TaxTMI 
TaxTMI 
2016 (6) TMI 1293
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....financial results of the assessee for the assessment year under consideration are recorded by the Transfer Pricing Officer (in short 'TPO') in paragraph 2.1 as under : ITES Rs. Software Rs. Total Rs. Total operating income 55,50,639 43,78,31,848 44,33,82,487 Total operating cost 49,12,070 39,80,28,956 40,29,41,023 Operating Profit 6,38,569 3,98,02,895 4,04,41,464 PBIT/Cost 13% 10% 10.04% PBIT/Sales 11.50% 9.09% 9.12% 3. The assessee has reported international transactions in 92 CE report which are reproduced by the TPO in paragraph 2.2 as under : Sl. No. Type of Transaction Amount Received Rs. Amount Paid Rs. 1 SWD Services 43,78,31,849 2 ITES 55,50,639 3 Reimbursement of expenses 1,60,05,330 Thus the assessee operates in two segments i.e. software development services and call centre services to its AEs. The services in call centre services are accepted by the TPO at arm's length. The TPO has not accepted the international transactions in software development services segment at arm's length and accordingly pr....
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....integra Solutions Ltd. 21.74 19.41 14 R S Software (India) Ltd. 7.41 9.71 15 R Systems International Ltd. 15.30 14.31 16 Sasken Communication Technologies Ltd. (Seg.) 7.58 7.97 17 Soft Sol India Ltd. 17.89 16.33 18 Tata Elxsi Ltd. (Seg.) 18.97 19.58 19 Thirdware Solutions Ltd 19.35 17.75 20 Wipro Ltd (Seg.) 28.45 30.40 Arithmetic Mean 23.65% 23.50% The TPO has determined the arithmetic mean at 26.35% and after granting working capital adjustment the adjusted mean margin was arrived at 23.5%. Accordingly, the TPO proposed an adjustment u/s. 92CA of Rs. 8,34,25,710. The assessee challenged the action of the TPO / AO by filing the appeal before the CIT (Appeals). The CIT (Appeals) rejected 9 comparable companies from the set of comparables selected by the TPO. The CIT (Appeals) has applied turnover filter and therefore most of the companies were excluded by the CIT (Appeals) on this ground. The assessee also pleaded for inclusion of two more companies in the set of comparables. However, the CIT(A) accpeted one of the companies namely VGL SoftTech Limited which was ....
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.... bad in law. c. adopting a flawed process for issuing notices u/s 133(6) and relying on the same without providing complete information or an opportunity to cross examine the companies concerned. GROUNDS ON COMPARABLES AND REJECTION OF TP ANALYSIS OF THE APPELLANT 4. The learned Assessing Officer, learned Transfer Pricing Officer and Commissioner of Income Tax (Appeals) - IV have erred in a. computing the arm's length price based on the data for the Financial Year 2007-08 of the comparables, which was not available when the appellant undertook transfer pricing documentation and reporting obligations; b. rejecting the comparables selected by the appellant on unjustifiable grounds; c. rejecting the additional comparables proposed by the appellant on unjustifiable grounds; and d. rejecting the transfer pricing analysis undertaken by the appellant on unjustifiable grounds. GROUNDS RELATING TO TP ANALYSIS OF THE TPO: 5. The learned Assessing Officer, learned Transfer Pricing Officer and Commissioner of Income Tax (Appeals) - IV have erred in: a. Performing fresh transfer pricing analysis and adopting inappropriate filters....
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....ection 234B and 234D is not leviable. The appellant denies its liability to pay interest under section 234B and 234D. PRAYER 11. On an overall consideration of the facts of the case, and the law applicable: The ALP as determined by the Transfer Pricing Officer, as adopted by the Assessing Officer and as confirmed by the CIT(A), to the extent prejudicial to the appellant, being not correct is to be quashed and the figures as determined and returned by the appellant being correct are to be accepted. a. The disallowance of R&D expenses be deleted. 12. Interest under section 234B and 234D be deleted. The appellant submits that each of the above grounds/ sub-grounds are independent and without prejudice to one another. The appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of hearing, of the appeal, so as to enable the Income-tax Appellate Tribunal to decide the appeals according to law. The appellant prays accordingly." 7. The assessee has also raised additional grounds by filing a petition dt.16.6.2016. The additional grounds raised by the assessee are as under : 1. "....
