AI Drafter 
TaxTMI 
TaxTMI 
2014 (11) TMI 604
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....and of Rs. 3,74,35,152/- on account of expenses incurred in foreign currency, both from the 'export turnover', for the purpose of recomputing the deduction u/s 10A of the Act?" 3. At the time of hearing nobody was present on behalf of the assessee neither any adjournment was sought. We, therefore, proceeded ex-parte qua the assessee and the issue is decided after hearing the ld. DR, off course on merit. 4. Facts of the case in brief are that the assessee was engaged in the business of Business Process Outsourcing (BPO), which provides back office services to its overseas clients. The unit of the assessee was eligible for deduction u/s 10A of the IT Act, 1961 (hereinafter referred to as the Act). During the course of the assessment pro....
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....RA System Ltd. (2008) 305 ITR (AT) 427 ACIT Vs Infosys Technologies Ltd. 172 Taxman 134 (Mad.) CIT Vs Bharat Earth Movers Ltd. (2004) 268 ITR 232 8. The ld. CIT(A) after considering the submissions of the assessee held that the action of the AO was not justified and that none of the expenses identified by the AO ought to have been excluded from export turnover as those were not incurred for providing Technical services outside India and there was no nexus of communication expenses with export of services. The relevant findings had been given by the ld. CIT(A) in the impugned order at paras 6 to 6.5 which read as under: "6. I have carefully considered the facts of the case in the light of the above submissions made by the appella....
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....vice (fees) at the agreed rate. Thus, in the absence of the same, such expenses are held to be not in the nature of 'turnover' per se and hence, these were not included in 'Export Turnover'. Therefore, there was no onus on the appellant to exclude the same from ETO. 6.3 Without prejudice to the above, I find that the Ld. AO failed to appreciate that various expenses incurred by the appellant in foreign exchange were not incurred for providing Technical services outside India. Only when there is a proximate nexus between the expenses and provisions of Technical services outside India that these could be considered for exclusion from ETO. Since the appellant provides back office services from India, it is evident, on perusal of invoices, t....
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....included in the export turnover. In our opinion when the expenses were not included in export turnover, there was no question of exclusion of the same from the export turnover. Moreover, the ld. CIT(A) categorically stated in para 6.4 of the impugned order that the communication expenses amounting to Rs. 18,27,434/- were related to domestic usage and there was no nexus of the same with export of services. It is also noticed that Explanation 2(iv) to sec. 10A of the Act provides that 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 not to be included in ex....
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....efinition of "export turnover" excludes freight and insurance. Since export turnover has been defined by Parliament and there is a specific exclusion of freight and insurance, the expression "export turnover" cannot have a different meaning when it forms a constituent part of the total turnover for the purposes of the application of the formula. A construction of a statutory provision which would lead to an absurdity must be avoided. Moreover, a receipt such as freight and insurance which does not have any element of profit cannot be included in the total turnover. Freight and insurance do not have an element of turnover. For this reason in addition, these two items would have to be excluded from the total turnover particularly in the absen....