COMMISSIONER OF INCOME TAX-2 vs. PATNI TELECOM SOLUTIONS PVT., LTD.,

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ITTA/588/2017HC TelanganaHBHC01022721201722 December 2025Bench: P.SAM KOSHY,SUDDALA CHALAPATHI RAO6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the question of law involved in the appeal is squarely covered by the judgment of the Hon'ble Supreme Court in Commissioner of Income Tax, Central-III vs. HCL Technologies Ltd. The Supreme Court had settled the issue, holding that expenses specifically excluded from export turnover under Explanation 2(iv) of Section 10A are also to be excluded from total turnover. Furthermore, the Court noted the CBDT Circular No. 4 of 2018, issued in light of the HCL Technologies Ltd. judgment, which directs that appeals on this issue should not be contested and already filed appeals may be withdrawn or not pressed. In light of these developments, the Revenue's counsel conceded that nothing further survived for adjudication. Consequently, the question of law was answered in favour of the assessee and against the Revenue. The appeal was disposed of accordingly, with no order as to costs.

What were the facts?

The Principal Commissioner of Income Tax-2, Hyderabad (Revenue) filed an appeal under Section 260A of the Income Tax Act, 1961, challenging an order dated November 16, 2016, passed by the Income Tax Appellate Tribunal (ITAT), Hyderabad Benches 'A'. The appeal pertains to assessment year 2007-08 and concerns M/s. Patni Telecom Solutions Pvt. Ltd. (assessee), now known as M/s. IGATE Information Services P. Ltd. The dispute revolves around the treatment of certain expenses in the computation of deduction under Section 10A of the Act. The ITAT's order is the subject of this High Court appeal.

What were the issues?

1. Whether expenses specifically excluded from export turnover under Explanation 2(iv) to Section 10A of the Income Tax Act, 1961, are also to be excluded from total turnover under Section 10A of the Act? (Question of law) Assessee's Contentions: The judgment does not record specific contentions from the assessee's counsel, Mr. M. Naga Deepak, beyond their agreement with the Revenue's submission based on the CBDT circular and Supreme Court judgment. Revenue's Contentions: The Revenue, represented by Ms. J. Sunitha (Sr. SC for Income Tax), submitted that the question of law is squarely covered by the Supreme Court judgment in Commissioner of Income Tax, Central-III vs. HCL Technologies Ltd. and the subsequent CBDT Circular No. 4 of 2018. Therefore, nothing further survives for adjudication.

Which sections of the Income-tax Act were involved?

Section 10A,Section 260A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD MONDAY, THE TWENTYSECOND DAY OF DECEMBER TWO THOUSAND AND TWENTY FWE PRESENT THE HONOURABLE SRIJUSTICE P.SAM KOSHY AND THE HONOURABLE SRIJUSTICE SUDDALA CHALAPATHI RAO lncome Tax Tribunal Aooeal No.588 of 2Ol7 lncome tax Appeal filed under Section 260A of the hrcome Tax Act, 1961 aggrieved by the order dated 16.11.2016 passed in ITA No.2040/Hyd/2011. on rhe file of the Lrcome Tax Appellate Tribunal Hyderabad Benches'A', Hyderabad. Between: Pr. Comrnissioner of Income Tax-2, Hyderabad. ...Appellant/ Appellant. AND M/s. Patrri Telecom Solutions Pvt., LTD., (Now known as M/s. IGATE Information Services P. Ltd.,) 5Q4A1, V Floor, Hi Tech City, Hyderabad-580081. ... Respondent/ Respondent. Counsel for the Appeltant Ms. J.Sunitha (Sr SC for Income Tax) Counsel for the Respondent Mr. M.Naga Deepak. The Court made the following: JTIDGMENT