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....the assessee did not raise any objection against 25% RPT filter applied by the TPO either before the TPO or before the CIT (Appeals). Therefore, this issue does not emanate from the impugned orders of the authorities below. Even otherwise the filter is applied for selecting the comparables and applicable to all the comparable companies either selected by the assessee or by the TPO then we do not find any substance in the additional grounds raised by the assessee so far as applying the RPT filter at 15% instead of 25% applied by the authorities below and accepted by the assessee. As regards the exclusion of 3 companies by raising the additional grounds we note that the comparability of those 3 companies have been examined by this Tribunal in series of cases. The Tribunal has taken a view in case of ITO Vs. M/s. Net Devices India Pvt. Ltd. Vide order dt.25.5.2016 in I.T.(T.P)A.No.1099/Bang/2011 & C.O. No. 19/Bang/2012 in para 15.3 as under : " 15.3 We have heard the rival submissions as well as considered the relevant material on record on the admissibility of the additional grounds raised by the assessee. We find that there are some decisions of this Tribunal wherein the comparab....
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....ng/provision of software development services which may be the inclusive of software development product and therefore the Tribunal in the case of Kodiak Network (India) Pvt. Ltd. (supra) has directed the exclusion of certain comparable companies on the ground of having software product. The said finding cannot be applied in the case of the assessee without verifying the fact that the assessee is not engaged in the software product. 10.5 We have considered the rival submissions as well as relevant material on record. It is pertinent to note that the TPO in the case of Kodiak Network (India) Pvt. Ltd. (supra) has selected an identical set of 21 companies as selected in the case of the assessee. Therefore, it is clear that while selecting the comparable companies, the TPO has considered the assessee as a software development services provider as in the case of Kodiak Network (India) Pvt. Ltd. (supra). Further, the TPO has recorded the functional profile of the assessee in the impugned order which has been reproduced in the foregoing paragraphs of this order and therefore we do not find any substance in the objections raised by the learned Departmental Representative that the busin....
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....9;s objections for the inclusion of this company from the list of comparable companies on the ground that this company is not functionally comparable to the assessee as it is into software products. It is also submitted that the segmental details of this company are not available and the Annual Report available in the public domain is not complete. It was further contended that the information obtained by the TPO under section 133(6) of the Act, on the basis of which the TPO included this company in the final list of comparable companies, has not been shared with the assessee. In support of this contention, the learned Authorised Representative placed reliance on the following judicial decisions: i) Trilogy E-Business Software India Pvt. Ltd. V DCIT (ITA No.1054/Bang/2011) ii) Telecordia Technologies India Pvt Ltd V ACIT (ITA No.7821/Mum/2011) It was also submitted that this company has been held to be functionally not comparable to the assessee by a co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2007-08 in ITA No.845/Bang/2011 dt.22.2.2013. 7.3 The learned Authorised Representative further submitted that the factsperta....
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....ed to perform FAR analysis for each year and it is quite possible that the FAR analysis can be different for each of the years. That being so, the principle applicable to one particular year cannot be extrapolated automatically and made applicable to subsequent years. To do that, it is necessary to first establish that the facts and attendant factors have remained the same so that the factors of comparability are the same. Viewed in that context, the assessee has not discharged the onus upon it to establish that the decision rendered in the case of Triology E-Business Software India Pvt. Ltd. (supra) can be applied to the facts of the case and that too of an earlier year i.e. Assessment Year 2007-08. The assessee, in our view, has not demonstrated that the facts of Triology E-Business Software India Pvt. Ltd. (supra) are identical to the facts of the case on hand and that the profile of the assessee for the year under consideration is similar to that of the earlier Assessment Year 2007-08. In view of facts as discussed above, we deem it fit to remand the matter back to the file of the Assessing Officer / TPO to examine the comparability of this company afresh by considering the abo....
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....inal list of comparables. Nonfurnishing the information obtained under section 133(6) of the Act to the assessee has vitiated the selection of this company as a comparable. 7.6.2 We also find substantial merit in the contention of the learned Authorised Representative that this company has been selected by the TPO as an additional comparable only on the ground that this company was selected in the earlier year. Even in the earlier year, it is seen that this company was not selected IT(TP)A 1380/Bang/2012 Page 7 of 34 on the basis on any search process carried out by the TPO but only on the basis of information collected under section 133(6) of the Act. Apart from placing reliance on the judicial decision cited above, including the assessee's own case for Assessment Year 2007-08, the assessee has brought on record evidence that this company is functionally dis-similar and different from the assessee and hence is not comparable. Therefore the finding excluding it from the list of comparables rendered in the immediately preceding year is applicable in this year also. Since the functional profile and other parameters by this company have not undergone any change during the year ....
