Dismissing the appeals of the revenue the Court held that ; if the deductions on freight, telecommunication and insurance attributable to the delivery of computer software u/s 10A of the IT Act are allowed only in Export Turnover but not from the Total Turnover then, it would give rise to inadvertent, unlawful, meaningless and illogical result which would cause grave injustice to the assessee which could have never been the intention of the legislature As the object of the formula is to arrive at the profit from export business, expenses excluded from export turnover have to be excluded from total turnover also. Otherwise, any other interpretation makes the formula unworkable and absurd. Even in common parlance, when the object of the formula is to arrive at the profit from export business, expenses excluded from export turnover have to be excluded from total turnover also. Otherwise, any other interpretation makes the formula unworkable and absurd. Hence, we are satisfied that such deduction shall be allowed from the total turnover in same proportion as well. (CA NOS. 8489-8490 OF 2013, dt. 24.04.2018)
CIT v. HCL Technologies Ltd( 2018) 404 ITR 719/ 165 DTR 305/302 CTR 191/255 Taxman 313 (SC) , www.itatonline.org/CIT v. Aditi Technologies (P) Ltd (2018) 165 DTR 305//302 CTR 191/255 Taxman 313 (SC) , www.itatonline.org
S. 10A : Free trade zone – Profits of business- Export turnover –Total turn over – Export turnover is the numerator whereas the total turnover is the denominator in the formula for computing profit from exports. Software development charges are to be excluded while working out the deduction admissible on the ground that such charges are relatable towards expenses incurred on providing technical services outside India. [ S.80HHC. 80HHE )