Exclusion of Lease Line Charges for Deductions Under Section 10A/10B

The Tribunal partially allowed the assessee's appeals by excluding lease line charges from export turnover and total turnover for deductions u/s 10A/10B. Revenue's appeals were dismissed as post facto approval from RBI was deemed valid for claiming deductions. The judgment was delivered on January 13, 2011, at Bangalore.

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Issues involved: The judgment involves issues related to deduction u/s 10A and 10B of the Income Tax Act, 1961 for the assessment years 2005-06 and 2006-07.

Issue 1 - Assessee's Appeals - Asst. Year 2005-06:
The assessee challenged the CIT(A)'s decision regarding leased line charges paid to Videsh Sanchar Nigam Ltd. The CIT(A) held that the charges are in the nature of expenditure for delivery or export of publication material. The assessee argued that the charges were not part of the export turnover and should not be reduced while determining deduction u/s 10B of the Act. The Tribunal reversed the CIT(A)'s decision based on previous rulings emphasizing parity between export turnover and total turnover for calculating deductions u/s 10A/10B.

Issue 2 - Revenue's Appeals - Asst. Years 2005-06 and 2006-07:
The revenue contested the CIT(A)'s decision on reducing export receipts not received in time from the export turnover for computing deduction u/s 10A. The revenue cited section 10A(3) which specifies conditions for treating convertible foreign exchange as export receipts. The CIT(A) ruled in favor of the assessee, considering post facto approval from RBI as valid for claiming the deduction. The Tribunal affirmed the CIT(A)'s decision, stating that post facto approval and realization of the amounts entitled the assessee to the deduction u/s 10A/10B.

Conclusion:
The Tribunal allowed the assessee's appeals partially by directing the exclusion of lease line charges from both export turnover and total turnover for calculating deductions u/s 10A/10B. The revenue's appeals were dismissed based on the post facto approval obtained by the assessee from RBI. The judgment was pronounced on January 13, 2011, at Bangalore.

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