Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2008 (1) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2008 (1) TMI 452 - AT - Income TaxCalculation of export turnover for the purpose of exemption u/s 10A - Expenses on account of ‘Internet Service Provider' (ISP) provider charges and foreign exchange in providing technical services outside India - “onsite” and “offsite” services - software development agreement between the client and the assessee - Disallowance of employee’s contribution to PF after due date. Delivery of software booked under ISP - Expenses on account of ‘Internet Service Provider' (ISP) - HELD THAT:- We find that the said expenditure on ‘Internet Service Provider (ISP)’ does not come within the scope of Telecommunication charges as provided in clause (iv) of Explanation 2 to section 10A of Income-tax Act because ISP was for transmitting the data, i.e., software developed by the assessee. The ISP expenses incurred is in respect of development of software, i.e., goods. The ISP expenses is not attributable to the delivery of computer software, therefore, such expenses needs not be excluded from consideration in foreign exchange. However, if for the sake of arguments it is presumed that the expenditure incurred is attributable to delivery of goods outside India even though same is not to be excluded. The agreement, invoices and the turnover clearly show that the assessee did not recover any such expenditure. Therefore, there is no scope for any exclusion from the export turnover on account of such expenses. If at all on presumption, it is to be excluded for the purpose of ‘export turnover’ then on the same assumption, reason and analogy it should be excluded from ‘total turnover’. The simple reason is that such expenditure is also included in consolidated consideration which is forming part of ‘total turnover’. In order to make the formula for the purpose of “export turnover” in section 10A workable one has to give a schematic interpretation to the formula. Elimination should be from both the denominator and the numerator. We therefore find that the Assessing Officer was not correct in excluding Rs. 40,93,493 from consideration received in convertible foreign exchange while calculating export turnover for the purpose of section 10A of the Income-tax Act. Expenses incurred in foreign exchange in providing technical services outside India - We find that the expenditure was not in connection with providing technical services. The assessee did not render any independent technical services, it developed software on contract basis as per the agreement and handed over the same to the customer. If the technical services are rendered independently which is being agreed to separately charge in addition to the price of the goods, in such circumstances expenditure incurred could be in the nature of expenditure for the purpose of technical services. In the case under consideration undisputed facts are that 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. Disallowance of employee’s contribution to PF after due date - under the head ‘Income from other sources’ or 'Income from business' - The contention of the learned A.R. is not acceptable in view of the clear provisions of section 2(24)(x), 36(va) and 56(2)(ic) of the Income-tax Act. The unpaid PF contribution of employees cannot be said to be a business receipt. If this receipt is allowed or to be treated as business receipt, then the assessee will be entitled to set-off of all business expenditure against this receipt which is not permissible. The assessee’s business is in software and not in dealing with contribution of PF of employees. We are, therefore, inclined to uphold the order of the CIT(A). Accordingly, the order of the CIT(A) on this issue is confirmed. In the result, appeal for the AY 2000-01 is partly allowed and appeal for AY 2001-02 is allowed.
|