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2008 (2) TMI 659 - AT - Income TaxExemption under section 10A - Free trade zone - Export turnover - 100 per cent EOU - Whether on-site expenditure incurred for development of software need to be reduced from convertible foreign exchange received by the assessee, for the purpose of calculation of export turnover? - HELD THAT:- We find that on identical set of facts, the Hyderabad Bench of the Tribunal has decided the issue in dispute, in favour of the assessee and against the revenue in Patni Telecom (P.) Ltd.[2008 (1) TMI 452 - ITAT HYDERABAD-A] held that; '' Software development services were rendered both "onsite" and "offsite". "Onsite" services were rendered at customer’s place by the assessee’s employee sent there. The ‘offsite’ services are rendered at the assessee’s place locally. The activities of the assessee-company amounts sale of goods in the form of computer software. The assessee received consideration in convertible foreign exchange for both types of services. Expenditure incurred by the assessee is on account of travelling allowances and others for the purpose of development of software at client’s site outside India i.e. in respect of goods. Such expenditure is not in the nature of expenditure for technical services. Since the expenditure is not for technical services, there is no need to exclude these expenditures from consideration received in convertible foreign exchange for the purpose of calculating ‘export turnover’ as defined in clause (iv) of Explanation 2 of section 10A.'' Following the order of the Tribunal, we accept the contention of the assessee that the on-site expenditure incurred for development of software need not be reduced from convertible foreign exchange received by the assessee, for the purpose of calculation of export turnover. The order of the CIT(A) is accordingly modified. Hence, the main plea taken by the assessee has been allowed. Therefore, the grounds raised by the revenue in its appeal against the finding of the CIT(A) with regard to the alternative plea of the assessee do not survive. Therefore, the grounds of the revenue are rejected.
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