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....objected to the inclusion of this company in the set of comparbales in earlier proceedings before the TPO and the DRP. It is also seen that even in the grounds of appeal raised before us, the assessee has not raised any grounds challenging the inclusion of this ompany in the list of comparbales. In fact in the assessee's own case for Assessment Year 2007-08, this company was selected as a comparable by the assessee itself. We, therefore, find no merit in the contentions raised by the learned Authorised Representative of the assessee in respect of this company at this stage of proceedings. 8.4.2 It is also seen from the submissions made before us that the assessee has only pointed out fluctuating margins in the results of this company over the years. This, in itself, cannot be reason enough to establish differences in functional profile or any clinching factual reason warranting the exclusion of this company from the list of comparables. In this view of the matter, the contentions of the assessee are rejected and this company is held to be comparable to the assessee and its inclusion in the list of comparable companies is upheld. 9. Celestial Biolabs Ltd. 9.1 This compa....
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.... the case of Transwitch India Pvt. Ltd. in ITA No.6083/Del/2010. (v) The facts pertaining to this company has not changed from Assessment Year 2007- 08 to Assessment Year 2008-09 and therefore this company cannot be considered for the purpose of comparability in the instant case and hence ought to be rejected. In support of this contention, the assessee has also referred to and quoted from various parts of the Annual Report of the company. 9.3 Per contra, the learned Departmental Representative supported the inclusion of this company in the list of comparable companies. The learned Departmental Representative submitted that the decisions cited and relied on by the assessee are for Assessment Year 2007-08 and therefore there cannot be an assumption that it would continue to be applicable for the period under consideration i.e. Assessment Year 2008-09. 9.4.1 We have heard both the parties and perused and carefully considered the material on record. While it is true that the decisions cited and relied on by the assessee were with respect to the immediately previous assessment year, and there cannot be an assumption that it would continue to be applicable for this year a....
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....enues and the revenue from software development services constitutes more than 75% of the total operating revenues for the F.Y. 2007-08 and qualifies as a comparable by the service income filter. 10.2 Before us, the learned Authorised Representative contended that this company is not functionally comparable to the assessee and ought to be rejected /excluded from the list of comparables for the following reasons:- (i) This company is functionally different from the software activity of the assessee as it is into software products. (ii) This company has been held to be functionally not comparable to software service providers for Assessment Year 2007-08 by the co-ordinate bench of this Tribunal in the assessee's own case. This company has been held to be different from a software development company in the decision of the Tribunal in the case of Bindview India Pvt. Ltd. V DCIT in ITA No.1386/PN/ 2010. (iii) The rejection of this company as a comparable has been upheld by coordinate benches of the Tribunal in the case of - (a) Triology E-Business Software India Pvt. Ltd. (ITA No.1054/Bang/2011). (b) LG Soft India Pvt. Ltd.IT(TP)A No.....
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..... (supra) have held that this company was developing software products and was not purely or mainly a software service provider. Apart from relying of the above cited decisions of coordinate benches of the Tribunal (supra), the assessee has also brought on record evidence from various portions of the company's Annual Report to establish that this company is IT(TP)A 1380/Bang/2012 Page 9 of 34 functionally dis-similar and different form the assessee and that since the findings rendered in the decisions of the coordinate benches of the Tribunal for Assessment Year 2007-08 (cited supra) are applicable for this year i.e. Assessment Year 2008-09 also, this company ought to be excluded from the list of comparables. In this view of the matter, we hold that this company i.e. KALS Information Systems Ltd., is to be omitted form the list of comparable companies. It is ordered accordingly." "11.0 Infosys Technologies Ltd. 11.1 This was a comparable selected by the TPO. Before the TPO, the assessee objected to the inclusion of the company in the set of comparables, on the grounds of turnover and brand attributable profit margin. The TPO, however, rejected these objections raised by the a....
