R. MAHADEVAN, J.) This Tax Case Appeal has been filed by the appellant / revenue, questioning the correctness of the order dated 08.08.2014 passed by the Income Tax Appellate Tribunal Madras 'B' Bench, Chennai in ITA.No.454/Mds/2014 for the assessment year 2006-07. 2. On 10.03.2015 this tax case appeal is admitted by this Court on the following substantial questions of law; '' ' 1. Whether on the facts and in the circumstances of the case, the Tribunal was right in directing the assessing officer to recompute the income in the light of the decision of the Special Bench in the case of Sak Soft by excluding the freight and insurance expenses both from the Export turnover and also from the Total turnover while computing deduction under Section 10A of the Income Tax Act? 2. Is not the finding of the Tribunal bad, especially when Explanation 2(iv) to section 10A defines the word “Export Turnover” whereby it had been clearly stated that it would not include freight, telecommunication charges attributable to the delivery of the articles or things or 2/4 https://www.mhc.tn.gov.in/judis TCA.No.67 of 2015 computer software outside India or expenses if any incurred in foreign exchange while computing deduction under Section 10A of the Income Tax Act? 3. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that for the purpose of applying the formula under sub-section (4) of section 10B, the freight, telecommunication charges or insurance attributable to delivery of articles, or things or computer software outside India or expenses, if any incurred in foreign exchange in providing the technical services outside India ought to be excluded both from the export turnover and from total turnover even though the statute has provided for such exclusion only from the export turnover?” 3. When the matter was taken up for consideration, the learned counsel for the appellant / Revenue brought to the notice of this court the Circular No.17/2019 dated 08.08.2019 issued by the Central Board Direct Taxes, wherein, it is stipulated that appeals shall not be filed/pursued by the Department before the High Court in cases where the tax effect does not exceed Rs.1,00,00,000/- (Rupees One Crore). It is also submitted that the tax effect in this appeal is less than the threshold limit. 3/4 https://www.mhc.tn.gov.in/judis TCA.No.67 of 2015 R. MAHADEVAN, J. and MOHAMMED SHAFFIQ, J. msr 4. In the light of the aforesaid submissions made by the learned counsel for the appellant / Revenue, the present appeal, wherein, the tax effect is said to be less than the monetary limit imposed, is dismissed as withdrawn, keeping open the substantial questions of law for determination in an appropriate case. No costs. [R.M.D,J.] [M.S.Q., J.] 26.08.2022 msr

Index : Yes / No To 1. The Assistant Commissioner of Income Tax, Circle 12(4), Bangalore. 2. The Commissioner of Income Tax, (Appeals) III, Chennai. 3. The Income Tax Appellate Tribunal Madras 'B' Bench, Chennai.

T.C.A.No. 67 of 2015 4/4 https://www.mhc.tn.gov.in/judis

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