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TMI Blog2007 (3) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment order, it is mentioned that the assessee company is engaged in the activity of trading of generic software, and providing customized software development services for domestic and US market, through its two units situated in Software Technology Park, Gurgaon. The assessee claimed exemption under Section 10A of the Act. This section is applicable to an undertaking if the sale proceeds of the articles, things or computer software, exported out of India, is received in or brought into India in convertible foreign exchange within a period of six months from the end of previous year, or within such further period as the competent authority may allow. It is further mentioned that the details of realization of export proceeds, in respect of which the exemption was claimed, were furnished. The details of expenses incurred in foreign exchange for providing technical services were also furnished. On examination of these details, it was found that the assessee incurred expenditure in foreign exchange in sending software professionals abroad as per the agreements with the foreign constituents. Such expenses in both the units amounted to Rs. 1,82,610 in Indian rupees. The assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid term, then, such expenses should also be excluded from the total turnover. In view of this finding, he allowed the appeal of the assessee in this matter. 4. Aggrieved by this order, the revenue is in appeal before us. The learned departmental Representative pointed out that Section 10A, below Sub-section (8), contains the definition of the term "export turnover" in Clause (iv) of Expln. 2. The term has been defined to mean the consideration in respect of export by undertaking of all articles, things or computer software received in, or brought into India, by the assessee in convertible foreign exchange in accordance with Sub-section (3), but does not include freight, telecommunication charges or insurance attributable to the delivery of articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India. Further, he pointed out that the term "total turnover" has not been defined in the section. Therefore, while finding out total turnover of the assessee, the natural meaning of this term, as understood in the common parlance, will have to be adopted. If that is done, one cannot exclude th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee ? The facts of that case were that the assessee was engaged in running five-star hotels in Delhi. The assessee had obtained a license for acting as a restricted money-changer. The foreign exchange receipts of the assessee inter alia included the receipts from the business of the money-changer. The assessee claimed deduction under Section 80HHD in respect of this activity also. The assessing officer excluded the sum received by the assessee through its money-changing activity for computing deduction under Section 80HHD on the ground that this activity does not qualify to be termed as the services rendered to the foreign tourists. In para 5 of the judgment, the Hon'ble court referred to their judgment in the case of CIT v. Lotus Trans Travels (P) Ltd. in IT Appeal No. 936 of 2006, dated 7-12-2006, in which it was held that the term "total receipts" for the purpose of the denominator of the ratio applied for computing deduction under Sub-section (3) of Section 80HHD, will admit the same construction as the numerator (foreign exchange receipts). In doing so, the court adopted the reasons furnished by Hon'ble Bombay High Court in the cases of CIT vs. Sudarshan Chemicals In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n reinsurer will be an empty formality and a meaningless ritual. Therefore, the Hon'ble court held that the income under the agreement was not generated in India or that the amount was received in convertible foreign exchange. On the basis of this decision, the case of the learned counsel was that remuneration to the foreign software professionals in the USA could have been paid by obtaining permission to remit the foreign exchange from India, after taking approval of the RBI. However, since the assessee was permitted to retain foreign exchange in the USA, out of which the aforesaid payment was made, such a remittance would have amounted to performing an empty ritual. The substance of the transaction cannot be judged on the basis of such a ritual. Therefore, the whole of the receipt, without deducting remuneration paid in foreign exchange, should be taken as the export turnover. 6. In the rejoinder, the learned departmental Representative pointed out that in the case of Lotus Turns Travels (P) Ltd. (supra) the Hon'ble court had relied on the decision in the case of Sudarshan Chemicals Industries Ltd. (supra) In that case, the sales-tax and the excise duty were excluded fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be understood in the same manner, namely that if certain amounts are not to be included in the expo turnover, the same should also not be included in the total turnover. In the words, such exclusion will have to be read by interpreting the two terms in the same manner. This decision was approved by the Hon'ble Delhi High Court being the jurisdictional Court, in the case of Jaypee Hotels Ltd. (supra) Thus the interpretation of Hon'ble Bombay High Court regarding contextual meaning, excluding the commonplace meaning, will have to be taken into account while computing the numerator and the denominator. The definition of the "export turnover", in Section 10A excludes from its ambit any expenses incurred in foreign exchange in providing technical services outside India. In view of the decision in the case of Sudarshan Chemicals Industries Ltd. (supra), suc) expenses will have to be included (sic-excluded) from the total turnover also Therefore, we are of the view that the learned Commissioner (Appeals) was right in holding that the total turnover shall not include expenses incurred in foreign exchange ii providing technical services outside India. 8. In result, the appeal is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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