AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (10) TMI 689
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.... Aggrieved by the order of Assessing Officer (AO), assessee carried the matter before the ld.CIT(A) who vide order dated 22/01/2013 (in Appeal No.CIT(A)/GNR/321/2011-12) upheld the order of AO and thereby dismissed the appeal of the assessee. Aggrieved by the order of the ld.CIT(A), assessee is now in appeal before us and has raised the following grounds:- 1. The learned CIT(A) has erred both in law and on the facts of the case in confirming the disallowance of Rs. 96,64,698/- u/s 10AA of the Act. 2. The learned CIT(A) has erred in law and on the facts of the case in confirming the action of AO in excluding export turnover of Rs. 17,64,95,304/- from the total export turnover of the appellant for the purpose of calculating deduction u/s 10AA of the Act. 3. Alternatively and without prejudice, if the export turnover is excluded from the computation, correspondingly identical amount may kindly be reduced from total turnover. 4. Alternatively and without prejudice, if the export turnover is excluded from the computation, correspondingly direct and indirect expenditure relating to such export turnover may also kindly be excluded from the computation of the deduction u/s 10AA....
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....wed the excess claim of Rs. 96,94,698/-. Aggrieved by the order of AO, assessee carried the matter before the ld.CIT(A) who upheld the order of AO and dismiss the appeal of the assessee by holding as under:- "3.5. I have gone through the facts of the case and the law. The export turnover is specifically defined in Explanation 1(i) of the section itself. For ready reference, it is reproduced as under:- Explanation 1: - For the purposes of this section - (i) "export turnover" means the consideration in respect of export by the undertaking, being the Unit of articles or things or services received in or brought into, India by the assessee but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things outside India or expenses. If any, incurred in foreign exchange in rendering of services (including computer software) outside India; (ii) "export in relation to the Special Economic Zones" means taking goods or providing services out of India from a Special Economic Zone by land, sea, air, or by any other mode, whether physical or otherwise. When the term has been clearly defined in the income-tax Act itself, the....
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....ed to in the income-tax Act. The Income-tax Act refers to several statutes in different places and wherever required, provisions of such statutes are incorporated in the Act through reference or by incorporation. It is not as if the Parliament is unaware of other statutes which have specific purposes inter-unit transfers in Economic Zones are treated as exports for the purpose of Customs Act and the Central Excise Act. However, when section 10A, provides for exemption only on profits derived on export proceeds received in convertible foreign exchange, the Legislature never intended the benefit to be extended to local sales made by the units in the Special Economic Zone, whether as part of Domestic Tariff Area sales or inter-unit sales within the Zone or units in other Zones. In fact all Special Economic Zones are allowed to make 25 per cent sales to Domestic Tariff Area and the profit derived from such sales are not entitled to exemption. Exemption under section 10A(3) is specifically geared to profit on actual exports, that too, made against receipt of convertible foreign exchange. We are of the view that if the provisions of the Special Economic Zones Act, 2005, are brought into ....
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.... in India has been disputed. Therefore, since the assessee has fulfilled the condition of exporting and receiving the consideration in India it has fulfilled the conditions laid down u/s.10AA of the Act and is therefore eligible for deduction. He further submitted that if the legislature intended to exempt only direct exports, it would have specified so as was done in section 10BA of the Act which grants a deduction only for "exports out of India" and defines the same specifically in Explanation(d) by excluding the transactions not involving customs clearance. He further submitted that section 10AA of the Act does not specify that the same units should export. He submitted that ld.CIT(A) confirmed the disallowance by relying on the decision of Hon'ble Kerala High Court rendered in the case of CIT vs. Electronic Controls & Discharge Systems (P) Ltd. reported in (2011) 245 CTR 465. He submitted that ld.CIT(A) has wrongly relied on the aforesaid decision because the decision relied upon by ld.CIT(A) dealt with section 10A and not with section 10AA and that the definition of "export turnover" are not similar in section 10A and section 10AA. He further submitted that ld.CIT(A) has also ....
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....after. As per clause (7) the profits derived from the export of article or things or services shall be the amount which bears to the profits of the business of the undertaking, being the unit, the same proportion as the export turnover in respect of such articles or things or services bears to the total turnover of the business carried on by the undertaking. As per Explanation 1(1) to s. 10AA, "export turnover" means the consideration in respect of export by the assessee but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things outside India or expenses, if any, incurred in foreign exchange in rendering of services outside India. In our understanding, on reading of sub section 7 along with the Explanation 1, the deduction u/s 10AA, apart from fulfilling of the other required conditions stipulated, the deduction of profits from exports u/s 10AA will be in the ratio of export turnover to the total turnover of the undertaking. We further find that the bringing in India the foreign currency on sale of goods has not been stipulated in "export turnover" though as per provisions of s. 10A, which in respect of special provis....
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.... or services received in, or brought into, in respect of export by the undertaking of articles or things or computer software received in, or brought into, India by means the consideration means the consideration in respect of export by by the undertaking of articles or things or computer software received in, or brought into, India by in respect of export by the undertaking of eligible articles or things received in, or brought into, India by the assessee India by the the assessee assessee but does convertible in the assessee convertible in in convertible not include freight, telecommunication or insurance foreign exchange foreign exchange charges foreign exchange in attributable to the in in accordance with sub- delivery of the articles accordance with sub- accordance with sub-section section (3), but (3), but does not include freight, or things outside India section (3), but or expenses, if any, incurred in foreign exchange in rendering of services (including computer software) outside Indi....