Tribunal upholds CIT(A)'s order on foreign exchange & capital expenditure treatment.

The Tribunal upheld the ld. CIT(A)'s order, dismissing the Revenue's appeals regarding the treatment of foreign exchange expenditure and amortization of capital expenditure. The expenses in foreign currency for technical services were held to be excluded from both export and total turnover for calculating deduction u/s 10B. Additionally, the claim for amortization of business acquisition expenses related to acquiring clientele and resources in the USA was allowed. The Tribunal directed the Assessing Officer to reconsider the issues in line with the Tribunal's decisions, allowing the appeals only for statistical purposes.

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Issues Involved:
The judgment involves two main issues:
1. Treatment of foreign exchange expenditure for deduction u/s 10B of the Act and amortization of capital expenditure.

Treatment of Foreign Exchange Expenditure:
The appeals by the Revenue for the assessment years 2006-07 and 2007-08 raised the issue of whether foreign exchange expenditure should be excluded from export turnover and total turnover for calculating the deduction u/s 10B of the Act. The assessee, a software development company eligible for u/s 10B claim, incurred expenses in foreign currency for technical services outside India. The Assessing Officer excluded these expenses from export turnover but not from total turnover. The ld. CIT(A) disagreed, following a Tribunal decision in the assessee's favor. The Tribunal confirmed the ld. CIT(A)'s order based on a previous decision in the assessee's case, holding that such expenses must be excluded from both export and total turnover.

Amortization of Capital Expenditure:
The second issue concerned the addition made by the Assessing Officer for amortization of capital expenditure. The company claimed sums for amortization of business acquisition expenses related to acquiring clientele and resources of various companies in the USA. The Assessing Officer disallowed the claim, but the ld. CIT(A) allowed it. The Tribunal found this issue also in favor of the assessee based on a Special Bench decision in the assessee's case, which clarified the treatment of expenses incurred in foreign exchange for providing technical services outside India. The Tribunal directed the issue to be reconsidered by the Assessing Officer in line with the Special Bench decision, allowing the ground for statistical purposes only.

Conclusion:
The Tribunal upheld the ld. CIT(A)'s order on both issues, dismissing the Revenue's appeals. The appeals were partly allowed for statistical purposes.

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