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2020 (5) TMI 17 - AT - Income TaxEligible profit for deduction u/s.10A - CIT(A) in directing the AO to deduct the export sale proceeds not received within the stipulated period from both the export turnover as well as the total turnover - HELD THAT - Decision of the Ld.CIT(A) is inconsonance with the decision of CIT v. HCL Technologies Ltd. 2018 (5) TMI 357 - SUPREME COURT and also the decision of CIT v. M/s.Maars Software International Ltd. 2019 (3) TMI 578 - MADRAS HIGH COURT components of the total turnover/denominator in the formula would be the quantum of export turnover/numerator plus proceeds from domestic sales. Thus what is export turnover for the purpose of the numerator would have to be the export turnover for the purpose of denominator as well and export turnover cannot assume two different characteristics for two parts of the same formula. Disallowing the loss on account of the exchange rate fluctuation in respect of sale proceeds holding to be a notional - HELD THAT - As decided in OIL NATURAL GAS CORPORATION LTD. VERSUS COMMISSIONER OF INCOME TAX 2010 (3) TMI 81 - SUPREME COURT held that the loss suffered by the Assessee maintaining accounts regularly on mercantile system and following accounting standards prescribed by the Institute of Chartered Accountants of India (ICAI) on account of fluctuation in the rate of foreign exchange as on the date of balance-sheet was an item of expenditure u/s 37(1) notwithstanding that the liability had not been discharged in the year in which the fluctuation in the rate of foreign exchange occurred. Loss claimed by the Assessee on account of fluctuation in the rate of foreign exchange as on the date of balance-sheet is allowable as expenditure under Section 37(1) - Decided in favour of the assessee Depreciation on the cost of the imported software from the eligible profits for the deduction u/s.10A - what can be allocated between the STP Unit and the non-STP Units is only indirect expenditure. The expenditure which can be directly be identified with a particular unit cannot be apportioned between the two units - HELD THAT - Admittedly the AO apportioned the depreciation between the STP units and the non-STP units but the contention of the assessee is that the depreciation on imported software cannot be apportioned to STP Unit because it was exclusively used in the domestic sales is required to be adjudicated with reference to the evidence on record as it is a question of fact. But CIT(A) had not gone into the evidence whether the imported software was used exclusively in the domestic sales or not. In these circumstances we are of the considered opinion that the matter should go back to the AO to adjudicate the issue as - Whether the imported software was used exclusively in the domestic sales? If so to exclude the same from the eligible profit for deduction u/s.10A - Appeal filed by the Revenue is partly allowed for statistical purposes.
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