Commissioner Of Income Tax, Company Circle Iii,Chennai v. M/S. Tnq Books & Journals Private Limited

IN THE HIGH COURT OF JUDICATURE AT MADRASDATE: 25.06.2021 CORAM: THE HON'BLE MR. JUSTICE M.DURAISWAMYAND THE HON'BLE MRS.JUSTICE R.HEMALATHA T.C.A.No.146 of 2015 Commissioner of Income Tax, Company Circle III,Chennai. ... Appellant Vs M/s. TNQ Books & Journals Private Limited,No.4/600, 4/197, Phase II,VSI Estate, Kottivakkam,Chennai – 600 041.PAN : ... Respondent Appeal preferred under Section 260A of the Income Tax Act,1961, against the order of the Income Tax Appellate Tribunal,Chennai, "C" Bench, dated 24.10.2014 in I.T.A.No.758/Mds/2014for the Assessment Year 2009-2010. Filed Against the order of The Commissioner of income Tax(Appeals) – III in ITA No.1418/2013-2014, Dated:28/11/2013,PAN.No. for in Assessment Year 2009-2010 Against Orderof The Assistant Commissioner of Income Tax CompanyCircle – III(2), Chennai – 600 034. PAN.No. inAssessment Year 2009 to 2010. For Respondent : Mr. Rahul Unnikrishnan (Judgment was delivered by M. DURAISWAMY, J.) Challenging the order passed in I.T.A.No.758/Mds/2014 inrespect of the Assessment Year 2009-2010 on the file of theIncome Tax Appellate Tribunal, Chennai, "C" Bench (for brevity, https://hcservices.ecourts.gov.in/hcservices/ the Tribunal), the Revenue has filed the above appeal. 2.1 The assessee is a resident company engaged in thebusiness of export of software and IT enabled service. For theAssessment Year 2009-2010, the assessee claimed deduction undersection 10B in his return of income for an amount ofRs.12,55,03,000/-. During the assessment proceedings, theassessee has presented before the Assessing Officer that if atall the claim under section 10B is not allowed, the same maybe considered under section 10A. The Assessing Officer completedthe assessment under section 143(3) on 26.12.2011 and disallowedthe claim of the assessee for deduction under section 10B forthe amount of Rs.12,55,03,000/- for want of rectificationaccorded by the Board of Approval appointed for this purpose bythe Government of India. The Assessing Officer rejected thealternative claim of the assessee for deduction under section10A. 2.2 Aggrieved over the order passed by the AssessingOfficer, the assessee preferred an appeal before theCommissioner of Income Tax (Appeals) and the Commissioner ofIncome Tax partly allowed the appeal. Challenging the same,the assessee preferred an appeal before the Income TaxAppellate Tribunal, and the Tribunal, allowed the appeal bydirecting the Assessing Officer to verity the condition as persection 10A and allowed the claim of the assessee. Aggrievedover the order passed by the Tribunal, the Revenue has filedthe above appeal. 3. The above appeal was admitted on the followingsubstantial questions of law: “ (I) Whether on the facts and in thecircumstances of the case, the Income TaxAppellate Tribunal was right in allowing theappeal of the assessee, who claimed exemptionunder section 10B but changed its claim tosection 10A when it could not produce the Board'sapproval in support of its claim? And (ii) Whether on the facts and in thecircumstances of the case,the Income TaxAppellate Tribunal was right in relying on thedecision of the Special Bench in the case of ITOVs.Sak Soft when the said decision has notreached the finality and the same is pendingbefore this Court? " 4. When the appeal is taken up for hearing, Mr. M.Swaminathan, learned Senior Standing Counsel appearing for theappellant fairly submitted that the the issue involved in thepresent appeals is covered by the decision of the Hon'bleSupreme Court of India reported in 2020 (113) taxmann.com 74(SC) [Commissioner of Income-Tax III v. Mphasis Ltd.], wherein,the Hon'ble Supreme Court of India held as follows : And (ii) Whether on the facts and in thecircumstances of the case,the Income TaxAppellate Tribunal was right in relying on thedecision of the Special Bench in the case of ITOVs.Sak Soft when the said decision has notreached the finality and the same is pendingbefore this Court? " 4. When the appeal is taken up for hearing, Mr. M.Swaminathan, learned Senior Standing Counsel appearing for theappellant fairly submitted that the the issue involved in thepresent appeals is covered by the decision of the Hon'bleSupreme Court of India reported in 2020 (113) taxmann.com 74(SC) [Commissioner of Income-Tax III v. Mphasis Ltd.], wherein,the Hon'ble Supreme Court of India held as follows : “1.The instant petition is filed by the petitioner-Revenue assailing the judgment dated 01.08.2014 passedby the High Court of Karnataka at Bangalore in I.T.A.No. 1075 of 2008. 2. When the petition is taken up for considerationMr. Vikramjit Banerjee, learned Additional SolicitorGeneral appearing for the petitioner-Revenue and Mr.Parcy Pardiwala, learned senior counsel appearing forthe respondent, are in agreement that SLP(C)No.2373/2015 preferred by the Revenue in respect ofconnected ITA NO.196 of 2009 which was disposed of bythe very same common Order dated 01.08.2014, wasdismissed by this Court on 28.01.2019 having takennote similar grounds raised in the special leavepetition. 3.Hence taking note of the fact that in respect ofcommon judgment this Court has already dismissed SLP(C)No.2373 of 2015 relating to the Assessment Year2004-2005 and in the present case except that issuerelates to Assessment year 2003-2004 all other aspectsare on the very same point, we are not inclined toentertain the instant petition. 4.Accordingly, the special leave petition shallstand dismissed. Pending applications, if any, shallalso stand disposed of.” 5. The issue involved in the present appeal was alsodecided by the Karnataka High Court in the judgment reported in2016 (74) taxmann.com 274 (Karnataka) [Commissioner of Income-Tax, Bangalore v. Mphasis Ltd.], wherein, the Karnataka HighCourt has held as follows : “......... 