Facts of the Case

The Revenue, through the Principal Commissioner of Income Tax and the Deputy Commissioner of Income Tax, filed an appeal under Section 260A of the Income-tax Act, 1961 against M/s Wipro Limited.

The appeal arose from the order dated 5 October 2020 passed by the Income Tax Appellate Tribunal in IT(TP)A No. 467/Bang/2015 for Assessment Year 2010–2011.

At the stage of admission before the Karnataka High Court, the Revenue sought permission to include an additional substantial question of law as Question No. 19. The proposed question concerned whether the Tribunal was justified in directing the Assessing Authority to include VAT/GST in export turnover for the purpose of computing deduction under Section 10A of the Income-tax Act, 1961, on the basis that the export profits realised by the assessee included such VAT/GST.

The Revenue questioned the Tribunal’s reliance on the Karnataka High Court’s earlier decision in the assessee’s own case, particularly because, according to the Revenue, the issue had not attained finality and Special Leave Petitions had been filed before the Hon’ble Supreme Court.

The respondent-assessee raised no objection to inclusion of the additional question. Accordingly, the High Court permitted its inclusion as Question No. 19.

Issues Involved

The principal issues before the High Court included:

  1. Whether Questions Nos. 1 to 12, 14, 15, 18 and 19 raised by the Revenue were already covered against the Revenue by the Karnataka High Court’s earlier decision in M/s Wipro Limited vs The Deputy Commissioner of Income Tax, ITA No. 879/2008 and connected matters, decided on 25 March 2015.
  2. Whether VAT/GST was required to be included in export turnover for computing deduction under Section 10A where the export profits realised by the assessee were stated to include such VAT/GST.
  3. Whether Questions Nos. 13, 16 and 17 required adjudication in the present appeal or could be kept open.
  4. Whether the rights and liabilities of the parties should remain governed by the final outcome of Civil Appeal No. 5391/2016 pending before the Hon’ble Supreme Court.

Appellants’ / Revenue’s Arguments

The Revenue sought leave of the Court to add Question No. 19 concerning inclusion of VAT/GST in export turnover for the purpose of computing deduction under Section 10A of the Income-tax Act, 1961.

The Revenue’s proposed question specifically challenged the Tribunal’s direction to the Assessing Authority to include VAT/GST in export turnover where the export profits realised by the assessee were stated to include VAT/GST.

The Revenue further highlighted that the Tribunal had relied upon the Karnataka High Court’s decision in the assessee’s own case, while the Revenue maintained that the matter had not reached finality because Special Leave Petitions had been filed before the Hon’ble Supreme Court.

The Revenue also submitted that the issues involved in the appeal were the subject matter of Civil Appeal No. 5391/2016 pending consideration before the Hon’ble Supreme Court. Accordingly, it requested the High Court to record that the parties would be governed by the final outcome of the said civil appeal.

Further, at the request of the Revenue, Questions Nos. 13, 16 and 17 were kept open.

Respondent-Assessee’s Arguments

The respondent, M/s Wipro Limited, did not object to the Revenue’s request for inclusion of the additional Question No. 19.

The assessee submitted that Questions Nos. 1 to 12, 14, 15, 18 and 19 were already covered against the Revenue by the Karnataka High Court’s earlier decision in:

M/s Wipro Limited vs The Deputy Commissioner of Income Tax, ITA No. 879/2008 and connected matters, decided on 25 March 2015.

The Revenue did not dispute this submission.

The assessee also raised no objection to the Revenue’s request that the parties should be governed by the final outcome of Civil Appeal No. 5391/2016 pending before the Hon’ble Supreme Court.

Court’s Findings

The Karnataka High Court recorded that the assessee’s submission regarding Questions Nos. 1 to 12, 14, 15, 18 and 19 being covered by the earlier decision in the assessee’s own case was not disputed by the Revenue.

Accordingly, the Court held that:

Questions Nos. 1 to 12, 14, 15, 18 and 19 stood covered against the Revenue and in favour of the assessee.

The Court further accepted the request that:

Questions Nos. 13, 16 and 17 would remain open.

The Court also took note of the Revenue’s submission that the issues involved were the subject matter of Civil Appeal No. 5391/2016 pending before the Hon’ble Supreme Court. Since the assessee had no objection, the High Court directed that:

The parties would be governed by the outcome of Civil Appeal No. 5391/2016.

Court Order

The Karnataka High Court disposed of the Revenue’s appeal with the following directions:

  1. Questions Nos. 1 to 12, 14, 15, 18 and 19 were held to be covered against the Revenue and in favour of the assessee.
  2. Questions Nos. 13, 16 and 17 were kept open.
  3. The parties were directed to be governed by the outcome of Civil Appeal No. 5391/2016.
  4. No order as to costs was passed.

Important Clarification

The judgment should not be understood as an independent detailed adjudication by the High Court on the merits of every question raised in the Revenue’s appeal.

The decisive clarification is that Questions Nos. 1 to 12, 14, 15, 18 and 19 were treated as already covered against the Revenue by the Karnataka High Court’s earlier ruling in the assessee’s own case.

Further, Questions Nos. 13, 16 and 17 were expressly kept open. Therefore, the present judgment did not finally determine those questions.

Most importantly, the High Court expressly directed that the parties would be governed by the final outcome of Civil Appeal No. 5391/2016. Accordingly, the operative position recorded in the judgment remains linked to the outcome of that proceeding before the Hon’ble Supreme Court.

Section Involved

·         Section 260A of the Income-tax Act, 1961

·         Section 10A of the Income-tax Act, 1961

Link to download the order -

https://www.mytaxexpert.co.in/uploads/1783320271_1153compressed.pdf

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