IN THE HIGH COURT FOR THE STATE OF TEI- \NGANA AT HYDERABAD THE HONOURABLE SRI JUSTICE P.SAM T:I ISHY AND THE HONOURABLE SRI JUSTICE SUDDAI-A CHAI., \PATHI RAO INCOME TAX TRIBUNAL APPEAL No.58a <t 2OL7 DATE OF JUDGMENT: 22.12.2025 Between: Pr. Commissioner of Income Tax-2, Hyderabad. Appellant AND M/s. Patni Telecom Solutions P Ltd., (now known as M/s. IGATE Information Services P. Lt( ), 5Q4A1, V Floor, Hi Tech City, Hyderabad 580 081. Respondent JUDGMENT: (per Lhe Honble 'ri lustice P.Sam Koshy) Heard Ms. J.Sunitha, learned Senior Standir t Income Tax Department appearing on behalf of the i Mr. M.Naga Deepak, learned counsel for the responde:r 2. The instant appeal has been filed by the F.r Section 26O-4 of the Income Tax Act, 1961 (for st assailing the order dated 16.11.2016, in I.T.A.No.2l) \!b Counsel for ppellant; and t / assessee. venue under :rt 'the Act') to/Hydl2011,

Page 2 of 4 passed by the Income Tax Appellate Tribunal, Hyderabad Bench 'A', Hyderabad (for short the'ITAT'), for the assessment year 2OO7-O8. 3. The question of law involved in the instant appeal is "whether the expenses specifically excluded from export turnover under explanation 2(iv) of Section 10A of the Act are also to bb excluded from total turnover under Section 10A of the Act?" 4. The aforesaid question of law fell for consideration before the Hon'ble Supreme Court in Commissioner of Income Tax, Central-flf vs. HCL Technologies Ltd.l, wherein the Hon'ble Supreme Court has emphatically settled the issue holding that such expenses so incurred have to be excluded from part of the export tu rnover or total turnover. 5. Today when the matter is taken up for hearing, the learned counsel appearing on either side have produced before the Bench the Circular issued by the CBDT i.e. Circular No.4 of 2018, dated 14.08.2018, whereby the CBDT itself in the light of the judgment of the Hon'ble Supreme Court in HCL Technologaes Ltd. (supra) have decided not to contest any appeals where the aforesaid ' 2or8 6 scc zo9

Page 3 of 4 question of law is involved. For ready reference, par;r, raph Nos'5, 6 and 7 of the Circular No.4 of 2018 are reproduced ht: r:under, viz., \ '5. The issue has been examined by the Boar(l clarified that freight, telecommunication cha;1 insurance expenses are to be excluded both fron turnover" and "total turnover", while working out < admissible under section 10A of the Act to the e( are afiributable to the delivery of articles or I computer outside India. 7. Accordingly, henceforth, appeals may not be the Department on the above settled issue, zr already filed may be withdrawn/not pressed upon.' 6. Similarly, expenses incurred in foreign exct'. tnge for providing the technical services outside India zt,:t to be excluded from both "expott turnover" and "total r rrnover" while computing deduction admissible under secti) 10A of the Act. Thus, all charges/expenses specified in E;:, lanation 2(iv) to section 10A of the Act, are liable to be ':xcluded from total turnover also for the purpose of compt ation of deduction u/s 10A of the Act. and it is es and "export eduction :nt they ,ings or filed by :1 those \ II 6. In the teeth of the said observations made by he CBDL the learned Senior Standing Counsel for Income Tz; Department submits that the question of law involved in the instr it appeal also

Page 4 of 4 being squarely covered by the judgment of the Hon,ble Supreme Court in HCL Technologies Ltd. (supra) and also the Circular dated 14.08.2018, nothing further survives to be adjudicated. 7. Accordingly, the instant appeal stands disposed of. The question of law stands answered in favour of the assessee and against the Revenue. 8. As a sequel, miscellaneous petitions pending if any, shall stand closed. However, there shall be no order as to costs. sd/-K. SFTYLESHT JOINT REGISTRAR \ ,a; To, / /TRUECOPY/ / SECTION OFFICER 1. The Income Tax Appellate Tribunal Hyderabad Benches'A', Hyderabad 2. The Commissioner of [ncome Tax (Appeals)-V, Hyderabad. 3. Income Tax Officer, Wud-1,6Q), Hyderabad. 4. One CC to Ms. ].Sunitha (Sr SC for lncome Tax) [OPUC] 5. One CC to Mr. M.Naga Deepak, Advocate [OPUC] 6. Two CD Copies. ICKIBA o e

tt HIGHCOURT DATED:Z2/12/2025 JUDGMENT ITTA.No.588 of 2017 Disposing of the I.T.T.A. without costs. \i€ 1 6 ttt i02t j;il i : i; ,'..,,, ^,,. t\I !\ i L-) 2A 0l

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