2020 (9) TMI 974

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....Section 10B? 2. Whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in restoring the issue with regard to amortization of capital expenditure to the file of the assessing officer for fresh adjudication in the light of the Special Bench decision in the assessee's own case when the issue of disallowance of amortised business acquisition expenses has not been dealt in the Special Bench decision?" 2. Learned counsel appearing for the appellant Revenue Mr.M.Swaminathan fairly submitted that as far as question No.1 is concerned regarding the expenditure incurred for providing technical services outside India is concerned, this Court has already held in the Assessee's own case itself in T.C.A.Nos.312 and 385 of 2011 (Commissioner of Income Tax -Vs- M/s.Zylog Systems Limited) decided on 20.02.2020 in favour of the Assessee and therefore the said question may be answered in favour of the Assessee and against the Revenue. 3. However, Mr.M.Swaminathan submitted that as far as question No.2 quoted above is concerned regarding the amortization of capital expenditure incurred by the Assessee, the Assessee himself has amortized the said ex....

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....ffirmed the view taken by the Division Bench of the Karnataka High Court and the Hon'ble Supreme Court has held that such expenditure incurred by the Assessee in foreign currency will be includible in the definition of 'export turnover' for the purpose of computing deduction under Section 10B of the Act. 6. The relevant portion of the judgment of the Division Bench of the Karnataka High Court in "CIT -Vs- Mphasis Ltd.," reported in [2016] 74 taxmann.com 274 (Karnataka) is quoted below for ready reference. " 2. The first substantial question of law arose for consideration before this Court in ITA No.776/2007 disposed of on 13.06.2014, wherein this Court has held at paras 18 and 19 as under:- 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 assessee is not liable to pay any income tax on such consideration received from export of computer software. However the said export turnover does not include freight, telecommunication charges or insurance attributable to the....

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....es from India outside India. Before a computer software is exported, the Software Engineers of the assessee would have initial discussion with regard to the requirements, specifications etc. Thereafter computer software is manufactured and then it is transmitted from India to a place outside India. The software Engineers deputed abroad who among other things have to do testing, installation and monitoring of software supplied to the client. Though the said services are technical in nature it does not fall within clause (ii) of subsection (1) of section 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 (1) of sub-section (1) of Section 80 HHE of the Act. Therefore, the said expenditure cannot be excluded in computing export turn over. 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. 3. In view of the said judgment, the substantial question of law is answered in favour of the assessee and against the Revenue. 4. Insofar as the secon....

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.... be attributed to the same, the said ordinary meaning to be attributed to such word is to be in conformity with the context in which it is used. When the statute prescribes a formula and in the said formula, 'export turnover' is defined, and when the 'total turnover' includes export turnover, the very same meaning given to the export turnover by the legislature is to be adopted while understanding the meaning of the total turnover, when the total turnover includes export turnover. If what is excluded in computing the export turnover is included while arriving at the total turnover, when the export turnover is a component of total turnover, such an interpretation would run counter to the legislative intent and impermissible. If that were the intention of the legislature, they would have expressly stated so. If they have not chosen to expressly define what the total turnover means, then, when the total turnover includes export turnover, the meaning assigned by the legislature to the export turnover is to be respected and given effect to, while interpreting the total turnover which is inclusive of the export turnover. Therefore the formula for computation of the deduct....