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2016 (5) TMI 260 - ITAT BANGALORE

2016 (5) TMI 260 - ITAT BANGALORE - TMI - Calculation of deduction u/s 10A - exclusion of telecommunication expenses and foreign travel expenditure from export turnover for the purpose of deduction - Held that:- We direct the AO to exclude the above mentioned expenses both from the export turnover as well as from the total turnover while calculating deduction u/s 10A of the Act. See CIT Vs. Gem Plus Jewellery India [2010 (6) TMI 65 - BOMBAY HIGH COURT ] wherein held that since the export turnove .....

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l Rao, J. M. This appeal by the assessee is directed against the assessment order dt.7.9.2010 passed under Section 143(3) rws 144C in pursuant to the directions of Dispute Resolution Panel ( DRP ) dt.30.08.2010. 2. The assessee has raised the following effective grounds :- Grounds 1. Transfer Pricing : The appellant wishes to state that the Hon'ble DRP and the learned A.O. grossly erred in upholding the income adjustment proposed by the learned TPO in arriving at the ALP of the international .....

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lecting the comparables. 3. Software-The filters should be used consistently for selecting comparable companies. The Hon'ble DRP and the learned A.O. have completely ignored the fact that the appellant did not contend on application of the filters or on the appropriateness of most filters, but on the inconsistent application of the filters by the learned TPO. 4. Software - Onsite filter should not be applied. The Hon'ble DRP and the learned A.O. have erroneously upheld the learned TPO s .....

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esolution and therefore the assessee seeks withdrawal of the ground relating to Transfer Pricing Adjustment. In this respect the assessee has filed a letter dt.20.01.2016 explaining that the assessee has received MAP Resolution and the same has been accepted. The learned Departmental Representative has not disputed the MAP Resolution and acceptance of the same by the parties. In view of the fact that there is a MAP Resolution of the transfer pricing issue vide order dt.20.10.2015, the Ground No. .....

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the exemption u/s 10A, if the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded from the total turnover in the denominator. 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 .....

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ine 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 denominato .....

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method 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 .....

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nothing 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 i .....

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case of CIT Vs. Gem Plus Jewellery India Ltd. 330 ITR 175, in identical circumstances, held that since the export turnover forms part of the total turnover, if an item is excluded from the export turnover, the same should also be reduced from the total turnover to maintain parity between numerator and denominator while calculating deduction u/s 10A of the Act. The relevant finding of the Hon ble Mumbai High Court reads as follows:- The total turnover of the business carried on by the undertakin .....

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nition of the expression export turnover in Expln.2 to s.10A which the expression is defined to mean the consideration in respect of export by the undertaking of articles, things or computer software received in or brought into India by the assessee in convertible foreign exchange but so as not to include inter alia freight, telecommunication charges or insurance attributable to the delivery of the articles, things or software outside India. Therefore in computing the export turnover the legisla .....

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r has been defined. The definition of export turnover excludes freight and insurance. Since export turnover has been defined by Parliament and there is a specific exclusion of freight and insurance, the expression export turnover cannot have a different meaning when it forms a constituent part of the total turnover for the purposes of the application of the formula. Undoubtedly, it was open to Parliament to make a provision which has been enunciated earlier must prevail as a matter of correct st .....

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