2012 (5) TMI 671 - AT - Income Tax

Summary

Issues:
The issues involved in this case are the reduction of leased line expenses and freight expenses from the export turnover while computing deductions u/s 10A and 10B of the Income-tax Act, 1961.

Leased Line Expenses and Freight Expenses:
The appellant contested the reduction of leased line expenses and freight expenses from the export turnover for computing deductions u/s 10A and 10B of the Act. The Assessing Officer (AO) had reduced these expenses from the export turnover during assessment. The CIT(A) upheld this decision, stating that sections 80HHC and 80HHE are different from sections 10A and 10B, and the Explanation for "total turnover" could not be applied in this context. The appellant argued that the issue was decided in their favor in a previous Tribunal decision and by the High Court in another case.

Judicial Interpretation:
The Tribunal referred to a High Court judgment that emphasized the need for uniformity in the components of the formula used to calculate deductions u/s 10A. It highlighted that the legislature intended to exempt profits related to exports and that the apportionment of profits based on turnover was a recognized method. The court clarified that the export turnover should be treated consistently in both the numerator and denominator of the formula, and any exclusions from the export turnover should also apply to the total turnover. The court emphasized that the legislative intent should guide the interpretation of terms like "total turnover" when export turnover is included.

Decision:
Considering the legal position established by the High Court judgment, the Tribunal ruled in favor of the appellant. The Tribunal set aside the CIT(A)'s order and directed the AO to allow the appellant's claim regarding the reduction of leased line expenses and freight expenses from the export turnover for computing deductions u/s 10A and 10B. Consequently, the appeal by the assessee was allowed, and the decision was pronounced on May 22, 2012.