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TMI Blog2016 (5) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... unds :- Grounds " 1. Transfer Pricing : The appellant wishes to state that the Hon'ble DRP and the learned A.O. grossly erred in upholding the income adjustment proposed by the learned TPO in arriving at the ALP of the international transactions entered into by the appellant. The appellant is in appeal before the Hon'ble Bench of the Income Tax Appellate Tribunal under Section 253(1)(d) against the order passed by the learned A.O. in pursuance of the directions of the learned Hon'ble DRP. 2. Software - Upper limit should be fixed for application of turnover filter. The Hon'ble DRP and the learned A.O. have erroneously upheld the TPO's contention that an upper limit to the turnover should not be applied while selectin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round No.1 relating to the issue of Transfer Pricing Adjustment become infructuous and accordingly the same is dismissed as withdrawn. 3. Ground No.2 regarding exclusion of telecommunication expenses and foreign travel expenditure from export turnover for the purpose of deduction under Section 10A. 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 349 ITR 98 (Kar) 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 jurisdictiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business, the legislature intended to have a formula to ascertain the profits from export business by apportioning the total profits of the business on the basis of turnovers. Apportionment of profits on the basis of turnover was accepted as a method of arriving at export profits. In the case of section 80HHC, the export profit is to be derived from the total business income of the assxcessee, whereas in section 10-A, the export profit is to be derived from the total business of the undertaking. Even in the case of business of an undertaking, it may include export business and domestic business, in other words, export turnover and domestic turnover. To the extent of export turnover, there would be a commonality between the numerator and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of CIT Vs. Gem Plus Jewellery India Ltd. 330 ITR 175, in identical circumstances, held that since the export turnover forms part of the total turnover, if an item is excluded from the export turnover, the same should also be reduced from the total turnover to maintain parity between numerator and denominator while calculating deduction u/s 10A of the Act. The relevant finding of the Hon'ble Mumbai High Court reads as follows:- "The total turnover of the business carried on by the undertaking would consist of the turnover from export and the turnover from local sales. The export turnover constitutes the numerator in the formula prescribed by sub-section (4). Export turnover also forms a constituent element of the denominator in as m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have a different meaning when it forms a constituent part of the total turnover for the purposes of the application of the formula. Undoubtedly, it was open to Parliament to make a provision which has been enunciated earlier must 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 turnove ..... X X X X Extracts X X X X X X X X Extracts X X X X
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