2011 (11) TMI 428 - HC - Income Tax

Whether expenditure incurred by the assessee should be excluded from the total turnover if the same are reduced from export turnover for computing relief u/s 10A Held that - To ascertain the profits from export business the total profits of the business are to be apportioned on the basis of turnovers. 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. - Decided in favour of the assessee.

Summary

Issues:
1. Interpretation of Section 10-A of the Income Tax Act, 1961 regarding the computation of relief.

Analysis:
The High Court of Karnataka considered the question of whether the Tribunal was correct in excluding the expenditure incurred by the assessee from the total turnover when computing relief under Section 10-A of the Income Tax Act, 1961. The Court referred to a previous judgment in the case of CIT v. Tata Elxsi Ltd., emphasizing the need for uniformity in the ingredients of the formula for computing export profits. The Court highlighted that Section 10-A aims to provide incentives for promoting exports by exempting profits related to exports. It was noted that the export turnover forms a part of the denominator in the formula for computing export profits. Therefore, if certain expenses are excluded from the export turnover in the numerator, they should also be excluded from the total turnover in the denominator to maintain consistency. The Court emphasized that the interpretation of 'total turnover' should align with the context and legislative intent, respecting the meaning assigned to export turnover by the legislature. Consequently, the Court upheld the Tribunal's decision, dismissing the appeal and ruling in favor of the assessee against the revenue on the substantial question of law framed in the appeal.