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TMI Blog2011 (11) TMI 848X X X X Extracts X X X X X X X X Extracts X X X X ..... y this consolidated order for the sake of convenience and brevity. 3. The grounds of appeal for both the asst. years are identical. Ground nos. 1 and 7 are general in nature and no specific adjudication is called for and hence, the same are dismissed. 4. Ground Nos.2 to 4 reads as follows:- (2) The learned CIT(A) erred in upholding the order of the AO in reducing the quantum of deduction u/s 10B of the Act in excluding certain items of expenditure incurred outside India by deducting the same from the quantum of export turnover. (3) The learned CIT(A) ought to have appreciated that even if the adjustments as made by the AO are to be held as correct with regard to the export turnover, he should have directed the AO to ado ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14,37,66,854 1,85,73,645 6.1 Similarly, for asst. year 2007-08, the AO, while concluding the assessment, reduced the quantum of deduction u/s 10B of the Act by reducing the freight from the export turnover and, at the same time keeping the total turnover at an amount inclusive of freight. The relevant details with reference to the claim of the assessee, the adjustment made by the AO are as follows:- Amount in Rupees Claimed by the assessee Adjusted claim as per AO Variance Export turnover 59,40,30,339 57,14,93,308 2,25,378,031 Tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ales. 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 much as the export turnover is a part of the total turnover. The export turnover, in the numerator must have the same meaning as the export turnover which is constituent element of the total turnover in the denominator. The legislature has provided a definition of the expression export turnover in Expln.2 to s.10A which the expression is defined to mean the consideration in respect of export by the undertaking of articles, things or computer software received in or brought into India by the assessee in convertible foreign exchange but so as not to include inter alia fre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eight 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 Indust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to the facts of the instant case. In the light of the above reasoning, we direct the AO to exclude the above mentioned expenses both from the export turnover as well as from the total turnover while calculating deduction u/s 10B of the Act. 6.11 In the result, ground no.3 mentioned above is allowed. 7. Ground Nos. 5 6 The assessee company is engaged in the business of manufacture and export of pharmaceutical and neutraceutical products. During the asst. years 2006-07 and 2007-08, the assessee company developed in its plant at Hosur a new product known as Sucralose . The expenditure incurred in relation to development of this new product was claimed as revenue expenditure. The AO while completing the assessment for asst. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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