DCIT, Bangalore V. M/s Provimi Animal Nutritions India Pvt. Ltd., Bangalore

ITA 379/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57499 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 06-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE SHRI N.K.SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K, JUDICIAL MEMBER I.T.A. NO.379/BANG/2011 (ASSESSMENT YEAR : 2006-07) DY. COMMISSIONER OF INCOME TAX, CIR. 12(2), NRUPATHUNGA ROAD, BANGALORE-560 001 . APPELLANT. VS. M/S. PROVIMI ANIMAL NUTRITIONS INDIA PVT. LTD. (FORMERLY KNOWN AS M/S. TETRAGON CHEMIE PVT. LTD.) NO.IS-40, KHB INDL. AREA, YELAHANKA NEW TOWN, BANGALORE-560 064 .. RESPONDENT. PAN AAACT 4909N APPELLANT BY : SHRI SARAVANAN. B. RESPONDENT BY : SHRI BALRAM R. RAO. DATE OF HEARING : 14.02.2012. DATE OF PRONOUNCEMENT : 24.2.2012. O R D E R PER N.K. SAINI, A.M. : THIS IS AN APPEAL BY THE DEPARTMENT AND IS DIRECT ED AGAINST THE ORDER DATED 7.12.2010 OF LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)-III, BANGALORE. 2. ALTHOUGH THE DEPARTMENT HAS RAISED AS MANY AS FO UR GROUNDS BUT THE ONLY EFFECTIVE GROUND RAISED IS AS UNDER : THE CIT(A) HAS ERRED IN LAW IN DIRECTING THE ASSE SSING OFFICER TO EXCLUDE EXPENSES INCURRED ON FREIGHT OF RS.41,78,700, INSUR ANCE CHARGES OF RS.1,14,000, 2 ITA NO.379/BANG/2011 TELECOMMUNICATION OF RS.1,02,674 AND EXPENSES INCUR RED ON IT NETWORK CHARGES OF RS.11,51,774 IN FOREIGN CURRENCY, FROM TOTAL TUR N OVER FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 10B OF THE IT ACT , 1961. 3. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE WAS ENGAGED IN MANUFACTURING AND SALE OF ANIMAL FEED SUPPLEMENTS AND VETERINARY DRUGS. THE ASSESSEE FILED ITS RETURN OF INCOME ELECTRONICALLY ON 29.11.2006 DECLARING NET T AXABLE INCOME OF RS.10,40,95,165 AND VALUE OF FRINGE BENEFIT TAX AT RS.67,03,498. THE RE TURN WAS PROCESSED UNDER SECTION 143(1) OF INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED AS THE ACT). LATER ON, THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESS MENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE IN RESPECT OF EXPORT OF M ANUFACTURED GOODS HAD CLAIMED A DEDUCTION OF RS.7,67,07,506 UNDER SECTION 10B OF TH E ACT. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE WHILE COMPUTING THE DEDUCTION UND ER SECTION 10B OF THE ACT HAD REDUCED AN AMOUNT OF RS.41,78,700 OUT OF THE EXPORT TURNOVE R IN RESPECT OF FREIGHT ATTRIBUTABLE TO DELIVERY OF EXPORTS OUTSIDE THE COUNTRY BUT DID NOT REDUCE THE TELECOMMUNICATION EXPENSES OR INSURANCE OR SALES CARRIAGE OUTWARDS OR EXPENSES IF ANY IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICES OUTSIDE INDIA. ACCORDING TO THE ASSESSING OFFICER, SUCH AMOUNT SHOULD ALSO NECESSARILY BE REDUCED FROM THE EXPORT TURN OVER BEFORE COMPUTATION OF DEDUCTION UNDER SECTION 10B OF THE ACT. THE ASSESS ING OFFICER ALSO NOTICED THAT THE ASSESSEE HAD PAID AN AMOUNT OF 19,588 EURO TOWARDS NETWORK COST TO PROVMI HOLDING B.V. OF NETHERLANDS, WHICH WAS HOLDING COMPANY OF THE ASSES SEE AND ITS IT NETWORK COST HAD NOTHING BUT IN THE NATURE OF TELECOMMUNICATION EXPE NSES IN RESPECT OF EXPORT TURN OVER. THE ASSESSING OFFICER ALSO REDUCED THE VALUE OF 19, 588 EURO WHICH WORKS OUT TO RS. 11,51,774 FROM THE EXPORT TURN OVER. ACCORDINGLY, DEDUCTION UNDER SECTION 10B WAS ALLOWED AT RS.7,38,75,455 INSTEAD OF RS.7,57,07,506 CLAIMED BY THE ASSESSEE. 