Export Incentive DEPB benefit to be excluded from Total T/O if excluded from Export T/O for S.10B Deduction

The issue in this appeal of the assessee is regard to the inclusion of DEPB entitlement of Rs. 48,28,152 in `total turnover‟ in the computation of deduction u/s 10B of the Income-tax Act, 1961 (The Act).

In this matter, assessee during the year claimed deduction u/s 10B of the Act. 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. Aggrieved by the order, assessee preferred appeal before the tribunal. ITAT in its order stated 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. ITAT, therefore, overturns the order of the ld. CIT(A) on this score.

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