2010 (3) TMI 1106 - AT - Income Tax

Summary

Issues Involved:
1. Exclusion of transport and insurance charges from export turnover and total turnover for computing deduction u/s 10B.
2. Exclusion of deemed exports from export turnover for deduction u/s 10B.
3. Setting off unabsorbed depreciation against profits before calculating deduction u/s 10B.

Exclusion of Transport and Insurance Charges:
The appeal addressed the correctness of reducing expenditure on freight and insurance charges from the export turnover and whether it should also be reduced from the total turnover for computing deduction u/s 10B. The CIT(A) relied on precedents and directed the AO to exclude these expenditures from both turnovers. The Tribunal upheld this decision, emphasizing that expenses incurred in Indian Rupees should not be deducted, as clarified by legislative history and relevant case law. The Tribunal found no reason to interfere with the CIT(A)'s ruling, affirming that the said expenses should be reduced from both export and total turnover for computing deduction u/s 10B.

Exclusion of Deemed Exports:
The issue involved the exclusion of deemed exports totaling &8377; 13,05,22,177 from the export turnover for calculating deduction u/s 10B. The CIT(A) granted relief after considering evidence that confirmed the realization of payments in convertible foreign exchange against materials purchased from the assessee under third party export basis. The Tribunal upheld this decision, noting that third party exports, when fulfilling specific criteria, qualify as export turnover eligible for benefits u/s 10B. The CIT(A)'s analysis of the evidence presented by the assessee supported the conclusion that the deemed exports should not be excluded for deduction u/s 10B.

Setting off Unabsorbed Depreciation:
The AO restricted the deduction available to the assessee u/s 10B after setting off unabsorbed depreciation against profits of the undertaking. The CIT(A) ruled in favor of the assessee, citing a Tribunal decision and pending High Court case. The Tribunal, acknowledging the similarity of the issue with another case, restored the matter to the AO for further consideration in light of the pending case's outcome. The Tribunal refrained from commenting on the issue's merits, directing the AO to decide after affording a reasonable opportunity to the assessee. Consequently, the appeal by the revenue was partly allowed, pending further assessment based on the final outcome in the related case.