Assessee is engaged in the business of providing solutions to the Railways. It had units both within and outside the Software Technology Park (STPI). In its return of income, it claimed deduction u/s. 10A for income earned from STPI unit. The lower authorities set-off the loss of non-STPI unit against profits of the STPI unit before giving the deduction u/s. 10A. Further, it made various disallowance/addition to returned income filed by the assessee. The authorities restricted deduction u/s. 10A as claimed in the return of income and not assessed income. The lower authorities excluded certain expenses from the export turnover and not from the total turnover while computing deduction u/s. 10A.

The Tribunal held the loss of the non-STPI unit shall not be adjusted against the profits of the STPI unit before computing deduction u/s. 10A. The disallowance/addition made during the assessment proceedings increases the profits of the assessee, thereby the deduction u/s. 10A should also be enhanced. Export turnover is part of total turnover. While computing deduction amount of deduction u/s. 10A, expenditure excluded from export turnover were also to be excluded from total turnover.  ( AY. 2008-09 to 2010-11)