s.10A allows deduction of up-linking charges in computing export turnover; loss-making units and set-offs permitted; s.92(4)/s.92C(4) upheld

HC answered the substantial questions in favour of the assessee and against the Revenue, holding that up-linking charges are deductible when computing export turnover under s.10A. The court affirmed that s.10A (as substituted w.e.f. 1.4.2001) applies consistent with prior HC decisions, rejecting the Revenue's contention that deductions are confined to independent profit-making units and that loss-making units cannot be set off for s.10A purposes. The HC also upheld the tribunal's correction of the AO's error in applying s.92(4)/s.92C(4), finding no infirmity in the impugned order.

---

---

The Revenue's appeal challenges the Tribunal's order in ITA No. 249/Bang/2007. The Court admitted four substantial questions of law, including: "(1) Whether the tribunal was correct in holding that up-linking charges deducted for computing export turnover u/s. 10A of the Act should also be reduced for computing total turn over when arriving at Section 10A of the Act deduction?" and whether deduction under Section 10A applies only to independent profit-making units or on the assessee's total income after the substituted Section 10A (w.e.f. 1.4.2001). Relying on precedents, the Court answered these questions in favour of the assessee and against the Revenue, citing Commissioner of Income Tax v. Tata Elxsi Ltd. and Commissioner of Income Tax v. Yokogawa India Ltd. The Court also held that the Assessing Officer erred in applying Section 92(4) to a case where the Arm's Length Price was determined by the assessee, and that the Tribunal correctly set aside the orders of the Commissioner and Assessing Officer. The matter is remitted for consequential orders under Section 260(1)(a) pending appeals before the Apex Court.

---