4. THE ASSESSEE CARRIED THE MATTER TO THE L EARNED CIT(A) AND SUBMITTED THAT THE EXPENSES IN QUESTION WERE SO EXCLUDED FROM EXPORT T URNOVER, THE SAME SHOULD ALSO BE EXCLUDED FROM THE TOTAL TURNOVER IN COMPUTING THE D EDUCTION UNDER SECTION 10B OF THE ACT. IT WAS FURTHER STATED THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF ANIMAL FEED, SUPPLEMENTS AND VETERINARY DRU GS. THEREFORE, THE EXPENDITURE INCURRED TOWARDS THE EXPORT OF GOODS WAS INCIDENTAL TO THE B USINESS OF EXPORT AND HENCE IT COULD NOT BE REDUCED FROM THE GROSS EXPORT TURNOVER FOR THE P URPOSE OF COMPUTING THE EXPORT TURNOVER. WITHOUT PREJUDICE TO THE ABOVE, THE ASSE SSEE ALSO CONTENDED THAT FREIGHT, INSURANCE, TELECOMMUNICATION AND COST OF IT NET WOR K IN FOREIGN CURRENCY SHOULD HAVE BEEN 3 ITA NO.379/BANG/2011 REDUCED FROM BOTH THE EXPORT TURNOVER AND THE TOTAL TURNOVER. THE RELIANCE WAS PLACED ON THE FOLLOWING CASES. I) KPIT CUMMINS INFOSYSTEMS VS. ACIT, CIR 11(2), BANGA LORE (IT APPEAL NO.60(BANG) OF 2008). II) DCIT VS. BINARY SEMANTICS LTD. (109 TTJ 556) III) DELL INTERNATIONAL SERVICES INDIA PVT. LTD. (ITA NO S.362 & 363/BANG/07 BANGALORE TRIBUNAL) IV) I GATE GLOBAL SOLUTIONS LTD. (2008) (TIOL-18 BANG) V) ANZ OPERATIONS & TECHNOLOGY PVT. LTD. VS. CIT (ITA NO.30/BANG/2008) VI) CIT VS. GEM PLUS JEWELLERY INDIA LTD. (2010) 330 IT R 175 (BOM) VII) ITO VS. SAK SOFT LTD. (2009) 313 ITR (AT) 353 (CHEN NAI) (SB) VIII) INFOSYS TECHNOLOGIES LTD. (ITA NOS.50, 793 TO 795, 742 AND 732 TO 734 BANGALORE TRIBUNAL) IX) GOODRICH AEROSPACE SERVICES PVT. LTD. (2008-TIOL-47 7-ITAT-BANG) 5. THE LEARNED CIT(A) AFTER CONSIDERING T HE SUBMISSIONS OF THE ASSESSEE DIRECTED THE ASSESSING OFFICER TO EXCLUDE EXPENSES INCURRED BY THE ASSESSEE TOWARDS FREIGHT, CLEARING & FORWARDING CHARGES AND INSURANCE CHARGES WHICH WERE ATTRIBUTABLE TO DELIVERY OF EXPORTED GOODS FROM THE EXPORT TURN OVER AND ALSO F ROM THE TOTAL TURN OVER WHILE COMPUTING THE DEDUCTION UNDER SECTION 10B OF THE AC T. 6. NOW THE DEPARTMENT IS IN APPEAL. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE STRON GLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER WHILE THE LEARNED COUNSEL FOR TH E ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMI TTED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE ITAT, CHENNAI (SPECIAL BENCH) IN THE CASE OF ITO VS. M/S.SAK SOFT LTD. (2009) 313 IT R (AT) 353 AND JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GEM PLUS JEWELLERY INDIA LTD. (2010) 330 ITR 175. