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HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE

Commissioner of Income Tax, Central-III v. HCL Technologies Ltd.

Civil Appeal Nos. 8489-8490 of 2013 / Civil Appeal Nos. 8535 & 8555-8556 of 2013 / Civil Appeal Nos. 7853 & 8789 of 2012 / Civil Appeal Nos. 8559, 8558, 8529-8530, 8515, 8557, 8524, 8518, 8525 & 8539 of 2013 / Civil Appeal No. 4392 of 2018 / Civil Appeal Nos. 8562 & 8533 of 2013 / Civil Appeal No. 7854 of 2012 / Civil Appeal No. 8560 of 2013 / Civil Appeal No. 4393 of 2018 / Civil Appeal Nos. 8537, 8543, 8492, 8540-8541, 8542, 8551, 8494, 8527 of 2013 / Civil Appeal No. 4543 of 2014 / Civil Appeal Nos. 8536, 8500, 8506, 8553, 8499, 8526, 8501, 8538, 8491 of 2013 / Civil Appeal No. 1098 of 2016 / Civil Appeal Nos. 8505, 8510, 8513, 8507, 8504, 8503, 8519, 8927 of 2013 / Civil Appeal No. 8791 of 2012 / Civil Appeal Nos. 8528, 8523, 8554, 8509, 8521-8522, 147 of 2013 / Civil Appeal No. 8912 of 2012 / Civil Appeal No. 6594 of 2015 / Civil Appeal Nos. 8561, 8531, 8544, 8550, 8545 of 2013 / Civil Appeal No. 4394 of 2018 / Civil Appeal No. 8929 of 2013 / Civil Appeal No. 1099 of 2016 / Civil Appeal No. 10830 of 2014 / Civil Appeal No. 4395 of 2018 / Civil Appeal Nos. 8552, 8495, 8493 of 2013 / Civil Appeal No. 4557 of 2018 / Civil Appeal No. 4537 of 2018 / Civil Appeal No. 9202 of 2013 / Civil Appeal Nos. 4538 & 4396-4397 of 2018 / Civil Appeal No. 4293 of 2014 / Civil Appeal Nos. 4443 & 4540 of 2018 / Civil Appeal No. 9167 of 2016 / Civil Appeal Nos. 4444, 4445, 4447 of 2018 / Civil Appeal Nos. 646-647 of 2015 / Civil Appeal Nos. 4398 & 4399 of 2018 / Civil Appeal No. 77 of 2015 / Civil Appeal Nos. 4450, 4452 4541 & 4455 of 2018 / Civil Appeal No. 1951 of 2015 / Civil Appeal Nos. 4544, 4458, 4400, 4542 & 4461 of 2018 / Civil Appeal No. 9250 of 2015 / Civil Appeal No. 4464 of 2018 / Civil appeal No. 4427 of 2016 / Civil Appeal No. 4611 of 2018 / Civil Appeal No. 9319 of 2016 / Civil Appeal No. 2999 of 2017 / Civil Appeal No. 4614 of 2018 / Civil Appeal No. 2998 & 3059 of 2017 / Civil Appeal No. 4612 of 2018 / Civil Appeal No. 11716 of 2016 / Civil Appeal No. 4613 of 2018 / Civil Appeal Nos. 911, 3948, 2419, 1535, 1536, 3797, 2420, 3060, 3275 & 3651 of 2017
[2018] 7 SCR 1079 ·
10A · 10A, Explanation 2(iv)

Reasoned final decisionAssessee
Download AKHB noteFive-part research note
Sources & disclosures includedDownload original judgment / order

Two-judge bench · R. K. Agrawal, J. · R. Banumathi, J.

Assessment years: 2004-05

01 · Facts of the case

HCL developed and exported computer software and supplied customized software-development services through two Software Technology Park units at Gurgaon. The lead facts concern AY 2004-05. The Assessing Officer attributed 60% of software-development charges to technical services outside India; the Commissioner (Appeals) substituted a 10% estimate despite recording the lack of evidence of independent technical services. The Tribunal allowed HCL’s appeal and dismissed Revenue’s cross-appeal; the Delhi High Court dismissed Revenue’s appeal (paragraphs 2-3 and 10-13).

The computational dispute was whether amounts excluded from export turnover also had to leave the total-turnover denominator. Revenue sought a gross ordinary or technical meaning of total turnover, whereas HCL sought consistent treatment of the export component in numerator and denominator (paragraphs 5-9).

