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2016 (4) TMI 420 - ITAT BANGALORE

2016 (4) TMI 420 - ITAT BANGALORE - TMI - Computation of deduction u/s 10A - exclusion of expenditure incurred in foreign currency towards tour and travel expenses from the export turnover as well as total turnover - Held that:- This issue is covered by the judgment of Hon'ble jurisdictional High Court in the case of CIT Vs. Tata Elxsi Ltd [ 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 .....

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siness of the undertaking Export turn over / (Export turnover + domestic turn over) Total Turn Over - I.T. (T.P) A. No.392/Bang/2013 - Dated:- 8-3-2016 - SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER For The Appellant : Shri G.R. Reddy, CIT-I (D.R) For The Respondent : Shri Vishnu Moorthy, C.A. ORDER Per Shri Vijay Pal Rao, J.M. : This appeal by the revenue is directed against the order dt.17.12.2012 of Commissioner of Income Tax (Appeals)-III, Bangalore for t .....

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pose of computation of deduction under Section 10A without appreciating the fact that the statute allows exclusion of such of expenditure only from export turnover by way of specific definition of export turnover as envisaged by sub-clause (4) of Explanation 2 below sub-section (8) of Section 10A and the total turnover has not been defined in this section. 3. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT (Appeals) in so far as it rel .....

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rency towards tour and travel from export turnover for the purpose of computing the deduction under Section 10A of the Income Tax Act, 1961 (in short 'the Act'). On appeal, the CIT (Appeals) by following the decision of Hon'ble jurisdictional High Court in the case of CIT Vs. Tata Elxsi Ltd. 349 ITR 98 directed the Assessing Officer to exclude the said expenditure form total turnover as well. 4. We have heard the learned A.R. as well as learned D.R. and considered the relevant materi .....

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, it is held as under : Under sub-section (4) the proportion between the export turnover in respect of the articles or things, or as the case may be, computer software exported, to the total turnover of the business carried over by the undertaking is applied to the profits of the business of the undertaking in computing the profits of the business of the undertaking in computing the profits derived from export. In other words the profits of the business of the undertaking are multiplied by the e .....

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taking The total turnover of the business carried on by the undertaking would consist of the turnover from export and the turnover from local sales. The export turnover constitutes the numerator in the formula prescribed by sub-section (4). Export turnover also forms a constituent element of the denominator in as much as the export turnover is a part of the total turnover. The export turnover, in the numerator must have the same meaning as the export turnover which is constituent element of the .....

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outside India. Therefore in computing the export turnover the legislature has made a specific exclusion of freight and insurance charges. The submission which has been urged on behalf of the 5 IT (T.P) A No.392/Bang/2013 revenue is that while freight and insurance charges are liable to be excluded in computing export turnover, a similar exclusion has not been provided in regard to total turnover. The submission of the revenue, however, misses the point that the expression total turnover has not .....

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liament to make a provision which has been enunciated earlier must prevail as a matter of correct statutory interpretation. Any other interpretation would lead to an absurdity. If the contention of the Revenue were to be accepted, the same expression viz. export turnover would have a different connotation in the application of the same formula. The submission of the Revenue would lead to a situation where freight and insurance, though these have been specifically excluded from export turnover fo .....

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gments of the High Court as well as the Supreme Court held as under : 53. For the above reasons, we hold that for the purpose of applying the formula under sub-section (4) of section 10-B, the freight, telecom charges or insurance attributable to the delivery of articles or things or computer software outside India or the expenses, if any, incurred in foreign exchange in providing the technical services outside India are to be excluded, both from the export turnover and from the total turnover, .....

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vide 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 business and domestic business, the legislature intended to have a formula to ascertain the profits from export business by apportioning the total profits of the business on the basis of turnovers. Apportionment of profits on the ba .....

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enominator, 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 should also be excluded in computing the export turnover as a component of total turnover in the denominator. Th .....

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ord is to be in conformity with the context in which it is used. When the statute 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 the meaning of the total turnover, when the total turnover includes export turnover. If what is excluded in computing the export turnover is included while arriving at the total turno .....

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