2018 (4) TMI 94 - HC - Income Tax

Deductions u/s 10-A claim computation - Interpretation of Total Turnover & Export Turnover under 10A - Held that - The method of computing the exemption under Section 10-A of the Act and precisely, the question as to whether the expenses excluded from the export turnover are also to be excluded from the total turnover for the purpose of Section10- A of the Act, has been dealt with by this Court in the case of TATA ELXSI LTD. 2011 (8) TMI 782 - KARNATAKA HIGH COURT as held 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. - Decided against revenue

Summary

Issues:
1. Appeal under Section 260-A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal.
2. Deductions under Section 10-A of the Act for the assessment year 2006-2007.
3. Exclusion of certain expenses from export turnover and total turnover for computing relief under Section 10-A of the Act.
4. Interpretation of the term "total turnover" in Section 10-A of the Act.

Analysis:
1. The Revenue filed an appeal under Section 260-A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal related to the assessment year 2006-2007. The Tribunal had directed the Assessing Officer to reduce the expenditure incurred in foreign currency from both export turnover and total turnover for computing the deduction under Section 10-A of the Act. The Revenue contended that the Tribunal erred in allowing the expenses reduced from export turnover to also be reduced from total turnover, as Section 10-A does not provide for such exclusion.

2. The High Court examined the issue of deductions under Section 10-A of the Act and referred to the case of COMMISSIONER OF INCOME TAX v. TATA ELXSI LTD., where it was held that expenses excluded from export turnover should also be excluded from total turnover for computing the deduction under Section 10-A. The Court emphasized that the components of export turnover in the numerator and the denominator cannot be different, and the interpretation should align with the legislative intent.

3. The Court reiterated that when the total turnover includes export turnover, the same meaning given to export turnover by the legislature should be adopted for total turnover. If the legislature intended to include what is excluded from export turnover in total turnover, it would have expressly stated so. Since there was no infirmity in the Tribunal's order, the Court dismissed the appeal, concluding that the principles laid down in the TATA ELXSI LTD. case applied to the present case as well.

4. In summary, the High Court upheld the Tribunal's decision regarding the exclusion of certain expenses from both export turnover and total turnover for computing relief under Section 10-A of the Income Tax Act, emphasizing the need for consistency in interpreting the components of turnover and aligning with legislative intent. The appeal was dismissed as no substantial question of law was found to merit admission.