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22 五月 2018

Deduction under s.10A allowed in both export and total turnover

Supreme Court has held that software development charges relatable to technical services provided outside India are to be excluded from ‘total turnover’ while working out deduction under Section 10A of Income Tax Act.

The main issue revolved around the claim of certain expenses attributable to the delivery of software outside India or in providing technical services, from ‘total turnover’ by the assessee under Section 10A.

The Court in this regard noted that the term ‘total turnover’ was neither defined in Section 10A nor in Section 2, and that though same is defined in clause (ba) of the Explanation to Section 80HHC, but said definition cannot be adopted for the purposes of Section 10A as the technical meaning of total turnover does not envisage reduction of any expenses from the total amount the taken into consideration for computing the deduction under Section 10A.

The Apex Court in CIT v. HCL Technologies observed that Section 10A is a special beneficial provision and the purpose of deduction under such section is to encourage and boost the new business undertakings situated in the free trade zone by providing suitable deductions to such business entities.
It was thus held that if deductions on freight, telecommunication and insurance are allowed only in export turnover and not total turnover, then intention of legislature would get defeated. 

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