2018 (5) TMI 357 - SC - Income Tax

Computation of Deduction u/s 10A - Software development charges to be excluded while working out the deduction admissible u/s 10A - claim of certain expenses attributable to the delivery of software outside India or in providing technical services from ‘total turnover’ - whether such charges are relatable towards expenses incurred on providing technical services outside India? - Held that:- As relying on CIT vs. Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] when a particular word is not defined by the legislature and an ordinary meaning is to be attributed to it, the said ordinary meaning is to be in conformity with the context in which it is used. Hence, what is excluded from ‘export turnover’ must also be excluded from ‘total turnover’, since one of the components of ‘total turnover’ is export turnover. Any other interpretation would run counter to the legislative intent and would be impermissible.

In the instant case, if the deductions on freight, telecommunication and insurance attributable to the delivery of computer software under Section 10A 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 which would cause grave injustice to the Respondent which could have never been the intention of the legislature.