TaxTMI 
TaxTMI 
2011 (11) TMI 119
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....missioner of Income Tax in exercise of his powers under Section 263 of the said Act. The assessing officer in the original assessment had not included the communication expenses in the figure of total turnover for computing the eligible deduction under Section 10A of the said Act nor any inquiry to that effect had been made by the assessing officer. Consequently, the Commissioner of Income Tax, in exercise of his powers under Section 263 of the said Act directed the assessing officer to re-assess the income of the assessee after making the adjustments, as directed, by including the communication expenses in the figure of total turnover for the purposes of computing the eligible deduction under Section 10A of the said Act. The assessee had filed the appeal being ITA No.2170/DEL/2009 before the Income Tax Appellate Tribunal in respect of the said order passed by the Commissioner of Income Tax dated 12.03.2009 under Section 263 of the said Act. 3. In the meanwhile, the assessing officer, following the directions given by the Commissioner of Income Tax in his order under Section 263 of the said Act had completed the assessment giving the consequential effect as directed by the Commiss....
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....ved in, or brought into India by the assessee in convertible foreign exchange but so as not to include, inter alia, freight, telecommunication charges or insurance attributable to the delivery of the articles, things or software outside India. Therefore, in computing the 'export turnover' the Legislature has made a specific exclusion of freight, telecommunication charges and insurance charges. 8. In this background, it was contended by Mr Sabharwal that wherever the exclusion was to be made, it has been done specifically by legislation. Since the telecommunication charges were not to be included in 'export turnover', it has been specifically indicated in explanation 2(iv) of Section 10A. He also drew our attention to the provisions of Section 80 HHC and in particular to the Explanation (b) and (ba) after Section 80 HHC (4)(c). He pointed out that in the said Explanation (b) 'export turnover' has been defined and that 'total turnover' has also been defined in Explanation (ba). In both the definitions, the items excluded are specifically mentioned and it is for that reason that in computing the deduction under Section 80 HHC, the exclusion is made both from numerator and the denomin....
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....ne, etc. - (1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by an undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee : Provided that where in computing the total income of the undertaking for any assessment year, its profits and gains had not been included by application of the provisions of this section as it stood immediately before its substitution by the Finance Act, 2000, the undertaking shall be entitled to deduction referred to in this sub-section only for the unexpired period of the aforesaid ten consecutive assessment years: Provided further that where an undertaking initially located in any free trade zone or export processing zone is subsequently located in a special economic zone by reason of conversion of such free trade zone or export processing zone into a special economic zone, the period of ten consecutive....
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....the relevant portion of the decision of the Bombay High Court in Gem Plus Jewellery India Ltd.'s case(supra).and endorse the same. The relevant portion of the said decision is as under:- "(6) The total turnover of the business carried on by the undertaking would consist of the turnover from export and the turnover from local sales. The export turnover constitutes the numerator in the formula prescribed by sub-section (4). Export turnover also forms a constituent element of the denominator inasmuch as the export turnover is a part of the total turnover. (7.) The export turnover, in the numerator must have the same meaning as the export turnover which is a constituent element of the total turnover in the denominator. The Legislature has provided a definition of the expression "export turnover" in Explanation 2 to Section 10A by which the expression is defined to mean the consideration in respect of export by the undertaking of articles, things or computer software received in, or brought into India by the assessee in convertible foreign exchange but so as not to include inter alia freight, telecommunication charges or insurance attributable to the delivery of the articles, things o....
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....exempt profits relatable to exports. In the case of combined business of an assessee, having export business and domestic business, the legislature intended to have a formula to ascertain the profits from export business by apportioning the total profits of the business on the basis of turnovers. Apportionment of profits on the basis of turnover was accepted as a method of arriving at export profits. In the case of Section 80 HHC, the export profit is to be derived from the total business of the undertaking. Even in the case of business of an undertaking, it may include export business and domestic business, in other words, export turnover and domestic turnover. The export turnover would be a component or part of a denominator, the other component being the domestic turnover. In other words, to the extent of export turnover, there would be a commonality between the numerator and the denominator of the formula. In view of the commonality the understanding should also be the same. In other words, if the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded in computing the export turnover as a component of total turnov....