TMI Blog2016 (6) TMI 1374X X X X Extracts X X X X X X X X Extracts X X X X ..... applied in this case. In view of the above facts, we admit the additional grounds raised by the assessee regarding the RPT filter at 15%. Application of employee cost filter at 25% - HELD THAT:- We agree with the contention of the learned Authorised Representative that the employee cost filter should be applied at 25% however even if it is applied to 1 or 2% less or more will not cause any substantial effect or would be prejudicial to the interest of either of the party. We are of the view that the ITES sector is employee intensive and therefore the cost of the employees cannot be ignored for selecting the comparable companies. If in a particular case of company, the employee cost is less than the average cost previaling in the industry then it is necessary to find out the reasons of such a low employee cost which is against the normal business practice in this industry. Accordingly we admit the additional ground raised by the assessee with a rider that the TPO has to apply a proper filter of employee cost and then apply the same on all the comparable companies in the set of comparables. A low employee cost shows a different business model and it appears that these compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived at after excluding certain expenses, the same should also be excluded from the total turnover in the denominator - 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 - I.T. (T.P) A. No.1359/Bang/2011 - - - Dated:- 30-6-2016 - Shri A. K. Garodia, Accountant Member And Shri Vijay Pal Rao, Judicial Member For the Appellant : Shri Sampath Raghunathan, Advocate For the Respondent : P. Chandrashekar, JCIT (D.R) ORDER Per Shri Vijay Pal Rao, J. M. This appeal by the assessee is directed against the assessment order dt.27.10.2011 passed under Section 143(3) r.w.s. 144C(5) of the Income Tax Act, 1961 (in short 'the Act') in pursuant to the directions of Dispute Resolution Panel (in short DRP ) dt.26.9.2011 for the Assessment Year 2007-08. 2. The assessee has raised the following grounds : 1 Assessment and reference to Transfer Pricing Officer are bad in law a) The final order issued by the Deputy Commissioner of Income-tax Circle 12(3) [ ACIT or AO ], is bad on facts and in law, and is in violation of the principles of natural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... definition as per the Income-tax Rules and arbitrarily applying a 25% related party criteria in accepting / rejecting comparables. f) The AO/TPO also erred on facts and in law in arbitrarily rejecting companies with different year ending (i.e. other than 31 March 2007) and inconsistently applying such filter. g) The AO/TPO grossly erred on facts in arbitrarily rejecting companies having IT enabled service revenue less than 75% of total operating revenue and inconsistently applying such filter, without considering the specific segmental results. h) The AO/TPO erred on facts in arbitrarily rejecting companies earning less than 25% of revenue from exports. i) The AO/TPO also erred on facts in arbitrarily rejecting companies based on their financial results without considering the comparability. j) The AO/TPO erred on facts and in law in considering a set of secret data , i.e. data which was not available in public domain, in arriving at a fresh set of companies using his power under section 133(6), which is grossly unjustified. k) The AO/TPO also erred on facts and in law in excluding the foreign exchange gain or loss while calculating the net margins of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... draft order of the AO/TPO. 10 Initiation of penalty proceedings The Assessee submits that based on the facts and circumstances of the case, there was no basis for the AO to propose to initiate proceedings under section 271(1)(c) of the Act. 11 Relief a) The Appellant prays that directions be given to grant all such relief arising from the above grounds and also all relief consequential thereto. b) The Appellant craves leave to add to or alter, by deletion, substitution or otherwise, the above grounds of appeal, at any time before or during the hearing of the appeal c) The Appellant further prays that the adjustment in relation to Transfer Pricing matters made by the Learned AO/TPO and upheld by the Honorable DRP be deleted. 3. Ground Nos.1 to 7 are regarding Transfer Pricing Adjustment. The assessee-company was incorporated on 13.10.2000 and part of Siemens Worldwide Group. The assessee is engaged in the business of providing software services related to back office operations on contract basis to overseas Siemens Group companies. The assessee has reported the financial results as well as international transactions which are reproduced in the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Financial Services Ltd. 24.21% 22.18% 7 Bodhtree Consulting Ltd. (Seg) 29.58% 28.99% 8 Caliber Point Business Solutions 21.26% 19.59% 9 Cosmic Global Ltd 12.40% 10.72% 10 Datamatics Financial Services Ltd (Seg) 5.07% - 2.99% 11 Eclerx Services Ltd 89.33% 85.68% 12 Flextronics Software Systems Ltd. (Seg) 8.62% 5.41% 13 Genesys International Corporation Ltd 13.35% 8.03% 14 HCL Comnet Systems Services Ltd (Seg) 44.99% 43.50% 15 ICRA Techno Analytics Ltd (Seg) 12.24% 10.80% 16 Informed Technologies India Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited as comparable in the order u/s 92CA without considering the differences in the business model employed by Spanco Limited (viz. outsourcing of services), being functionally dissimilar to the model employed by the Appellant for rendering of IT enabled services. 