Source: reported judgment / paragraphs 3, 5-9, 10-13 / PDF pages 6, 7, 9, 10 / judicial text

02 · Discussion by the Hon’ble Court

On the factual attribution, the Court noted that customized software development may require personnel at a foreign customer’s site, including work to make delivered software functional. The Assessing Officer had produced no evidence of technical services independent of software development. The Court did not create a universal percentage allocation for offshore work (paragraphs 11-12).

Neither section 10A nor section 2 defined total turnover. Definitions confined to sections 80HHC and 80HHE were not automatically imported into section 10A. The meaning had to fit this deduction’s statutory context: export turnover is itself a component of total turnover. An asymmetric calculation would distort the export-profit fraction (paragraphs 8-10 and 13-17).

The formula in paragraph 18 uses business profit multiplied by export turnover as defined in Explanation 2(iv), divided by that export turnover plus domestic sale proceeds. Therefore, freight, telecommunication and insurance attributable to delivering computer software, when excluded from export turnover, must also be excluded from total turnover. The same parity applies to expenses incurred in foreign exchange for technical services outside India (paragraphs 18-21).

Source: reported judgment / paragraphs 8-21 / PDF pages 8, 9, 10, 11, 12, 13 / judicial text

03 · Judicial decision

Revenue’s appeals were dismissed as devoid of merit. The section 10A computation must exclude the identified items from total turnover consistently with their exclusion from export turnover. All connected matters and any interlocutory applications were disposed of without an order as to costs (paragraphs 19-22).

Source: reported judgment / paragraphs 19-22 / PDF pages 13 / judicial text

04 · Outcome / in whose favour

In whose favour: Assessee

Revenue appeals dismissed; connected matters and interlocutory applications disposed of; no order as to costs

Final section 10A computation decision

Applies to the section 10A formula and identified export-turnover exclusions. It does not decide eligibility under every export incentive or permit arbitrary deductions from every turnover measure. No standard 10% or 60% technical-service allocation is approved.

Source: reported judgment / paragraphs 19-22 / PDF pages 13 / judicial text

05 · AKHB REVIEW POINT

Reconcile the export-turnover exclusions with the export component in total turnover, item by item. Keep evidence distinguishing software-development delivery work from any genuinely separate technical service; do not replace that inquiry with a fixed percentage. The judgment supplies a parity rule within section 10A, not a general turnover rewrite for all deductions.

This is a historical AY 2004-05 computation decision. Entitlement, applicable statutory version, time limits and any different incentive provision require their own review. Do not carry the result automatically into section 10AA, another deduction regime or the Income-tax Act, 2025.

Source: reported judgment / paragraphs 11-14 and 17-22; editorial application / PDF pages 10, 11, 12, 13 / judicial text

Detailed disposition and connected groups

issue results
  • issue
    Freight, telecommunication and insurance excluded from export turnover
    result
    Exclude corresponding amounts from total turnover for the section 10A computation
    in whose favour
    Assessee
    pinpoints
  • issue
    Foreign-exchange technical-service expenses
    result
    Apply the same numerator-denominator parity
    in whose favour
    Assessee
    pinpoints
  • issue
    Independent offshore technical-service attribution
    result
    Court records that the Assessing Officer had not established independent technical services; no universal percentage rule
    in whose favour
    Assessee on this record
    pinpoints

