DCIT, BANGALORE vs. M/S ADITYA AUTO PRODUCTS & ENGINEERING (I) PVT. LTD.,, BANGALORE

This appeal is against the order dated 15.12.2011 of the CIT(Appeals)-I, Bangalore relating to assessment year 2008-09.

The only issue that arises for consideration in this appeal is as to whether the CIT(Appeals) was justified in directing the AO to exclude freight charges of Rs.2,07,19,006 from the export turnover, without reducing the same from the total turnover also, while computing deduction u/s. 10B of the Act.

According to the AO, as per the definition of export turnover given in clause (iv) to Explanation 2, the expenses incurred for freight expenses attributable to the delivery of the product or software outside India should be reduced from the export turnover. However, the provisions of section 10B do not provide for exclusion of such expenditure from total turnover. In the absence of a definition for total turnover in section 10B, the normal definition of total turnover has to be adopted and as such the expenses which are reduced from the export turnover in accordance with the specific definition cannot be reduced from the total turnover.

On appeal by the assessee, the CIT(Appeals) following the decision of the Hon’ble High Court of Karnataka in the case of CIT v. Tata Elxsi Ltd., 349 ITR 98 (Karn), held that whatever is excluded from the export turnover, has also to be excluded from the total turnover.