COMMISSIONER OF INCOME TAX, CENTRAL-III versus HCL TECHNOLOGIES LTD.

Citation: [2018] 7 S.C.R. 1079 · Decided: 24-04-2018 · Supreme Court of India · Bench: R.K. AGRAWAL · Disposal: Dismissed

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Judgment (excerpt)

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1079
COMMISSIONER OF INCOME TAX, CENTRAL-III
v.
HCL TECHNOLOGIES LTD.
(Civil Appeal Nos. 8489-8490 of 2013)
APRIL 24, 2018
[R. K. AGRAWAL AND R. BANUMATHI, JJ.]
Income Tax Act, 1961 – ss.10A, 80HHC and 80HHE – Claim
of certain expenses attributable to the delivery of software outside
India or in providing technical services from ‘total turnover’ by the
Respondent u/s. 10A of the IT Act – Neither s.10A nor s.2 of the IT
Act define the term ‘total turnover’ – However, the term ‘total
turnover’ is given in clause (ba) of the Explanation to s.80 HHC of
the IT Act – Held: The definition of total turnover given u/ss. 80HHC
and 80HHE cannot be adopted for the purpose of s.10A as the
technical meaning of total turnover, which does not envisage the
reduction of any expenses from the total amount, is to be taken into
consideration for computing the deduction u/s.10A – When the
meaning is clear, there is no necessity of importing the meaning of
total turnover from the other provisions – What is excluded from
‘export turnover’ must also be excluded from ‘total turnover’, since
one of the components of ‘total turnover’ is export turnover – Even
in common parlance, when the object of the formula is to arrive at
the profit from export business, expenses excluded from export
turnover have to be excluded from total turnover also – Otherwise,
any other interpretation makes the formula unworkable and
absurd – Hence, such deduction shall be allowed from the total
turnover in same proportion as well – In the same way, expenses
incurred in foreign exchange for providing the technical services
outside shall be allowed to exclude from the total turnover.
Interpretation of Statutes – Harmonious Construction – Held:
The rule of harmonious construction is the thumb rule to
interpretation of any statute – An interpretation which makes the
enactment a consistent whole, should be the aim of the Courts and
a construction which avoids inconsistency or repugnancy between
the various sections or parts of the statue should be adopted.
  [2018] 7 S.C.R. 1079
 1079
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1080
SUPREME COURT REPORTS
[2018] 7 S.C.R.
Dismissing the appeals, the Court
HELD: 1.1  Section 10A of the Income Tax Act, 1961 is a
special beneficial provision and the purpose of deduction under
such Section is to encourage and boost the new business
undertakings situated in the free trade zone of this Nation by
providing suitable deductions to such business entities.
[Para 10] [1087-F]
1.2  The definition of total turnover given under Sections
80HHC and 80HHE cannot be adopted for the purpose of Section
10A as the technical meaning of total turnover, which does not
envisage the reduction of any expenses from the total amount, is
to be taken into consideration for computing the deduction under
Section 10A. When the meaning is clear, there is no necessity of
importing the meaning of total turnover from the other provisions.
If a term is defined under Section 2 of the IT Act, then the
definition would be applicable to all the provisions wherein the
same term appears. As the term ‘total turnover’ has been defined
in the Explanation to Section 80HHC and 80HHE, wherein it has
been clearly stated that “for the purposes of this Section only”, it
would be applicable only for the purposes of that Sections and
not for the purpose of Section 10A.  [Para 14] [1089-A-C]
2.  A Statute is the intention of the legislature who enacts it
after having regard to various facts and circumstances. It is a
cardinal principle of law that the interpretation by the Court shall
be done in such a way that the intention of the legislature shall
prevail and no injustice occurred with the parties. The rule of
harmonious construction is the thumb rule to interpretation of
any statute. An interpretation which makes the enactment a
consistent whole, should be the aim of the Courts and a
construction which avoids inconsistency or repugnancy between
the various sections or parts of the statue should be adopted.
[Para 15] [1089-D-E]
3.  Accordingly, the formula for computation of the deduction
under Section10A of the Act would be as follows:
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1081
[Para 18] [1090-F-H]
4. In the instant case, if the deductions on freight,
telecommunication and insurance attributable to the delivery of
computer software under Section10A of the IT Act are allowed
only in Export Turnover but not from the Total Turnover then, it
would give rise to inadvertent, unlawful, meaningless and illogical
result 

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