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....er contra, opposing the contentions of the assessee, the learned Departmental Representative submitted that comparability cannot be decided merely on the basis of scale of operations and the brand attributable profit margins of this company have not been extraordinary. In view of this, the learned Departmental Representative supported the decision of the TPO to include this company in the list of comparable companies. 11.4 We have heard the rival submissions and perused and carefully considered the material on record. We find that the assessee has brought on record sufficient evidence to establish that this company is functionally dissimilar and different from the assessee and hence is not comparable and the finding rendered in the case of Trilogy E-Business Software India Pvt. Ltd. (supra) for Assessment Year 2007-08 is applicable to this year also. We are inclined to concur with the argument put forth by the assessee that Infosys Technologies Ltd is not functionally comparable since it owns significant intangible and has huge revenues from software products. It is also seen that the break up of revenue from software services and software products is not available. In this view....
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....nd merit in the contentions of the assessee for exclusion of this company from the set of comparables. It is seen that this company is engaged both in software development and product development services. There is no information on the segmental bifurcation of revenue from sale of product and software services. The TPO appears to have adopted this company as a comparable without demonstrating how the company satisfies the software development sales 75% of the total revenue filter adopted by him. Another major flaw in the comparability analysis carried out by the TPO is that he adopted comparison of the consolidated financial statements of Wipro with the stand alone financials of the assessee; which is not an appropriate comparison. 12.4.2 We also find that this company owns intellectual property in the form of registered patents and several pending applications for grant of patents. In this regard, the coordinate bench of this Tribunal in the case of 24/7 Customer.Com Pvt. Ltd. (ITA No.227/Bang/2010) has held that a company owning intangibles cannot be compared to a low risk captive service provider who does not own any such intangible and hence does not have an additional advanta....
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....able IPs and products. The learned Authorised Representative pleads that in view of the above reasons, Tata Elxsi Ltd . is clearly functionally different/dis-similar from the assessee and therefore ought to be omitted form the list of comparables. 13.3 Per contra, the learned Departmental Representative supported the stand of the TPO in including this company in the list of comparables. 13.4 We have heard both parties and carefully perused and considered the material on record. From the details on record, we find that this company is predominantly engaged in product designing services and not purely software development services. The details in the Annual Report show that the segment " software development services" relates to design services and are not similar to software development services performed by the assessee. 13.5 The Hon'ble Mumbai Tribunal in the case of Telcordia Technologies India (P.) Ltd . (supra) has held that Tata Elxsi Ltd . is not a software development service provider and therefore it is not functionally comparable. In this context the relevant portion of this order is extracted and reproduced below :- " .... Tata Elxsi is engaged in de....
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....y does not contain detailed descriptive information on the business of the company, the assessee places reliance on the details available on the company's website which should be considered while evaluating the company's functional profile. It is also submitted by the learned Authorised Representative that KPO services are not comparable to software development services and therefore companies rendering KPO services ought not to be considered as comparable to software development companies and relied on the decision of the coordinate bench in the case of Capital IQ Information Systems (India) (P.) Ltd . v. Dy. CIT (International Taxation) [2013] 32 taxmann.com 21 (Hyd. - Trib.) and prayed that in view of the above reasons, this company i.e. e-Zest software Ltd., ought to be omitted from the list of comparables. 14.3 Per contra, the learned Departmental Representative supported the inclusion of this company in the list of comparables by the TPO. 14.4 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the record that the TPO has included this company in the list of comparbales only on the basis of the stateme....
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....e facts and in view of the afore cited decision of the Tribunal (supra), this company ought to be omitted from the list of comparables. 15.2 Per contra, the learned Departmental Representative supported the action of the TPO in including this company in the list of comparables. 15.3 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the material on record that the company is engaged in product development and earns revenue from sale of licenses and subscription. However, the segmental profit and loss accounts for software development services and product development are not given separately. Further, as pointed out by the learned Authorised Representative, the Pune Bench of the Tribunal in the case of E-Gain Communications (P.) Ltd. (supra) has directed that since the income of this company includes income from sale of licenses, it ought to be rejected as a comparable for software development services. In the case on hand, the assessee is rendering software development services. In this factual view of the matter and following the afore cited decision of the Pune Tribunal (supra), we direct that this company be omi....
