The assessee is a resident company engaged within the business of export of software and IT-enabled service. For the Assessment Year 2009-2010, the assessee claimed deduction under section 10B in his return of income for an amount of Rs.12,55,03,000/-. During the assessment proceedings, the assessee has presented before the Assessing Officer that if in the least the claim under section 10B isn't allowed, an equivalent could also be considered under section 10A.
The Assessing Officer completed the assessment under section 143(3) and disallowed the claim of the assessee for deduction under section 10B for the quantity of Rs.12,55,03,000 for want of rectification accorded by the Board of Approval appointed for this purpose by the govt of India. The Assessing Officer rejected the choice claim of the assessee for deduction under section 10A.
Aggrieved over the order gone by the Assessing Officer, the assessee preferred an appeal before the Commissioner of tax (Appeals) and therefore the Commissioner of tax partly allowed the appeal. Challenging an equivalent, the assessee preferred an appeal before the Tax Appellate Tribunal, and therefore the Tribunal allowed the appeal by directing the Assessing Officer to verify the condition as per section 10A and allowed the claim of the assessee.
Mr M. Swaminathan, the counsel for the department contended that Tribunal was right in allowing the appeal of the assessee, who claimed exemption under section 10B but changed its claim to section 10A when it couldn't produce the Board’s approval in support of its claim.
The division bench of Justice M.Durai Swamy and Justice R. Hemalatha relied on the choice of the Supreme Court within the case of Commissioner of Income-Tax III v. Mphasis Ltd. wherein it had been held that there should be uniformity within the ingredients of both the numerator and therefore the denominator of the formula since otherwise, it might produce anomalies or absurd results. Section 10A may be beneficial. it's intended to supply incentives to market exports. the motivation is to exempt profits relatable to exports. within the case of combined business of an assessee, having export business and domestic business, the legislature intended to possess the formula to determine the profits from export business by apportioning the entire profits of the business on the idea of turnovers Apportionment of profits on the idea of turnover was accepted as a way of arriving at export profits. Though there's no definition of the term ‘total turnover’ in Section 10-A, there's nothing within the said Section to mandate that, what's excluded from the numerator that's export turnover would nevertheless form a part of the denominator.