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF B OTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PR ESENT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF EXPORTING D IFFERENT VETERINARY PRODUCTS AND CLAIMED DEDUCTION UNDER SECTION 10B OF THE ACT BEIN G PROFIT ON 100 % EXPORT ORIENTED UNIT. HOWEVER, THE ASSESSING OFFICER WHILE FRAMING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT COMPUTED DEDUCTION UNDER SECTION 10B OF THE ACT BY REDUCING THE EXPENDITURE 4 ITA NO.379/BANG/2011 INCURRED ON ACCOUNT OF FREIGHT, ATTRIBUTABLE TO DEL IVERY OF EXPORTED GOODS ONLY FROM EXPORT TURN OVER AND NOT FROM THE TOTAL TURN OVER. HOWEVER , THE LEARNED CIT(A) ON APPEAL BY THE ASSESSEE, DIRECTED THE ASSESSING OFFICER TO EXCLUDE EXPENSES INCURRED BY THE ASSESSEE TOWARDS FREIGHT, CLEARING & FORWARDING CHARGES AND INSURANCE CHARGES FROM THE EXPORT TURNOVER AS WELL AS TOTAL TURNOVER. NOW THIS ISSUE HAS BEEN SETTLED BY THE SPECIAL BENCH OF ITAT, CHENNAI IN THE CASE OF ITO VS. M/S. SAK SOFT LTD. (SUPRA) BY HOLDING AS UNDER : TO SAY THAT IN THE ABSENCE OF ANY DEFINITION OF TOTAL TURNOVER FOR THE PURPOSE OF SECTION 10B, THERE IS NO AUTHORITY TO EXCLUDE AN YTHING FROM THE EXPRESSION AS UNDERSTOOD IN GENERAL PARLANCE WOULD BE WRONG, AS T HERE HAS TO BE AN ELEMENT OF TURNOVER IN THE RECEIPT IF IT HAS TO BE INCLUDED IN THE TOTAL TURNOVER. THAT ELEMENT IS MISSING IN THE CASE OF FREIGHT, TELECOM CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE GOODS OUTSIDE INDIA AND EXPENSES IN CURRED IN FOREIGN EXCHANGE IN CONNECTION WITH THE PROVISION OF TECHNICAL SERVICES OUTSIDE INDIA. THESE RECEIPTS CAN ONLY BE RECEIVED BY THE ASSESSEE AS REIMBURSEME NT OF SUCH EXPENSES INCURRED BY HIM. MERE REIMBURSEMENT OF EXPENSES CANNOT HAVE AN ELEMENT OF TURNOVER. IT IS ONLY IN RECOGNITION OF THIS POSITION THAT IN THE DEFINITION OF EXPORT TURNOVER IN SECTION 10B THE AFORESAID TWO ITEMS HAVE BEEN DIREC TED TO BE EXCLUDED. SECONDLY, THE DEFINITION OF EXPORT TURNOVER CONTEMPLATES THAT THE AMOUNT RECEIVED BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE SHOULD REP RESENT CONSIDERATION IN RESPECT OF THE EXPORT. ANY REIMBURSEMENT OF THE TW O ITEMS OF EXPENSES MENTIONED IN THE DEFINITION CAN UNDER NO CIRCUMSTANCES BE CON SIDERED TO REPRESENT CONSIDERATION FOR THE EXPORT OF THE COMPUTER SOFT WARE OR ARTICLES OR THINGS. THUS THE EXPRESSION TOTAL TURNOVER WHICH IS NOT D EFINED IN SECTION 10B SHOULD ALSO BE INTERPRETED IN THE SAME MANNER. THUS THE TWO IT EMS OF EXPENSES REFERRED TO IN THE DEFINITION OF EXPORT TURNOVER CANNOT FORM PAR T OF THE TOTAL TURNOVER SINCE THE RECEIPTS BY WAY OF RECOVERY OF SUCH EXPENSES CANNOT BE SAID TO REPRESENT CONSIDERATION FOR THE GOODS EXPORTED SINCE TOTAL TU RNOVER IS NOTHING BUT THE AGGREGATE OF THE DOMESTIC TURNOVER AND THE EXPORT T URNOVER. IN THE FORMULA PRESCRIBED BY SECTION 10B(4) THE FIGURE OF EXPORT T URNOVER HAS TO BE THE SAME BOTH IN THE NUMERATOR AND IN THE DENOMINATOR OF THE FORM ULA. IT FOLLOWS THAT THE TOTAL TURNOVER CANNOT INCLUDE THE TWO ITEMS OF EXPENSES R ECOVERED BY THE ASSESSEE AND REFERRED TO IN THE