The Commissioner Of Income-Tax-Ichennai v. M/S.poaris Software Lab Limitedno.713, Anna Salaichennai-600 002

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 25.01.2022 CORAM: THE HONOURABLE MR.JUSTICE R. MAHADEVANANDTHE HONOURABLE MR.JUSTICE MOHAMMED SHAFFIQ TAX CASE (APPEAL) NOS.160 AND 161 OF 2010 The Commissioner of Income-Tax-IChennai ...Appellant in both T.C.(Appeals) Vs M/s.Poaris Software Lab LimitedNo.713, Anna SalaiChennai-600 002 ...Respondent in both T.C.(Appeals) Prayer : Tax Case Appeals filed against the order of the Income-tax Appellate Tribunal “B” Bench Chennai dated 03.07.2009 passedin I.T.A.Nos.2156/Mds/2007 and 2146/Mds/2007 for the assessmentyear 2003-04. Tax Case Appeal No.160 of 2010 : Preferred against the orderpassed by the Commissioner of Income Tax (Appeals)–V, Chennai-34dated 31.05.2007 made in ITA No.192/2006-2007 against the orderpassed by the Income Tax Officer (OSD) Company Circle-V(2),Chennai dated 03.07.2009 for the Assessment year 2003-2004. Tax Case Appeal No.161 of 2010 : Preferred against the orderpassed by the Commissioner of Income Tax (Appeals)–V, Chennai-34dated 31.05.2007 made in ITA No.192/2006-2007 against the orderpassed by the Income Tax Officer (OSD) Company Circle-V(2),Chennai dated 03.07.2009 for the Assessment year 2003-2004. COMMON JUDGMENT [Judgment of the Court was delivered by R. MAHADEVAN, J.] The above tax case appeals have been filed by theappellant / Revenue, challenging the order dated 03.07.2009 https://hcservices.ecourts.gov.in/hcservices/ passed in I.T.A.Nos.2156/Mds/2007 and 2146/Mds/2007 for theassessment year 2003-04. 2. By order dated 22.02.2010, this court admitted theaforesaid tax case appeals on the following substantialquestions of law: T.C.(A).No.160 of 2010 :- ”Whether on the facts and in the circumstances ofthe case, the Income Tax Appellate Tribunal was right inholding that the interest under Section 234D was notleviable in the assesee's case for the Assessment Year2003-04 on the ground that the section had noretrospective operation and was not applicable for theAssessment Year 2003-04 ignoring the Explanation to theSection ?” T.C.(A).No.161 of 2010:- ”Whether on the facts and in the circumstances ofthe case, the Tribunal was right in holding that theexpenditure incurred in foreign exchange which have beenspecifically excluded from export turnover byexplanation 2(iv) to section 10A would also not formpart of the total turnover for the purpose of section10A of the Act ?” 3. The learned counsel appearing for the appellant/Revenueas well as the respondent/assessee jointly submitted that thesubstantial question of law raised in TC(A).No.160 of 2010 iscovered by the decision of the Hon'ble Supreme Court inCommissioner of Income-tax Vs. Reliance Energy Ltd. [358 ITR 371(SC)] and hence, the same has to be answered in favour of theRevenue and against the assessee. They further submitted thatthe substantial question of law raised in T.C.A.No.161 of 2010is covered in favour of the assessee and against the Revenue asper the unreported decision of a Division Bench of this court inT.C.A.Nos.1193 and 1194 of 2008 dated 12.10.2018. 4.1 The Honourable Supreme Court in Reliance Energy Limited(supra), while dealing with the question of retrospectivity ofSection 234D, held as follows:-“3. Learned counsel for the assessee places relianceon Expln.2 inserted in S.234SD of the Act by the FinanceAct, 2012 w.e.f. 1[st] June, 2003. 4. Explanation 2 which has been inserted in S.234Dof the Act reads as under:“Explanation 2. - For the removal of doubts, it ishereby declared that the provisions of this section shallalso apply to an assessment year commencing before the 1[st]day of June, 2003 if the proceedings in respect of suchassessment year is completed after the said date”. https://hcservices.ecourts.gov.in/hcservices/ to 1 5. The High Court was concerned with the appealrelating to the assessment year 1998-99. It is admittedcase that the assessment of that year was completed priorto 1[st] June, 2003. 