Deduction under Section 80HHE: 'Total Turnover' Limited to Eligible Business Turnover

The Tribunal held that for the purposes of section 80HHE, the 'total turnover' should be limited to the turnover of the eligible business of computer software. Consequently, the assessee's method of computing the deduction by considering only the eligible unit's turnover was approved. The appeal was allowed in favor of the assessee.

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Issues Involved:
1. Deduction under section 80HHE and its computation.
2. Inclusion of turnover from all units versus only the eligible unit for the purpose of deduction under section 80HHE.

Issue-wise Detailed Analysis:

1. Deduction under section 80HHE and its computation:
The primary issue in this appeal is whether the deduction under section 80HHE should be computed based on the turnover of all the units of the appellant company or only the turnover of the eligible unit. The assessee claimed a deduction of Rs. 55,99,722/- under section 80HHE, which was restricted by the Assessing Officer (AO) to Rs. 8,02,842/-. The AO's computation included the turnover of all units, contrary to the assessee's claim that only the eligible unit's turnover should be considered.

2. Inclusion of turnover from all units versus only the eligible unit for the purpose of deduction under section 80HHE:
The assessee argued that the 'total turnover' for computing the deduction should be limited to the eligible unit's turnover. Various case laws were cited to support this contention, including decisions in Mike Agencies, Datamatics Ltd. v. ACIT, and others. The Revenue, however, contended that the 'total turnover' should include all units' turnover, citing decisions in CIT v. Parry Agro Industries Ltd. and others. The Tribunal examined the relevant provisions of section 80HHE and noted that the term 'total turnover' is not explicitly defined in the statute, except for specific exclusions.

The Tribunal observed that the deduction under section 80HHE is business-specific rather than unit-specific, meaning it pertains to the business of exporting computer software or providing related technical services. The Tribunal also noted that the profits to be apportioned under section 80HHE(3) should be derived from the business of computer software, which implies that the turnover of this specific business should be considered.

The Tribunal referred to the decision in Tessitura Monti India (P.) Ltd. and other relevant case laws, concluding that the 'total turnover' should be confined to the eligible business of computer software. The Tribunal emphasized that including the turnover of other unrelated businesses would lead to absurd results and dilute the benefit intended for the specified activity of exporting computer software.

Conclusion:
The Tribunal held that for the purposes of section 80HHE, the 'total turnover' should be limited to the turnover of the eligible business of computer software. Consequently, the assessee's method of computing the deduction by considering only the eligible unit's turnover was approved. The appeal was allowed in favor of the assessee.

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