Additional statutory context, not separate holdings

2; 80HHC, Explanation (ba); 80HHE; 143

Judicial authorship and separate opinions

R. K. Agrawal, J.

Act identified in the reviewed source

Income-tax Act, 1961

Companion case schedule as reported

Civil Appeal Nos. 8535 & 8555-8556 of 2013, Civil Appeal
Nos. 7853 & 8789 of 2012, Civil Appeal Nos. 8559, 8558, 8529-8530,
8515, 8557, 8524, 8518, 8525 & 8539 of 2013, Civil Appeal No. 4392 of
2018, Civil Appeal Nos. 8562 & 8533 of 2013, Civil Appeal No. 7854 of
2012, Civil Appeal No. 8560 of 2013, Civil Appeal No. 4393 of 2018,
C Civil Appeal Nos. 8537, 8543, 8492, 8540-8541, 8542, 8551, 8494, 8527
of 2013, Civil Appeal No. 4543 of 2014, Civil Appeal Nos. 8536, 8500,
8506, 8553, 8499, 8526, 8501, 8538, 8491 of 2013, Civil Appeal No. 1098
of 2016, Civil Appeal Nos. 8505, 8510, 8513, 8507, 8504, 8503, 8519,
8927 of 2013, Civil Appeal No. 8791 of 2012, Civil Appeal Nos. 8528,
8523, 8554, 8509, 8521-8522, 147 of 2013, Civil Appeal No. 8912 of
D 2012, Civil Appeal No. 6594 of 2015, Civil Appeal Nos. 8561, 8531,
8544, 8550, 8545 of 2013, Civil Appeal No. 4394 of 2018, Civil Appeal
No. 8929 of 2013, Civil Appeal No. 1099 of 2016, Civil Appeal
No. 10830 of 2014, Civil Appeal No. 4395 of 2018, Civil Appeal
Nos. 8552, 8495, 8493 of 2013, Civil Appeal No. 4557 of 2018, Civil
E Appeal No. 4537 of 2018, Civil Appeal No. 9202 of 2013, Civil Appeal
Nos. 4538 & 4396-4397 of 2018, Civil Appeal No. 4293 of 2014, Civil
Appeal Nos. 4443 & 4540 of 2018, Civil Appeal No. 9167 of 2016, Civil
Appeal Nos. 4444, 4445, 4447 of 2018, Civil Appeal Nos. 646-647 of
2015, Civil Appeal Nos. 4398 & 4399 of 2018, Civil Appeal No. 77 of
2015, Civil Appeal Nos. 4450, 4452 4541 & 4455 of 2018, Civil Appeal
F No. 1951 of 2015, Civil Appeal Nos. 4544, 4458, 4400, 4542 & 4461 of
2018, Civil Appeal No. 9250 of 2015, Civil Appeal No. 4464 of 2018,
Civil appeal No. 4427 of 2016, Civil Appeal No. 4611 of 2018, Civil
Appeal No. 9319 of 2016, Civil Appeal No. 2999 of 2017, Civil Appeal
No. 4614 of 2018, Civil Appeal No. 2998 & 3059 of 2017, Civil Appeal
No. 4612 of 2018, Civil Appeal No. 11716 of 2016, Civil Appeal
G
No. 4613 of 2018, Civil Appeal Nos. 911, 3948, 2419, 1535, 1536, 3797,
2420, 3060, 3275 & 3651 of 2017.

Source & verification

Download original judgment / order · Open cited source rendition

Identified source rendition: 13 PDF pages; SHA-256 2cdbf596a7ae28676a192d33f034b4d850667c5c59a61b07471bc50943742920. Original bytes preserved. Judicial paragraphs 1-22 on physical PDF pages 5-13; earlier pages are editorial headnote, reported identity, jurisdiction and appearances. No adjacent judgment.

  • Reported SCR title/date/bench and jurisdiction checked in preserved PDF. Catalogue-supplied retrospective INSC identifier is not treated as an independently verified neutral citation.
  • 2004-05 is the assessment year stated for the lead factual case; separate assessment years for connected appeals are not identified in the bounded judgment.
  • The complete connected-appeal schedule is preserved verbatim in companion_case_schedule; the lead pair must not be reduced to catalogue Civil Appeal No. 8489 alone.
  • The reported paragraph 2 refers to an ITAT order dated 30 March 2007, whereas paragraph 3(e) refers to 23 January 2009. The note does not silently harmonize these dates.; Paragraph 3(b) describes the returned figure as undisclosed income; the note does not adopt this anomalous label as a finding of concealment.; Paragraph 7’s statement of the parties’ fraction argument reverses the inclusion wording. Paragraphs 14 and 18-21 supply the clear Court conclusion.; Paragraph 14 includes language about a technical meaning not envisaging reduction of expenses. Read in isolation that conflicts with its own final sentence and the explicit parity formula and conclusions in paragraphs 18-21; the note relies on those operative passages and preserves the source wording.; Physical page 13 has a stray repeated formula fragment at its lower edge, not an additional order. The numerator and denominator are visually verified on page 12.

Statutory scope

Historical assessment-year and statutory setting. No automatic mapping to the Income-tax Act, 2025; check applicable statutory text and subsequent treatment independently.

Later treatment

Source checked 2026-10-04. No comprehensive subsequent-treatment or present-law audit. Any expressly identified bounded comparison is limited to the cited passages.

Page references identify the supplied PDF; paragraph references identify the judgment unless stated otherwise.

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