2015 (3) TMI 1220

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.... judgement dt.16.9.2014 in ITA Nos.69 of 2013 (A.Y. 2006-07), 400 of 2013 (A.Y. 2007-08), 403 of 2013 (A.Y. 2008-09) and others had remanded one of the grounds of appeal raised by the assessee for fresh consideration. The ground remanded is as follows :-   " Whether the telecommunication expenses, insurance charges, personnel expenses, professional expenses, branch office expenses and other expenses incurred in foreign exchange should not be excluded from export turnover for the purpose of computing from export turnover for the purpose of computing deduction under Section 10A of the Act ?" 3. In view of the same, these appeals are refixed for hearing. It is the case of the assessee that the Assessing Officer and the learned CIT(A....

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....he deduction under Section 10A of the Act. The learned Authorised Representative referred to the decision of the Hon'ble High Court of Karnataka in the case of CIT V Mphasis Ltd. in ITA No.1075/2008 and ITA No.196 of 2009 dt.1.8.2014 and the decision of the co-ordinate bench of this Tribunal in Softek India P. Ltd. V ITO in IT(TP)A No.222/Bang/2014 dt.31.10.2014 wherein following the decision of the Hon'ble High Court of Karnataka in ITA No.776/2007 dt.13.6.2014, it was held that expenses incurred in foreign currency should not be reduced from export turnover while computing the deduction under Section 10A of the Act. 4. The learned Departmental Representative filed written submissions and was heard in the matter. The learned Dep....

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....nt. The Assessing Officer, however, has come to the view that development and export of computer software is methodological, mechanical, procedural, practical, scientific and technological which cannot be provided by any layman without special training and hence providing service relating to software development and consultancy falls within the meaning of 'technical service' and consequently the same has to be reduced from export turnover. 5.2 The learned CIT(A) has given an identical finding for all these years concluding that the assessee is engaged in development and export of computer software but nevertheless no developer of software who exports this product and subsequently incurs expenses on travel or maintenance of a branch offic....

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....foreign exchange in providing technical services outside India is liable to be deducted out of export turnover. The said provision has no application in the case of export out of India of computer software or its transmission from India to a place outside India by any means. The law makes a distinction between technical services rendered in connection with export of computer software and export of technical services for the purpose of development or production of computer software outside India. If the technical services rendered by the assessee's Engineers is in connection with the export of computer software for the purpose of testing, installation and monitoring of software such a turnover do not fall within clause (ii) of subsection (1)....

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....t does not fall within clause (ii) of subsection (1) of 80HHE of the Act, of providing technical services outside India in connection with the development or production of computer software. It falls under sub-clause (i) of sub section (1) section 80HHE of the Act. Therefore, the said expenditure cannot be excluded in computing export turnover. In that view of the matter we do not see any merit in this appeal. Accordingly, the said question of law is answered in favour of the assessee and against the revenue. Ordered accordingly." 5.4 This decision was followed by the Hon'ble High Court of Karnataka in the case of Mphasis Ltd. (supra) and it was held that even for the purposes of section 10B of the Act, expenses incurred in foreig....

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....nover and therefore there is no scope for reduction of the said expenditure from export turnover. In respect of insurance charges, referring to submissions made before the Assessing Officer, it was contended by the assessee that insurance charges were paid to protect the assessee against risk of bankruptcy of the overseas customers and not incurred for the purpose of export of computer software and therefore the same cannot be reduced from the export turnover. In respect of Assessment Years 2006-07 and 2007-08, the learned CIT(A) rejected the above contentions and held that both telecommunication charges and insurance charges should be reduced from export turnover. However, in respect of Assessment Year 2008-09, the learned CIT(A) at para 9....