DEFINITION OF EXPORT TURNOVER. IT HAS FURTHER BEEN HELD THAT THE COMMON THREAD RUNNING THROUGH SECTIONS 80HHC, 80HHE AND 80HHF IS THAT THEY ARE ALL PROVISIONS GRANTING RELI EF TO THE ASSESSES IN RESPECT OF PROFITS DERIVED FROM EXPORT. THE DIFFER ENCE BETWEEN 5 ITA NO.379/BANG/2011 CHAPTER III IN WHICH SECTION 10B FALLS, AND CHAPTER VI-A IN WHICH THESE SECTIONS FALL, IS THAT WHILE THE FORMER EXCLUDES TH E INCOME IN QUESTION TOTALLY FROM THE PURVIEW OF TOTAL INCOME AND GIVES TOTAL EXEMPTION FROM TAX, THE LATTER GIVES DEDUCTION OF A PART OF THE PR OFITS AND GAINS OF THE CONCERNED BUSINESS FROM THE GROSS TOTAL INCOME. BO TH, HOWEVER, ARE CHAPTERS WHICH GIVE RELIEF TO ASSESSES FROM TAXATIO N SUBJECT TO THE CONDITIONS BRING FULFILLED AND IN THAT SENSE THEY A RE OF THE SAME GENRE. THE OBJECT OF THESE SECTIONS IS TO ENCOURAGE THE EA RNING OF FOREIGN EXCHANGE AND PROVIDE INCENTIVE TO PROMOTE EXPORTS. IF SOME OF THE SECTIONS SUCH AS SECTIONS 80HHE AND 80HHF PROVIDE F OR A FORMULA FOR CALCULATING THE DEDUCTION WHICH IS IDENTICAL WITH THE FORMULA PRESCRIBED BY SECTION 10B, IT WOULD BE INCONGRUOUS TO INTERPRE T SECTION 10B IN A MANNER DIFFERENT FROM THOSE TWO SECTIONS MERELY BEC AUSE THERE IS NO DEFINITION OF TOTAL TURNOVER IN THAT SECTION. E XPORT TURNOVER AS DEFINED IN THESE SECTIONS EXCLUDES FREIGHT, TELECOM CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE COMPUTER SOFTWA RE OUTSIDE INDIA OR EXPENSES, IF ANY, INCURRED IN FOREIGN EXCHANGE IN P ROVIDING TECHNICAL SERVICES OUTSIDE INDIA. THUS STATUTORY PARITY IS M AINTAINED BETWEEN EXPORT TURNOVER AND TOTAL TURNOVER IN THESE SECTION S. THERE IS NO REASON WHY SUCH PARITY CANNOT BE MAINTAINED BETWEEN EXPORT TURNOVER AND TOTAL TURNOVER IN SECTION 10B JUST BECAUSE TOTAL TURNOVE R HAS NOT BEEN DEFINED IN THAT SECTION. 9. SIMILAR VIEW HAS BEEN TAKEN BY THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. GEM PLUS JEWELLERY INDIA LTD. (SUPRA) WHEREIN I T HAS BEEN HELD AS UNDER : UNDER SUB-SECTION 10A OF THE INCOME TAX ACT, 196 1, A DEDUCTION IS ALLOWED FROM THE TOTAL INCOME OF THE ASSESSEE OF SUCH PROFI TS AND GAINS AS ARE DERIVED BY AN UNDERTAKING FROM THE EXPORT OF ARTICLES OR TH INGS OR COMPUTER SOFTWARE FOR A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS CO MMENCING FROM THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH THE UNDERTAKING BEGINS MANUFACTURE OR PRODUCTION. SUB-SECTION (4) OF SECT ION 10A PROVIDES THE MANNER IN WHICH THE PROFITS DERIVED FROM THE EXPORT OF ART ICLES OR THINGS OR COMPUTER SOFTWARE SHALL BE COMPUTED. UNDER SUB-SECTION (4) THE PROPORTION BETWEEN THE EXPORT TURNOVER IN RESPECT OF THE ARTICLES OR THING S, OR, AS THE CASE MAY BE, COMPUTER SOFTWARE EXPORTED, TO THE TOTAL TURNOVER O F THE BUSINESS CARRIED OVER BY THE UNDERTAKING IS APPLIED TO THE PROFITS OF THE BUSINESS OF THE UNDERTAKING IN COMPUTING THE PROFITS DERIVED FROM EXPORT. IN O THER WORDS, THE PROFITS OF THE BUSINESS OF THE UNDERTAKING ARE MULTIPLIED BY T HE EXPORT TURNOVER IN