TaxTMI 
TaxTMI 
2011 (4) TMI 936
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....Installation, Services Testing etc.)". Considering the definition of "export turnover" given under Explanation 2 to section 10B(7), the Assessing Officer opined that this amount could not be included in the export turnover while computing u/s.10B. On being called upon to explain the reasons in this regard the assessee stated that these expenses were incurred on installation and services etc. for the software exported by the assessee. Not convinced with the assessee's submission the Assessing Officer excluded this amount from the export turnover. The assessee furnished copies of certain purchase contracts entered into by the assessee with the foreign parties, which were not called for by the Assessing Officer during the course of assessment proceedings, in support of its claim. The learned CIT (A) called for the comments of the Assessing Officer. After considering the remand report and the reply of the assessee, he, held that no technical services were provided by the assessee outside India in foreign currency and the obligation of the assessee continued till the stage when the customer was able to effectively use the software supplied. It was, therefore, held the expenses incurred ....
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....by the learned CIT (A) is accordingly modified by which he had held that expenses for installation etc. are not to be excluded from the export turnover. In our opinion the proper course is to exclude such amount both from the export turnover as well as export turnover. We, therefore, set aside the impugned order on this issue and direct the Assessing Officer to re-compute the deduction in accordance with our above observations. 4. Ground no.2 is against holding software development expenses amounting to Rs.16,60,65,953 as revenue expenses. The facts of this ground are that the assessee debited the same under the head software development charges and claimed deduction for the same. On being called upon to justify this deduction, the assessee stated that its software development activities involved series of trials and errors and the software tools and materials used did not have even a scrap value. The materials used for developing a product were always as per clients' requirements and specifications and could not be used for manufacturing any other product or services. It was, therefore, claimed that such expenses were to be considered as revenue expenditure as was done in earli....
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....ht into India within the stipulated period of six months should be excluded both from export turnover and total turnover, is incorrect. It is for the reason that "export turnover" has been defined in clause (iii) of Explanation 2 below section 10B(9) as per which the "export turnover" means the consideration in respect of export of article or things received in or brought into India by the assessee in convertible foreign exchange in accordance with sub-section (3). When we go to sub-section (3) of section 10B, it becomes apparent that this section applies to an undertaking if the sale proceeds of articles or things or computer software exported out of India are received in or brought into India by the assessee in convertible foreign exchange within the period of six months from the end of the previous year or within such further period as the competent authority may allow in this behalf. On a conjoint reading of the definition of `export turnover' and sub-section (3) of section 10B, it becomes abundantly clear that in order to constitute part of export turnover it is sine qua non that the sale proceeds must be received in or brought into India in convertible foreign exchange within....
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....o include the amount of Rs.81 1 crores as discussed above. 9. In the result, the appeal is partly allowed for statistical purposes. Assessment Year 2005-2006 10. Ground no.1 of this year is admittedly similar to ground no.1 of assessment year 2004-2005. We, therefore, hold that the sum of Rs.60.87 crores and odd, being expenses towards installation etc. of computer software is excluded from the export turnover and simultaneously from the total turnover and the benefit u/s 10B be computed accordingly. 11. Ground no.2 is against the capitalization of software development expenses. Here again both the sides are in agreement that the facts and circumstances of this year are mutatis mutandis similar to those of assessment year 2004-2005. Following the view taken hereinabove, we uphold the impugned order and direct that a sum of Rs. 17.21 crores be taken as revenue expenditure. 12. The only other ground is against the direction of the learned CIT (A) for adopting total turnover of the business carried on by the undertaking at Rs.169.08 crores in place of Rs. 174.33 crores thus excluding other sales of Rs.3.88 crores. The facts apropos this ground are that while computing t....