TaxTMI 
TaxTMI 
TaxTMI 
2008 (8) TMI 430
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....d the AO's action and his order has been challenged by the assessee in the present appeal. Ground No. 1 1. The order of the learned CIT(A)-III, Chennai in ITA No. 167 of 2006-07/A, III dt. 17th Nov., 2006 insofar as it relates to the ascertaining of the disputed infra, is contrary to the facts and circumstances of the case, counter to the settled law and harsh in equity. 4. This ground is general in nature and does not require adjudication. Ground No. 2 2. Exclusion of telecommunication charges and expenses incurred in foreign currency for the payment of technical qualified employees outside India from the export turnover Rs. 2,72,26,288 and denial of alternative claim of application of ratio formula. The learned CIT(A) grossly erred on facts, in law and equity in excluding the expenses incurred in payment of salaries for staff in foreign currency and telecommunication expenses in Indian rupees from the export turnover and also failed to consider in proper perspective in respect of the application of ratio formula correctly. 5. The assessee had claimed exemption under Section 10B of the Act for Rs. 25,74,349 which was restricted by the AO to Rs. 15,44,731, computed as un....
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....ian rupee, it could not be deducted from the "export turnover". In order to decide this issue we need to examine the language of the definition of the expression "export turnover", appearing in Clause (iii) of the Explanation below Sub-section. (9) of Section 10B. It reads as under: 'export turnover' means the consideration in respect of export by the undertaking of articles or things or computer software received in, or brought into, India by the assessee in convertible foreign exchange in accordance with Sub-section (3), but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India. 9. The above definition of the expression 'export turnover' has three parts as under: (i) the consideration in respect of export by the undertaking of articles or things or computer software received in, or brought into, India by the assessee in convertible foreign exchange in accordance with Sub-section (3), (ii) but not to include-- (a) freight, telecommunication charges or insuran....
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.... best interpreted when we know why it was enacted. No part of a statute and no word of a statute can be construed in isolation. 10.2 The rule of construction is "to intend the legislature to have meant what they have actually expressed". The object of all interpretation is to discover the intention of Parliament, "but the intention of Parliament must be deduced from the language used". One should remember that statutes have some purpose and object to accomplish whose sympathetic and imaginative discovery is the surest guide to their meaning. One cannot make a fortress out of the dictionary. 11. In the present case we have to try and find out the intention of the legislature behind drafting the expression "export turnover" in the above language. It appears that, for this purpose, we need to look, briefly, at the legislative history of the provisions of tax concession, brought into the statute for export promotion, from time to time. 12. The tax concession in the case of profits derived from the export of goods or merchandise out of India was provided for the first time for asst. yr. 1962-63 by the Finance Act, 1962 in the form of the rebate of tax which continued upto asst. yr. 1....
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....39;, as appearing in Sub-section (4) above, was defined in Clause (c) of the Explanation, as inserted by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986 w.e.f. 1st April, 1987. It reads as under: (c) 'net foreign exchange realization' means the total free on board value of exports out of India of goods and merchandise to which this section applies as reduced by the aggregate of the cost, insurance and freight value of all categories of import licences, to be issued by the Chief Controller of Imports and Exports, Government of India, to which the assessee is entitled during the previous year, either against export obligation or against exports as replenishments. 12.8 The Sub-section (4) of Section 80HHC was amended w.e.f. 1st April, 1989 and the expression 'net foreign exchange realization' was omitted and in its place, the expression 'export turnover' was substituted. (It is this transition which helps us in understanding the intention of the legislature, for interpreting the definition of "export turnover", in the present appeal). 12.9 The expression 'export turnover', was defined in Clause (b) of the Explanation, as under: ....
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....gible profit' is determined by the provisions of Sub-section (4) which, as applicable w.e.f. 1st April, 2001 reads as under: (4) For the purposes of Sub-section (1), the profits derived from export of articles or things or computer software shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking. 13. One can see that the above definition of 'export turnover' is more or less similar to the one that appears in Sections 80HHB and 80HHC as discussed in the above paras. From the discussion of the legislative history one can see that the quantum of tax relief that was to be allowed to an 'exporter' was to be based on 'net inflow of foreign exchange' in the case of that 'exporter'. In other words, the 'consideration' of the sale proceeds in the form of 'convertible foreign exchange' was to be reduced by the 'outflow' of the foreign exchange in the form of various expenses incurred by the exporter. Therefore, if we look at the a....