2. The learned TPO erred in selecting Wipro Limited and Infosys BPO Limited as comparables in the order u/s 92CA despite that the functional and risk profile, including the scale of operations, intangibles, etc. of Wipro Limited and Infosys BPO Limited cannot be compared to the IT enabled services rendered by the Appellant. 3. The learned TPO erred on facts in selecting Maple Esolutions Ltd. as comparable in the order u/s 92CA, despite that the said company was functionally not comparable to the IT enabled services rendered by the Appellant, in addition to having peculiar economic circumstances and extraordinary growth during FY 2006-07. 4. The learned TPO erred on facts in selecting Triton Corp. Ltd. as comparable in the order u/s 92CA, despite that the said company was functionally not comparable to the IT enabled services rendered by the Appellant. 5. The learned TPO erred on facts and in law in n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has taken a consistent view that the RPT filter should not be more than 15% and therefore the companies which are having more than 15% related party transactions should be excluded from the list of comparables selected by the TPO. 6. On the other hand, the learned Departmental Representative has submitted that when the assessee selected these companies as comparables in the TP study, the assessee cannot be permitted to raise the objections against the comparability of those companies. He has further submitted that if the objections raised by the assessee is accepted then it will reverse the entire process of determination of ALP conducted by the TPO. He has further contended that neither the assessee nor the TPO has applied any employee cost filter therefore at this stage, the assessee cannotbe allowed to raise such an objection which requires investigation of new facts in respect of the companies selected by the TPO as well as by the assessee. As regards the RPT filter, the learned Departmental Representative has contended that the TPO has applied 25% which was not objected by the assessee either before the TPO or before the DRP and therefore at this stage the assessee cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted party and the Datamatics. The case of Datamatics is like that of Imercius Technologies representing extreme positions. If Imercius Technologies has suffered heavy losses and, therefore, it is not treated as comparable by the tax authorities, they also have to consider that the Datamatics has earned extraordinary profit and has a huge turnover, besides differences in assets and other characteristics referred to by Shri Aggarwal. The Tribunal is a fact-finding body and, therefore, has to take into account all the relevant material and determine the question as per the statutory regulations. 38. Accordingly, on facts and circumstances of the case, we hold that taxpayer is not estopped from pointing out that Datamatics has wrongly been taken as comparable. While admitting additional ground of appeal raised by the assessee to require us to consider whether or not Datamatics should be included in the comparable, we make no comments on merit except observing that assessee from record has shown its prima facie case. Further claim may be examined by the AO. This course we adopt as objection to the inclusion of Datamatics as comparable has been raised now and not before Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... software development services and ITES and the TPO aplied the employee cost filter of 25% in software development segment but refused to apply the same in the ITES segment. In those circumstances the Tribunal held that once the TPO has applied the employee cost filter in software development segment, then the same shall be applied in the ITES segment as per the rule of consistency. In the case on hand when no filter was applied either by the assessee or by the TPO regarding employee cost therefore fixing a particular limit at this stage will not be appropriate as the TPO has to decide the appropriate filter of employee cost. Though in principle, we agree with the contention of the learned Authorised Representative that the employee cost filter should be applied at 25% however even if it is applied to 1 or 2% less or more will not cause any substantial effect or would be prejudicial to the interest of either of the party. We are of the view that the ITES sector is employee intensive and therefore the cost of the employees cannot be ignored for selecting the comparable companies. If in a particular case of company, the employee cost is less than the average cost previaling in the ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent and implementation. Therefore this company is