TaxTMI 
TaxTMI 
2014 (1) TMI 1538
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....ing deductions eligible under Section 80HHE of the Act and in restoring the order of the Assessing Authority. 2. The assessee is engaged in the business of software development and export. It has two software units which are eligible for exemption under Section 10A of the Income Tax Act, 1961 (for short hereinafter referred to as the "Act"). In respect of another unit which is also in the business of export of software, deduction under Section 80HHE of the Act on the profit of such unit was claimed. The Assessing Officer while computing the deduction under Section 80HHE allowed the same as claimed by the assessee. While allowing deduction under Section 10A of the Act, the Assessing Officer restricted the claim by excluding certain profit....
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.... part of "profits of the business", the turnover in respect of such unit can also not form part of the total turnover of the business carried on by the assessee. The rationale behind allowing such deduction under Section 80HHE is that when the profits of eligible and ineligible business is clubbed together while computing total gross income and since it is not practicable to compute separately the profits of business from the export of software, the formula of apportioning the profit in proportion to turnover is being applied. Therefore, the Tribunal interfered with the order passed by the Commissioner setting aside the same and restored the order passed by the Assessing Authority. Aggrieved by the said order, the revenue is in appeal. 3....
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....t arises for consideration in this appeal is:- "In the facts and circumstances of this case whether the Tribunal was correct in holding that the profit eligible for deduction under Section 10A of the Act does not form part of the profit of the business and therefore the turnover in respect of such unit also cannot be form part of total turnover of the business carried on by the assessee?" 6. Section 80HHE reads as under:- "80HHE:- (1)Where an assessee, being an Indian Company or a person(other than a company) resident in India, is engaged in the business of,- (i) export out of India of computer software or its transmission from India to a place outside India by any means; (i....
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.... the company being engaged in the business of computer software, a portion of his business includes export out of India and the remaining portion is for domestic consumption. It is in those circumstances, to be eligible for the benefit of deduction in respect of profits from export of computer software that profit has to be determined. In order to determine the said profit Sub- Section(3) of Section 80HHE prescribes a formula, which reads as under:- "Sub-Section(3) For the purposes of sub-section(1), profits derived from the business referred to in that sub-section shall be the amount which bears to the profits of the business, the same proportion as the export turnover bears to the total turnover of the business carried on ....
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.... be added to find out the profit from export of computer software under Section 80HHE. In fact this is also clear from Section 80A which forms part of Chapter VI-A in which Section 80HHE also finds a place. The relevant provision is Sub-Section(4) of Section 80A, which reads as under:- "(4) Notwithstanding anything to the contrary contained in Section 10A or Section 10AA or Section 10B or Section 10BA or in any provisions of this Chapter under the heading "CDeductions in respect of certain incomes", where, in the case of an assessee, any amount of profits and gains of an undertaking or unit or enterprise or eligible business is claimed and allowed as a deduction under any of those provisions for any assessment year, deductio....