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2014 (3) TMI 256 - AT - Income TaxDeduction u/s 10A of the Act Exclusion from export turnover Business of software development services - As decided in CIT vs. Gem Plus Jewellery India Ltd. 2010 (6) TMI 65 - BOMBAY HIGH COURT whatever is the amount arrived at as export turnover for numerator, the same should be included in the total turnover which is denominator in the calculation for deduction u/s 10A of the Act. Exclusion of communication charges and insurance charges Held that - For the purpose of inclusion in the profit the receipt should have an element of turnover and profit - whatever is not included in the export turnover cannot form part of total turnover also - The expenditure which was excluded by the Assessing Officer while computing the export turnover does not have the element of turnover thus, it cannot be included in the total turnover also there is no justification for inclusion of the expenditure which is excluded from export turnover, in the total turnover - Export proceeds not received within six months are also to be excluded from the total turnover on the same principle - Decided in favour of Assessee.
Issues:
Deduction under section 10A - Exclusion of certain amounts from 'export turnover'. Analysis: 1. Background: The case involves cross-appeals by the Assessee and Revenue regarding the deduction under section 10A, specifically focusing on the exclusion of certain amounts from the 'export turnover'. The appeals stem from the Order of the learned CIT(A)-III dated 24.01.2013. 2. Assessee's Position: The Assessee, a firm engaged in software development services, declared total income and claimed a deduction under section 10A. However, the Assessing Officer (A.O.) excluded specific amounts from the 'export turnover', leading to a reduction in the claimed deduction. The Assessee contended before the CIT(A) that the excluded amounts should be eliminated from both the numerator and denominator of the formula for export turnover. 3. CIT(A)'s Decision: The CIT(A) accepted the Assessee's contentions partially, excluding communication and insurance charges from the total turnover as well. However, regarding export profits not received within six months, the CIT(A) held that it should not be considered part of the export turnover but included in the total turnover. This decision led to cross-appeals by the Assessee and Revenue. 4. Legal Precedents: The Counsels referred to various legal precedents to support their arguments. The Assessee relied on the principles established in previous Tribunal decisions and High Court judgments related to similar provisions under different sections of the Income Tax Act. 5. Tribunal's Analysis: The Tribunal analyzed the issue of excluding communication and insurance charges from the total turnover, citing previous decisions and statutory provisions. It highlighted that what is excluded from export turnover should also be excluded from the total turnover for the purpose of calculating deductions under section 10A. 6. High Court Rulings: The Tribunal referred to High Court judgments, emphasizing that the export turnover and total turnover must align in their interpretation and exclusions. The High Court rulings clarified that the exclusion of specific charges from export turnover should also apply to the total turnover to maintain consistency in the calculation formula. 7. Final Decision: Based on the legal principles and precedents discussed, the Tribunal concluded that export proceeds not received within six months should be excluded from the total turnover. The Tribunal upheld the Assessee's contentions, allowing the appeal and dismissing the Revenue's appeal. 8. Outcome: Ultimately, the Tribunal's decision favored the Assessee, allowing the appeal and maintaining the exclusion of certain amounts from the total turnover for the purpose of calculating the deduction under section 10A. This detailed analysis of the judgment provides a comprehensive understanding of the issues involved, the arguments presented by the parties, the legal precedents cited, and the final decision rendered by the Tribunal.
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