not comparable to the service provided by the assessee. Further this company has launched new products as well as there was an extra-ordinary event of amalgamation of subsidiaries during the year under consideration. He has pointed out that the amalgamated subsidiary Iridium Technology Ltd. is a software product company therefore this company cannot be considered as a good comparable. The learned Authorised Representative has further pointed out that the employee cost of this company is only 16.58% and also incurred business promotion expenses to the extent of 28.34% of the total operating revenue. Therefore this company is not in the same business as provided by the assessee. He has further contended that this company also fails the ITES filter of 75% as its ITES service is only 67.21%. The learned Authorised Representative has relied upon the following decisions : i) M/s. Online India Pvt. Ltd. Vs. DCIT Dt.18.3.2016 in IT(TP)A No.1336/B/ ii) M/s. Stream International Pvt. Ltd. dt.10.10.2014 53 taxman.com 19 (Mum) 13. On the other hand, the learned Departmental Representative has relied upon the orders of the authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of the Tribunal in Petro Araldite (P) Ltd. Vs. DCIT (2013) 154 TTJ (Mum) 176, has held that a company cannot be considered as comparable because of exceptional financial results due to mergers/demergers. Similar view has been adopted by the Delhi Bench of the Tribunal in several cases including Ciena India Pvt. Ltd. Vs. DCIT (ITA No.3324/Del/2013) vide its order dated 23.4.2015. The ld. DR contended that the mere fact of acquisition and merger should not be considered as a decisive test for exclusion of a company unless it has affected the profitability due to such merger etc. We are not inclined to accept this contention for the obvious reason that once acquisition and merger etc. has taken place, it is always likely to affect the profitability of such a company in the year of acquisition etc. There cannot be any standard yardstick to measure the impact of such a factor on the overall profitability of such a company. It is relevant to highlight that we are considering the exclusion of a company on this score. In our considered opinion, when other comparables are available, the exclusion of a probable comparable company cannot have much significance in contrast to a situation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered only data cleansing segment which is in the nature of ITES. He has relied upon the orders of the authorities below. 15.4 We have considered the rival submissions as well as the relevant material on record. We note that the comparability of this company has been examined by this Tribunal in a series of decisions including the decisions relied upon by the learned Authorised Representative. At the outset we find that in the recent decision in the case of Pole to Win India Pvt. Ltd. (supra), we had the occasion to examine the comparability of this company and given the finding in para 7.3 as under : 7.3 We have considered the rival submissions and the relevant material on record. In case of Ariba Technologies India Pvt. Ltd. (supra), the objections against this company was on the ground of extra-ordinary profit and therefore the Tribunal has no occasion to examine the functional comparability of this company except the ground raised by the assessee regarding extra-ordinary profit margin. The learned Authorised Representative of the assessee has referred to the Annexure to the Directors Report wherein segment-wise and product-wise performance has been reported as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Departmental Representative has relied upon the orders of the authorities below. 16.3 We have considered the rival submissions as well as the relevant material on record. At the outset we note that the functional profile of this company was examined by the Special Bench of Mumbai Tribunal in the ase of Maerk Global Centre (supra). By following the Special Bench decision, the Tribunal in the case of Flextronics Technologies India P. Ltd. (supra) has again considered the functional comparability of this company in paras 8.1.2 8.1.3 as under : 8.1.2 We have considered the rival submissions as well as relevant material on record. We find that the company Eclerx Services Ltd. is engaged in diversified activity of providing services including analytic services and data process solutions to its global clients. The service provided by Eclerx Services Ltd., is in various areas including capital market and therefore, the services are in the nature of consultancy and end to end support through trade centre including trade confirmation, settlement, transaction, maintenance and analytic and reporting. Thus it is apparent from the nature of the activity of this company th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lving specialized knowledge and domain expertise in the field and the same cannot be compared with the assessee company which is mainly engaged in providing low-end services to the group concerns. 