THE PR COMMISSIONER OF INCOME TAX, CIT(A) vs. M/S INFOSYS LTD

THE PR COMMISSIONER OF INCOME-TAX, CIT(A) 5TH FLOOR, BMTC BUIDLING 80 FEET ROAD, KORMANAGALA BENGALURU-560 095.

THE ADDL. COMMISSIONER OF INCOME-TAX, RANGE-11 PRESENT ADDRESS ACIT, CIRCLE-3(1)(1), 2ND FLOOR BMTC BUIDLING, 80 FEET ROAD KORMANAGALA BENGALURU-560 095. …APPELLANTS

THE PR COMMISSIONER OF INCOME-TAX, CIT(A) 5TH FLOOR, BMTC BUIDLING 80 FEET ROAD, KORMANAGALA BENGALURU-560 095.

THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-11(4) PRESENT ADDRESS ACIT, CIRCLE-3(1)(1), 2ND FLOOR BMTC BUILDING, 80 FEET ROAD KORMANAGALA BENGALURU-560 095. …APPELLANTS

At the outset, Shri. K.V. Aravind, learned Senior Standing Counsel for the Revenue submitted that though five questions out of six raised by the Revenue have been admitted, this Court may consider all six questions in ITA No.348/2018, which will cover all the questions of law raised in ITA No.349/2018. They read as follows:

Whether on the facts and in the circumstances of the case and in law, the Tribunal is right in allowing claim of assessee that income derived from rental income from Infosys BPO Ltd and BSNL Chennai Ltd as profits derived under Section 10A of the Income Tax Act, 1961?

Whether on the facts and in the circumstances of the case and in law, the Tribunal is right in allowing claim for foreign tax credit under Section 90 of the Act in respect of income exempt under Section 10A of the Act by following the decision of this Hon'ble Court in case of Wipro Ltd?

Whether on the facts and in the circumstances of the case and in law, the Tribunal is right in law in allowing claim of credit for state taxes paid outside India by following the decision of this Hon'ble Court in case of Wipro Ltd?

Whether on the facts and in the circumstances of the case and in law, the Tribunal is right in allowing in setting aside re-computation of Section 10A made by Assessing Authority by following the judgment of this Hon'ble Court in case of CIT Vs. Tata Elxsi Ltd?

Whether on the facts and in the circumstances of the case and in law, the Tribunal is right in directing the Assessing Authority to allow proportionate deduction under Section 10A of the Act on account of disallowance of Rs.25,20,566/- made under Section 14A of the Act?

Whether on the facts and in the circumstances of the case and in law, the Tribunal is right in law in setting

Shri. Suryanarayana, learned Senior Advocate for the assessee submitted that questions No.2, 3 and 6 are covered by the decision in Wipro Ltd. Vs. Deputy Commissioner of Income-tax, Central Circle 1(3), Bangalore1. Question No.4 is covered by the decision in Commissioner of Income-tax, Central-III Vs. HCL Technologies Ltd.2 Question No.5 is covered by the decision in Commissioner of Income-tax Vs. M/s. M. Pact Technology Services Pvt. Ltd.3 ITA No.228/2013 decided on 11.07.2018. Thus, the only question which remains for consideration is question No.1.

Shri. Aravind does not dispute the submission of Shri. Suryanarayana. Thus, the following question remains for consideration in these two appeals: 1. Whether on the facts and in the circumstances of the case and in law, the Tribunal is right in allowing claim fo assessee that income derived from rental income from Infosys BPO Ltd and BSNL Chennai Ltd as profits derived under Section 10A of the Income Tax Act, 1961?

Undisputed facts of the case are, assessee had taken on lease certain area in STPI4 at Bangalore. It could not use the entire area for its operation. Therefore, a portion of it was leased to Infosys BPO Ltd., and BSNL, Chennai, on sub-lease. Assessee was receiving rent from the said Companies. It claimed deduction under Section 10A of the Income Tax Act. The Assessing Authority disallowed the rental income received from the said two Companies on the ground that the lease amounts received from the said Companies cannot be considered as income derived from export of any software. The CIT(A) held that

Shri. Aravind submitted that admittedly, assessee is receiving rent, which is not a part of its business. In order to claim deduction under Section 10A of the IT Act, the gains must be derived from the export of articles or things. The money received as rent does not fall within the definition of 'turnover' and does not become eligible for deduction under Section 10A of the IT Act. In support of his contention, he placed reliance on Commissioner of Income-tax-VII, New Delhi Vs. Punjab

Shri. Suryanarayana, opposing the appeal, relied upon the full Bench decision of this Court in Commissioner of Income-tax Vs. Hewlett Packard Global Soft Ltd.7, and submitted that once a unit is situated in an STPI, it becomes eligible under Section 10A of the IT Act. In the case of Hewlett Packard, full Bench of this Court has held that the interest amount received by the assessee therein towards the money parked in the Bank and the loans advanced to the staff eligible for deduction under Section 10A of the IT Act.

Placing reliance on HCL Technologies Ltd., Shri. Suryanarayana submitted that the 'export profit' has to be computed as per the formula extracted in para 18 of

We have carefully considered rival contentions and perused the records.

Undisputed facts of the case are, assessee is situated in the STPI and is a 100% EOU. A portion of the premises which was taken on lease has been given on sub- lease to the two units and the assessee has received certain sum of money as rental income.

In the case of Hewlett Packard, the full Bench of this Court has held that the interest earned on the deposit and interest income of the staff loans are also eligible for deduction under Section 10A of the IT Act. Admittedly, the income earned as interest on the staff loans is not in any

In HCL Technologies, the Apex Court has held that the computation of deduction under Section 10A of the IT Act has to be made as follows:

In the case on hand, the assessee was receiving the amount as rental income and in Hewlett Packard, the amount was received as interest on deposits and the staff loans. Therefore, in our considered view, the conditions such as location of unit in an STPI having been complied with, the benefit of Section 10A of the IT Act must be available to the assessee in this case also.

In view of the above, these appeals must fail and they are accordingly dismissed.

The question of law is answered in favour of the assessee and against the Revenue.