M/S. POLYBOND INDIA PVT.LTD,,PUNE vs. JOINT COMMISSIONER OF INCOME-TAX, RANGE - 4,, PUNE

Briefly stated, the facts of the case are that the assessee claimed deduction u/s 10B of the Act. Insofar as the issue under consideration is concerned, the Assessing Officer (AO) observed that in the computation of deduction u/s 10B of the Act, the export incentive in the shape of DEPB entitlement amounting to Rs.48,28,452 was though correctly excluded by the assessee from the export turnover, but was not included in the total turnover as well. He, therefore, included the DEPB entitlement in the `total turnover‟. The ld. CIT(A) affirmed the decision of the AO.

Having heard the rival submissions and perused the relevant material on record, it is seen that the assessee claimed deduction u/s 10B of the Act. In the computation of deduction, the assessee inter alia, excluded DEPB entitlement of Rs.48.28 lakhs from the `export turnover‟ which amount was also excluded from the amount of `total turnover‟. The authorities below have opined that though the assessee was correct in excluding DEPB benefit from the `export turnover‟ but ought to have retained it in the `total turnover‟. In our considered opinion, this proposition is ill- founded. `Total turnover‟ comprises of `export turnover‟ and domestic turnover. If a particular constituent of `export turnover‟ is not rightly includible in it, that obviously ceases to be a part of export turnover and hence cannot be included in the amount of `total turnover‟ because it is the amount of export turnover, which forms a part of total turnover. The Hon'ble Supreme Court in CIT vs. HCL Technologies (2018) 404 ITR 719 (SC) has held to this extent in the context of section 10A. We, therefore, overturn the order of the ld. CIT(A) on this score.

The only other ground which survives is against confirmation of addition 10% of Director‟s foreign travelling expenses at Rs.2,39,124. The factual matrix of the issue is that the assessee incurred Rs.23.91 lakh as foreign travel expenses. The AO made the disallowance at 10% on the ground that the relevant details were not submitted, which came to be affirmed in the first appeal.

We have heard the rival submissions and perused the relevant material on record. The ld. AR fairly admitted that this issue has been considered by the Tribunal in the immediately next A.Y. 2012-13 in which the disallowance has been restricted to 5% of foreign travel expenses. A copy of such order dated 02.11.2018 in restricting the disallowance at 5% of total foreign travelling expenses has been placed on record. He argued that the view taken by the Tribunal in the assessee‟s own case for the immediately succeeding year be followed. No serious objection was taken by the ld. DR. Without going into the evaluation of the issue on legal parameters and accepting the contention of ld. AR, based on the Tribunal order, we sustain the disallowance at 5% as against 10% upheld in the first appeal.

The additional ground was not pressed by the ld. AR, which is hereby dismissed.

In the result, the appeal is partly allowed.