TMI Blog2011 (4) TMI 936X X X X Extracts X X X X X X X X Extracts X X X X ..... ipulated time was to be excluded from the export turnover but will find its place in the figure of total turnover for computation of relief u/s. 10B. Exclusion of the local turnover from total turnover – Held that:- Local turnover which does not relate to the eligible undertaking u/s 10B, should be excluded from the total turnover. The Assessing Officer is directed to compute relief u/s. 10B in accordance with the above observations. Appeal partly allowed in favor of assessee for statistical purposes. - ITA No.6533/Mum/2007, ITA No.3584/Mum/2008, ITA No.5058/Mum/2008 - - - Dated:- 20-4-2011 - Shri R.S.Syal, Shri V.Durga Rao, JJ. Appellant by: Shri Goli Srinivas Rao Respondent by : Shri Reepal Tralshawala O R D E R Per R.S.Syal, AM : These three appeals by the Revenue relate to the assessment years 2004- 2005, 2005-2006 and 2006-2007. Since some of the issues raised in these appeals are common, we are, therefore, proceeding to dispose them off by this consolidated order for the sake of convenience. Assessment Year 2004-2005 2. First ground is against the direction of the learned CIT (A) not to exclude expenses amounting to Rs.41,50,84,960 towards install ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost towards installation and testing etc. of Rs. 10 is borne by the assessee, the net effective export turnover is sliced to Rs.90 instead of Rs. 100. In such a situation the proper course is to have the figure of export turnover at Rs.90 and not Rs. 100. Coming to the formula u/s. 10B, by which benefit is calculated by multiplying profit of the business of the undertaking with the export turnover and divided by the total turnover of the business carried on by the undertaking, it is seen that there is difference in export turnover and total turnover. The amount of export turnover in numerator actually constitutes part of the total turnover in denominator if there is some other local turnover also. If a particular amount is reduced from the amount of export turnover, such amount also needs to be excluded from the figure of total turnover which comprises of the amount of export turnover. The Hon ble jurisdictional High Court in the case of CIT Vs. Gem Plast Jewellery India Ltd. [(2011) 330 ITR 175 (Bom.)] has held so in computing the relief u/s. 10A by laying down that once the amount of freight and insurance is excluded from the figure of export turnover, it has naturally to be ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is spent in developing software for a particular customer, the tools and materials become useless. In other words this expenditure is input cost for the development of software which is in the nature of stock in trade of the assessee. In our considered opinion the learned CIT(A) was right in holding that software development expenses of Rs. 16.60 crores were allowable as revenue expenses. 6. Last ground of this appeal is against the direction of the learned CIT (A) to reduce unrealized export proceeds of Rs.8,1 1,8 8,085 for the purpose of calculating total turnover. The assessee had total turnover of the undertaking at Rs.123.57 crores. The Assessing Officer while calculating relief u/s 10B adopted the figure of total turnover at Rs.1 15.45 crores, which resulted by reducing a sum of Rs.8.1 1 crores towards export realization beyond the period of six months from the end of the previous year, from the above referred figure of total turnover of the undertaking. The learned CIT (A) observed that the amount of foreign exchange not brought into India within stipulated time was to be excluded from the computation of relief u/s. 10B. In his opinion the said amount of Rs.8.11 crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for the assessment year 2004-2005 the Reserve Bank of India, being the competent authority as per sub-section (3), has extended the period. Though this order was passed in the context of section 10A, the learned A.R. contended that the same would be applicable for calculating relief u/s. 10B also. On a specific query, the learned A.R. could not place on record the full text of Circular of Reserve Bank of India on which he has placed reliance. The ld. AR candidly accepted that the matter be restored to the file of Assessing Officer with the direction to decide this aspect in the light of the RBI Circular as well as the mandate of sub-section (3) of section 10B in the light of the definition of export turnover in Explanation 2(iii) of section 10B. No serious objection was taken by the learned Departmental Representative. Under such circumstances, we, set aside the impugned order on this issue and direct the Assessing Officer to re-compute the relief u/s.10B by initially not including the sum of Rs.8.1 1 crores in the export turnover, which was realized beyond the period of six months from the close of the previous year. If however as per RBI Circular there is some scope for the ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at sub-section (4) of section 10B provides that for the purpose of sub-section (1), the profits derived from export of articles or things 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 . Thus it can be seen that the profits of the business as well as total turnover of the business have to be considered that of the undertaking alone and not the entire business of the assessee. The Assessing Officer has rightly taken the profits of the business of the undertaking at Rs.71.03 crores but the amount of total turnover adopted by him at Rs. 174.33 crores includes that of local turnover of Rs.3.88 crores which is not part of section 10B undertaking, as is apparent from the chart drawn by the A.O. on page 2 of the assessment order. As we have held, while deciding ground no.1, that the amount of Rs.60.87 crores is to be reduced both from the export turnover as well as total turnover, it therefore, becomes clear that the amount of deduction u/s.10B shall be cal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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