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2020 (8) TMI 19 - HC - Income TaxComputing deduction u/s 10AA - expenditure incurred in foreign currency by the appellant - Whether to be excluded from export turnover for the purpose of computing deduction? - finding of the Tribunal that the expenditure incurred in foreign currency by the appellant needs to be excluded from the export turnover for the purpose of computation of deduction - HELD THAT:- Appeal before the Tribunal was on the direction of the DRP to exclude the foreign exchange expenditure. Unfortunately, the Tribunal did not discuss the matter but proceeded on the basis that foreign currency expenditures cannot be considered as part of 'export turnover' and at the same time, it cannot form part of 'total turnover'. The Tribunal did not decide as to whether it was expenses incurred by the assessee in respect of services rendered by the assessee outside India. Assessee has explained, nevertheless AO did not take into consideration as to whether there were any services outside India and held against the assessee and proceeded to make a draft assessment. Before the DRP, which is a fact finding expert body, the assessee placed all materials and established that the assessee did not render any services outside India and they operate on a cost plus model and the reimbursement constitute a part of the operating cost which was recovered by the assessee from their associated enterprises. This factual matrix had not been examined by the Tribunal. No useful purpose would be served in remanding the matter to the Tribunal for fresh consideration as submitted by the Revenue as an alternate submission. The principal submission of the Revenue is to support the order passed by the Tribunal and seeking for dismissal of this appeal. Even in the grounds of appeal filed by the Revenue before the Tribunal, a cost plus model of functioning by the assessee appears to be have not been disputed but their contention was that the definition of ''export turnover'' in explanation 1 to Section 10 AA does not distinguish or exclude reimbursement or advances. In our considered view, the issue is not as to whether reimbursement or advances, but the issue is whether these were incurred by the assessee in foreign exchange in respect of rendering services outside India. If it is established that no services have been rendered outside India and the assessee has been reimbursed the actual cost only, the question of exclusion from the 'export turnover' does not arise. The issue in the instant case is whether at all expenses were incurred for rendering any of the services outside India. On facts, it has been established that no such services have been rendered. Therefore, we are of the considered view that the Tribunal fell in error in reversing the decision of the DRP. Appeal filed by the assessee is allowed and the order passed by the Tribunal is set aside
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