83. For the reasons given above, we are of the view that if the functions actually performed by the assessee company for its AEs are compared with the functional profile of M/s eClerx Services Pvt. Ltd. and Mold-Tec Technologies Ltd., it is difficult to find out any relatively equal degree of comparability and the said entities cannot be taken as comparables for the purpose of determining ALP of the transactions of the assessee company with its AEs. We, therefore, direct that these two entities be excluded from the list of 10 comparables finally taken by the AO/TPO as per the direction of the DRP. Thus it is clear that the Special Bench found that this company is not comparable with BPO company which are engaged only in low end services of data processing. Accordingly, we direct the AO/TPO to exclude Eclerx Services Ltd. from the list of comparables for the purposes of determining ALP. 8.1.3 We further note that the Hon ble Delhi High Court in ITA No.102 of 2015 dated 10/8/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Tribunal in a series of decisions as relied upon by the assessee and referred (supra). In the case of Sandstone Capital Advisors Pvt. Ltd. vs. ACIT (supra), the Tribunal vide its order dated 6/2/2013 held in para.10 to 10.3 as under: 10. We have considered the rival submissions and relevant material on record. The TPO has rejected this comparable because the financial data for the Financial Year 2007- 08 were not available in the public domain and hence, if was held that this company is not a suitable comparable. There is no dispute that the data furnished by the assessee are regarding the financial results as on 30.6.2007. Therefore, as far as the financial year 2007-08 is concerned, the data available were only for 3 months. 10.1 As per Rule 10B(4), the data to be used in analysing the comparability of or uncontrolled transaction with an international transaction shall be the data relating to the financial year in which the international transaction has been entered into. Therefore, it is mandatory for the purpose of comparing the data of an uncontrolled transaction with an international transaction that the same should relating to the financial year in which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of determination of ALP. No contrary view of the decision has been brought to our notice. Accordingly, following the earlier year decision of this Tribunal we direct the A.O/TPO to exclude this company from the list of comparables for the purpose of determining the ALP. 18. Informed Technology Limited. 18.1 The learned Authorised Representative of the assessee has submitted that this company is engaged in collecting and analysing data on financial fundamentals, corporate governance, Director / Executive compensation and capital market. The business promotion expenses of this company is 14.94% of the total operating revenue. Therefore this company cannot be considered functionally comparable with the assessee. He has further pointed out that this company has low employee cost at 22.69% and it fails the employee cost filter generally applied at 25%. He has relied upon the decision in the case of First Advantage Offshore Services Pvt. Ltd. Vs. DCIT (supra). 18.2 On the other hand, the learned Departmental Representative has relied upon the orders of the authorities below and submitted that predominant activity of this company is ITES and even the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Annual Report of this company, it has been reported that there was amalgamation w.e.f 1/4/2008. The relevant part of the information provided in the Annual Report reads as under: Amalgamation of PAN Financial Services India Private Limited The Board of Directors in their meeting held on October 6. 2008. approved, subject to the approval of the Honorable High Courts of Karnataka and Chennai, a Scheme of amalgamation ( the Scheme ) to amalgamate PAN Financial Services India Private Limited (-PAN Financial ), a wholly owned subsidiary of the Company engaged in providing business process management of services, with the Company with effect from April 1. 2008 ( effective date ). The approval of the High Court was received on April 6, 2009 and filed with the respective Registrar of Companies of Karnataka and Tamilnadu on April 6, 2009 and March 10, 2009 respectively. Accordingly on the scheme becoming effective, the financial statement of PAN Financial has been merged with the company. It is clear that there was extraordinary event of amalgamation during the year under consideration. Therefore, in view of the extraordinary development of amalgamation of another compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Mumbai Benches of this Tribunal in the case of Wills Processing Services (I) Pvt. Ltd. Vs. DCIT (2013) 30 taxmann.com 350 (Mumbai-Trib.). 20.2 On the other hand, the learned Departmental Representative has submitted that when the TPO has obtained the complete information / data of this company and found that this company is functionally comparable with the assessee then mainly because the assessee was not having the information would not render this company non-comparable. He has relied upon the orders of the authorities below. 