TMI Blog2019 (3) TMI 578X X X X Extracts X X X X X X X X Extracts X X X X ..... soning that the provisions of Section 10A/10B are beneficial in nature and seek to encourage an assessee engaging in a prescribed activity. We answer the question of law in the negative, in favour of the assessee - Tax Case Appeal No.390 of 2009 - - - Dated:- 5-12-2018 - Dr. Justice Vineet Kothari And Dr. Justice Anita Sumanth For the Appellant : Mr.Karthik Renganathan Standing Counsel For the Respondent : Mr.N.V.Balaji for Mr.Krishna Ravindran JUDGMENT DR.ANITA SUMANTH, J. The Revenue is in appeal before us challenging an order of the Income Tax Appellate Tribunal dated 12.06.2008 in relation to the assessment year 2001-02. 2. The assessee/respondent is a Software Technology Park engaged in the business of manufacture and export of software. The sole issue raised relates to the exclusion of unrealised sale proceeds from 'total turnover' in the formula for computation of relief under section 10A of the Income Tax Act, 1961 (in short 'Act'). 3. The assessee filed a return of income returning a loss that was initially accepted under section 143(1). The assessment was taken up for scrutiny and completed under s.143(3) on 27.12.2002. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant to the previous year in which the undertaking begins the eligible activity. 9. In the present case, the eligibility of the assessee to this relief is not disputed. The mode of computation of the relief is set out in terms of subsection (4) of section 10A by way of a formula. 10.Sub-section (4) is extracted below: (4) For the purposes of sub-sections (1) and (1A), the profits derived from export of articles or things or computer software shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking. The resultant formula is thus: export profits X export turnover total turnover. 11. Sub-section (3) stipulates that the foreign exchange derived from eligible activity be brought into the country within a specified period, i.e., six (6) months from the end of the previous year or within such period as the competent authority may allow in this behalf. In the present case, admittedly, foreign exchange to the extent of ₹ 2,89,96,894/- has not been received in India withi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nover'. However, the corresponding amendment was not made in the definition of 'total turnover'. In the aforesaid circumstances, the intention of the Legislature was clear to the effect that it would be only sale proceeds actually 'received' that would be included within the ambit of 'export turnover' in the numerator whereas, in addition to actual receipts, what was 'receivable' or 'not actually received' would also stand included within the ambit of denominator i.e, 'total turnover'. 17. This position hinges on the scheme of deduction under section 80HHC, which is specific to the provisions set out therein. The provisions of section 10B do not contain a definition of 'total turnover' and therefore the interpretation of the Court in the context of section 80HHC would not advance the case of the Revenue as far as the scheme of section 10A or 10B is concerned. 18. In the case of Pentasoft (supra), the Bench decided the claim for exclusion of unrealised sales proceeds against the assessee since no such claim had been made at the time of assessment, and the assessee therein had raised the claim only by way of addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Profit = total Profit of the Business X Export turnover as defined in Explanation 2(IV) of Section 10A of the IT Act + domestic sale proceeds 19) In the instant case, if the deductions on freight, telecommunication and insurance attributable to the delivery of computer software under Section10A 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 19 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 interpretation makes the formula unworkable and absurd. Hence, we are satisfied that such deduction shall be allowed from the total turnover in same proportion as well. 21) On the issue of expenses on technical services provided outside, we have to follow the same principle of interpretation as followed in the case of expenses of freight, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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