TMI Blog2008 (1) TMI 929X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee submitted that the AO while framing order under s. 143(3) considered that a sum of ₹ 6,39,040 was to be excluded from the export turnover as it was incurred on telecommunication charges, insurance attributed to the delivery of articles or thing computer software outside India on sales earned in foreign exchange in providing technical services outside India. For the asst. yr. 2004-05, the AO had considered this amount at ₹ 4,71,309. He pointed out that export turnover for the asst. yr. 2003-04 was ₹ 4.35 crores and ₹ 4.67 crores for the asst. yr. 2004-05 respectively. He therefore, recomputed the deduction under s. 10A to ₹ 23,47,457 as against claimed by the assessee at ₹ 26,61,434 for the asst. yr. 2003-04 and recomputed the deduction under s. 10A to ₹ 89,98,544 as claimed against ₹ 90,90,301 by the assessee for asst. yr. 2004-05. For the asst. yr. 2003-04 the learned AO also held that the provision of s. 115JB indicates the amount of expenditure and income relatable to any income to which s. 10A applies is to be added back to the P L a/c and accordingly he held that in view of the amendment in the Finance Act applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or disallowance from export turnover may be held at 80 per cent of such expenses and in view of the consistent view held by the Tribunal for the purpose of claiming deduction under s. 10A, the amount so disallowed is to be correspondingly reduced from the total turnover for computation of deduction under s. 10A. 6. On the second issue, the learned counsel pointed out that the restriction of deduction under s. 10A cannot become the guiding principle for the purpose of computing book profits for the purpose of Minimum Alternate Tax (MAT) under the provisions of s. 115JB. He pointed out that this issue also stands covered in favour of the assessee insofar as Tribunal, Mumbai Special Bench decision in the case of Bhushan Steel Strips (P) Ltd. vs. Dy. CIT (2007) 108 TTJ (Mumbai)(SB) 105: (2007) 292 ITR 144(Mumbai)(SB)(AT), it was held that for tax on book profits being special provision under s. 115JB has an overriding effect and being a special deduction is to be calculated on adjusted book profit and not on profits as calculated as per other provisions of the Act. He pointed out that the book profit is computed in accordance with the decision of the apex Court in the case of Apol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch decision of Tribunal in the case of Bhushan Steel Strips Ltd. (supra) when it was held that adjustment in terms of cl. (ii), Explanation to s. 115JB of the Act stand already credited/debited to the P L a/c. This view is supported by plethora of judgments such as Tribunal, Bombay Bench, in the case of Tushako Pumps Ltd. vs. Asstt. CIT (2005) 2 SOT 556(Mumbai) and in the case of Asstt. CIT vs. Varinder Agro Chemicals Ltd. (2007) 107 TTJ (Chd) 842: (2007) 161 Taxman 134(Chd)(Mag) which confine to the issue that the income to which s. 10A/10B of the Act applies only when such amount is credited to the P L a/c. Similarly, the amount of expenditure including depreciation relatable to any income to which s. 10A/10B applied would certainly stand debited to the P L a/c and not render computation in the manner provided in ss. 28 to 44 of the Act. Therefore, keeping these factual matrix in mind, there was no occasion for the lower authorities to compute book profit by visiting the restriction in the claim of deduction under s. 10A proviso applicable only to the asst. yr. 2003-04 when the assessee had no inbuilt mechanism to compute separate income and expenditure for the purpose of dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harges when all such communication facilities are available at both sides and to be fair insofar as the assessee being only exporter and not a call center was entitled to 80 per cent expenses to be considered for having incurred on the export turnover. Therefore, the expenses in telecommunication are estimated at 80 per cent thereof which are to be reduced from the export turnover. However, on the issue of claiming deduction under s. 10A, we are of the considered view that the Tribunal has been consistently holding the view that it be reduced from export turnover and has to be correspondingly reduced from the total turnover in view of the fact that the assessee, irrespective of the assessee being a 100 per cent EOU or having domestic turnover could not by any stretch of imagination be considered for a disallowed turnover be increased by like amount which was reduced from the export turnover. Therefore, on this issue we are inclined to follow the Tribunal, Bangalore Bench decision in respect of other assessees, similarly placed which facts are identical to the facts of the assessee before us and direct that 80 per cent of the communication expenses would stand reduced from the expor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the adjustments insofar as the income so competed under s. 10A was to be adjusted against the said expenditure was also to be considered under sub-cl. (ii) to cl. (g) of the said Explanation. In other words, a nil effect was given which the AO failed to observe as the law provided and also accepted by the learned CIT(A) who but could not specify any basis for holding the action of the AO justified. He noted that there was no scope for hypothetical expenditure and income from the book profits without specifying whether the book profit under the provision of s. 115JB could be tampered with as specified in the Explanation to the said section. In other words if the exercise as contemplated by the AO was to be undertaken it would result in establishing that determination of book profits for the purpose of taxation under the provisions of s. 115JB was a complete code and the provisions relating to income which does not form part of total income as also has been deliberated upon by the Special Bench decision in the case of Bhushan Steel Strips Ltd. (supra) would result in holding that for deduction out of adjusted book profit the assessee would get a higher amount of deduction worked ou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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