2014 (1) TMI 1177 - ITAT BANGALORE

Deduction u/s 10A - Whether sale of hardware components be excluded from the export turnover - Held that:- Following Income-Tax Officer. Versus Sak Soft Limited. [2009 (3) TMI 243 - ITAT MADRAS-D] - There should be uniformity in the ingredients of both the numerator and the denominator of the formula, since otherwise it would produce anomalies or absurd results - In the case of s. 80HHC, the export profit is to be derived from the total business income of the assessee, whereas in s. 10A, the export profit is to be derived from the total business of the undertaking - 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 - Though there is no definition of the term 'total turnover' in s. 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.

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 - If that were the intention of the legislature, they would have expressly stated so - If they have not chosen to expressly define what the total turnover means then, when the total turnover includes export turnover, the meaning assigned by the legislature to the export turnover is to be respected and given effect to, while interpreting the total turnover which is inclusive of the export turnover - The issue has been restored for fresh adjudication.

Foreign travel expenditure – Held that:- The expenses incurred in foreign currency outside India are mainly for the personnel of the assessee deployed abroad for on-site development of the software and not for providing any technical services outside India – Expenses are not to be excluded from the export turnover and also from the total turnover - Decided in favour of assessee.

Notional interest on interest free loan given to its subsidiary concern – Held that:- The authorities below have not recorded any relevant reasons for making either addition or sustaining the same - The AO should have recorded his reasons by way of a speaking order, highlighting what constitutes for resorting to such an addition - The Revenue has also failed to prove the nexus between the interest bearing loan availed by the assessee and interest free advance extended to its subsidiary – The issue has been restored for fresh adjudication.