2011 (6) TMI 769 - HC - Income Tax

Summary

Issues involved: Interpretation of Section 10A of the Income Tax Act, 1961 regarding exclusion of expenditure from export turnover and total turnover.

Summary:

Issue 1: Exclusion of expenditure from export turnover and total turnover under Section 10A

The respondent-assessee, engaged in software export business, claimed deduction under Section 10A for four STP units. The assessing officer excluded certain expenditure from both export turnover and total turnover. The CIT disagreed, stating that only expenditure related to foreign exchange for software delivery outside India should be excluded from export turnover, not total turnover. The CIT invoked Section 263 and directed reassessment. The ITAT, however, set aside the CIT's order.

Issue 2: Justification of ITAT's decision

The High Court considered whether the ITAT was correct in holding that expenditure excluded from export turnover should also be excluded from total turnover under Section 10A. Referring to a previous case, the Court emphasized that the term 'export turnover' should have a consistent meaning when part of the total turnover calculation. Without a specific definition of 'total turnover' to the contrary, what is excluded from export turnover must also be excluded from total turnover. Consequently, the Court found no error in the ITAT's decision and dismissed the appeal.