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....elation to computer programmes. The appellant is registered with the STPI as a computer software company and not considered as an exclusive technical service provider, as understood in the software industry parlance. The activities of development of software consist the following activities viz.; (a) Scope--Ascertaining the requirements of the customer and undertaking the in-depth study on the proposal. (b) Requirements definition--Specification on the basic concepts and operation design, in relation to final deliverable. (c) Designing--Designing of the deliverable from the macro (overall flow of the integrated software) and micro perspective (designing of each module of the programme). (d) Application development--Developing the application. M/s California Software Co. Ltd. (e) Testing--Developer integration testing, system integration testing and user acceptance testing, to ensure that the software works as required by the customer. (f) Defect fixing--Rectifying errors that have arisen during the testing process. (g) Production parallel run-undertaking a dry run of the developed software system. (h) Customer user acceptance--Final acceptance of the software develo....
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....ed in foreign exchange on such technical services outside India', resulted in 'outflow' of foreign exchange, therefore, it had to be deducted from the 'consideration', in respect of the 'export', received in, or brought into, India by the assessee exporter, in convertible foreign exchange. In our opinion, there is no ambiguity in the language used in the statute which has been correctly applied by the lower authorities. Therefore, we hold that the expenditure of Rs. 2,56,36,156 incurred in foreign exchange was rightly deducted for arriving at 'export turnover'. This issue is decided against the assessee. 18. The third issue, forming part of ground No. (2), is about making similar adjustment in the 'total turnover'--the 'denominator' in the formula of Section 10B(4) of the Act. In the written explanation, filed before the CIT(A), the learned Authorised Representative submitted as under: The appellant respectfully submits that the object of Section 10B is similar to that of objects of Sections 80HHC and 80HHE i.e., to provide incentive by way of deduction from export profits, i.e., export of computer software/goods, for understan....
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.... nuts as an exporter. The assessee had plant and machinery and complete infrastructure for processing the cashew nuts. The assessee also processed cashew nuts of other exporters on job work basis and earned processing charges. The assessee was an exporter and a job worker. In the return for asst. yr. 1993-94, the assessee showed business profit of Rs. 1,94,08,220 which included the 'processing charges' (receipts) amounting to Rs. 1,54,68,811. However, he did not include the 'processing charges' amounting to Rs. 1,54,68,811 in his 'total turnover'. It was contended on behalf of the assessee that the 'processing charges' (receipts) amounting to Rs. 1,54,68,811 were not includible in the 'total turnover' in the formula under Section 80HHC(3). 22.1 The narrow dispute which arose for determination before the Supreme Court was whether the Department was right in including the 'processing charges' amounting to Rs. 1,54,68,811 in the 'total turnover' while computing the export profits under Section 80HHC(3) of the Act. The Court held that while computing the export profits under Section 80HHC(3), the 'processing charges' are ....
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.... loss on account of exchange fluctuation, which was reckoned as per Accounting Standard of the ICAI and accepted accounting principles. 25. The assessee had claimed Rs. 14,96,225 as loss arising from foreign exchange fluctuation. In para 3.2 of his order, the CIT(A) has, inter alia, noted that relevant liability related to a loan give to a subsidiary company abroad and that this loss was arrived at as a result of the restatement of the value of the 'current assets' and 'liabilities' in the balance sheet, on account of exchange rate fluctuation as on 31st March, 2003. It was contended by the learned Authorised Representative that the loss was claimed as per AS 11, issued by the ICAI. We find that this issue is covered in favour of the Department and against the assessee by the decision of the jurisdictional High Court in the case of Indian Overseas Bank v. CIT (1990) 82 CTR (Mad) 81 : (1990) 183 ITR 200 (Mad). In this case the Court held as under: Held, that the amounts in question were only estimated anticipated income arrived at on the basis of the rates of exchange which prevailed, presumably on the last day of the accounting year, without an actual settlement ....
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....e is not pertaining to any statutory liability for which the appellant can be permitted to raise fresh pleas and contentions at any stage. This issue requires finding of facts from the assessment records and books of accounts and therefore, the matter should have been agitated before the AO only. Since the AO has not made any addition on this issue, it will not be proper at this stage to entertain the plea of the appellant to allow the said amount as deduction from the taxable income. Furthermore, a fresh deduction which is not claimed earlier cannot be allowed to the assessee without his revising the relevant return of income as was held by Hon'ble Supreme Court in the case of Goetze (India) Ltd. v. CIT (2006) 204 CTR (SC) 182 : (2006) 284 ITR 323 (SC). Furthermore, I do not agree with the plea of the appellant that such income should be adjusted against the expenditure incurred for the training of new employees. Whatever expenditure has been incurred by the appellant, the same has apparently been claimed by it in the audited P&L a/c. Therefore, I do not find any force in the contentions of the appellant on merits also. This ground of appeal is therefore dismissed. 29. In the....