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2016 (4) TMI 420 - AT - Income TaxComputation of deduction u/s 10A - exclusion of expenditure incurred in foreign currency towards tour and travel expenses from the export turnover as well as total turnover - Held that - This issue is covered by the judgment of Hon ble jurisdictional High Court in the case of CIT Vs. Tata Elxsi Ltd 2011 (8) TMI 782 - KARNATAKA HIGH COURT there should be uniformity in the ingredients of both the numerator and the denominator of the formula, Section 10-A is a beneficial section. It is intended to provide incentives to promote exports. 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. The components of the export turnover in the numerator and the denominator cannot be different. Formula will be Profits of the business of the undertaking Export turn over / (Export turnover domestic turn over) Total Turn Over
Issues:
Exclusion of expenditure incurred in foreign currency towards tour and travel expenses from export turnover and total turnover for computing deduction under Section 10A of the Income Tax Act, 1961. Analysis: The main issue in this case revolves around the exclusion of foreign currency expenditure for tour and travel expenses from both export turnover and total turnover for the purpose of computing the deduction under Section 10A of the Income Tax Act, 1961. The Assessing Officer initially reduced these expenses from the export turnover only. However, the CIT (Appeals) directed the exclusion of these expenses from the total turnover as well, citing the decision of the Hon'ble jurisdictional High Court in a similar case. The Tribunal noted that the issue was covered by a judgment of the Hon'ble jurisdictional High Court, which emphasized the need for uniformity in the elements of both the numerator and the denominator of the formula for computing the deduction under Section 10A. The Tribunal referred to the definition of "export turnover" and concluded that if certain expenses are excluded from the export turnover in the numerator of the formula, they should also be excluded when computing the export turnover as part of the total turnover in the denominator. The Tribunal further discussed a Special Bench judgment that clarified the exclusion of certain expenses from both the export turnover and the total turnover, emphasizing the need for consistency in the treatment of expenses in the formula. The Tribunal highlighted that Section 10A is aimed at providing incentives to promote exports, and the formula for computing the deduction is intended to apportion profits based on turnovers. The Tribunal concluded that since there is no specific definition of "total turnover" in Section 10A, the exclusion of expenses from the export turnover should also apply when calculating the export turnover as part of the total turnover. Therefore, the Tribunal upheld the decision of the CIT (Appeals) based on the principles established by previous judgments and the legislative intent behind Section 10A. In summary, the Tribunal dismissed the appeal of the revenue, affirming the decision to exclude the expenditure incurred in foreign currency towards tour and travel expenses from both the export turnover and total turnover for computing the deduction under Section 10A. The Tribunal found no error in following the judgments related to similar provisions and upheld the decision based on the legislative intent to promote exports and ensure consistency in the application of the formula for computing deductions under Section 10A.
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