Section 10A computation requires unit-wise profit calculation and matching exclusions from export turnover and total turnover.

Deduction under section 10A is to be computed unit-wise for the eligible STPI undertaking, so the loss of a separate non-STPI unit cannot be set off against the STPI unit's profit at the deduction stage; the non-eligible unit's losses and unabsorbed depreciation are considered only after computing the eligible profit. The computation formula also requires parity between export turnover and total turnover, so any expenditure reduced from export turnover must be reduced from total turnover as well. The assessment was directed to be recomputed on that basis.

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Issues: (i) Whether the loss of the non-STPI unit could be set off against the profit of the STPI unit before computing deduction under section 10A; (ii) Whether the expenses reduced from export turnover were also required to be reduced from total turnover while computing deduction under section 10A.

Issue (i): Whether the loss of the non-STPI unit could be set off against the profit of the STPI unit before computing deduction under section 10A.

Analysis: Deduction under section 10A was treated as relating to the eligible STPI unit under Chapter III, and the profit of that unit was required to be computed independently. On that approach, the profits of the eligible unit could not be diluted by setting off losses of a separate non-eligible unit at the stage of computing the section 10A deduction. The carry forward of the non-STPI unit's losses and unabsorbed depreciation had to be considered after computing the eligible section 10A profit.

Conclusion: The issue was decided in favour of the assessee. The non-STPI unit's loss could not be set off against the STPI unit's profit before computing deduction under section 10A.

Issue (ii): Whether the expenses reduced from export turnover were also required to be reduced from total turnover while computing deduction under section 10A.

Analysis: For the formula under section 10A, the components excluded from export turnover could not be retained in total turnover for the purpose of computing the eligible deduction. The computation had to maintain parity between the numerator and denominator so that an amount not forming part of export turnover did not distort the deduction by remaining included in total turnover.

Conclusion: The issue was decided in favour of the assessee. The same expenditure reduced from export turnover had to be reduced from total turnover as well.

Final Conclusion: The appeal succeeded only to the extent of the section 10A computation issues, and the assessment was directed to be recomputed accordingly.

Ratio Decidendi: Deduction under section 10A must be computed unit-wise for the eligible undertaking, without setting off losses of a separate non-eligible unit at that stage, and the formula for deduction requires corresponding exclusion from both export turnover and total turnover.

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