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10. Mr Ganesh, the learned senior counsel appearing on behalf of the assessee, submitted that the question at hand has been answered in favour of the assessee by the Bombay High Court in the case of Commissioner of Income Tax v. Gem Plus Jewellery India Ltd.: (2011) 330 ITR 175 Bombay. He submitted that the Bombay High Court‟s decision in Gem Plus Jewellery (supra) has been followed by the Karnataka High Court in CIT v. TATA ELXSI Ltd., ITA No.70/2009 decided on 30.08.2011.

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14. Having considered the arguments advanced by the counsel for the parties, we are in complete agreement with the decision of the Bombay High Court in the case of Gem Plus Jewellery (supra). In order to avoid prolixity, we set out the relevant portion of the decision of the Bombay High Court in Gem Plus Jewellery and endorse the same. The relevant portion of the said decision is as under:-

when it forms an element of the total turnover as a denominator in the formula. A construction of a statutory provision which would lead to an absurdity must be avoided." (underlining added)

15. The Karnataka High Court has also followed the view taken by the Bombay High Court in Gem Plus Jewellery (supra). The relevant extract from the Karnataka High Court‟s decision is as under:-

"From the aforesaid judgments, what emerges is that, there should be uniformity in the ingredients of both the numerator and the denominator of the formula, since otherwise it would produce anomalies or absurd results. Section 10-A is a beneficial section. It is intended to provide incentives to promote exports. The incentive is to exempt profits relatable to exports. In the case of combined business of an assessee, having export business and domestic business, the legislature intended to have a formula to ascertain the profits from export business by apportioning the total profits of the business on the basis of turnovers. Apportionment of profits on the basis of turnover was accepted as a method of arriving at export profits. In the case of Section 80 HHC, the export profit is to be derived from the total business of the undertaking. Even in the case of business of an undertaking, it may include export business and domestic business, in other words, export turnover and domestic turnover. The export turnover would be a component or part of a denominator, the other component being the domestic turnover. In other words, to the extent of export turnover, there would be a commonality between the numerator and the denominator of the formula. In view of the commonality the understanding should also be the same. In other words, if the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded in computing the export turnover as a component of total turnover in the denominator. The reason being the total turnover includes export turnover. The components of the export turnover in the numerator and the denominator cannot be different. Therefore, though there is no definition of the term „total turnover‟ in Section 10-A, there is nothing in the said Section to mandate that, what is excluded from the numerator that is export turnover would nevertheless form part of the denominator. Though when a particular word is not defined by the legislature and an ordinary meaning is to be attributed to the same, the said ordinary meaning to be attributed to such word is to be in conformity with the context in which it is used. When the statute prescribes a formula and in the said formula, „export turnover‟ is defined, and when the „total turnover‟ includes export turnover, the very same meaning given to the export turnover by the legislature is tobe adopted while understanding the meaning of the total turnover, when the total turnover includes export turnover. If what is excluded in computing the export turnover is included while arriving at the total turnover, when the export turnover is a component of total turnover, such an interpretation would run counter to the legislative intent and impermissible. If that were the intention of the legislature, they would have expressly stated do. If they have not chosen to expressly define what the total turnover means, then when the total turnover includes export turnover, the meaning assigned by the legislature to the export turnover is to be respected and given effect to, while interpreting the total turnover which is inclusive of the export turnover. Therefore, the formula for computation of the deduction under Section 10-A, would be as under: