Deductions under Section 10A or 10B should be made while computing the gross total income of the eligible undertaking under Chapter IV of the Income Tax Act, 1961.

JUDGMENT :

M. DURAISWAMY, J.

Prayer: Appeals preferred under Section 260A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal, Chennai, "C" Bench, dated 25.07.2013 in I.T.A.Nos.824 to 826/Mds/2013 for the assessment year 2005-06, 2006-07 and 2008-09.

1. Challenging the orders passed in I.T.A.Nos.824 to 826/Mds/2013 in respect of the assessment years 2005-06, 2006-07 and 2008-09 on the file of the Income Tax Appellate Tribunal, Chennai "C" Bench, the Revenue has filed the above appeals.

2. The above appeals were admitted on the following substantial question of law:

“Whether under the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the internet expenditure incurred by the assessee are excluded from export turnover should also be excluded from total turnover?”

3. When the appeals are taken up for hearing, Ms.Sriniranjani Srinivasan, learned counsel appearing for the respondent submitted that the above question of law is covered by the decision of this Court dated 02.03.2021 made in T.C.A.No.975 of 2010, wherein this Court held as follows:

“...

4. When the appeal is taken up for hearing, Mr.R.Sivaraman, learned counsel appearing for the respondent submitted that the Question of Law no.1 is covered by the decision of the Hon'ble Supreme Court reported in [2018] 93 taxmann.com 33 (SC) [Commissioner of Income-tax, Central – III Vs. HCL Technologies Ltd.], an un-reported judgment of the Division Bench of this Court dated 10.01.2019 made in T.C.A.Nos.1257 & 1258 of 2009 [Commissioner of Income Tax, Chennai Vs. M/s.Sak Soft Ltd.] and the Question of Law no.2 is covered by the decision of this Bench dated 19.01.2021 made in T.C.A.Nos.1470 to 1472 of 2010 [Commissioner of Income Tax, Chennai Vs. M/s.S.R.A. Systems Ltd., No.100, Valluvar Kottam High Road, Nungambakkam, Chennai] and the Question of law no.3 is covered by the decision of the Division Bench of this Court dated 18.03.2020 made in T.C.A.No.228 of 2011 [M/s.Comstar Automative Technologies Private Ltd., (formerly known as Visteon Powertrain Control Systems India Private Limited, Keelakaranai Village, Malrosapuram Post, Maraimalai Nagar, Chengalpattu District- 603 204 Vs. The Deputy Commissioner of Income Tax, Company Circle – I (3), 121, Nungambakkam High Road, Chennai – 600 034].

5. It would be appropriate to extract the relevant portions of the judgments relied upon by the learned counsel for the respondent.

(i) [2018] 93 taxmann.com 33 (SC) [Commissioner of Income-tax, Central – III Vs. HCL Technologies Ltd.]

“...

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.

20. Even in the 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.

21. On the issue of expenses on technical services provided outside, we have to follow the same principle of interpretation as followed in the case of expenses of freight, telecommunication etc., otherwise the formula of calculation would be futile. Hence, in the same way, expenses incurred in foreign exchange for providing the technical services outside shall be allowed to exclude from the total turnover.”

(ii) Following the ratio laid down by the Hon'ble Supreme Court, the Division Bench of this Court, by order dated 10.01.2019 in T.C.A.Nos.1257 & 1258 of 2009 [Commissioner of Income Tax, Che