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2015 (10) TMI 1592 - ITAT BANGALORE

2015 (10) TMI 1592 - ITAT BANGALORE - [2015] 41 ITR (Trib) 208 (ITAT [Bang]) - Entitlement for deduction under section 10AA - whether CIT(A) has erred in directing the AO to reduce the expenditure incurred in foreign currency, both from the export turnover as well as total turnover for the purpose of computation of deduction u/s. 10AA and allowed deduction of ₹ 36,065,831/- as claimed by the assessee? - Held that:- We are of the view that the arguments advanced by the ld. DR are contrary t .....

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-2015 - N V Vasudevan, JM And Abraham P George, AM,JJ. For the Appellant : Shri P Dhivahar, Jt. CIT(DR) For the Respondent : Shri Bharath Agarwal, CA ORDER Per N V Vasudevan: This appeal by the revenue is against the order dated 3.9.2014 of the CIT(Appeals)-III, Bengaluru relating to assessment year 2009-10. 2. The assessee is engaged in the business of manufacture and sale of tapered roller bearings and its components from a unit registered under the Special Economic Zones Act at Mahindra World .....

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of section 10AA of the Act. 3. The AO has recomputed deduction under section 10A of the Act by reducing travel expenses incurred in foreign currency amounting to ₹ 90,044,900 from the export turnover on the ground that the Company is engaged in the business of rendering technical services outside India/delivery of software services outside India without considering the fact the Assessee was engaged in the business of manufacture and export of tapered roller bearings and its components. 4. .....

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nting to ₹ 7,024,483, ₹ 3,810,473 and ₹ 2,341,410 respectively. The AO has reduced the said amounts in computing the export turnover of the assessee by holding that the same is attributable to the delivery of software outside India, and consequently reduced the amount of deduction claimed under section 10AA of the Act. According to the assessee, the telecommunication, freight and insurance expenses were not incurred for the purpose of delivery of the articles or things outside .....

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ned with regard to items of inclusions and exclusions between numerator and denominator, i.e., Export Turnover and Total Turnover, in the formula prescribed under section 10AA of the Act. The assessee placed reliance on the recent decisions of the of the Hon'ble High Court of Karnataka in the case of CIT Vs. Tata Elxsi (17 taxmann.com 100) (Kar.) wherein it was held that expenses should be reduced from the Total Turnover if the same is reduced from Export Turnover, while computing deduction .....

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n of raw materials and components in the said manufacturing process. It is therefore not clear as to what was the factual basis for the AO's observation that the assessee is engaged in the business of export of software. Appellant has also stated that the value of goods exported is the FOB value and therefore it cannot be said that the telecommunication freight and insurance expenses have been incurred for the purpose of export of articles outside India. The appellant's contentions are b .....

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o be proportionately reduced from the total turnover. This contention of the appellant is supported by the decision of the jurisdictional High Court in Tata Elxsi reported in 349 ITR 98, which has held as follows: "In other words, if the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded in computing the export turnover as a component of total turnover in the denominator. The reason being the total turnover includes export .....

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