2017 (4) TMI 1346 - AT - Income Tax

Deduction u/s 10A - the expenses reduced from the export turnover for the purpose of computing deduction allowable to the assessee u/s 10A should be reduced from the total turnover also - Held that - This aspect of the matter is now squarely covered in favour of the assessee by the judgment in the case of M/s Tata Elxsi Ltd. (2011 (8) TMI 782 - KARNATAKA HIGH COURT). In this case, it was held by the Hon ble High Court that the total turnover is sum total of export turnover and domestic turnover and therefore, if an amount is reduced from the export turnover then the total turnover also goes down by the same amount automatically. Respectfully following the aforesaid judgment, we decline to interfere with the order of the ld. CIT(A) on this issue.

Summary

Issues:
1. Revenue's appeal challenging the order of the ld. CIT(A)-3, Bangalore for assessment year 2009-10.
2. Assessee's cross-objections regarding exclusion of telecommunication and travel expenses from export turnover for computing deduction under section 10A/10B of the Act.

Analysis:
1. The revenue challenged the CIT(A)'s order, arguing that the expenses reduced from export turnover should not be reduced from total turnover. The revenue contended that the CIT(A) erred in following the ratio of a High Court case and that no provision under section 10A allows for such exclusion. However, during the hearing, the AR of the assessee supported the CIT(A)'s order, citing a judgment by the Hon’ble Karnataka High Court in the case of M/s Tata Elxsi Ltd. The Tribunal noted that the High Court held that reducing an amount from export turnover automatically reduces the total turnover. Consequently, the Tribunal declined to interfere with the CIT(A)'s order, dismissing the revenue's appeal.

2. The assessee's cross-objections focused on the exclusion of telecommunication and travel expenses from export turnover for deduction computation under section 10A/10B. The assessee argued that these expenses were not included in the export turnover, representing only consideration for services rendered. The assessee claimed that the telecommunication expenses were not related to services outside India, and the foreign currency travel expenses were not for providing technical services abroad. However, the AR of the assessee, during the hearing, withdrew the grounds raised in the cross-objections, stating that since the revenue's appeal should be dismissed, the assessee did not press these grounds. Consequently, the Tribunal dismissed the cross-objections as not pressed.

In conclusion, the Tribunal upheld the CIT(A)'s decision regarding the reduction of expenses from export turnover for computing deductions under section 10A. The Tribunal also dismissed the revenue's appeal and the assessee's cross-objections, as the grounds raised in the cross-objections were withdrawn during the hearing.