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TMI Blog2009 (7) TMI 1276X X X X Extracts X X X X X X X X Extracts X X X X ..... f it has to be included in the total turnover. That element is missing in the case of freight, telecom charges or insurance attributable to the delivery of the goods outside India and expenses incurred in foreign exchange in connection with the provision of technical services outside India. These receipts can only be received by the assessee as reimbursement of such expenses incurred by him. Mere reimbursement of expenses cannot have an element of turnover. It is only in recognition of this position that in the definition of export turnover in section 10B the aforesaid two items have been directed to be excluded. Secondly, the definition of export turnover contemplates that the amount received by the assessee in convertible foreign exchange should represent consideration in respect of the export. Any reimbursement of the two items of expenses mentioned in the definition can under no circumstances be considered to represent consideration for the export of the computer software or articles or things. Thus, the expression total turnover which is not defined in section 10B should also be interpreted in the same manner. Thus, the two items of expenses referred to in the definiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Bangalore) Pvt. Ltd. ITA No.60(Bang) of 2008. 3.3 It was further submitted that the issue of not setting off of unabsorbed depreciation and BF losses while allowing deduction u/s 10A has been decided by the jurisdictional Bench in the case of KPIT Cummins Infosystems (P) Ltd. vs ACIT 26 SOT 529. After considering the various decisions of the jurisdictional Bench, the learned CIT(A) directed that the brought forward losses and unabsorbed depreciation of earlier years should not be reduced for the purpose of computing deduction u/s 10A as per para 7.4 of his order, which is reproduced as under:- 7.4 In a nutshell, to arrive at the taxable income, one has to determine the profits and gain derived by the 10A unit, quantify the deduction, give effect to the deduction and compute the balance business income. The same analogy applies even in respect of brought forward losses. The set off of the current year's losses is done u/s 71 and carried forward u/s 72 - both under Chapter VI. Since the relief u/s 10A is provided in Chapter III, there arises no need to traverse to Chapter VI for set off and carry forward of losses. Respectfully following the decisions of the jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al undertaking was exempt u/s 10A while for the asst. year under consideration, the language of the section stands changed and it has been made clear that subject to provisions of section 10A, a deduction of such profits and gains as are derived by an undertaking from the export of articles or things is to be allowed from the total income of the assessee. When the Legislature has provided that deduction is of such profits and gains, then the word 'such' as mentioned in the provision will refer to the profit and gains of the undertaking only. The word 'an' has been used before undertaking and therefore, the profits and gains of each undertaking is to be separately ascertained for computing the deduction. It is mentioned that deduction is to be allowed from the total income. It is nowhere mentioned that deduction is to be allowed from the total income to the extent such income is included in the total income. It means that the provisions similar to section 80AB has not been mentioned in section 10A of the I.T. Act. Section 80AB is applicable in respect of deduction under Chapter VIA. Section 10A(4) provides the mode for computing the deduction. Section 10A(4) is as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4) refers to the profit and gains of that particular year. If for earlier years, the assessee has opted u/s 10A(8) that provisions of section 10A be not applied then the undertaking is non STPI unit for those asst. years and loss of non STPI unit cannot be set off against profit of an STPI undertaking. 3.12 The Special Bench while considering allowability of deduction u/s 80IA has held that profits or losses and unabsorbed depreciation is to be reduced for the purpose of computing deduction u/s 80IA. Such conclusion was based on account of sub section (5) of section 80IA. 80IA(5) is as under:- 80IA(5) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar's depreciation, is a fiction for a specific purpose. The Supreme Court in the case of CIT vs Mother India Refrigeration Industries (P) Ltd. (1985) 155 ITR 711 explained it in the following words: The avowed purpose of the legal fiction created by the deeming provision contained in provision (b) to section 10(2)(vi) of the Indian Income-tax Act, 1922 and in section 32(2) of the Income-tax Act, 1961, is to make the unabsorbed carried forward depreciation partake of the same character as the current depreciation in the following year so that it is available unlike unabsorbed carried forward business loss, for being set off against other heads of income of that year. Such being the purpose for which the legal fiction is created, the fiction cannot be extended beyond its legitimate field and will have to be confined to that purpose. It cannot be said that because of the legal fiction, the unabsorbed carried forward losses should be given preference not merely over the unabsorbed carried forward depreciation but also over the current year's depreciation. Current year's depreciation is allowed as a deduction u/s 32(1) of the Income-tax Act. If the net result of the computa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... culars and notifications also provides that the unabsorbed depreciation allowance and brought forward business loss should not be included in the computation of deduction u/s 10A. The format of return of income prescribed by CBDT through its circulars and notifications being binding on the revenue authorities, they should not be allowed to take a contrary stand. The lower authorities in support of their stand have relied on the decision of Karnataka High Court in the case of Himatasingike Seide Ltd. (supra). The Karnataka High Court held that unabsorbed depreciation and investment allowance have to be set off against income of eligible units before the computation of exemption u/s 10B. It was also held that the income eligible for exemption has to be computed as per the provision of the Income-tax Act and not on a commercial basis. The case before the Karnataka High Court pertained to asst. year 1994-95. Section 10B at the relevant time excluded certain incomes in the process of arriving at the total income. Section 10B at the relevant time operated as an exemption section. The terminology of section 10B has not been changed. The section currently provides for a deduction from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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