Renault Nissan Technology & Business Centre India Private Limited Vs CIT (Madras High Court)
The issue under consideration is whether the foreign currency expenditure need to be excluded from the ‘export turnover’ of the assessee for the purpose of computing deduction under Section 10AA of the Act?
In the present case, the assessee is an undertaking registered as a Special Economic Zone (SEZ) which is eligible to claim deduction under Section 10AA of the Income Tax Act, 1961 and it renders services out of this SEZ premises in Chennai. The assessee filed its Return of Income, after claiming a deduction under Section 10AA of the Act. During the assessment the Assessing Officer proposed to exclude the expenditure incurred in foreign currency from the ‘export turnover’ of the assessee for the purpose of computing deduction under Section 10AA of the Act.
High Court states that, the definition of ”export turnover” in explanation 1 to Section 10AA and observed that it necessary that any expenses incurred in foreign exchange by the assessee should be in respect of rendering of services outside India. While framing the points for determination, the DRP observed that the question is whether the expenditures incurred by the assessee in foreign exchange was in respect to services outside India. After steering clear as to what would be ‘export turnover’ as defined under the Act, the DRP exempted the expenditures incurred by the assessee and held that the expenditures are not in respect to services rendered by the assessee outside India and therefore, it cannot be excluded from the ‘export turnover’ and the Assessing Officer was directed to delete the exclusion of foreign exchange from the export turnover of the busines. In our considered view, the decision referred to by the Revenue may not be of assistance to their case because, the dispute is not with regard to whether there is direct nexus between the amount and the activity of the industrial undertaking. The issue in the instant case is whether at all expenses were incurred for rendering any of the services outside India. On facts, it has been established that no such services have been rendered. Therefore, we are of the considered view that the Tribunal fell in error in reversing the decision of the DRP.Accordingly the appeal filed by the assessee is allowed.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
Judgment was delivered by T.S.SIVAGNANAM.J)
This appeal filed by the assessee under Section 260A of the Income Tax Act, 1961 (the ‘Act’ for brevity), is directed against the order dated 16.11.2016 in ITA.No.1009/Mds/2014 on the file of the Income Tax Appellate Tribunal, Madras ‘D’ Bench, Chennai, for the assessment year 2009 – 10.
2. The appeal was admitted on 05.06.2018, on the following substantial questions of law.
“1. Whether the Tribunal erred in holding that the expenditure incurred in foreign currency by the appellant was to be excluded from export turnover for the purpose of computing deduction under Section 10AA of the Income Tax Act, 1961, when the same is against the provisions of the Act?
2. Is the finding of the Tribunal that the expenditure incurred in foreign currency by the appellant needs to be excluded from the export turnover for the purpose of computation of deduction under Section 10AA of the Income Tax Act, 1961 vitiated by perversity and arbitrariness?”
3. We have heard Mr.N.V.Balaji, learned counsel appearing for the appellant/assessee, and M/s.R.Hemalatha, learned Standing Counsel appearing for the respondent/revenue.
4. The assessee is a Private Limited Company incorporated under the Companies Act, on 21st September 2007 as a joint venture between Renault Group B.V (“RGBV”) and Nissan International Holding B.V (“NIHBV”). The assessee is an undertaking registered as a Special Economic Zone (“SEZ”) which is eligible to claim deduction under Section 10AA of the Income Tax Act, 1961 and it renders services out of this SEZ premises in Chennai. The assessee filed its Return of Income for the assessment year 2009 – 10 (hereinafter ‘under consideration’ for brevity) on 30.09.2009, returning a total income of Rs.5,83,39,429/-, after claiming a deduction of Rs.29,96,00,054/- under Section 10AA of the Act. The assessment was completed under Section 143(3) of the Act and the Assessing Officer proposed to exclude the following expenditure incurred in foreign currency from the ‘export turnover’ of the assessee for the purpose of computing deduction under Section 10AA of the Act.