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....sions and perused and carefully considered the material on record. It is seen from the details on record that the company i.e. Lucid software Ltd., is engaged in the development of software products whereas the assessee, in the case on hand, is in the business of providing software development services. We also find that, co-ordinate benches of the Tribunal in the assessee's own case for Assessment Year 2007- 08 (IT(TP)A No.845/Bang/2011), LG Soft India (P.) Ltd. (supra), CSR India (P.) Ltd. (supra); the ITAT, Mumbai Bench in the case of Telcordia Technologies India (P.) Ltd (supra) and the Delhi ITAT in the case of Transwitch India (P.) Ltd. (supra) have held, that since this company, is engaged in the software product development and not software development services, it is functionally different and dis-similar and is therefore to be omitted from the list of comparables for software development service providers. The assessee has also brought on record details to demonstrate that the factual and other circumstances pertaining to this company have not changed materially from the earlier year i.e. Assessment Year 2007-08 to the period under consideration i.e. Assessment Year 2....
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....s into product development and product design services and for which the segmental data is not available. The learned Authorised Representative prays that in view of the above, this company i.e. Persistent Systems Ltd. be omitted from the list of comparables. 17.2 Per contra, the learned Departmental Representative support the action of the TPO in including this company in the list of comparables. 17.3 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the details on record that this company i.e. Persistent Systems Ltd., is engaged in product development and product design services while the assessee is a software development services provider. We find that, as submitted by the assessee, the segmental details are not given separately. Therefore, following the principle enunciated in the decision of the Mumbai Tribunal in the case of Telcordia Technologies India (P.) Ltd. (supra) that in the absence of segmental details/information a company cannot be taken into account for comparability analysis, we hold that this company i.e. Persistent Systems Ltd. ought to be omitted from the set of comparables for the year u....
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....also mitigate risks." (iv) The TPO has applied the filter of excluding companies having peculiar economic circumstances. Quintegra fails the TPO's own filter since there have been acquisitions in this case, as is evidenced from the company's Annual Report for F.Y. 2007- 08, the period under consideration. The learned Authorised Representative prays that in view of the submissions made above, it is clear that inter alia, this company i.e. Quintegra Solution Ltd. being functionally different and possessing its own intangibles/IPRs, it cannot be considered as a comparable to the assessee in the case on hand and therefore ought to be excluded from the list of comparables for the period under consideration. 18.3 Per contra, the learned Departmental Representative supported the action of the TPO in including this company in the set of comparables to the assessee for the period under consideration. 18.4 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the details brought on record that this company i.e. Quintegra Solutions Ltd. is engaged in product engineering services and is not purely a software d....
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....5%. The learned Authorised Representative submitted that for the current period under consideration, the RPT is 18.3% and therefore this company requires to be omitted from the list of comparables. 19.2 Per contra, the learned Departmental Representative supported the action of the TPO in including this company in the list of comparables as this company was a pure software development service provider like the assessee. 19.3 We have heard both parties and perused and carefully considered the material on record. We find that the co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2007-08 in ITA No.845/Bang/2011 has excluded this company from the set of comparables for the reason that RPT is in excess of 15% following the decision of another bench of this Tribunal in the case of 24/7 Customer.Com (P.) Ltd. (supra). As the facts for this year are similar and material on record also indicates that RPT is 18.3%, following the afore cited decisions of the co-ordinate benches (supra), we hold that this company is to be omitted from the list of comparables to the assessee in the case on hand. 23. Thus, it is clear from the findings of the Co-ordin....
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....twork (India) Pvt. Ltd. (supra), we direct the A.O./TPO to exclude 12 comparable companies from the set of comparables. 11.1 The next grievance of the assessee is regarding incorrect operating margin taken by the TPO. The learned Authorised Representative of the assessee has submitted that the TPO has computed the profit margin of the assessee without excluding the Fringe Benefit Tax ('FBT'). The learned Authorised Representative has referred to the decision of the Tribunal in assessee's case for the asst. year 2007-08 and submitted that an identical issue has been decided by the Tribunal by directing the A.O./TPO not to consider the FBT as part of the operating cost of the assessee when the same was not considered as part of the OC in the case of the comparables. The learned Authorised Representative has submitted that while computing the operating margin the TPO has considered the total expenditure at page 138 of the paper book showing that the total cost includes FBT. The learned Authorised Representative has then referred to page 176 of the paper book, the computation of total income at page 176 of paper book wherein the provision for FBT has been separately shown as an item....