RESPECT 6 ITA NO.379/BANG/2011 OF THE ARTICLES, THINGS OR, AS THE CASE MAY BE, COM PUTER SOFTWARE AND DERIVED BY THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY TH E UNDERTAKING. THE EXPRESSION TOTAL TURNOVER HAS NOT BEEN DEFINED AT ALL BY PARLIAMENT FOR THE PURPOSES OF SECTION 10A. HOWEVER, THE EXPRESSION EXPORT TURNOVER HAS BEEN DEFINED. THE DEFINITION OF EXPORT TURNOVER EXCLU DES FREIGHT AND INSURANCE. SINCE EXPORT TURNOVER HAS BEEN DEFINED BY PARLIAMEN T AND THERE IS A SPECIFIC EXCLUSION OF FREIGHT AND INSURANCE, THE EXPRESSION EXPORT TURNOVER CANNOT HAVE A DIFFERENT MEANING WHEN IT FORMS A CONSTITUEN T PART OF THE TOTAL TURNOVER FOR THE PURPOSES OF THE APPLICATION OF THE FORMULA. A CONSTRUCTION OF A STATUTORY PROVISION WHICH WOULD LEAD TO AN ABSURDIT Y MUST BE AVOIDED. MOREOVER, A RECEIPT SUCH AS FREIGHT AND INSURANCE W HICH DOES NOT HAVE ANY ELEMENT OF PROFIT CANNOT BE INCLUDED IN THE TOTAL T URNOVER. FREIGHT AND INSURANCE CHARGES DO NOT HAVE ANY ELEMENT OF TURNOV ER. FOR THIS REASON IN ADDITION, THESE TWO ITEMS WOULD HAVE TO BE EXCLUDED FROM THE TOTAL TURNOVER PARTICULARLY IN THE ABSENCE OF A LEGISLATIVE PRESCR IPTION TO THE CONTRARY. 10. A SIMILAR VIEW HAS BEEN TAKEN BY THE HON'BLE JU RISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. TATA ELEXI (2011) TIOL 684-HC-(KARN) AN D THE RELEVANT FINDING GIVEN THEREIN READS AS UNDER : THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY T HE UNDERTAKING WOULD CONSIST OF THE TURNOVER FROM EXPORT AND THE TURNOVER FROM L OCAL SALES. THE EXPORT TURNOVER CONSTITUTES THE NUMERATOR IN THE FORMULA P RESCRIBED BY SUB-SECTION (4). EXPORT TURNOVER ALSO FORMS A CONSTITUENT ELEMENT OF THE DENOMINATOR IN AS MUCH AS THE EXPORT TURNOVER IS A PART OF THE TOTAL TURNO VER. THE EXPORT TURNOVER, IN THE NUMERATOR MUST HAVE THE SAME MEANING AS THE EXP ORT TURNOVER WHICH IS CONSTITUENT ELEMENT OF THE TOTAL TURNOVER IN THE DE NOMINATOR. THE LEGISLATURE HAS PROVIDED A DEFINITION OF THE EXPRESSION EXPORT TUR NOVER IN EXPLN.2 TO S.10A WHICH THE EXPRESSION IS DEFINED TO MEAN THE CONSIDE RATION IN RESPECT OF EXPORT BY THE UNDERTAKING OF ARTICLES, THINGS OR COMPUTER SOF TWARE RECEIVED IN OR BROUGHT INTO INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN E XCHANGE BUT SO AS NOT TO INCLUDE INTER ALIA FREIGHT, TELECOMMUNICATION CHARG ES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES, THINGS OR SOFTWARE OU TSIDE INDIA. THEREFORE IN COMPUTING THE EXPORT TURNOVER THE LEGISLATURE HAS M ADE A SPECIFIC EXCLUSION OF FREIGHT AND INSURANCE CHARGES. THE SUBMISSION WHIC H HAS BEEN URGED ON BEHALF OF THE REVENUE IS THAT WHILE FREIGHT AND INSURANCE CHA RGES ARE LIABLE TO BE EXCLUDED IN COMPUTING EXPORT TURNOVER, A SIMILAR EXCLUSION H AS NOT BEEN PROVIDED IN REGARD TO TOTAL TURNOVER. THE SUBMISSION OF THE REVENUE, HOWEVER, MISSES THE POINT THAT THE EXPRESSION TOTAL TURNOVER HAS NOT BEEN DEFINE D AT ALL BY PARLIAMENT FOR THE PURPOSES OF S.10A. HOWEVER, THE EXPRESSION EXPORT TURNOVER HAS BEEN DEFINED. 