2019 (3) TMI 578 - HC - Income Tax

Eligible deduction u/s 10A - computation of claim - quantum of export turnover has been taken to be the actual remittances of foreign exchange after excluding the unrealised foreign exchange - HELD THAT - The 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. In the present case, the quantum of export turnover has been taken to be the actual remittances of foreign exchange after excluding the unrealised foreign exchange. This then would be the same figure to be adopted so far as the denominator is concerned as well. In fine, total turnover for purposes of the formula would be the actual sale receipts excluding unrealised foreign exchange as adopted for export turnover . This conclusion is also supported by the reasoning that the provisions of Section 10A/10B are beneficial in nature and seek to encourage an assessee engaging in a prescribed activity. We answer the question of law in the negative, in favour of the assessee

Summary

Issues:
- Appeal challenging an order of the Income Tax Appellate Tribunal related to the assessment year 2001-02.
- Exclusion of unrealised sale proceeds from 'total turnover' in the computation of relief under section 10A of the Income Tax Act, 1961.

Analysis:
1. The case involves the Revenue appealing against an order of the Income Tax Appellate Tribunal concerning the exclusion of unrealised sale proceeds from 'total turnover' for the assessment year 2001-02 under section 10A of the Income Tax Act, 1961.

2. The dispute revolves around the exclusion of unrealised sale proceeds from 'total turnover' in the formula for computing relief under section 10A. The Revenue argued that the unrealised amount should be included in 'total turnover' as it constitutes turnover, aligning with the Act's objective of promoting foreign exchange inflows.

3. The Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal had previously ruled in favor of the assessee, citing judgments emphasizing maintaining parity between the numerator and denominator in such computations.

4. The Revenue contended that the unrealised sale proceeds not brought into the country within the prescribed period should be excluded from the numerator (export turnover) but included in the denominator ('total turnover') to uphold the Act's purpose of incentivizing export activities.

5. The Court referred to precedents related to section 80HHC deductions, emphasizing that only actual receipts should be included in 'export turnover,' while 'total turnover' encompasses both actual receipts and unrealised amounts. This interpretation aligns with the legislative intent behind the Act's provisions.

6. The Court also discussed the definition of 'export turnover' and 'total turnover' under section 10A, highlighting that items excluded from the numerator should likewise be excluded from the denominator, as established in a Supreme Court ruling.

7. The judgment concluded that the unrealised sale proceeds should be excluded from both 'export turnover' and 'total turnover' in the formula for computing relief under section 10A, supporting the assessee's position. The decision favored the assessee, dismissing the Revenue's appeal.