TaxTMI 
TaxTMI 
TaxTMI 
2016 (2) TMI 43
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....The assessee filed the return of income on 30.10.2004 and claimed deduction under section 10A of the Income Tax Act, 1961 ['the Act', for short]. The Assessing Officer held that expenses incurred in foreign currency for providing software development services outside India of Rs. 17,80,68,049/- should be excluded from the export turnover while computing deductions under section 10A of the Act. It is further held that the exchange fluctuation loss of Rs. 74,25,340/- should not be considered for reduction from the total turnover for the purpose of computation of deduction under section 10A of the Act. On appeal, the Appellate Commissioner upheld the finding of the Assessing Officer. On further appeal, the Tribunal reversing the orders of ....
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.... for the purpose of computation of deduction under section 10A of the Act, as the services rendered by the assessee relating to the software development has to be construed as technical service, excluded from the export turnover in terms of Explanation (2)(iv) of section 10A of the Act. 6. Secondly, it is contended that the exchange fluctuation loss of Rs. 74,25,340/- should be reduced from the total turnover for the purpose of computation of deduction under section 10A of the Act, placing reliance on sub-section [4] of section 10A of the Act. 7. In support of his contention, learned Counsel places reliance on the Judgment of the Apex Court in the case of 'COMMISSIONER OF INCOME TAX - VII v. PUNJAB STAINLESS STEEL INDUSTRIES' repo....
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.... the export turnover. This Judgment relied on by the Tribunal is confirmed by this court in the case of 'THE COMMISSIONER OF INCOME TAX AND ANOTHER v. M/S. MPHASIS LIMITED' [ITA No.1075/2008 connected with ITA No.196/2009 - DD 1.8.2014]. 10. It is also contended that the second question raised in this appeal is squarely covered by the Judgment of this court in the case of 'COMMISSIONER OF INCOME TAX AND ANOTHER v. TATA ELXSI LTD.,' reported in [2012] 349 ITR 98 (Karn)]. 11. We have considered the rival submissions made by the parties and perused the material on record. 12. On substantial question No.1, the Assessing Authority has extensively considered whether the activity carried on by the assessee is software developmen....
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....hange in providing the technical services outside India. What is relevant to be noticed as per this provision is that the consideration in respect of export of computer software received in or brought into India by the assessee in convertible foreign exchange is an export turnover and what is excluded from this clause is [a] freight, [b] telecommunication charges or insurance attributable to the delivery of the articles or things or computer software outside India [c] expenses, if any, incurred in foreign exchange in providing the technical services outside India. Explanation (3) inserted by Finance Act, 2001 with effect from 1.4.2001 explains that the profits and gains derived from on site development of computer software including service....
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....hasis Limited. The very same Judgment was subjected to judicial scrutiny before this court in ITA No.1075/2008 connected with ITA No.196/2009, wherein this court, following the Judgment of Motor Industries Co., Ltd., [supra], answered the substantial question of law in favour of the assessee and against the revenue. This court has held that the expenditure incurred in the development or production of computer software though is in the nature of technical services, is not so, for the purposes of the Act and the said expenditure cannot be excluded in computing export turnover. Thus, we are of the view that the said Judgment is squarely applicable to the facts of the present case. Accordingly, we answer the first question in favour of the asse....
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....he application of the same formula, was considered by this court in the case of Tata Elxsi Limited [supra], this court while interpreting the term'total turnover' for the purposes of section 10A of the Act has held that the total turnover is inclusive of the export turnover. Therefore, the formula for computation of deduction under section 10A is laid down as under: 'Profits of the business of the undertaking X Export Turnover (Export turnover + domestic turnover) = Total turnover' Applying the said principles of law enunciated by this court in the case of Tata Elxsi Limited [supra], we are of the view that the arguments advanced by the revenue if, accepted would lead to absurdity. We have no reason to differ from the Ju....