Deduction U/s 10A

[KR Ramesh]

Respected Members,

Can any one please clarify the deduction calculation u/s 10 A with an e.g.

The formula is as below;

Profit of the business x Export Turnover / Total Turnover

Accordingly to explanation 

• “Export Turnover” means the consideration in respect of export by the undertaking of articles or things or computer software received in, or bought into India by the asssesee in convertible foreign exchange in accordance with sub-section (3), but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things or computer software outside India or expenses, if any, incurred in foreign currency in providing the technical services outside India.
• Freight, telecom charges or insurance attributable to delivery of article or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing technical service outside India are to be excluded, both from export turnover and from total turnover for purpose of computation of deduction under Sec 10B(4) or 10A(4)  

Queries:

1. Does this mean that telecommunication charges (i.e. Telephone Expenses / Internet Expenses), Insurance Expense etc. would be excluded from the calculations?
2. If yes, does it mean that it would be excluded from the calculation only if these being incurred in foreign currency?

Stating an example 

My Turnover (all exports) – Rs. 20 crore

Export Realized in foreign currency – Rs. 20 Crore

Profit of the business =  Rs. 5 Crore

Expenses on Foreign Travel = Rs. 2 Crore

Expenses on Communication Exp = 3 Crore

 

In this case what would be the calculation as per the formulae of Sec 10?

Please revert back with example with easy understanding.

Many thanks

Regards

Ramesh

AI Summary

Clarification on Section 10A: Exclude Foreign Currency Telecom and Insurance Costs from Export and Total Turnover Calculations. A discussion in a forum seeks clarification on calculating deductions under Section 10A of the Income Tax Act, focusing on whether telecommunication charges, insurance expenses, and other costs should be excluded from calculations if incurred in foreign currency. The formula for deduction involves multiplying business profit by the ratio of export turnover to total turnover. The query includes an example with specific financial figures and expenses. A Chartered Accountant responds, referencing several case laws and confirming that such expenses should be excluded from both export and total turnover when applying the formula, as per Sections 10A and 10B.