Law:

Section:

I. Section 10A of the Income-tax Act, 1961 - Free trade zone - Assessment year 2003-04 - Whether for purpose of application of formula prescribed by section 10A(4), export turnover in numerator must have same meaning as export turnover which is a constituent element of total turnover in denominator - Held, yes - Whether since in computing export turnover Legislature has made a specific exclusion of freight and insurance charges, these two items would have to be excluded from total turnover also for purpose of computing exemption under section 10A - Held, yes II. Section 10A of the Income-tax Act, 1961 - Free trade zone - Assessment year 2003-04 - Whether where Assessing Officer had enhanced income by disallowing employer's as well as employee's contributions towards provident fund/ESIC, exemption under section 10A had to be granted on such enhanced income - Held, yes III. Section 10A of the Income-tax Act, 1961 - Free trade zone - Assessment year 2003-04 - Whether exemption under section 10A should be granted on foreign exchange gain earned on realization of export receipts in year of export and gains on sales of earlier years should be excluded from profits of year under consideration - Held, yes FACTS-I The Assessing Officer held that while computing exemption under section 10A, freight and insurance charges should not be excluded from total turnover. The Commissioner (Appeals) affirmed the view of the Assessing Officer. On appeal, the Tribunal held that (i) the expression 'total turnover' has not been defined in section 10A; (ii) profits derived from export have to be computed by taking into consideration both - the export turnover and total turnover of the business carried on by the undertaking; (iii) both - the export turnover and total turnover which constitute the numerator and denominator in the application of the formula under sub-section (4) of section 10A should be comparable; and (iv) freight and insurance have no element of profit and, hence, cannot be included in the total turnover of the business carried on by the industrial undertaking. The Tribunal, accordingly, directed that the deduction under section 10A should be computed after excluding…

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