THE PR COMMISSIONER OF vs. M/S MPHASIS LIMITED

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ITA/910/2017HC KarnatakaKAHC01050407201714 August 2018Bench: S.SUJATHA,VINEET KOTHARI5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that there was no substantial question of law arising from the ITAT's order. The court agreed with the principle that expenses excluded from export turnover should also be excluded from total turnover for the formula under Section 10A to be workable and logical.

What were the facts?

The Revenue appealed against an ITAT order concerning the computation of relief under Section 10A for AY 2005-06. The core issue was whether certain expenses should be excluded from both export turnover and total turnover.

What were the issues?

Whether expenses deducted from export turnover should also be deducted from total turnover for calculating Section 10A relief. Whether the ITAT correctly applied a High Court decision when the Revenue had not accepted it.

Which sections of the Income-tax Act were involved?

Section 10A,Section 260-A

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

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IN THE HIGH COURT OF KARNATAKA, BENGALURU

DATED THIS THE 14th DAY OF AUGUST 2018

PRESENT

THE HON'BLE Dr.JUSTICE VINEET KOTHARI

AND

THE HON’BLE Mrs.JUSTICE S.SUJATHA

I.T.A.No.910/2017

BETWEEN:

1.

THE PR. COMMISSIONER OF INCOME-TAX-4 BMTC COMPLEX, KORAMANGALA BANGALORE.

2.

THE ASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE-12(1), BENGALURU.

…APPELLANTS (By Mr. SANMATHI E.I. ADV.)

AND:

M/S. MPHASIS LIMITED BAGMANE WORLD TECHNOLOGY CENTRE K.R. PURAM, WTC-3, BLOCK-B 1ST FLOOR, MARATHHALLI ORR, DODDENEKUNDI, BANGALORE-560048 PAN: AACCB6820C.

…RESPONDENT

THIS I.T.A. IS FILED UNDER SECTION 260-A OF THE IT ACT, PRAYING TO DECIDE THE FOREGOING QUESTION OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON’BLE COURT AS DEEMED FIT. SET ASIDE THE APPELLATE ORDER DATED 07-06-2017 PASSED IN IT(TP)No.1258/BANG/2012 FOR A.Y. 2005-06 VIDE ANNEXURE-

Date of Judgment 14-08-2018 I.T.A.No.910/2017 The Pr. Commissioner of Income-tax-4 & Anr. Vs. M/s. Mphasis Limited

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‘A’ BY THE INCOME TAX APPELLATE TRIBUNAL, ‘B’ BENCH, BANGALORE, AS SOUGHT FOR, IN THE ABOVE CASE & ETC.

THIS I.T.A. COMING ON FOR ADMISSION THIS DAY, S. SUJATHA J. DELIVERED THE FOLLOWING:-

JUDGMENT

Mr. Sanmathi E.I. Adv. for Appellants- Revenue

1.

The Appellants-Revenue have filed this appeal u/s.260A of the Income Tax Act, 1961, raising purportedly one substantial question of law arising from the order of the ITAT, Bangalore Bench ‘B’, Bangalore, dated 07.06.2017 passed in IT(TP)A No.1104/Bang/2012 (M/s.Mphasis Limited vs. Asst. Commissioner of Income-Tax ) for A.Y.2005-06.

2.

The proposed substantial question of law framed in the Memorandum of appeal by the Appellants-Revenue is quoted below for ready reference:- “Whether on the facts and circumstances of the case, the Tribunal is correct in applying the ratio of the decision of the Hon’ble High Court of

Date of Judgment 14-08-2018 I.T.A.No.910/2017 The Pr. Commissioner of Income-tax-4 & Anr. Vs. M/s. Mphasis Limited

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Karnataka in the case of M/s. Tata Exlsi Ltd., (349 (ITR 98 when the Revenue has not accepted the decision and SLP has been filed which is pending for adjudication?

3.

Learned counsel for the Appellants-Revenue Mr.E.I.Sanmathi submits that in so far as the aforesaid substantial question of law is concerned, the same is covered by the decision of the Hon’ble Apex Court in the case of Commissioner of Income-tax, Central – III vs. HCL Technologies Ltd., [2018] 93 Taxmann.com 33(SC). The relevant portion of the judgment of the Hon’ble Supreme Court in the case of HCL Technologies Ltd. (supra), is quoted below for ready reference:- “17. The similar nature of controversy, akin this case, arose before the Karnataka High Court in CIT v. Tata Elxsi Ltd. [2012] 204 Taxman 321/17/taxman.com 100/349 ITR 98. The issue before the Karnataka High Court was whether the Tribunal was correct in holding that

Date of Judgment 14-08-2018 I.T.A.No.910/2017 The Pr. Commissioner of Income-tax-4 & Anr. Vs. M/s. Mphasis Limited

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while computing relief under Section 10A of the IT Act, the amount of communication expenses should be excluded from the total turnover if the same are reduced from the export turnover? While giving the answer to the issue, the High Court, inter-alia, held that when a particular word is not defined by the legislature and an ordinary 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.

XXXXXX

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.

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20.

Even in common parlance, when the object of the formula is to arrive at the profit from export business, expenses excluded from export turnover have to be excluded from total turnover also. Otherwise, any other interpretation makes the formula unworkable and absurd. Hence, we are satisfied that such deduction shall be allowed from the total turnover in same proportion as well”.

4.

Having heard the learned counsel for the Appellants-Revenue, we are therefore of the opinion that no substantial question of law arises in the present case. The appeal filed by the Appellants-Revenue is liable to be dismissed and it is dismissed accordingly. No costs.

Copy of this order be sent to the Respondent- Assessee forthwith.

Sd/- JUDGE

Sd/-

JUDGE Srl.

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