TMI Blog2014 (11) TMI 604X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses were related to domestic usage and there was no nexus with export of services. Explanation 2(iv) to sec. 10A of the Act provides that freight, telecommunication charges or insurance attributable to the delivery of the articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing the Technical services outside India not to be included in export turnover – in CIT Vs Gem Plus Jewellery India Ltd. [2010 (6) TMI 65 - BOMBAY HIGH COURT] the same has been decided - since export turnover has been defined by Parliament and there is a specific exclusion of freight and insurance, the expression “export turnover” cannot have a different meaning when it forms a constituent part of the to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocess Outsourcing (BPO), which provides back office services to its overseas clients. The unit of the assessee was eligible for deduction u/s 10A of the IT Act, 1961 (hereinafter referred to as the Act). During the course of the assessment proceedings the Assessing Officer noticed that the assessee had incurred certain expenses in foreign exchange as under, which were not excluded from the export turnover within the meaning of Explanation 2(iv) to sec. 10A of the Act: Head Amount (in Rs.) Maintenance charges 1,45005/- Legal Professional Charges 1,21,22,835/- Lease line and connectivity charges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad.) CIT Vs Bharat Earth Movers Ltd. (2004) 268 ITR 232 8. The ld. CIT(A) after considering the submissions of the assessee held that the action of the AO was not justified and that none of the expenses identified by the AO ought to have been excluded from export turnover as those were not incurred for providing Technical services outside India and there was no nexus of communication expenses with export of services. The relevant findings had been given by the ld. CIT(A) in the impugned order at paras 6 to 6.5 which read as under: 6. I have carefully considered the facts of the case in the light of the above submissions made by the appellant and applicable law in this regard. Accordingly, my decision on various grounds is as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not in the nature of turnover per se and hence, these were not included in Export Turnover . Therefore, there was no onus on the appellant to exclude the same from ETO. 6.3 Without prejudice to the above, I find that the Ld. AO failed to appreciate that various expenses incurred by the appellant in foreign exchange were not incurred for providing Technical services outside India. Only when there is a proximate nexus between the expenses and provisions of Technical services outside India that these could be considered for exclusion from ETO. Since the appellant provides back office services from India, it is evident, on perusal of invoices, that no technical services were rendered by the appellant outside India. Hence, the action of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turnover, there was no question of exclusion of the same from the export turnover. Moreover, the ld. CIT(A) categorically stated in para 6.4 of the impugned order that the communication expenses amounting to ₹ 18,27,434/- were related to domestic usage and there was no nexus of the same with export of services. It is also noticed that Explanation 2(iv) to sec. 10A of the Act provides that freight, telecommunication charges or insurance attributable to the delivery of the articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing the Technical services outside India not to be included in export turnover. 11. On a similar issue the Hon ble Bombay High Court in the case of CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been defined by Parliament and there is a specific exclusion of freight and insurance, the expression export turnover cannot have a different meaning when it forms a constituent part of the total turnover for the purposes of the application of the formula. A construction of a statutory provision which would lead to an absurdity must be avoided. Moreover, a receipt such as freight and insurance which does not have any element of profit cannot be included in the total turnover. Freight and insurance do not have an element of turnover. For this reason in addition, these two items would have to be excluded from the total turnover particularly in the absence of a legislative prescription to the contrary. 12. Similarly, the Hon ble Karnatak ..... X X X X Extracts X X X X X X X X Extracts X X X X
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