20.3 We have considered the rival submissions as well as the relevant material on record. We note that this Tribunal has taken a view that if the TPO has used the information obtained under Section 133(6) of the Act withut giving an opportunity to the assessee to counter the same then the decision of the TPO to include in the list of comparables is not sustainable. In the recent decision in the case of M/s. Pole To Win India Pvt. Ltd. (supra) dt.8.6.2016, both of us party to the same have considered an identical issue in para 11.3 as under : 11.3 We have considered the rival submissions as well as the relevant material on record. At the outse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aside this issue to the record of the A.O./TPO for deciding the comparability of the same after considering the reply of the assessee on furnishing of the information received under Section 133(6) of the Act. We do agree with the earlier view taken by the Tribunal and accordingly we set aside this issue to the record of the A.O/TPO for deciding the comparability of this company after considering the reply of the assessee on furnishing of the information received under Section 133(6) of the Act. 21. Maple e-Solution Ltd. 21.1 The learned Authorised Representative of the assessee has submitted that this company is engaged in providing voice out bound, voice in bound data services. There is an extra ordinary event of amalgamation with Triton Corporation Ltd. (supra). He has also submitted that the financial results during the year of this company are unreliable as the Directors / owner of this company were in a serious indictment. Therefore, it is unsafe to take the result of this company for comparing the international transactions of the assessee. He has relied upon the decision of this Tribunal in the case of Flextronics Technologies India (P.) Ltd (supra). 21.2 On th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er this company is having low employee cost of 7.59% of total sales therefore it cannot be compared with the assessee. He has relied upon the decision of this Tribunal in the case of Flextronics Technologies India P. Ltd. (supra). 22.2 On the other hand, the learned Departmental Representative has relied upon the orders of authorities below. 22.3 We have considered the rival submissions as well as the relevant material on record. Though this company is having very low revenue from ITES at 12.93% and further very low employee cost at 7.93% however, the functional comparability of this company was examined by this Tribual in the case of Flextronics Technologies India P. Ltd. (supra) in para 8.5.3 as under : 8.5.3 We have considered the rival submissions as well as the material on record. At the outset, we note that functional analysis of the Co. has been examined by the Special Bench in case of M/s Maersk Global India Pvt.Ltd(Supra) in para-81 83 as under: 81. Insofar as the case of M/s Mold Tek Technologies Ltd is concerned, it is observed from the annual report of the said company for the FY: 2007-08 placed at pp.139 to 151 of the paper book that he said company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d) it was held by the Division Bench of this Tribunal that the gain or loss arising from the forward contract entered for the purpose of foreign currency exposure on the export and import has to be taken into consideration while computing the operating profit. 83. For the reasons given above, we are of the view that if the functions actually performed by the assessee company for its AE are compared with the functional profile of M/s eClerx Services(P)Ltd and Mold-Tek Technologies Ltd. it is difficult to find out any relatively equal degree of comparability and the said entities cannot be taken as comparables for the purpose of determining ALP of the transactions of the assessee company with its AEs. We, therefore, direct that these two entities be excluded from the list of 10 comparables finally taken by the AO/TPO as per the directions of the DRP. Following the earlier years of this Tribunal, we direct the A.O./TPO to exclude this company from the list of comparables. 23. Spanco Limited. 23.1 The learned Authorised Representative of the assessee has submitted that this company fails the ITES filter of 75% as it earns only 8.21% from ITES segment. He has further con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, it is unsafe to take the result of this company for comparing the international transactions of the assessee. He has relied upon the decision of this Tribunal in the case of Flextronics Technologies India (P.) Ltd. (supra). 24.2 On the other hand, the learned Departmental Representative has submitted that this company is in the ITES segment and it is irrelevant whether the ITES provided in the voice out bound and voice in bound in the data sector. The incident of indictment of Director took place more than two decades ago therefore, the same cannot be the relevant factor for the Assessment Year under consideration. He has relied upon the orders of the authorities below. 