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

[Surender Gupta]

There are various case laws on computation of turnover. Few of them are:

2012 (5) TMI 484 - ITAT, BANGALORE - DCIT Versus Mphasis Ltd.

2011 (10) TMI 372 - KARNATAKA HIGH COURT - Commissioner of Income-tax, Hubli Versus Flowserve Microfinish Valves (P.) Ltd.

2013 (3) TMI 509 - ITAT MUMBAI - M/s. Renfro India Pvt. Ltd. Versus Income-tax Officer-10(3)(1), Mumbai

2012 (6) TMI 595 - ITAT, BANGALORE - DEPUTY COMMISSIONER OF INCOME TAX Versus M/s FLOWSERVE MICROFINISH VALVES PVT LTD

2012 (6) TMI 413 - ITAT HYDERABAD - WESTON KNOWLEDGE SYSTEMS & SOLUTIONS (INDIA) PVT LTD Versus INCOME TAX OFFICER

2013 (1) TMI 110 - ITAT BANGALORE - M/s SYMPHONY SERVICES CORPORATION (I) PVT LTD. Versus DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-12(3), BANGALORE

2013 (3) TMI 415 - MUMBAI TRIBUNAL COURT - Willis Processing Services (I) (P.) Ltd. Versus Deputy Commissioner of Income-tax 2(3), Mumbai

[Surender Gupta]

For the purpose of applying the formula under sub-section (4) of section 10B, the freight, telecom charges or insurance attributable to the delivery of articles or things or computer software outside India or the expenses, if any, incurred in foreign exchange in providing the technical services outside India are to be excluded both from the export turnover and from the total turnover, which are the numerator and the denominator respectively in the formula – as the provisions of sections 10A and 10B are identical on all material aspects the order of the CIT(A) cannot be perverse

AI Summary

Export turnover exclusion requires deducting freight, telecom and insurance attributable to exports from both numerator and denominator. Deduction is apportioned by profit x (export turnover / total turnover), where export turnover excludes freight, telecommunication charges and insurance attributable to delivery outside India and expenses incurred in foreign exchange for providing technical services outside India; those excluded items must be removed from both the numerator (export turnover) and the denominator (total turnover) when computing the deduction.