TaxTMI 
TaxTMI 
2008 (8) TMI 430
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....ion under s. 10B 15,44,731 Total income 1,01,30,383 3. The CIT(A) confirmed 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 Sect....
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....aying that the expenses, mentioned in the above definition of "export turnover", were not to be deducted if they were incurred in Indian rupee. He contended that since the impugned telecommunication expenses of Rs. 15,90,132 were incurred in Indian 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 ....
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....ard such interpretation and adopt an interpretation which will give effect to the purpose of the legislature. Also, interpretation must depend on the text and the context; one may well say if the text is the texture, the context is what gives the colour. Neither can be ignored. Both are important. A statute is 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, bro....
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....Sub-section (2) of Section 288, certifying that the deduction has been correctly claimed on the basis of the amount of 'net foreign exchange realization' as determined in accordance with the import and export policy of the Government of India for the relevant period. 12.7 The expression 'net foreign exchange realization', 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 ....
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....similar to the one provided to industrial undertakings operating in free trade zones. 12.12 By the Finance Act, 2000 a new Section 10B was substituted for the existing Section 10B w.e.f. 1st April, 2001. It was subsequently amended by the Finance Acts, 2001, 2002 and 2003 w.e.f. 1st April, 2001, 1st April, 2002 and 1st April, 2003 respectively. The 'eligible 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....
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.... 5,21,82,124 15. In the written submission filed before the CIT(A), which is available at p. 16 of the paper book filed by the assessee before us, the learned Authorised Representative, inter alia, submitted as under: The appellant is engaged in development of software/computer programme, which is distinct from rendering of pure technical services, which would comprise of advise/consulting in relation 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 ap....
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....ections 10A and 10B on the ground that it was prepared onsite, as long as the software is a product of the unit, i.e., it is produced by the unit. 17. It is seen from the above clarification that the expression 'technical services outside India', appearing in the definition of 'export turnover', refers to the technical services provided outside India' for the development or production of computer software which is eligible for the said tax incentive. Since the expenses incurred 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....
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....and, contended that this issue was squarely covered by the decision of the Supreme Court in the case of CIT v. K. Ravindranathan Nair (2007) 213 CTR (SC) 227 : (2007) 295 ITR 228 (SC). 21. We have considered the matter and in our opinion, this issue has to be decided in the light of the judgment of the Supreme Court in the case of K. Ravindranathan Nair (supra). 22. In the case of K. Ravindranathan Nair (supra), the assessee had a factory in which he processed cashew nuts which were grown in his farm. He, thereafter, exported the cashew 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 charge....
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....ecommunication expenses of Rs. 15,90,132 will not be deducted from the 'export turnover' if it is found by the AO that these expenses were incurred in Indian rupee, the expenses of Rs. 2,56,36,156 incurred in foreign currency will be deducted from the 'export turnover', and, no such adjustment will be made in the 'total turnover'. In the result, the ground No. (2) is partly allowed. Ground No. 3 3. Disallowance of loss from foreign exchange fluctuation Rs. 14,96,225. The learned CIT(A) erred in upholding the disallowance of 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 A....
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....ng cost because of the employees are left immediately and it is pleaded that the expenditure incurred on recruitment and training should have been allowed as deduction if the same is treated as an income. 28. The CIT(A) rejected the claim for the reasons given in para 4.2 of his order as under: 4.2 I have considered the facts of this issue. On my query, it was informed by the learned Authorised Representative that no written submission had been made by them before the AO for claiming the said deduction. Therefore, this ground No. 3 of the appellant pertains to an issue which was not before the AO. This issue 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....