Section 10A computation requires matching exclusions in export and total turnover, and prior losses cannot dilute the deduction.

For Section 10A computation, any expense excluded from export turnover must also be excluded from total turnover to preserve parity in the statutory formula and avoid distortion. The same approach applies to telecommunication expenses, which are to be removed from both limbs of the computation. Section 10A relief is also to be determined at the stage of computing the eligible undertaking's income, without first setting off brought forward losses or unabsorbed depreciation under Sections 71 and 72 so as to neutralise the deduction. The result is that the assessee remains entitled to the Section 10A benefit on the issues considered.

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Issues: (i) whether establishment and maintenance expenses attributable to the foreign branch were to be excluded from export turnover and total turnover while computing deduction under Section 10A; (ii) whether telecommunication expenses were to be excluded from both export turnover and total turnover while computing deduction under Section 10A; (iii) whether deduction under Section 10A could be granted without first setting off brought forward losses and giving effect to Sections 71 and 72.

Issue (i): whether establishment and maintenance expenses attributable to the foreign branch were to be excluded from export turnover and total turnover while computing deduction under Section 10A.

Analysis: The question was governed by the settled principle that where an item is excluded from export turnover for the purpose of the statutory formula, the computation must remain consistent by excluding the same item from total turnover as well, so that the formula does not produce an unintended and distorted result.

Conclusion: The issue was answered against the Revenue and in favour of the assessee.

Issue (ii): whether telecommunication expenses were to be excluded from both export turnover and total turnover while computing deduction under Section 10A.

Analysis: The same computation principle applied to telecommunication expenses, and the binding precedents treated such expenses as requiring corresponding exclusion from both limbs of the formula to preserve parity in the deduction mechanism.

Conclusion: The issue was answered against the Revenue and in favour of the assessee.

Issue (iii): whether deduction under Section 10A could be granted without first setting off brought forward losses and giving effect to Sections 71 and 72.

Analysis: The governing legal position was that deduction under Section 10A is to be worked out at the stage of computing the gross total income of the eligible undertaking and not after first setting off brought forward losses or unabsorbed depreciation so as to defeat the statutory benefit.

Conclusion: The issue was answered against the Revenue and in favour of the assessee.

Final Conclusion: The appeals did not merit interference, and the common outcome left the assessee entitled to the claimed Section 10A relief on all substantial questions considered.

Ratio Decidendi: For computing deduction under Section 10A, exclusions from export turnover must also be reflected in total turnover, and the deduction is to be determined at the stage of computing the eligible undertaking's income without first setting off brought forward losses or unabsorbed depreciation to neutralize the statutory benefit.

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