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2015 (10) TMI 2428 - ITAT BANGALORE

2015 (10) TMI 2428 - ITAT BANGALORE - TMI - Exemption u/s 11A - Expenditure incurred on telecommunication charges and bandwidth & internet charges and travel expenditure incurred in foreign currency excluded by the AO from the export turnover for the purpose of computing deduction u/s 10A - Held that:- As decided in case of Tata Elxsi [2011 (8) TMI 782 - KARNATAKA HIGH COURT] there should be uniformity in the ingredients of both the numerator and the denominator of the formula, Section 10-A is a .....

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ent : Shri Madhukar Dhakappa, C.A ORDER PER SHRI VIJAYPAL RAO, JUDICIAL MEMBER : This appeal by the Revenue is directed against the order dated 6/3/2013 of Commissioner of Income-tax (Appeals) - III, Bangalore for the assessment year 2008-09. 2. The Revenue has raised the following grounds: i. On the facts and in the circumstances of the case the learned CIT(A) erred in law in directing the AO to exclude the reimbursement of expenses of telecommunication charges and bandwidth & internet char .....

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hat may be urged at the time of hearing, it is prayed that the order of the CIT(A) is so far as it relates to the above grounds may be reversed and that of the AO may be restored. 3. The only issue raised in the appeal of the Revenue is regarding the expenditure incurred on telecommunication charges and bandwidth & internet charges and travel expenditure incurred in foreign currency excluded by the AO from the export turnover for the purpose of computing deduction u/s 10A. 4. We have heard t .....

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igh Court in the case of Tata Elxsi, 349 ITR 98. At the outset we note that this issue is now covered by the decision of Hon ble Jurisdictional High Court in the case of Tata Elxsi (Supra), the relevant finding of the Hon ble jurisdictional High Court reads as follows:- ………..Section 10A is enacted as an incentive to exporters to enable their products to be competitive in the global market and consequently earn precious foreign exchange for the country. This aspect has to be .....

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total turnover , the word total turnover falls for interpretation by this Court; ……..In section 10A, not only the word total turnover is not defined, there is no clue regarding what is to be excluded while arriving at the total turnover. However, while interpreting the provisions of section 80HHC, the courts have laid down various principles, which are independent of the statutory provisions. There should be uniformity in the ingredients of both the numerator and the denominator of .....

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hod of arriving at export profits. In the case of section 80HHC, the export profit is to be derived from the total business income of the assxcessee, whereas in section 10-A, the export profit is to be derived from the total business of the undertaking. Even in the case of business of an undertaking, it may include export business and domestic business, in other words, export turnover and domestic turnover. To the extent of export turnover, there would be a commonality between the numerator and .....

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ing in the said section to mandate that, what is excluded from the numerator that is export turnover would nevertheless form part of the denominator. When the statute prescribed a formula and in the said formula, export turnover is defined, and when the total turnover includes export turnover, the very same meaning given to the export turnover by the legislature is to be adopted while understanding the meaning of the total turnover, when the total turnover includes export turnover. If what is ex .....

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that, there should be uniformity in the ingredients of both the numerator and the denominator of the formula, since otherwise it would produce anomalies or absurd results. Section 10A is a beneficial section. It is intended to provide incentives to promote exports. The incentive is to exempt profits relatable to exports. In the case of combined business of an assessee, having export business and domestic business, the Legislature intended to have a formula to ascertain the profits from export b .....

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other words, export turnover and domestic turnover. The export turnover would be a component or part of a denominator, the other component being the domestic turnover. In other words to the extent of export turnover, there would be a commonality between the numerator and the denominator of the formula. In view of the commonality, the understanding should also be the same. In other words, if the export turnover in the numerator is to be arrived at after excluding certain expenses, the same shoul .....

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minator. Though when a particular word is not defined by the Legislature and an ordinary meaning is to be attributed to the same, the said ordinary meaning to be attributed to such word is to be in conformity with the context in which it is used. When the statue prescribes a formula and in the said formula, export turnover is defined, and when the total turnover includes export turnover, the very same meaning given to the export turnover by the Legislature is to be adopted while understanding th .....

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