4. Insofar as the second substantialquestion of law is concerned, the same was consideredby this Court in the case of CIT v. Tata Elxsi Ltd.[2012] 17 taxmann.com 100/204 Taxman 321/349 ITR 98(Kar). It has been held as under: 4.Accordingly, the special leave petition shallstand dismissed. Pending applications, if any, shallalso stand disposed of.” 5. The issue involved in the present appeal was alsodecided by the Karnataka High Court in the judgment reported in2016 (74) taxmann.com 274 (Karnataka) [Commissioner of Income-Tax, Bangalore v. Mphasis Ltd.], wherein, the Karnataka HighCourt has held as follows : “......... 4. Insofar as the second substantialquestion of law is concerned, the same was consideredby this Court in the case of CIT v. Tata Elxsi Ltd.[2012] 17 taxmann.com 100/204 Taxman 321/349 ITR 98(Kar). It has been held as under: “17. From the aforesaid judgments, what emergesis that, there should be uniformity in theingredients of both the numerator and thedenominator of the formula, since otherwise itwould produce anomalies or absurd results.Section 10A is a beneficial section. It isintended to provide incentives to promoteexports. The incentive is to exempt profitsrelatable to exports. In the case of combinedbusiness of an assessee, having export businessand domestic business, the legislature intendedto have a formula to ascertain the profits fromexport business by apportioning the total profitsof the business on the basis of turnoversApportionment of profits on the basis of turnoverwas accepted as a method of arriving at exportprofits. In the case of section 80HHC, the exportprofit is to be derived from the total businessincome of the assessee, whereas in Section 10A,the export profit is to be derived from the totalbusiness of the undertaking. Even in the case ofbusiness of an undertaking, it may include exportbusiness and domestic business, in other words,export turnover and domestic turnover. The exportturnover would be a component or part of adenominator, the other component being thedomestic turnover. In other words, to the extentof export turnover, there would be a commonalitybetween the numerator and the denominator of theformula. In view of the commonality, theunderstanding should also be the same. In otherwords, if the export turnover in the numerator isto be arrived at after excluding certainexpenses, the same should also be excluded incomputing the export turnover as a component oftotal turnover in the denominator. The reasonbeing the total turnover includes exportturnover. The components of the export turnoverin the numerator and the denominator cannot bedifferent. Therefore, though there is nodefinition of the term 'total turnover' inSection 10-A, there is nothing in the saidSection to mandate that, what is excluded from the numerator that is export turnover wouldnevertheless form part of the denominator. Thoughwhen a particular word is not defined by thelegislature and an ordinary meaning is to beattributed to the same, the said ordinary meaningto be attributed to such word is to be inconformity with the context in which it is used.When the statute prescribes a formula and in thesaid formula, 'export turnover' is defined, andwhen the ‘total turnover’ includes exportturnover, the very same meaning given to theexport turnover by the legislature is to beadopted while understanding the meaning of thetotal turnover, when the total turnover includesexport turnover. If what is excluded in computingthe export turnover is included while arriving atthe total turnover, when the export turnover is acomponentoftotalturnover,suchaninterpretation would run counter to thelegislative intent and impermissible. If thatwere the intention of the legislature, they wouldhave expressly stated so. If they have not chosento expressly define what the total turnovermeans, then, when the total turnover includesexport turnover, the meaning assigned by thelegislature to the export turnover is to berespected and given effect to,while interpreting the total turnover which isinclusive of the export turnover. Therefore theformula for computation of the deduction undersection 10-A, would be as under: Profits of the business Export turn overof the undertaking x __________________________ [Export turnover + domestic turnover) Total turnover ” 6.Similarly, in an unreported judgment of the Hon'bleDivision Bench of this Court, dated 20.02.2020, made in Tax Case(Appeal) Nos.312 & 385 of 2011 [The Commissioner of Income Tax,Chennai v. M/s.Zylog Systems Limited], following the judgment ofthe Hon'ble Supreme Court of India reported in 2020 (113)taxmann.com 74 (SC) (cited supra), the Hon'ble Division Benchalso decided the issue in favour of the assessee. 7. Mr. Rahul Unnikrishnan, learned counsel appearing for therespondent-assessee submitted that in view of the Judgment ofthe Hon'ble Supreme Court of India reported in 2020 (113) https://hcservices.ecourts.gov.in/hcservices/ taxmann.com 74 (SC) [cited supra], the appeal may bedismissed. 8. Having regard to the submissions made by the learnedcounsel on either side, following the ratio laid down by theHon'ble Supreme Court of India in the Judgment reported in2020 (113) taxmann.com 74 (SC) [cited supra], the questions oflaw are decided against the Revenue and in favour of theassessee. Accordingly, the Tax Case Appeal is dismissed. Nocosts. Sd/- Assistant Registrar(CS VIII) //True Copy// Sub Assistant Registrar RjTo 1. The Income Tax Appellate Tribunal, Chennai,"C" Bench. 2. The Commissioner of Income Tax Appeals – III, No.121, Mahatma Gandhi Road, Chennai – 600 034. 3. The Assistant Commissioner of Income Tax, Company Circle – III(2), Chennai – 600 034. T.C.A.No. 146 of 2015 VSN-II(CO)HS(15/07/2021)