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2020 (8) TMI 666 - AT - Income TaxDeduction allowable u/s 10AA - adjustment of expenditure incurred on telecommunication expenses from the export turnover - HELD THAT:- Taking into consideration the decision rendered in the case of CIT v. Tata Elxsi Ltd [2011 (8) TMI 782 - KARNATAKA HIGH COURT] we are of the view that telecommunication charges should be excluded both from export turnover and total turnover. We are of the view that as of today, law declared by the Hon'ble High Court of Karnataka which is the jurisdictional High Court is binding on us. Order of the Hon’ble Karnataka High Court has been upheld in the case of CIT v. HCL Technologies Ltd. [2018 (5) TMI 357 - SUPREME COURT] - The aforesaid additional grounds by the assessee are therefore allowed. Disallowance u/s 14A - assessee submitted that disallowance u/s. 14A would go to increase profits of the business on which deduction u/s. 10AA will be allowed and prayed that AO should be directed to allow deduction u/s. 10AA on the profits of the business as enhanced by the disallowance u/s 14A - HELD THAT:- We find force in the submissions of the assessee on this issue because if part of expenses claimed by the assessee against business income is considered as expenses incurred for earning tax free income and is disallowed u/s 14A, the business income stands increased by that amount and only such increased business income should be considered for computing the amount of deduction u/s 10A. AO is directed accordingly. We direct the AO to allow deduction u/s. 10AA of the Act on the profits of the business as increased by addition u/s. 14A of the Act.
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