Court rules on exclusion of foreign exchange expenditure from export turnover under Section 10B

The court ruled in favor of the Assessee regarding the exclusion of expenditure incurred in foreign exchange for providing technical services outside India from export turnover for deduction under Section 10B. The court affirmed that such expenditure should be included in the 'export turnover.' However, the court found an error in the Tribunal's decision to remit the issue of amortization of capital expenditure back to the Assessing Officer based on a Special Bench decision. The court remitted the issue back to the Tribunal for fresh adjudication.

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Issues Involved:
1. Expenditure incurred in foreign exchange for providing technical services outside India and its exclusion from export turnover for computing deduction under Section 10B.
2. Amortization of capital expenditure and its adjudication by the Assessing Officer in light of the Special Bench decision.

Detailed Analysis:

Issue 1: Expenditure Incurred in Foreign Exchange for Providing Technical Services Outside India

The primary question was whether the expenditure incurred in foreign exchange for providing technical services outside India should be excluded from the export turnover for the purpose of computing deduction under Section 10B of the Income Tax Act.

Court's Analysis:
- The court noted that this issue had already been decided in favor of the Assessee in the Assessee's own case (T.C.A.Nos.312 and 385 of 2011) on 20.02.2020.
- The Tribunal had held that the expenditure incurred in foreign currency in the foreign country where computer software was exported would be included in the 'export turnover', thus allowing the Assessee the benefit of deduction under Section 10B.
- This decision was affirmed by the Hon'ble Supreme Court in "Commissioner of Income Tax -Vs- Mphasis Ltd" (2020) 113 taxmann.com 74, where it was held that such expenditure would be includible in the definition of 'export turnover' for computing deduction under Section 10B.

Conclusion:
- The court answered this question in favor of the Assessee and against the Revenue, confirming that the expenditure incurred in foreign exchange for providing technical services outside India should not be excluded from the export turnover.

Issue 2: Amortization of Capital Expenditure

The second question involved the amortization of capital expenditure and whether the Income Tax Appellate Tribunal was correct in remitting the issue back to the Assessing Officer for fresh adjudication in light of the Special Bench decision.

Court's Analysis:
- The Revenue argued that the Assessee had already amortized the expenditure over five years and that the Tribunal erred in remitting the issue back to the Assessing Officer, as the Special Bench was not concerned with this issue.
- The Tribunal had stated that the issue was covered in favor of the Assessee by the Special Bench decision dated 02.11.2010 in the Assessee's own case. However, the court found that the issue of amortization was not before the Special Bench.

Conclusion:
- The court found that the Tribunal committed an error by remitting the matter to the Assessing Officer with reference to the Special Bench decision.
- The court remitted the issue of amortization of capital expenditure back to the Tribunal for fresh adjudication on merits and in accordance with law, after giving an opportunity to both sides.

Final Judgment:
- Question No.1 regarding the inclusion of expenditure incurred in foreign exchange for providing technical services outside India in the export turnover was answered in favor of the Assessee.
- Question No.2 regarding the amortization of capital expenditure was remitted back to the Tribunal for fresh adjudication. The appeals were disposed of with no costs.

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