7 ITA NO.379/BANG/2011 THE DEFINITION OF EXPORT TURNOVER EXCLUDES FREIGH T AND INSURANCE. SINCE EXPORT TURNOVER HAS BEEN DEFINED BY PARLIAMENT AND THERE I S A SPECIFIC EXCLUSION OF FREIGHT AND INSURANCE, THE EXPRESSION EXPORT TURNO VER CANNOT HAVE A DIFFERENT MEANING WHEN IT FORMS A CONSTITUENT PART OF THE TOT AL TURNOVER FOR THE PURPOSES OF THE APPLICATION OF THE FORMULA. UNDOUBTEDLY, IT WAS OPEN TO PARLIAMENT TO MAKE A PROVISION WHICH HAS BEEN ENUNCIATED EARLIER MUST PREVAIL AS A MATTER OF CORRECT STATUTORY INTERPRETATION. ANY OTHER INTERPRETATION WOULD LEAD TO AN ABSURDITY. IF THE CONTENTION OF THE REVENUE WERE TO BE ACCEPTED, THE SAME EXPRESSION VIZ. EXPORT TURNOVER WOULD HAVE A DIFFERENT CONNOTATIO N IN THE APPLICATION OF THE SAME FORMULA. THE SUBMISSION OF THE REVENUE WOULD LEAD TO A SITUATION WHERE FREIGHT AND INSURANCE, THOUGH THESE HAVE BEEN SPECI FICALLY EXCLUDED FROM EXPORT TURNOVER FOR THE PURPOSES OF THE NUMERATOR WOULD B E BROUGHT IN AS PART OF THE EXPORT TURNOVER WHEN IT FORMS AN ELEMENT OF THE T OTAL TURNOVER AS A DENOMINATOR IN THE FORMULA. A CONSTRUCTION OF A STATUTORY PROV ISION WHICH WOULD LEAD TO AN ABSURDITY MUST BE AVOIDED. MOREOVER, A RECEIPT SUC H AS FREIGHT AND INSURANCE WHICH DOES NOT HAVE ANY ELEMENT OF PROFIT CANNOT BE INCLUDED IN THE TOTAL TURNOVER. FREIGHT AND INSURANCE CHARGES DO NOT HAV E ANY ELEMENT OF TURNOVER. FOR THIS REASON IN ADDITION, THESE TWO ITEMS WOULD HAVE TO BE EXCLUDED FROM THE TOTAL TURNOVER PARTICULARLY IN THE ABSENCE OF A LEG ISLATIVE PRESCRIPTION TO THE CONTRARY CIT V SUDARSHAN CHEMICALS INDUSTRIES LTD . (2000) 163 CTR (BOM) 596: (2000) 245 ITR 769 (BOM) APPLIED; CIT V LAKSHMI MAC HINE WORKS (2007) 210 CTR (SC) 1: (2007) 290 ITR 667 (SC) AND CIT V CATAP HARMA (INDIA) (P) LTD. (2007) 211 CTR (SC) 83: (2007) 292 ITR 641 (SC) REL IED ON 11. FROM THE RATIO LAID DOWN IN THE AFO RESAID JUDICIAL PRONOUNCEMENTS BY THE HON'BLE JURISDICTIONAL HIGH COURT AND HON'BLE HIGH COURT OF BOMBAY, IT IS CRYSTAL CLEAR THAT IF AN ITEM IS EXCLUDED FROM THE EXPORT TURN OVER, THE SAM E SHOULD ALSO BE EXCLUDED FROM THE TOTAL TURN OVER TO MAINTAIN PARITY BETWEEN THE NUME RATOR AND DENOMINATOR WHILE CALCULATING THE DEDUCTION UNDER SECTION 10A OF THE ACT. ALTHOU GH THE SAID JUDGMENTS ARE IN RESPECT OF PROVISION OF SECTION WITH 10A OF THE ACT, HOWEVER, THE RATIO LAID DOWN APPLIES TO THE SECTION 10B OF THE ACT AS WELL, AS THE PROVISIONS OF SECTI ONS 10A AND 10B ARE IDENTICAL ON ALL MATERIAL ASPECTS. IN VIEW OF THE ABOVE, WE DO NOT SEE ANY MERIT IN THE APPEAL OF THE DEPARTMENT. 8 ITA NO.379/BANG/2011 12. IN THE RESULT, THE APPEAL OF DEPARTMENT IS DISM ISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 24.2. 2012.) SD/- SD/- (GEORGE GEORGE) (N.K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEM BER BANGALORE, DATED: 24.2.2012. *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, - A BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDER ASSTT. REGISTRAR, ITAT, BANGALORE .