TaxTMI 
TaxTMI 
2024 (8) TMI 282
X X X X Extracts X X X X
X X X X Extracts X X X X
....5 percent of the total turnover of the STP unit. It was submitted by the assessee that, it treated export credits of the bank account maintained by it in the USA as export proceeds and that, this a/c was operated with the approval of the RBI. However, it is submitted that the Ld.AO considered the net inward remittances into India from such account which was net of the onsite expenses incurred by the assessee from the US a/c and also net of the sub-contractor payments from such a/c to Indian subcontractors as "export turnover". The Ld.AO was of the view that since these inward remittances were less than the threshold of 75% of total turnover, minimum exports required as per section 10A(2)(ia) were not fulfilled. 2.1 Aggrieved by the order of the Ld.AO, assessee filed appeal before the Ld.CIT(A). The Ld.CIT(A) vide its detailed order dated 29.04.2003 held that service rendered by sub-contractor outside India has no effect on the assessee's claim of exemption u/s. 10A of the act and further held that assessee is entitled to exemption u/s. 10A in respect of its income from STPI units. 2.2 Aggrieved by the order of the Ld.CIT(A), the revenue filed appeal before this Tribunal vide ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....comes export turnover in the hands of the assessee. He submitted that, the assessee satisfied the requirement u/s. 10A(2)(ia) of the act. The Ld.AR submitted that the assessing officer went on a wrong footing that, only 56% of the revenue relates to export turnover as against the claim of 100% made by the assessee. 3.1 He submitted that, section 10A(2)(ia) as it prevailed for the relevant assessment year under consideration did not contain the definition of export turnover and the provision read as follows: "(ia) in relation to an undertaking which begins to manufacture or produce any article or thing on or after the 1st day of April, 1995, its exports of such articles or things are not less than seventy-five per cent of the total sales thereof during the previous year;" 3.2 The Ld.AR submitted that, as per the above provision, the entire sales without considering any expenditure incurred or foreign inward remittances or any foreign exchange fluctuation etc. is to be treated as export turnover. He submitted that, the Ld.AO while considering the claim of the assessee ignored the gross sales credited in the overseas bank account maintained by the assessee with the appr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng as is referred to in section 33B, in the circumstances and within the period specified in that section; (iii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose. Explanation. The provisions of Explanation 1 and Explanation 2 to sub-section (2) of section 80-I shall apply for the purposes of clause (iii) of this sub-section as they apply for the purposes of clause (ii) of that subsection. [(3) The profits and gains referred to in subsection (1) shall not be included in the total income of the assessee in respect of any [ten] consecutive assessment years, [* * *]beginning with the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or things [* * *]. [* * *]] (4) Notwithstanding anything contained in any other provision of this Act, in computing the total income of the assessee of the previous year relevant to the assessment year immediately succeeding the last of the relevant assessment years, or of any previous year, relevant to any subsequent assessment year, (i) section 32, section 32A, section 33, section 35 and clau....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e provisions of sub-section (1) may be made applicable to him for each of the relevant assessment years as reduced by the number of assessment years which expired before the 1st day of April, 1981, and if he does so, then the provisions of sub-section (1) shall apply to him for each of such relevant assessment years and the provisions of sub-section (4) shall also apply in computing the total income of the assessee for the assessment year immediately succeeding the last of the relevant assessment years and any subsequent assessment year. (6) The provisions of sub-section (8) and sub-section (9) of section 80-I shall, so far as may be, apply in relation to the industrial undertaking referred to in this section as they apply for the purposes of the industrial undertaking referred to in section 80-I. (7) Notwithstanding anything contained in the foregoing provisions of this section, where the assessee, [before the due date for furnishing the return of income under sub-section (1) of section 139] [***], furnishes to the [Assessing] Officer a declaration in writing that the provisions of this section may not be made applicable to him, the provisions of this section shall not apply....
