TaxTMI 
TaxTMI 
2013 (11) TMI 183
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....he Act' in short). Under the provisions of section 115JB of the Act, the assessee declared loss of Rs.4,81,213/-. The return of income was processed under section 143(1) of the Act and the case was taken up for scrutiny. The Assessing Officer completed the assessment by an order under section 143(3) of the Act dated 29/12/2009 determining the total income of the assessee at Rs.10,62,058/- as against declared income of Rs.27,394/-. In doing so, the Assessing Officer had restricted the assessee's claim for deduction under section 10A of the Act to Rs.1,80,84,981/- as against Rs.1,91,19,645/- claimed it in the return of income, by reducing the expenditure in foreign currency amounting to Rs.68,93,405/- and telecommunication expenditure of Rs.16,53,000/- from export turnover while computing the eligible deduction under section 10A of the Act. For assessment year 2008-09, the assessee filed the return of income on 30.9.2008 declaring income of Rs.2,10,15,900/- after claiming deduction of Rs.3,81,03,677/- under section 10A of the Act. The return was processed under section 143(1) of the Act and the case was taken up for scrutiny. The assessment was completed by an order under section 143....
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....of the Hon'ble High Court of Karnataka". The learned CIT(A) in his common order dated 28/6/2012 has given the same finding on this issue for assessment year 2008-09 at para 4.3 of his order. 3. Aggrieved by the orders of the CIT(A)-I, Bangalore for the assessment years 2006-07 and 2008-09 by common order dated 28/6/2012, revenue is in appeal before us raising the following grounds for assessment year 2006-07:- 1. The order of the learned CIT(A) in so far as it is prejudicial to the interest of revenue, is opposed to law and the facts and circumstances of the case. 2. The learned CIT(A) was not justified in directing the Assessing Officer to re-compute the deduction allowable under section 10A of the IT Act, 1961 after reducing the telecommunication expenses of Rs.16,53,000/- and expenses incurred in foreign currency amounting to Rs.68,93,405/- both from the export turnover and from the total turnover, without appreciating the facts and circumstances of the case. 3. The learned CIT(A) has erred in not appreciating that there is no provision in section 10A, which requires the above mentioned expenses to be reduced from the total t....
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....dismissed. 5.3.1 We have heard the rival submission and perused the material on record. The Hon'ble Karnataka High Court in the case of CIT v M/s Tata Elxsi Ltd. & Others had held that while computing the exemption u/s 10A, if the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded from the total turnover in the denominator. The relevant finding of the Hon'ble jurisdictional High Court reads as follows:- "...........Section 10A is enacted as an incentive to exporters to enable their products to be competitive in the global market and consequently earn precious foreign exchange for the country. This aspect has to be borne in mind. While computing the consideration received from such export turnover, the expenses incurred towards 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 exchange, in providing the technical services outside India should not be included. However, the word total turnover is not defined for the purpose of this section. It is because of this omission ....
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....dopted while understanding the meaning of the total turnover, when the total turnover includes export turnover. If what is excluded in computing the export turnover is included while arriving at the total turnover, when the export turnover is a component of total turnover, such an interpretation would run counter to the legislative intent and impermissible. Thus, there is no error committed by the Tribunal in following the judgments rendered in the context of section 80HHC in interpreting section 10A when the principle underlying both these provisions is one and the same". 5.3.2 The Hon'ble Mumbai High Court in the case of Gem Plus Jewellery India Ltd. (supra), in identical circumstances, held that since the export turnover forms part of the total turnover, if an item is excluded from the export turnover, the same should also be reduced from the total turnover to maintain parity between numerator and denominator while calculating deduction u/s 10A of the Act. The relevant finding of the Hon'ble Mumbai High Court reads as follows:- "The total turnover of the business carried on by the undertaking would consist of the turnover from export and the turnover from loca....
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....art of the 'export turnover' when it forms an element of the total turnover as a denominator in the formula. A construction of a statutory provision which would lead to an absurdity must be avoided. Moreover, a receipt such as freight and insurance which does not have any element of profit cannot be included in the total turnover. Freight and insurance charges do not have any element of turnover. For this reason in addition, these two items would have to be excluded from the total turnover particularly in the absence of a legislative prescription to the contrary - CIT v Sudarshan Chemicals Industries Ltd. (2000) 163 CTR (Bom) 596: (2000) 245 ITR 769 (Bom) applied; CIT v Lakshmi Machine Works (2007) 210 CTR (SC) 1: (2007) 290 ITR 667 (SC) and CIT v Catapharma (India) (P) Ltd. (2007) 211 CTR (SC) 83: (2007) 292 ITR 641 (SC) relied on" 5.3.3 In the case of Sak Soft Ltd. (supra), the assessee was engaged in the business of exporting computer software and claimed deduction u/s 10B of the Act. In completing the assessment u/s 143(3) of the Act, the AO reduced the expenditure incurred in foreign exchange in providing the technical services outside India, from the export turnover withou....