TaxTMI 
TaxTMI 
2008 (6) TMI 593
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.... the definition of 'total turnover, the adjustment of telecommunication expenses of Rs. 19,238,244 to be made to the 'export turnover need not be made to the total turnover'. (iv) The learned CIT(A) erred in not excluding telecommunication expenses of Rs. 19,238,244 from the total turnover, having excluded the same from the export turnover. (v) The appellant therefore prays that the order passed by the CIT(A) under section 250 of the Act and the consequential effect thereof, including under sections 234B, 234C and 234D of the act is bad in law, and should be annulled." 2. The assessee is engaged in the business of software development and service. The assessee had furnished its return for the assessment year 2003-04 computed after claiming deduction u/s 10B of the Income-tax Act, 1961 ["the Act" for short]. During the scrutiny of assessment, the AO recomputed the quantum of deduction allowable u/s 10B as against the claimed deduction by excluding certain expenses from export turnover declared and not reducing such expenses from the total turnover. Aggrieved with the finding, the assessee moved the learned CIT (A) who confirmed the action of the AO. Still aggrie....
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.... types of activities. It has accordingly prescribed two separate sub clauses for them. The exclusion from export turnover and total turnover, of expenditure incurred in foreign currency is only where an assessee is involved in rendering of technical services outside India . Such exclusion is not required to be made when a company incurs expenditure in foreign currency in connection with the computer software development. The explanation to 80HHE which has incorporated the principle in circular No. 694 also indicates that the software development activity done at the clients place, outside India , should be regarded as an equivalent to the export of software developed in India . The appellant company being involved in development of a part of the computer software life cycle outside India , will fit into the meaning of the said explanation. The counsel for the department apart from arguing on the technical side of the matter was not able to bring to our attention any specific instances of the company being involved in rendering of technical services in an advisory or consultancy capacity for the software created by a third party; the role of appellant company being limited to pro....
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....elecommunication expenses. This was disallowed by the AO and confirmed by the learned CIT (A) as under:- "6.1. The appellant's written submissions were duly considered. The judicial decisions relied on by the appellant and the AO were carefully perused. The AR was heard. I agree with the AO that the provisions of sec.10B do not define the TTO, while the ETO is defined vide clause (iii) of the Explanation-2 to the sub sec.(8) of the sec.10B inter alia expressly providing for exclusion of certain expenses from gross ETO. In view of such method adopted by the AO by not reducing the expenses - excluded as per the Explanation-in the TTO is found to be in order. The AR's argument in drawing parallels from the provisions of sec.80HHE and sec.80HHC, to support the appellant's stance, though well taken is found not acceptable for, the said sections are provided in the scheme of deductions while sec.10-B in the exemptions. Moreover, what is not expressly provided in a section cannot be imported from other provisions of the Act, through an exercise of drawing parallels, thereby distorting the objectives of a particular provision. In that view of the matter, the AO's action ....
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....would then be a component or part of the denominator; the other component being the domestic turnover. In other words, to the extent of 'export turnover' there would be a commonality between the numerator and denominator of the formula. In view of the commonality, the understanding should also be the same. In other words, if the 'export turnover' in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded in computing the 'total turnover' in the denominator. Though there is no definition of the term 'total turnover' in sec.10A, there is also nothing in the said section to mandate that what is excluded from the numerator (export turnover) would nevertheless form part of the denominator. One would have to apply consistent standards in understanding and applying a term, particularly when, such term, viz., export turnover has an independent function and at the same time a part of a larger term viz., total turnover. Thus, if some expenses, for any reason are excluded in arriving at the 'export turnover' the same should be reduced from 'total turnover' also. 11. Even otherwise, in the context o....