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TMI Blog2013 (11) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... 2006-07 and 2008-09. Since both appeals have common issues they were heard together and are disposed off by way of this combined order. 2. The facts of the case, in brief, are as under:- 2.1 The assessee, a company engaged in software development services, is a subsidiary of Ikanos Communications Inc., USA. It was incorporated on 13/1/2004 and is registered with the Software Technology Parks of India (STPI). For assessment year 2006-07, the assessee filed its return of income on 15/11/2006 declaring income of Rs.27,394/- after claiming deduction of Rs.1,91,19,645/- under section 10A of the Income Tax Act, 1961 ( the Act in short). Under the provisions of section 115JB of the Act, the assessee declared loss of Rs.4,81,213/-. The return of income was processed under section 143(1) of the Act and the case was taken up for scrutiny. The Assessing Officer completed the assessment by an order under section 143(3) of the Act dated 29/12/2009 determining the total income of the assessee at Rs.10,62,058/- as against declared income of Rs.27,394/-. In doing so, the Assessing Officer had restricted the assessee s claim for deduction under section 10A of the Act to Rs.1,80,84,981/- as aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of CIT v Tata Elxsi Ltd. (judgement dated 30.08.2011) (2012) 247 CTR 334. The Hon ble High Court clearly held that for the purpose of computing deduction/exemption under section 10A of the IT Act, The communication expenses are to be excluded from the numerator i.e. export turnover as well as from the denominator i.e. total turnover . The decision of the jurisdictional High Court is application to the present case for the assessment year 2006-07. Therefore, the Assessing Officer is directed to recompute the deduction under section 10A of the I T Act for the assessment year 2006-07 as per the decision of the Hon ble High Court of Karnataka . The learned CIT(A) in his common order dated 28/6/2012 has given the same finding on this issue for assessment year 2008-09 at para 4.3 of his order. 3. Aggrieved by the orders of the CIT(A)-I, Bangalore for the assessment years 2006-07 and 2008-09 by common order dated 28/6/2012, revenue is in appeal before us raising the following grounds for assessment year 2006-07:- 1. The order of the learned CIT(A) in so far as it is prejudicial to the interest of revenue, is opposed to law and the facts and circumstances of the case. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompute the deduction under section 10A of the Act by reducing the telecommunication expenses and expenditure incurred in foreign currency from both the export turnover as well as the total turnover. The learned Authorised Representative submitted that this issue as held by the learned CIT (Appeals) is squarely covered in favour of the assessee by the decision of the Hon'ble jurisdictional High Court of Karnataka in the case of CIT V Tata Elxsi Ltd Others (2011) 247 CTR 334 (Karnataka) and therefore revenue s grounds are liable to be dismissed. 5.3.1 We have heard the rival submission and perused the material on record. The Hon ble Karnataka High Court in the case of CIT v M/s Tata Elxsi Ltd. Others had held that while computing the exemption u/s 10A, if the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded from the total turnover in the denominator. The relevant finding of the Hon ble jurisdictional High Court reads as follows:- ..Section 10A is enacted as an incentive to exporters to enable their products to be competitive in the global market and consequently earn precious foreign exchange for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ominator cannot be different. Therefore, though there is no definition of the term total turnover in section 10A, there is nothing in the said section to mandate that, what is excluded from the numerator that is export turnover would nevertheless form part of the denominator. When the statute prescribed a formula and in the said formula, export turnover is defined, and when the total turnover includes export turnover, the very same meaning given to the export turnover by the legislature is to be adopted while understanding the meaning of the total turnover, when the total turnover includes export turnover. If what is excluded in computing the export turnover is included while arriving at the total turnover, when the export turnover is a component of total turnover, such an interpretation would run counter to the legislative intent and impermissible. Thus, there is no error committed by the Tribunal in following the judgments rendered in the context of section 80HHC in interpreting section 10A when the principle underlying both these provisions is one and the same . 5.3.2 The Hon ble Mumbai High Court in the case of Gem Plus Jewellery India Ltd. (supra), in identical circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st prevail as a matter of correct statutory interpretation. Any other interpretation would lead to an absurdity. If the contention of the Revenue were to be accepted, the same expression viz. export turnover would have a different connotation in the application of the same formula. The submission of the Revenue would lead to a situation where freight and insurance, though these have been specifically excluded from export turnover for the purposes of the numerator would be brought in as part of the export turnover when it forms an element of the total turnover as a denominator in the formula. A construction of a statutory provision which would lead to an absurdity must be avoided. Moreover, a receipt such as freight and insurance which does not have any element of profit cannot be included in the total turnover. Freight and insurance charges do not have any element of turnover. For this reason in addition, these two items would have to be excluded from the total turnover particularly in the absence of a legislative prescription to the contrary CIT v Sudarshan Chemicals Industries Ltd. (2000) 163 CTR (Bom) 596: (2000) 245 ITR 769 (Bom) applied; CIT v Lakshmi Machine Works (20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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