The Income Tax Act, 1961 (IT Act) contains several special beneficial provisions that allow for deductions in order to promote certain activities. One such provision is Section 10A of the IT Act, which seeks to promote and boost new business undertakings situated in free trade zones by providing suitable deductions. It provides for a 100 percent deduction of profits and gains derived by undertakings engaged in export of articles or computer software. The deduction is available for ten assessment years from the year in which the entity commences operations. These profits are to be determined based on the ratio of export turnover to the total turnover of the undertaking.

Over the years, there have been several disputes over the manner in which this ratio is to be determined. This is largely because while the term ‘export turnover’ has been defined under Section 10A of the IT Act, “total turnover” has not. In other words, there is no explicit provision that allows the taxpayer to exclude amounts from total turnover in case such amounts have already been excluded from export turnover.

In the recent case of CIT v HCL Technologies Limited[1], the Supreme Court of India dealt with this issue and provided much needed clarity on the subject.

Continue Reading Expenses Excluded from Export Turnover, also to be Excluded from Total Turnover

Published here is Part II, the concluding section, of our blog piece on the key amendments proposed under Budget 2018 to the Income Tax Act. You can view Part I here. We hope you enjoy reading this as much as we have enjoyed putting this together.


  • Amendments in Relation to Income Computation Disclosure Standards (ICDS): Recently, the Delhi High Court had held that some provisions of the ICDS are unconstitutional for want of legislative backing and their variance from applicable judicial precedents. In order to provide a requisite legislative framework for ICDS, the Budget now proposes to make various amendments in the provisions of the IT Act, pertaining to the deduction of marked to market losses computed in accordance with ICDS, for treating the gains or losses, computed in accordance with ICDS, as income or loss and to provide for a method of valuations in cases of inventory, goods, services and securities, etc.
  • Facilitating Measures for Companies under Insolvency Proceedings:
    • Relief from MAT: The Budget proposes to provide MAT relief for companies whose application for a corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 (IBC) has been admitted by the Adjudicating Authority. Accordingly, the aggregate amount of unabsorbed depreciation and loss brought forward shall be allowed to be reduced from the book profit to determine MAT.
    • Benefit of carry forward and set off of losses: The provisions of section 79 of the IT Act relating to carry forward and set off losses would not apply to companies whose resolution plan has been approved under the IBC.

Continue Reading First Impressions of the Budget 2018: Income Tax Act – Part II