TMI Blog2018 (7) TMI 1258X X X X Extracts X X X X X X X X Extracts X X X X ..... rising from the Order of the learned Income Tax Appellate Tribunal Bangalore Bench A , Bangalore dated 30/08/2010 in ITA.No.398/Bang/2008 for AY 2003- 04. 2. The Revenue has suggested ten substantial questions of law in the present appeal which are quoted below for ready reference:- a. Whether under the facts and circumstances of the cases, the tribunal is justified in law in including foreign exchange gain as part of operating revenues even though foreign exchange gain is not related to the business operations of the company and is dependent on external factors like money supply, inflation, Govt. policy etc? b. Whether under the facts and circumstances of the case, the tribunal is justified in law in equating business income/sales with operating revenues and thus concluding that foreign exchange gain forms part of operating revenues even when the same is not permissible under law? c. Whether on the facts and circumstances of the case the tribunal is justified in law in concluding that the assessee company is a risk mitigated entity without appreciating the facts of the case that the assessee company is also assuming risks like single customer risk and political ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether on the facts and circumstances of the case, the Tribunal is correct in law in holding that foreign exchange fluctuation gains constitute part of operating revenue of the assessee for purpose of determination of arms length price under the provisions of Section 92-C of the Income Tax Act, 1961? b. Whether Tribunal is justified in rejecting comparable cases adopted by transfer pricing officer for purpose of determination of arms length price and whether the rejection of such comparables by the Tribunal is sustainable in law? c. Whether the Tribunal is correct in law in interpreting the proviso to sub-section (2) of Section 92-C of the Income Tax Act as mandatorily providing for deduction of +/-5% benefit and whether such interpretation is sustainable having regard to subsequent amendment by the Finance Act, 2009 being of clarificatory in nature? d. Whether the Tribunal is correct in law in directing the Assessing Officer to exclude Telecommunication expenses in the computation of deduction under section 10A of the I.T.Act? 4. In so far as the substantial question of law (a) to (c) framed by the Co-ordinate Bench of this Court in the connected ITA No.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e TPO/AO has selected M/s Hinduja TMT Ltd., as one of the comparables. The reported margin of the said company is 111.45%. This is an extreme case of super profit. Likewise, another company selected by the TPO/AO as comparable is M/s Atek Infosys Ltd. In this case, the margin is 69.70%, which is again very much on the higher side. The TPO/AO has normalized their Profit Limit Indicator (PLI) to 31.78% adopting the margin reported in the case of M/s Infotech Enterprises Ltd. At the same time, the TPO/AO has not explained the common thread running through all these four entities to bring out a functional similarity. In these circumstances, it is our considered view that such super profit making companies can not be considered as comparables in the present case. Therefore, we exclude M/s Hinduja TMT Ltd. and M/s Aftek Infosys Ltd. from the list of comparables. 55 to 62 63. The first limb of the old proviso and the first limb of the present proviso is regarding arriving at the arithmetical mean which is the same. There is no change with regard to that. The change is with reference to the second limb. The old proviso says that at the option of the assessee, the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a assessee wants to claim the benefit of Section 10A, firstly he must export articles or things or computer software. Secondly, the said export may be done directly by him or through other exporter after fulfilling the conditions mentioned therein. Thirdly, such an export should yield foreign exchange which should be brought into the country. If all these three conditions are fulfilled, then the object of enacting Section 10A is fulfilled and the assessee would be entitled to the benefit of exemption from payment of Income Tax Act on the profits and gains derived by the Undertaking from the export. 21. Clause 6.11 of Exim Policy dealing with entitlement for supplies from the DTA states that supplies from the DTA to EOU/EHTP/STP/BTP units will be regarded as deemed export , besides being eligible for relevant entitlements under paragraph 6.12 of the Policy. They will also be eligible for the additional entitlements mentioned therein. What is of importance is when a supply is made from DTA to STP, it does not satisfy the requirements of export as defined under the Customs Act. However, for the purpose of Exim Policy, it is treated as deemed export . Therefore, when Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the answer to the issue, the High Court, inter-alia, held that when a particular word is not defined by the legislature and an ordinary meaning is to be attributed to it, the said ordinary meaning is to be in conformity with the context in which it is used. Hence, what is excluded from export turnover must also be excluded from total turnover , since one of the components of total turnover is export turnover. Any other interpretation would run counter to the legislative intent and would be impermissible. 18. XXXXXX 19. In the instant case, if the deductions on freight, telecommunication and insurance attributable to the delivery of computer software under Section 10A of the IT Act are allowed only in Export Turnover but not from the Total Turnover then, it would give rise to inadvertent, unlawful, meaningless and illogical result which would cause grave injustice to the Respondent which could have never been the intention of the legislature. 20. Even in common parlance, when the object of the formula is to arrive at the profit from export business, expenses excluded from export turnover have to be excluded from total turnover also. Otherwise, any other inter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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