TaxTMI 
TaxTMI 
2015 (7) TMI 876
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....arranty claim made by the assessee for any claims made by the assessee's customers in future in respect of defect on repairs towards goods sold should be allowed as an expenditure during the current assessment year itself? (3) Whether the Tribunal is correct in holding that the assessee is entitled to deduction under Section 80HHC of the Act without including the sales tax and excise duty collected during the assessment year by the assessee when computing the total turnover before computing the deduction? (4) Whether the Tribunal was correct in holding that the assessee which manufactures motor spares, has also interest income which cannot be excluded to an extent of 90% while computing the profits of the business as per explanation (baa) to Section 80HHC of the Act and Section 80HHE of the Act? (5) Whether the Tribunal was correct in holding that 90% of fee refund of Rs. 2,70,18,366/- from Robert Bosch cannot be treated as business income of the assessee but should be treated as other income and consequently deduction as per section 80HHC was not allowable? (6) Whether the Tribunal was correct in holding that the assessing officer cannot exc....
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....l expenses incurred against it subsequently. Thus the decision on the warranty provisions should be based on past experience of the Company. A detailed assessment of the warranty provisioning policy is required particularly if the experience suggests that warranty provisions are generally reversed if so remained unutilized at the end of the period prescribed in the warranty. Therefore the company should scrutinize the historical trend of warranty provisions made and the actual expenses incurred against it. On this basis a sensible estimate should be made. The warranty provision for the products should be based on the estimate at year end of future warranty expenses. Such estimates need re-assessment every year and therefore he submitted that this exercise should be done before the warranty claim is accepted. In reply learned Senior counsel appearing for the assessee pointed out from the order passed in the assessee's case for the assessment year 1989-90 in I.T.A. No. 2473/1991 that the Tribunal has observed that with regard to the basis of estimation the assessee has placed before them at pages 193 to 194 of the paper books the details of methodology of making impugned provisio....
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.... 'Explanation (baa) has to be construed on its own language and as per the plain natural meaning of the words used in it, the words "receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits" will not only refer to the nature of receipts but also the quantum of receipts included in the profits of the business as computed under the head "Profits and gains of business or profession" referred to in the first part of Explanation (baa). Accordingly, if any quantum of any receipt of the nature mentioned in clause (1) of Explanation (baa) has not been included in the profits of business of an assessee as computed under the head "profits and gains of business or profession", ninety percent of such quantum of the receipt cannot be deducted under Explanation (baa) to section 80HHC. Held accordingly, that ninety per cent of neither the gross rent nor gross interest but only the net interest or net rent, which had been included in the profits of business of the assessee as computed under the head "profits and gains of business or profession", was to be deducted under clause (1) of Explanation (baa) to sec....
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....een incorporated in section 80HHC of the Act. The intention behind the enactment of section 80HHC of the Act was to encourage export so as to earn more foreign exchange. For the said purpose, the Government wanted to encourage businessmen, traders and manufacturers to increase the export so as to bring more foreign exchange in our country. If the purpose is to bring more foreign exchange and to encourage export, we are of the view that the Legislature would surely like to give more benefit to persons who are making an effort to help our nation in the process of bringing more foreign exchange. If a trader or a manufacturer is trying his best to increase his exports, even at the cost of his business in a local market, we are sure that the Government would like to encourage such a person. In our opinion, once the Government decides to give some benefit to someone who is helping the nation in bringing foreign exchange, the Revenue should also make all possible efforts to encourage such traders or manufacturers by giving such business units more benefits as contemplated under the provisions of law. For the aforesaid reasons, we are of the view that the view expressed by the High C....
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.... man power abroad for development of software there, that is not export of man power as the personnel are bound to return nor of software, as no software generated outside can be stated to have been generated in India and exported from India. In such a situation, the receipt, if any, abroad on account of service by personnel sent from India cannot be stated to be fro export out of India of computer software, but for technical services mentioned in 80HHE(1)(ii) and there would be case for exclusion of expenses incurred in foreign exchange for rendering such services through its personnel." 13. After remand the Assessing Authority passed the following order: "The CIT (Appeal) remanded the issue of exclusion of expenses incurred in foreign exchange from export turnover and total turnover in the calculation of deduction u/s. 80HHE with a direction to examine whether the assessee is exporting software or rendering technical services outside India in connection with development software. In this connection the assessee submitted the details of expenses, purpose and nature, incurred in foreign exchange. Further, a copy of software projects agreement entered into with M/s. Bosc....
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....de India. Thus expenses incurred in foreign exchange are to be excluded in case the assessee has claimed deduction under Section 80HHE of the Act on receipt of technical fees. In the instant case the assessee is engaged in export of computer software. Hence, in the case of assessee only freight, telecommunication charges and insurance charges attributable to the delivery of computer software outside India is to be excluded for the purpose of determining export turnover and therefore the Tribunal set aside the order passed by the Appellate Commissioner as well as the Assessing Authority and held that the assessee need not exclude the expenditure in foreign exchange from computer software exports for the purpose of computing deduction under Section 80HHE of the Act. 15. The learned counsel for the revenue assailing the impugned order contends that as is clear from the finding of fact recorded by the Assessing Authority the Software Engineers of the assessee who are deputed abroad have rendered technical services outside India. Therefore the expenditure incurred in foreign exchange in respect of such services is to be excluded from the total export turnover. Therefore he submits th....
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.... shall be reduced by such amount which bears to the total profits derived by the assessee from the export, the same proportion as the amount of the export turnover specified in such certificate bears to the total export turnover of the assessee. Explanation.-For the removal of doubts, it is hereby declared that the profits and gains derived from on site development of computer software (including services for development of software) outside India shall be deemed to be the profits and gains derived from the export of computer software outside India. (1A) Where the assessee, being a supporting software developer, has during the previous year, developed and sold computer software to an exporting company in respect of which the said company has issued a certificate under the proviso to sub-section (1), there shall, in accordance with and subject to the provisions of this section, be allowed in computing the total income of the assessee a deduction of the profits derived by the assessee from the developing and selling of computer software to the exporting company in respect of which the certificate has been issued by the said company 16to such extent and for such years as specifi....
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....e or more exporting companies, the amount which bears to the profits of the business, the same proportion as the turnover in respect of sale to the respective exporting company bears to the total turnover of the business carried on by the assessee. (4) The deduction under sub-section (1) shall not be admissible unless the assessee furnishes in the prescribed form, along with the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this section. (4A) The deduction under sub-section (1A) shall not be admissible unless the supporting software developer furnishes in the prescribed form along with his return of income,- *(i) the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed on the basis of the profits of the supporting software developer in respect of sale of computer software to the exporting company; and †(ii) a certificate from the exporting company containing such particulars as may be prescribed and verified....
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....delivery of the computer software outside India; and (iii) expenses, if any, incurred in foreign exchange in providing the technical services outside India; (ea) "supporting software developer" means an Indian company or a person (other than a company) resident in India, developing and selling computer software to an exporting company for the purposes of export.' 17. For the purpose of this Section export turnover has been defined in Explanation (c) to the section and it reads as under: (c) "export turnover" means the consideration in respect of computer software received in, or brought into, India by the assessee in convertible foreign exchange in accordance with sub-section (2), but does not include freight, telecommunication charges or insurance attributable to the delivery of the computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India; 18. From the aforesaid provision it is clear that the consideration in respect of computer software received in or brought into India by the assessee in convertible foreign exchange is deducted from the profits of the said business. In other words the a....