TaxTMI 
TaxTMI 
2007 (11) TMI 444
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....d, freight, telecommunication charges or insurance attributable to delivery of software have to be reduced. The learned CIT(A) noticed that no expenditure was reduced from the export turnover. Hence, it was indicated to the learned Authorised Representative that income has to be enhanced. Expenditure on delivery of software has not been reduced from the export turnover. Before the learned CIT(A), the assessee made the following submissions in respect of the above issue :- "Link lines are obtained using a WAN (wide area network). The WAN provides video, data and voice connectivity services across a large geographical area from iGate locations in India. A wide area network (WAN) or leased line link includes communication lines and equipment upto and including the router at a particular end user site, excluding local area networks (LANs). Our links are connected between offices as well as to our overseas collocation centers. AT&T provides a rack space specifically for iGate. iGate will use this rack space through the telecom infrastructure/telecom lines and put the network equipments in that rack and, finally, connect to the end customer. These link lines are required to receive....
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....ch operations. The learned CIT(A), therefore, held that estimate of 50 per cent of data link charges as made by the assessee, as attributable to delivery of software is on the lower side. The learned CIT(A) estimated it at 80 per cent of the uplinking charges. 5. On the above referred issue, we have heard both the parties. The details of expenses incurred towards link charges are available with the assessee company. It would not have been difficult for the assessee company to have asked the services provider to give the details of expenses incurred in transmitting information from India. The assessee could have obtained the details of expenses of outward transmission of data. When a specific information is available with the assessee and if the same is not produced, then adverse inference can be drawn. The assessee in the course of proceedings before the learned CIT(A) estimated such expenditure for transmission of data at 50 per cent of the expenditure on link charges. The learned CIT(A) discussed the software development with a number of representatives of various companies. Facts as mentioned by the learned CIT(A) in his order have not been controverted by the learned Authori....
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....9;export turnover' the same should be reduced from 'total turnover' also. Even otherwise, in the context of section 80HHC whereunder a similar formula is applicable, it has been held that the components entering into export turnover and the total turnover should be the same. In other words, one should compare apples with apples and not apples with oranges." 9. Reliance was also placed on the number of judgments of the High Courts, vide which, it has been held that excise duty and sales-tax should not be included in the total turnover, as the same are not includible in the export turnover. The learned apex Court in the case of CIT v. Lakshmi Machine Works [2007] 290 ITR 667 (SC) and in the case of CIT v. Catapharma (India) (P.) Ltd. [2007] 292 ITR 641 (SC) has hold that excise duty and sales-tax are not includible in the total turnover. It was, therefore, held in the cases of Tata Elxsi Ltd. (supra) and Infosys Technologies Ltd. (supra) that expenditure incurred in foreign currency by the assessee should be excluded from the total turnover, as the same is not to be considered in export turnover. Following the same reasoning, it is held that uplinking charges which ....
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....ing the course of proceedings before us, the learned Authorised Representative referred to the decision of this Bench in the case of Webspectrum Software (P.) Ltd. The ground of appeal raised by the revenue in this appeal appearing in ITA No. 387/Bang/2006 was as under:- "The learned CIT (A) erred in directing the Assessing Officer to allow the deduction under section 10A without setting off of brought forward and current year losses of non section 10A unit and also in directing the Assessing Officer to allow to carry forward of losses of the non section 10A unit." Thereafter, he drew our attention to the findings given in para 11 of the order and these are reproduced for ready reference. 14. The learned Authorised Representative drew our attention to the reference of findings given in the case of CIT v. Canara Workshops (P.) Ltd. [1986] 161 ITR 320 (SC). At p. 11 of the order, while considering the appeal in the case of Webspectrum Software (P.) Ltd. (supra), following observations were made from the case of Canara Workshops (P.) Ltd. (supra). "80E. Deduction in respect of profits and gains from specified industries in the case of certain companies.-(1) In the case of ....
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....ns as are derived by an undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee : Provided that where in computing the total income of the undertaking for any assessment year, its profits and gains had not been included by application of the provisions of this section as it stood immediately before its substitution by the Finance Act, 2000, the undertaking shall be entitled to deduction referred to in this sub-section only for the unexpired period of the aforesaid ten consecutive assessment years : Provided further that where an undertaking initially located in any free trade zone or export processing zone is subsequently located in a special economic zone, by reason of conversion of such free trade zone or export processing zone into a special economic zone, the period of ten. consecutive assessment years referred to in this sub-section shall be reckoned from the assessmen....
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....rocessing of goods or in mining. Hence, the meaning of 'industrial undertaking' is not restricted to one unit. The undertaking is to be considered as consisting of a number of units provided all the units are engaged in any of the activities mentioned in Explanation to section 33B. Industrial undertaking has also been defined in Explanation to section 10(15). 20. Before us, it has not been clarified that Pune unit is an independent unit and is in no way related with the activities carried out at Bangalore or Chennai unit. In absence of the facts, it is not possible to say that Pune unit was an independent undertaking engaged in the business of software development, which was in no way related to the software development done at Bangalore or Chennai unit. In case, the Pune unit is found to be independent, then loss from such unit is to be independently calculated. In case such unit is associated with the activities, which are carried out at Bangalore or Chennai unit, then Pune unit will -be considered as part of that undertaking. Hence, the issue of ascertaining as to whether Pune unit was an independent unit or a unit associated with activities of other two units is rest....