24.3 We have considered the rival submissions as well as the relevant material on record. The assessee has raised objection regarding the functional comparability of this company as well as some extra ordinary event of merger and involvement of Director in some fraud activity. As far as the indictment of the Director is concerned, we are of the view that when the said incident was not in relation to the business of this Company but some other independent business of the Director and that too in long past t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n record, we find that this issue had arisen in the assessee's own case for the assessment year 2006-07. This Tribunal has held that employee cost filter is to be the same even for ITES segment also. The learned DR's argument that the employee cost filter is applicable only to software development segment and not to ITES segment is not acceptable. Though it is without any dispute that the software development would require skilled employees and, therefore, the employee cost would definitely be moretha425% of the total expenses, it cannot he said that the said filter is not applicable to ITES segment, where comparably less employees are employed. In the ITES segment, the entire work is to be done by the employees and, therefore, even though they may be less skilled compared to software development segment, the number of employees would definitely be more and thus the employee cost would be high and thus application of employee cost filter to the IT1ES sector is also justified. In view of the same, we direct the TPO to apply the employee cost filter to exclude companies with employee cost of less than 25% from the list of comparables for the computation of ALP. Similar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , this Tribunal has considered the functional comparability of this company in para-12.4.1 and 12.4.2 as under; 12.4.1 We have heard both parties and carefully perused and considered the material on record. We find merit in the contentions of the assessee for exclusion of this company from the set of comparables. It is seen that this company is engaged both in software development and product development services. There is no information on the segmental bifurcation of revenue from sale of product and software services. The TPO appears to have adopted this company as a comparable without demonstrating how the company satisfies the software development sales 75% of the total revenue filter adopted by him. Another major flaw in the comparability analysis carried out by the TPO is that he adopted comparison of the consolidated financial statements of Wipro with the stand alone financials of the assessee; which is not an appropriate comparison. 12.4.2 We also find that this company owns intellectual property in the form of registered patents and several pending applications for grant of patents. In this regard, the co-ordinate bench of this Tribunal in the case of 24/7 Custo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the relevant material on record. The assessee has pointed out certain crucial facts of low employee cost at 1.61% as well as outsourcing of the business to the outside vendor, therefore, these facts are found to be correct and this company cannot be considered as good comparable. Further, the learned Authorised Representative has also pointed out that this company provides software development services and the financial details obtained under Section 133(6) of the Act has been used by the TPO without sharing with the assessee to reply/counter the same. Having considered the peculiar facts as pointed out by the learned Authorised Representative, we find that if these facts are found to be correct on verification then this company shall be excluded from the list of comparables. Accordingly we set aside this issue of comparability of this company to the record of the Assessing Officer / TPO for verification of the facts as pointed out before us as well as to provide the information collected by the TPO under Section 133(6) and then decide the comparability of this company after considering the reply of the assessee. 28. Since we have directed the A.O./TPO to exclude certain compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 denominator of the formula, since otherwise it would produce anomalies or absurd results. Section 10A is a beneficial section which intends to provide incentives to promote 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 by apportioning the total profits of the business on the basis of turnovers. Apportionment of profits on the basis of turnover was accepted as a 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 and the denominato ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constituent element of the total turnover in the denominator. The legislature has provided a definition 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 legislature has made a specific exclusion of freight and insurance charges. The submission which has been urged on behalf of the 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 been defined at all by Parliament for the purposes of s.10A. However, the expression export turnover has been defined. The definition of export turnover excludes freight and insurance. Since ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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