ITAT Allows Genpact to Exclude Telecom and Training Receipts from Total Turnover u/s 10AA as They Are Already Excluded from Export Turnover [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) allowed Genpact to exclude telecommunication expenses and recovery receipts for migration and on-the-job training from total turnover under Section 10AA, as these were already excluded from export turnover.

Genpact India Pvt.Ltd., appellant-assessee, was engaged in providing business process outsourcing services such as finance and accounting, collections, insurance, IT services, software solutions, and e-learning. It filed its return of income on 29.09.2010, declaring income of ₹24.73 lakhs, and later revised it to ₹6.55 lakhs on 27.12.2011 after excluding unrealized export proceeds and recomputing deduction under Section 10AA.

During assessment, the Assessing Officer (AO) issued notices under Sections 143(2) and 142(1), and the assessee responded by submitting the required details. The AO questioned why freight and telecommunication charges related to export services should not be excluded from export turnover and also proposed to treat interest on term deposits as “Income from Other Sources.”

After considering the submissions, the AO held that interest income was not eligible for deduction under Section 10AA and excluded related expenses from export turnover. The Commissioner of Income Tax( Appeals)[ CIT(A)] upheld this view and dismissed the appeal. The assessee then filed the present appeal before the tribunal.

The issue was about whether telecom expenses and recovery of costs for migration or on-the-job training services should be included in the total turnover, even though they were excluded from export turnover.

The assessee counsel argued that the issue had already been settled in favour of a group company, Genpact India Ltd., by the Delhi Tribunal in its order dated 11.10.2024 for AY 2010-11.

The tribunal held that since telecom expenses and reimbursements for migration/on-the-job training were excluded from export turnover, they should also be excluded from total turnover while computing deduction under Section 10A, following the Supreme Court ruling in CIT vs. HCL Technologies Ltd.

This view was also upheld in Genpact's case for AY 2012-13 by order dated 18.12.2024. In response, the department supported the findings of the lower authorities.

The two member bench comprising Mahavir Singh ( Vice President) and Manish Agarwal (Accountant Member) found that the issue had already been decided in earlier cases. It held that since the receipts were excluded from export turnover, they should also be excluded from total turnover while calculating deduction under Section 10AA. The AO was directed to re-compute the deduction, and the assessee’s appeal was allowed.

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