The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has dismissed the Revenue's appeal and partly allowed the assessee's cross-appeal for the Assessment Year 2013–14. The ruling, dated 13th June 2025, centered around the treatment of various income streams and expenses concerning deduction eligibility under Section 10AA of the Income Tax Act, 1961.
Background of the Case
Both the Revenue and Genpact India had filed cross appeals against the order of CIT(A)-37, New Delhi, dated 18.10.2024. The core of the dispute involved the eligibility of income from interest on fixed deposits, inter-corporate deposits, and employee loans, as well as foreign exchange gains and export-related reimbursements, for deduction under Section 10AA.
Key Issues Raised by the Revenue
The Revenue raised eight grounds in its appeal (ITA No.6415/Del/2016), including:
Interest income on fixed and inter-corporate deposits being ineligible for Section 10AA deduction.
Interest on employee loans being outside the purview of Section 10AA.
Foreign exchange gains and forward contract gains being business income unrelated to export activities.
Reduction of telecommunication and job training expenses from total turnover.
Disallowance of depreciation on computer peripherals.
Disallowance under Section 14A despite no exempt income.
ITAT’s Observations and Ruling
The Tribunal carefully considered prior year rulings involving Genpact, particularly for AYs 2010–11, 2011–12, and 2012–13, and found consistency in the treatment of such income as eligible business income under Section 10AA. Notably:
The ITAT reaffirmed that interest earned on temporary surplus funds placed in FDs and ICDs, and interest on employee loans, were closely connected to the export-oriented business and qualify for Section 10AA deduction.
Foreign exchange gains and forward contract gains were deemed to have a direct nexus with export sales and thus eligible for tax deduction.
In line with the Supreme Court’s landmark ruling in CIT v. HCL Technologies Ltd, the Tribunal ruled that telecommunication and migration/on-the-job training expenses, if excluded from export turnover, must also be excluded from total turnover.
The Tribunal allowed higher depreciation on computer peripherals by recognizing them as part of the computer system.
Disallowance under Section 14A was dismissed due to absence of exempt income.
Assessee’s Cross Appeal
Genpact's appeal contested the inclusion of telecommunication and training expenses in export turnover and also sought credit for TDS amounting to Rs. 6.04 lakh. The ITAT ruled in Genpact’s favor on both issues, directing the AO to verify and allow TDS credit.
However, Genpact also sought a refund of excess Dividend Distribution Tax (DDT) paid under Section 115-O, claiming that the rate should have been 5% as per the India-Mauritius DTAA. This claim was dismissed by the ITAT based on the Special Bench ruling in Total Oil India (P) Ltd, which held the domestic rate of 16.2225% to be valid.
Income Tax Case Law Genpact India Versus DCIT, Circle 10 (1), New Delhi
Citation-2025 TAXONATION 700 (ITAT-DELHI) (Click here ot read full judgement)
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