Section 10A turnover parity requires matching exclusions in export and total turnover, with profits computed under business income provisions.

For section 10A computation, communication charges excluded from export turnover must also be excluded from total turnover to preserve parity in the turnover formula. The document further states that profits eligible for deduction under section 10A must be computed in accordance with sections 28 to 43D, so disallowances under section 40(a)(ia), section 36 and section 40A(7) form part of the computed business profits on which the deduction is worked out. On that basis, the assessee's section 10A claim was upheld and the Revenue's objections were rejected.

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Issues: (i) Whether communication charges excluded from export turnover under section 10A were also required to be excluded from total turnover. (ii) Whether disallowances made under section 40(a)(ia), section 36 and section 40A(7) could be included in the profits eligible for deduction under section 10A.

Issue (i): Whether communication charges excluded from export turnover under section 10A were also required to be excluded from total turnover.

Analysis: The turnover formula under section 10A required a consistent treatment of the same item in both limbs of the computation. Since telecommunication expenditure did not contain any profit element and was excluded from export turnover, the same exclusion had to be made from total turnover to maintain parity between the numerator and the denominator.

Conclusion: The exclusion had to be made from both export turnover and total turnover, and the Revenue's objection was rejected.

Issue (ii): Whether disallowances made under section 40(a)(ia), section 36 and section 40A(7) could be included in the profits eligible for deduction under section 10A.

Analysis: The profits of the undertaking for the purpose of section 10A had to be computed in accordance with the scheme of sections 28 and 30 to 43D of the Income-tax Act, 1961. Accordingly, the disallowances under section 40(a)(ia) and allied provisions formed part of the computed profits on which deduction under section 10A was to be worked out.

Conclusion: The disallowances were rightly taken into account while computing profits for deduction under section 10A, and the Revenue's challenge failed.

Final Conclusion: The assessee's entitlement under section 10A was upheld on both issues, and the Revenue's appeal was dismissed.

Ratio Decidendi: For section 10A computation, any expenditure excluded from export turnover must also be excluded from total turnover, and business profits must be computed in accordance with sections 28 and 30 to 43D before allowing the deduction.

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