2014 (7) TMI 81 - AT - Income Tax

Deduction u/s 10A of the Act Computation of export turnover Exclusion of non-export turnover but inclusion in total turnover It was clarified by the assessee, that the corporate subsidy of Rs. 3,36,56,472/- pertained to the period April 2006 to October 2006 and the balance amount of Rs. 3,46,96,577/- pertained to the period from November 01,2006 onwards. - Held that - there was no merit in the ground raised by department because CIT(A) deleted the addition on the ground of double addition which finding has not been controverted by department Following CIT Vs. Lakshmi Macahine Works 2007 (4) TMI 202 - SUPREME Court - any receipt which does not have an element of turnover cannot find a place either in the export turnover or the total turnover - Reimbursement of expenses has to be excluded from both export turnover and total turnover - Decided against Revenue.

Summary

Issues:
1. Allowability of deduction u/s 10A.
2. Treatment of corporate subsidy in relation to export turnover.
3. Exclusion of expenses from export turnover for computing deduction u/s 10A.
4. Parity between export turnover and total turnover for deduction calculation.

Issue 1: Allowability of deduction u/s 10A:
The appeal focused on the deduction u/s 10A claimed by the assessee company for the assessment year. The assessing officer had completed the assessment at a different income amount than declared by the company, leading to a dispute over the allowable deduction under section 10A. The department challenged the order of the CIT(A) regarding the deduction, raising specific grounds for appeal.

Issue 2: Treatment of corporate subsidy in relation to export turnover:
The main contention revolved around a corporate subsidy received by the company, which the assessing officer deemed as not forming part of the export turnover. The CIT(A) upheld this decision, excluding a portion of the subsidy from the export turnover calculation. The judgment analyzed the nature of the subsidy, its relation to the actual business activities, and its impact on the computation of deduction u/s 10A.

Issue 3: Exclusion of expenses from export turnover for computing deduction u/s 10A:
The judgment delved into the exclusion of specific expenses, such as lease line charges, from the export turnover for the purpose of calculating the deduction u/s 10A. The CIT(A) considered various legal precedents and explanations to determine the treatment of these expenses in relation to both export turnover and total turnover, emphasizing the need for consistency and adherence to statutory provisions.

Issue 4: Parity between export turnover and total turnover for deduction calculation:
A significant aspect addressed in the judgment was the principle of parity between export turnover and total turnover for the computation of deductions under section 10A. The CIT(A) relied on judicial decisions to establish the correlation between the two turnovers and the necessity of aligning the treatment of specific items, such as communication charges, in both calculations to avoid double taxation and ensure fairness.

This detailed analysis of the judgment highlights the key issues surrounding the allowance of deduction u/s 10A, treatment of corporate subsidy, exclusion of expenses from export turnover, and the principle of parity between export turnover and total turnover in the context of computing deductions. The judgment provides a comprehensive examination of the legal arguments, factual submissions, and relevant precedents to arrive at a reasoned decision dismissing the department's appeal.