SOFTSOL INDIA LTD, HYDERABAD V. COMMISSIONER OF INCOME TAX, BASHEERBAGH, HYDERABAD-3

ITTA/10/2006

AI Insights

The case revolves around an appeal by Soft Sole India Ltd. against the orders of the Income Tax Appellate Tribunal, Hyderabad, which had affirmed the decisions of the assessing officer and the first appellate authority. The core issue was whether unrealized sale proceeds should be included in the 'total turnover' for the purpose of calculating exemptions granted to 100% export-oriented units under Section 10B of the Income Tax Act, 1961. The appellant argued that such proceeds should be included, citing similar cases where the Supreme Court and High Court had ruled in favor of including such components in the total turnover. The Income Tax Department, represented by the Commissioner of Income Tax, Circle 3 [2], opposed this interpretation.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 753146 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 02-11-2022
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax, Central-III, New Delhi v. HCL Technologies Limited, Commissioner of Income Tax v. Maars Software International Limited
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: J V PRASAD
• Assessee Lawyers: CHALLA GUNARANJAN
• Keywords: Exemption; Export Oriented Units; Income Tax; Total Turnover; Unrealised Sale Proceeds
• Section: 10B; 260-4

Judgement Text

" [ 32e5 I IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD WEDNESDAY ,THE SECOND DAY OF NOVEMBER TWO THOUSAND AND TWENTY TWO PRESENT THE HONOURABLE THE CHIEF JUSTICE UJJAL BHUYAN AND THE HONOURABLE SRI JUSTICE C.V. BHASKAR REDDY INCOME TAX TRIBUNAL APPEAL NO: 10 OF 2006 lncome Tax Tribunal Appeal Under Section 260-4 of the lncome Tax Act, 1961 against the order of the lncome Tax Appellant Tribunal, Hyderabad Bench 'B' Hyderabad in ITA No.642lHl03'for Assessment Year 2001-02 dated 27.08.2004 preferred against the Order of the Commissioner of lncome Tax (Appeals) lV Hyderabad, Appeal No.308lDC-3 (2)lcff (A)-lV, dated 19.03.2003, preferred against the Order of the Deputy Commissioner of lncome Tax 3 (2) PAN/GlR No.AACN732B P/S-23 dated 30.01 .2003, Hyderabad. Between: Soft Sole lndia Ltd., Plot No.4, Soft Ware Units Layout, lnfocity, Madhapur, Hyderabad-500033. AND The Commissioner of lncome Tax, Circle 3 [2] Ayakar Bhavan, Basheerbagh, Hyderabad - 3. ...RESPONDENT/RESPONDENT Counsel for the Appellant: SRI CHALLA GUNARANJAN Counsel for the Respondent: SRI J. V. PRASAD (SC FOR INCOME TAX) The Court delivered the following: JUDGMENT I ...PETITION ERYAPPE LLANT THE IICI}'BLE THE CHIEF JUSTICE UJJAL BHIIYAN AND THE HO {,3LE SRI JUSTICE C.V.BHASKAR REDDY JUDGMENT: lPe'tl1c Hoihle the Chiel Justi<* Uial Bh Add) Heard Mr. Challa Gunaranjan, learned counsel for the appellant and Mr. J.V.Prasad, learned Standing Counsel for I ncome Tax Department appearing for the re spondent. 2. This app:al has been prelerred under Section 260.4 of the Income T,rx Act, 1961 (briefly, \"the Act\" l-rereinafter) assailing the order dated 27.08.2004 passed biz the Income Tax Appellate Tribunal, Hyderabad Bench B', Hyderabad (briefly, 'the Tribunal\" hereinafter) in I.T.A.No.642 /Ilyd/2OO3 for the assessment year 2001- 2002. 3. From the docket proceedings we find that though the appeal was admitted on 75.02.2006, substantial questions of law were no - framed. / 7 I.T.T.A.No. 1O of 2OO6 2 4. Be that as it may, learned counsel for the appellant submits that two questions were proposed as substantial questions of law by the appellant in the memo of appeal. out of which one question covers the controversy. 5. The proposed substantial question of law reads as under: 6. Both the assessing officer as well as the Iirst appellate authority had rejected the claim of the appellant that unreaiised sale proceeds should also be inciuded for granting exemption to 100% export oriented units like the appellant under Section 1OB of the Act. In appeal before the Tribunal, the above ground was rejected by affirming the views taken by the assessing officer as well as by the first appellate authorit5r. Whether on the facts and in the circumstances of the case, provisions relating to exemption under Section 10B of the Act granted to 1007o export oriented unit would also include the unrealised part of sale proceeds? I I ) 7 . Learned counsel for the appellant submits that issue raised in this appeal 13 nO more res integra. In Commission.er of Income Tax, Central-Ill, New Delhi v, HCL Technologies Limitedr Supreme Court has held that what is exch rded from \"export turnover\" must also be excluded from \"total turnover\", since one of the components ol \"total turnover\" is export turnover. Therefore, su<,h deduction should be allowed from the total turnover in the same proportion. B. Macllrs High Court in Cornmissioner of Income Tax v, Maars Sof -ware International Limited2 rcferred to the aforesaid clecision of the Strpreme Court in HCL Technologies Limited (supra) and reiterated that components of total turnover/denominator in the formula would be the quantum of export turnover/numerator plus proceeds fro\"n dornestic sales. Total turnover for the purpose of the formula would be the actual sale receipts excluding urrealised foreign exchange adopted by export turno .er. I I Itzore) ro scc ?oe ' 2018 SCC Onlir e Mad 10907 I 4 I 9. In the tight of the aJoresaid two judiciaJ pronouncements, Central Board of Direct Taxes (CBDT) has issued Circular No.4/201g dated 14.0g.2018 declaring that all charges/expenses specified in Explanation 2(iv) to Secdon 10A of the Act are liable to be excluded from the total turnover also for the purpose of computation of deduction under Section 10A of the Act. Income Tax Department has been instructed not to file appeals henceforth on the above settled issue and to withdraw those appeals already fiied. 10. It is submitted at the bar that provisions of Section in pai materia. i 1. In view of the above, the substantial question of law' as framed above, is answered in favour of the assessee and against the revenue. 12. Appeal is accordinglY allowed' I I 10A and 10B of the Act insofar this issue is concerned, are Miscellaneous applications pending' if any' shall stand closed. However, there shall be no order as to costs' //TRUE COPY// SDhB.S.CHtRANJEEVt JOINT REGISTRAR