X X X X Extracts X X X X
X X X X Extracts X X X X
....entitled to deduction referred to in this sub-section only for the unexpired period of the aforesaid ten consecutive assessment years : Provided further that where an undertaking initially located in any free trade zone or export processing zone is subsequently located in a special economic zone by reason of conversion of such free trade zone or export processing zone into a special economic zone, the period of ten consecutive assessment years referred to in this sub-section shall be reckoned from the assessment year relevant to the previous year in which the [undertaking began to manufacture or produce such articles or things or computer software] in such free trade zone or export processing zone : [Provided also that the profits and gains derived from such domestic sales of articles or things or computer software as do not exceed twenty-five per cent of total sales shall be deemed to be the profits and gains derived from the export of articles or things or computer software :] Provided also that no deduction under this section shall be allowed to any undertaking for the assessment year beginning on the 1st day of April, 2010 and subsequent years. (2) This section appl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gs or computer software shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking.] (5) The deduction under sub-section (1) shall not be admissible for any assessment year beginning on or after the 1st day of April, 2001, unless the assessee furnishes in the prescribed form,along with the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this section. (6) Notwithstanding anything contained in any other provision of this Act, in computing the total income of the assessee of the previous year relevant to the assessment year immediately succeeding the last of the relevant assessment years, or of any previous year, relevant to any subsequent assessment year,- (i) section 32, section 32A, section 33, section 35 and clause (ix) of sub-section (1) of section 36 shall apply as if every allowance or deduction referred to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the assessment year relevant to such previous year and the subsequent years. Explanation 1.-For the purposes of this section, in the case of a company, where on the last day of any previous year, the shares of the company carrying not less than fifty-one per cent of the voting power are not beneficially held by persons who held the shares of the company carrying not less than fifty-one per cent of the voting power on the last day of the year in which the undertaking was set up, the company shall be presumed to have transferred its ownership or the beneficial interest in the undertaking : [Provided that nothing contained in this Explanation shall apply to any change in the shareholding of the company as a result of- (a) its becoming a company in which the public are substantially interested; or (b) disinvestment of its equity shares by any venture capital company or venture capital fund.] Explanation 2.-For the purposes of this section,- (i) "computer software" means,- (a)any computer programme recorded on any disc, tape, perforated media or other information storage device; or (b)any customized electronic data or an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itted that the definition of "export turnover" introduced by Finance Act, 2001 specifically excluded expenditure incurred in foreign exchange in providing technical services outside India. He further submitted that, legislature by way of Finance Act, 2000 w.e.f 1/04/2001 i.e; assessment year 2001-02, introduced the requirement to bring the export proceeds to India within 6 months from the end of the assessment year for the first time in section 10A. From the above, it becomes clear that there was no condition applicable for Assessment year 2000-01, to bring foreign exchange in India on account of the exports of sales. The Ld.AR also placed reliance on the CBDT Circular No. 794 dated 09.08.2000 to substantiate that the requirement to bring the export proceeds maintained by an assessee in a foreign bank into India within 6 months was an additional condition introduced by way of the Finance Act, 2000 made w.e.f. AY 2001-02. 3.6 Referring to the observations of Ld.CIT(A), upheld by this Tribunal vide order dated 31.10.2007, the Ld.AR submitted that any expenditure that is directly relatable in respect of income in the bank account outside India are clearly verifiable. He however sub....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has claimed deduction u/s. 10A of the act on the profits derived from export of computer software, programs and related materials. 4.1 Admittedly for the year under consideration, assessee earned income under 3 distinct heads: 1) STPI units covered u/s. 10A of the act 2) Export receipts as per section 80 HHE of the act and 3) Domestic sales 4.2 There is no dispute that assessee maintained foreign account with the approval of RBI and is allowed to receive export proceeds in the foreign account. From the assessment order, we note that, the Ld.AO denied exemption on various counts and this Tribunal decided the issues raised by the revenue on the relief granted by the Ld.CIT(A) in respect of calculation of export profits and gains earned from STPI units. 4.3 Against the Tribunal order, the revenue preferred appeal before the Hon'ble High Court and the Hon'ble High Court upon admitting the question of law reproduced hereinabove, returned the issue to this Tribunal to give a finding in respect of what would constitute the "export turnover" received by the assessee in the foreign account. In other words, the Hon'ble High Court directed this ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... imposes a value based restriction and not a quantitative restriction. In other words, what is required to be satisfied as per sub-section (ia) to clause (2) of section 10A is that, the export turnover should constitute 75% of the total turnover, although in quantitative terms, the export quantity might be less than 75% of the total sale quantity. 4.8 Further, if one compares the language of section 10A with that of section 80HHC/80HHE that was applicable for the year under consideration. Section 80HHC/80HHE applies to a person/undertaking engaged in business of 'export out of India' [Section 80HHC(1)/80HHE(1)]. Whereas, section 10A applies to an undertaking which 'exports' certain articles or things [Section 10A(2)(ia)]. The words 'out of India' are conspicuously absent from the provision of section 10A. Hence, it can be said that the legislature intends to consider 'deemed exports' as 'exports' for the purpose of this section. 4.9 It is noted that, section 10A for assessment year 2000-01, did not provide for definition of "export turnover". The definition was introduced by way of finance Act 2001 w.e.f. 1.04.2001 relevant to assessmen....