Madras High Court Dismissed Tax Appeals Filed by Revenue Authorities

Madras High Court Dismissed Tax Appeals Filed by Revenue Authorities

Supreme Court ruling that expenses incurred in foreign exchange for providing the technical services should be allowed to exclude from the total turnover was referred to before dismissing the appeals

The Madras High Court has dismissed tax appeals filed by the Revenue Authorities by relying on the judgment of the Supreme Court regarding deduction u/S 10-B of the Income Tax Act, 1961.

A Division Bench of the High Court of Madras, comprising Justices M. Duraiswamy and R. Hemalatha dealt with this matter titled Commissioner of Income Tax II v M/s HTC Global Services India Pvt Ltd.

Multiple tax appeals were filed by the Respondent – Revenue Authorities challenging the order passed by the Income Tax Appellate Tribunal. The Petitioner – Assessee was a company engaged in the business of providing customer support, services in the form of e-mail support, voice support and chatting. The Petitioner had claimed a deduction u/S 10-B of the Income Tax Act, 1961 for the Assessment Year 2009-10. The Assessing Officer after scrutiny had invoked the provisions of Section 14-A read with Rule 8D Clause (ii) and (iii) as expenditure attributable to the investments whose income was exempt from tax on the dividend earned since the assessee had not claimed any expenditure for earning the dividend income. The Income Tax Appellate Tribunal reworked the calculation and confirmed the disallowance under Rule 8D.

Therefore, the substantial question of law raised in these appeals was whether the Appellate Tribunal was right in law in confirming the order of CIT (A) and confirmed the disallowance to ₹12,31,129 under Rule 8D of the Income Tax rules.

The judgment of the Supreme Court, i.e. [2018] 93 taxmann.com 33 (SC) [Commissioner of Income-Tax, Central-III v. HCL Technologies Ltd, was placed before the Court, in which the questions of law that arose for consideration in these present appeals were already decided against the Respondent – Revenue Authorities and in favour of the assessee. It had been observed by the Supreme Court in the aforesaid case that expenses incurred in foreign exchange for providing the technical services outside should be allowed to exclude from the total turnover.

The Court took this judgment into account and dismissed these tax appeals as the questions of law were decided against the Revenue and in favour of the assessee.