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The Tax Publishers2020 TaxPub(DT) 4726 (Karn-HC) : (2020) 429 ITR 0386 : (2021) 278 TAXMAN 0072 INCOME TAX ACT, 1961
Section 10A
Assessee had units spread over various part of country and might be abroad, the only plausible method of reasonable allocation of overhead expenses was by relating them to the turnover.
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Deduction under section 10A - Reasonable basis for computation of estimated overhead expenses of STP and non-STP units - Assessee having units spread over various parts of the country -
Assessee was in the business of export of software solutions and maintenance services. It had Software Technology Park (STP) unit as well as non STP unit and all overhead expenses had been charged in relation to non-STP unit and no expenditure was claimed in resepct of STP unit for which exemption under section 10A was calimed. Assessee bifurcated overheads between STP units and non-STP units, in respect of cost of materials/services. However, in respect of payments to sub-contractors, royalties, technical fees, communication expenses, assessee stimated on the basis of turnover instead of actuals. Question arose for consideration was whether estimated overhead expenses of STP units and non-STP units should be taken into account for computing exemption under section 10A.Held: Assessee had units spread over various part of country and might be abroad, the only plausible method of reasonable allocating of overhead expenses was by relating them to the turnover. Since, assessee had identified turnover relating to STPI units and there was a reasonable basis for quantifying direct and indirect expenses pertaining to sTPI units, and income pertaining to STP units, and there was a reasonable basis for quantifying direct and indirect expenses pertaining to STPI units, and income pertaining to STPI units, therefore, exemption under section 10A of could be worked out.
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2000-01
INCOME TAX ACT, 1961
Section 10A
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