Relief to Infosys: Expenditure excluded from ‘Export Turnover’ to be excluded from ‘Total Turnover’ for Computing Deduction, reiterates ITAT [Read Order]

In a major relief to Infosys, the Bangalore Bench of Income Tax Appellate Tribunal (ITAT) while dismissing the appeal of Revenue reiterated that expenditure excluded from ‘export turnover’ should be excluded from ‘total turnover’ for computing deduction.

The revenue has raised the issue in respect of deduction claimed under section 10AA of the Act, i.e. whether expenses that were reduced from export turnover should also be reduced from the total turnover or not.

The assessee, M/s. Infosys BPM Limited claimed deduction under section 10AA of the Act. While computing deduction, the assessee reduced communication expenses from both export turnover and total turnover and accordingly computed the quantum of deduction.

The AO was of the view that the communication expenses should be deducted from only export turnover and not from Total turnover. Accordingly, he recomputed the deduction u/s 10AA of the Act. The CIT(A) allowed the claim of the assessee in both the years by following the decision rendered by Karnataka High Court in the case of CIT Vs. Tata Elxsi Ltd. The revenue has challenged the said decision of CIT(A) by submitting that the revenue has filed a SLP in the Supreme Court challenging the above said decision of the Karnataka High Court.

The two member bench headed by the Vice President N.V. Vasudevan and Accountant Member, B.R. Baskaran in line with the decision of the Supreme Court in the case of HCL Technologies Ltd  ruled that what is excluded from ‘export turnover’ must also be excluded from total turnover’, since one of the components of ‘total turnover’ is export turnover. Any other interpretation would run counter to the legislative intent and would be impermissible

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