4. Explanation 2 which has been inserted in S.234Dof the Act reads as under:“Explanation 2. - For the removal of doubts, it ishereby declared that the provisions of this section shallalso apply to an assessment year commencing before the 1[st]day of June, 2003 if the proceedings in respect of suchassessment year is completed after the said date”. https://hcservices.ecourts.gov.in/hcservices/ to 1 5. The High Court was concerned with the appealrelating to the assessment year 1998-99. It is admittedcase that the assessment of that year was completed priorto 1[st] June, 2003. 6. Having regard to the legal position which hasbeen clarified by the Parliament by insertion of Expln.2in s.234D of the Act, in the present case,retrospectively of S.234D does not arise.” 4.2Applying the ratio laid down in the aforesaid decisionto the facts of the present case, wherein, admittedly, therefund was granted to the assessee on 28.04.2005 i.e., on orafter 01.06.2003 and in such event, interest is leviable underSection 234D. In view of the same, we answer the substantialquestion of law in TCA.No.160 of 2010 relating to interest underSection 234D in favour of the Revenue and against the assessee. 5.1As regards the substantial question of law framed inT.C.A.No.161 of 2010, the Division Bench of this court, inT.C.A.Nos.1193 and 1194 of 2008 by order dated 12.10.2018, afterfollowing the decision of the Hon'ble Supreme court in CIT,Central III Vs. HCL Technologies Limited [(2018) 404 ITR 719],dealt with the same question and answered the same in favour ofthe assessee, the relevant passage of which, is usefullyextracted hereunder:- “3. The question of law framed above has beenanswered by the Honourable Supreme Court in the caseof CIT, Central III Vs. HCL Technologies Limited[reported in (2018) 404 ITR 719] wherein it has beenheld as follows : “18. Accordingly, the formula forcomputation of the deduction under Section 10Aof the Act would be as follows:Export Profit = total Profit of theBusiness X ___________Export turnover asdefined in Explanation 2(IV) of Section 10A ofthe IT Act + domestic sale proceeds19. In the instant case, if the deductionson freight, telecommunication and insuranceattributable to the delivery of computersoftware under Section10A of the IT Act areallowed only in Export Turnover but not fromthe Total Turnover, then, it would give rise toinadvertent,unlawful,meaninglessandillogical result which would cause graveinjustice to the respondent which could havenever been the intention of the Legislature.20. Even in common parlance, when theobject of the formula is to arrive at theprofit from export business, expenses excluded from export turnover have to be excluded fromtotal turnover also. Otherwise, any otherinterpretation makes the formula unworkable andabsurd. Hence, we are satisfied that suchdeduction shall be allowed from the totalturnover in same proportion as well.21. On the issue of expenses on technicalservices provided outside, we have to followthe same principle of interpretation asfollowed in the case of expenses of freight,telecommunication etc., otherwise the formulaof calculation would be futile. Hence, in thesame way, expenses incurred in foreign exchangefor providing the technical services outsideshall be allowed to exclude from the totalturnover.22. In view of above discussion, we are ofthe considered view that these instant appealsare devoid of merits and deserve to bedismissed. Accordingly, all the connectedmatters and interlocutory applications, if any,are disposed of with no order as to costs.?”4. Following the above, these tax case appealsare dismissed and the substantial questions of lawframed for consideration are answered in favour ofthe assessee and against the Revenue. No costs.” 5.2In the light of the aforesaid judgment, we answer thesubstantial question of law involved in T.C.A.No.161 of 2010 infavour of the assessee and against the Revenue. 6. In fine, TCA.No.160 of 2010 is allowed. TCA.No.161 of2010 is dismissed. No costs. Sd/-Assistant Registrar(CCC) // True Copy // nvsri Sub Assistant Registrar To 1.The Commissioner of Income-Tax-I Chennai. Chennai. 2.The Income-tax Appellate Tribunal “B” Bench Chennai. “B” Bench Chennai. 3.The Income Tax Officer (OSD), Company Circle V(2), Aayakarbhavan, 121, MG Road, Chennai.4.The Commissioner of Income-Tax (Appeals)-V, 121, Mahatma Gandhi Road, Chennai-600 034.+1cc to M/s.N.V.Balaji, Advocate Sr.No.5380 TC(A).No.160 and 161 of 2010 KSM(CO)RVM(28/02/2022)