TaxTMI 
TaxTMI 
2014 (1) TMI 1751
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.... the Act, the assessee excluded communication charges, expenditure incurred in foreign currency from export turnover and also from the total turnover. 3. The AO referred to clause (iv) of Explanation 2 of section 10A of the Act which defines export turnover, which reads as under:- " "export turnover" means the consideration in respect of export by the undertaking of articles or things or computer software received in, or brought into, India by the assessee in convertible foreign exchange in accordance with sub-section (3), but does not include 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; " Section-10A(4) of the Act prescribes that the profits derived from the business of manufacture and sale of computer software shall be the amount which bears to the profits of the business, the same proportion as the export turnover bears to the total turnover of the business carried on by the Assessee. 4. According to the AO, communication charges and expenses incurred in foreign currency, a....
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....and the total turnover represents the denominator and further because, the word export turnover is defined but total turnover is not defined, applying the well-known principles of construction that meaning of words and expressions used in the Act must take their colour from the context in which they appear, the AO ought to have accepted the assessee's stand that the adjustments carried to arrive at the export turnover needs to be applied to total turnover also. The Assessee contended that the exclusion clause in the provisions of clause (iv) of Explanation to Sec 10A refers to two items. The first item is freight, telecommunication charges or insurance attributable to the delivery of the articles or things or computer software outside India. This exclusion can only be with reference to a case where the deduction u/s.10A(1) is claimed by an Assessee engaged in the business of export of computer software. The second item of exclusion is "expenses, if any, incurred in foreign exchange in providing the technical services outside India. This exclusion can be only with reference to a case where expenditure in foreign exchange is incurred in providing technical services outside India. The....
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....et the deduction u/s. 10A, as was claimed by it in the return of income. The assessee has therefore filed the present appeal raising the following effective ground:- "1. The learned CIT(A) LTU erred in concluding [in penultimate para on Page 10 of her Order], "to decline to go into the merits of the issue in Ground 3", although the CIT(A) in fact went into the issue on merits, both on facts and in law [in para 6.1.1 on pages 9 and 10] and consequently ought to have rendered her decision on merits on Grounds 2 & 3." 11. It can be seen from the aforesaid ground that the assessee is aggrieved by the order of the CIT(A) whereby she refused to go into the question as to whether expenditure incurred in foreign currency in a sum of Rs. 92,43,87,701 has to be excluded from the export turnover while computing deduction u/s. 10A of the Act. 12. The submission of the ld. counsel for the assessee was that the ratio laid down by the Hon'ble ITAT Bangalore Bench in the case of M/s. Infosys Ltd. (supra) and the Hyderabad Bench of the ITAT in the case of Patni Telecom Pvt. Ltd. (supra) are squarely applicable to the assessee's case. 13. In the case of Patni Telecom Pvt. Ltd. (sup....
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....ter software and was not engaged in the business of providing technical services outside India. It was submitted that the expenses incurred in foreign currency was not for rendering technical services outside India and therefore the same should not be excluded from the export turnover. According to him, in the light of the admitted factual position that the assessee was not engaged in the business of providing technical services outside India and was engaged in the business of export of computer software, the issue can be decided by the Tribunal without remanding the issue to the CIT(Appeals) for consideration as the factual position is not in dispute. 15. The ld. DR, however, submitted that the issue should be directed to be examined by the CIT(A). 16. We have considered the rival submissions. It is clear from the decision of the Hyderabad Bench of the ITAT that to exclude expenses incurred in foreign currency from the export turnover, the assessee should have obtained the benefit of section 10A on income from rendering technical services outside India. The admitted factual position in the present case is that the assessee is in the business of exporting computer software an....