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....hes of this Tribunal in the case of Intellinet Technologies India Pvt. Ltd. (ITA No.237/Bang/2010) and Bearing Point Business Consulting Pvt. Ltd. (ITA No.1124/Bang/2011) have held that the TPO ought to have given risk adjustment to the margins of the comparables for bringing them on par with the assessee and remanded the issue back to the file of the TPO. Following the decisions in the aforementioned cases of the co-ordinate benches of this Tribunal (supra), we remand the issue of market risk adjustment to the file of the Assessing Officer/TPO for examining the issue in the light of the decisions cited." In view of the above decisions of the co-ordinate benches of the Tribunal, we direct the TPO to consider the risk adjustment of the margins of comparables for bringing them on par with the assessee. 12.1 The next issue raised by the assessee is regarding web site creation expenses which has been disallowed by the A.O by treating the same as capital in nature. 12.2 The learned Authorised Representative of the assessee has submitted that an identical issue has been considered by the Tribunal in the assessee's own case for the asst. year 2007-08 and the issue was remanded to....
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....s that do not reflect the normal industry trend. 4. On the facts and in the circumstances of the case the learned CIT (Appeals) has erred inaccepting M/s. VGL Softech Ltd. as a comparable. 5. On the facts and in the circumstances of the case the learned CIT (Appeals) has erred in deleting M/s. Celestial Biolabs from the comparables as functionally different. 6. On the facts and in the circumstances of the case the learned CIT (Appeals) has erred in holding that the reimbursement of expenditure towards freight of Rs. 1,27,288, telecommunication charges of Rs. 65,70,127, insurance charges of Rs. 18,57,172, travelling and conveyance charges ofRs.2,71,19,823 are to be excluded from the total turnover as well, for computation of deduction under Section 10A of the IT Act whereas such exclusion is permitted to arrive at the export turnover only as per the definitions given in section 10A of the IT Act and total turnover has not been defined in section 10A of the Act. 7. The CIT (Appeals) ought to have appreciated that the decision of Hon'ble High Court of Karnataka inthecase of M/s. Tata Elxsi Ltd. on the issue of computing deduction under Section 10A by excluding the abov....
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....he Act. 14.4 In view of the above facts when the TPO did not examine the relevant details and data, we set aside this issue to the record of the TPO to consider the relevant information of this company as filed by the assessee before the CIT (Appeals) as well as before us. However, the learned Authorised Representative has submitted that these details were available with the TPO. In any case, we direct the TPO to consider the relevant details and then decide the issue of comparability after giving an opportunity of hearing to the assessee. 15. The other objections of the revenue is regarding exclusion of certain companies including Celestial Biolabs which stand decided in view of our finding in the assessee's appeal in directing the 12 companies to be excluded from the set of comparables. 16. The next ground is regarding exclusion of freight charges, telecommunication charges, insurance charges, travelling and financial charges from the export turnover as well as total turnover while computing the deduction u/s. 10A of the Act. 16.1 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....
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....usiness, in other words, export turnover and domestic turnover. To the extent of export turnover, there would be a commonality between the numerator and the denominator of the formula. 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 turnover in the denominator. The reason being the total turnover includes export turnover. The components of the export turnover in the numerator and the denominator cannot be different. Therefore, though there is no definition of the term 'total turnover' in section 10A, there is nothing in the said section to mandate that, what is excluded from the numerator that is export turnover would nevertheless form part of the denominator. When the statute prescribed a formula and in the said formula, 'export turnover' is defined, and when the 'total turnover' includes export turnover, the very same meaning given to the export turnover by the legislature is to be adopted while understanding the meaning of the total turnover, when the total turnover includes export turnover. If what is excluded in computing the export turnover i....
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....t for the purposes of s.10A. However, the expression "export turnover" has been defined. The definition of "export turnover" excludes freight and insurance. Since export turnover has been defined by Parliament and there is a specific exclusion of freight and insurance, the expression "export turnover" cannot have a different meaning when it forms a constituent part of the total turnover for the purposes of the application of the formula. Undoubtedly, it was open to Parliament to make a provision which has been enunciated earlier must prevail as a matter of correct statutory interpretation. Any other interpretation would lead to an absurdity. If the contention of the Revenue were to be accepted, the same expression viz. 'export turnover' would have a different connotation in the application of the same formula. The submission of the Revenue would lead to a situation where freight and insurance, though these have been specifically excluded from 'export turnover' for the purposes of the numerator would be brought in as part 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 t....