Section 10A turnover computation requires excluding foreign currency service from both export and total turnover.

Foreign currency expenditure incurred for services provided outside India must be excluded from both export turnover and total turnover while computing deduction under section 10A. Although section 10A expressly defines export turnover to exclude freight, telecommunication charges, insurance and such foreign currency expenditure, it does not separately define total turnover. The provision, being a beneficial export incentive, must be construed consistently so the exclusion from export turnover is not neutralised by inclusion in total turnover. A contrary interpretation would dilute the intended relief and distort the computation formula. The issue was therefore decided in favour of the assessee.

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Issues: Whether expenditure incurred in foreign currency for services provided outside India is to be excluded from total turnover, as well as export turnover, while computing deduction under section 10A.

Analysis: Section 10A defines export turnover to exclude freight, telecommunication charges, insurance, and foreign currency expenditure incurred in providing technical services outside India, but does not define total turnover. A comparable deduction provision, section 80HHE, expressly excludes such items from total turnover as well. Since section 10A is a beneficial export incentive provision, the formula must be construed so that the exclusion from export turnover is not offset by inclusion in total turnover. A contrary reading would reduce the intended relief and make the provision work in a manner inconsistent with its object.

Conclusion: The foreign currency expenditure excluded from export turnover must also be excluded from total turnover for section 10A computation, and the issue is decided in favour of the assessee.

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