TMI Blog2015 (3) TMI 933X X X X Extracts X X X X X X X X Extracts X X X X ..... hat:- It can be seen that the expenditures considered in the immediately preceding assessment years are identical to the expenditure considered during the year under consideration. A similar issue was considered in the case of Patni Telecom (P) Ltd. Vs ITO (2008 (1) TMI 452 - ITAT HYDERABAD-A ) wherein the issue was that the assessee had incurred certain expenditure on account of travelling allowance for the purpose of development of Software at clients cited outside India and had also incurred certain expenditure on the delivery of software booked under Internet Service Provider (ISP), since it got leased ISP line exclusively. It was explained by the Tribunal that if the quoted price is inclusive of such expenses, then consolidated value of the goods is only mentioned in the invoice. In a case where only value of goods is quoted, expense is borne by the supplier. The logic and reason behind this have been explained by the CBDT vide its Circular No. 564 dt. 5.7.1990 that the delivery of the goods should be free on Board. In respect of expenses incurred in foreign exchange in providing technical services outside India, the Tribunal observed that on reading of clause (iv) of Expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Partly in favour of assessee. - I.T.A. No. 5974/Mum/2010, I.T.A. No. 2672/Mum/2010, I.T.A. No. 2750/Mum/2011 - - - Dated:- 11-3-2015 - Shri N.K. Billaiya And Shri Vivek Varma JJ. For the Appellant : Shri F.V. Irani For the Respondent : Shri Pavan Kumar Beerla ORDER Per N.K. Billaiya, AM: These three appeals by the assessee are preferred against separate orders of the Ld. CIT(A)-21, Mumbai for assessment years 2002-03, 2004-05 and 2006-07. All these appeals have common issues, therefore they were heard together and disposed of by this common order for the sake of convenience and brevity. 2. The Ld. Counsel for the assessee stated that facts of A.Y. 2004-05 would cover the issues involved in all three appeals. 3. The Ld. Departmental Representative fairly conceded to this. 4. We have heard these appeals on the basis of the facts of A.Y. 2004- 05 in ITA No. 2672/M/2010. The assessee has raised 11 substantive grounds of appeal. 5. Ground No. 1,2 and 3 relate to the treatment of income claimed by the assessee under the head Profits Gains of Business or Profession but assessed by the AO and confirmed by the Ld. CIT(A) under the head I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... giving a thoughtful consideration to this claim of the assessee, the Ld. CIT(A) dismissed the same by holding that there was no machinery or plant which were let out alongwith the building. The Ld. CIT(A) also dismissed the claim of depreciation. 7. Aggrieved by this, the assessee is before us. 8. The Ld. Counsel for the assessee reiterated what has been submitted before the lower authorities. In support of its claim, the Ld. Counsel relied upon the decision of the Hon ble Supreme Court in the case of Laxmi Silk Mills in 20 ITR 451. 9. We have carefully perused the orders of the authorities below and the decision of the Hon ble Supreme Court relied upon by the Ld. Counsel. At the outset, the decision of the Hon ble Supreme Court relied upon by the Ld. Counsel is misplaced and do not match with the facts of the case in hand because in the case of the Hon ble Supreme Court, the commercial asset of the business were temporarily put out of use and let out to another person and on this temporary let out, the Hon ble Supreme Court held that the yield of income by way of commercial asset is the profit of the business. However, in the case in hand, the let out was not temporary , ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im of deduction u/s. 10A of the Act. 14. While scrutinizing the return of income, the AO observed that in the computation of deduction claimed by the assessee u/s. 10A of the Act export turnover and total turnover were included on gross basis. The assessee was asked to explain the calculation of export turnover vis- -vis freight, telecommunication charges, insurance attributable to the delivery of the articles or things or computer software outside India, expenses if any incurred in foreign exchange in providing the technical services outside India. The assessee was also asked to bifurcate sales software packages and services with supporting sample bills of export sales. The assessee filed a detailed reply in the light of the provisions of Section 10A(iv) r/w Explanation 2 and claimed that there is no freight, telecommunication charges or insurance included in either the export turnover or total turnover. 14.1. After considering the submissions made by the assessee, the AO observed that if turnover of the assessee does not include freight, telecommunication charges or insurance charges separately, then why it should not be assumed that the said charges/bill amount include del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the computer software exported. The Ld. CIT(A) was convinced that professional fees of ₹ 19,61,324/-, royalty ₹ 49,806/-, exhibition expenses ₹ 6,74,877/- and other expenses at ₹ 1,12,85,960/- cannot be considered as attributable to providing of technical services outside India. At the same time, the Ld. CIT(A) was not convinced that travelling expenses, salary on-site employees, software package tools and sales and marketing expenses were also not attributable to providing of technical services outside India. The Ld. CIT(A) finally directed the AO not to consider professional fees, exhibition expenses, royalty and other expenses as pertaining to providing of technical services. In respect of other expenses, the Ld. CIT(A) reduced the allocation to 25% as pertaining to incurred for the purpose of providing technical services outside India and accordingly directed the AO to recomputed the deduction u/s. 10A of the Act. 16. Before us, the Ld. Counsel for the assessee explained the provisions of Sec. 10A(iv) r.w. Explantion -2 of the Act. Clause (iv) reads as under: Export turnover means the consideration in respect of export (by the undertaking) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofessional fees - ₹ 18,72,157/- (iv) Sales marketing expenses - ₹ 7,70,56,613/ (v) Exhibition expenses - ₹ 14,48,572/- (vi) Royalty - ₹ 51,41,R67/- (vii) Other expenses (net of reimbursement include foreign office expenses) - ₹ 1,67,70,596/- - ₹ 11,92,14,246/- 21. The Tribunal observed as under: As regards the ground on which the revision was sought to be made, we find that section 1OA is a special provision relating to newly established undertaking in trading zones and the clause (iv) of Explanation (2) of the section 1OA defines the export turnover, according to which, it is the consideration in respect of the export by the undertaking articles or things or computer software received in or brought into India by the assessee in convertible foreign exchange in accordance with sub-section (3) i.e. within a period of six months from the end of the previous year or within such further period as the competent authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vel Expenses 55,64,008/- Salary onsite employees 76,76,341/- Software package Tools 13,27,805/- Sales Marketing Expenses 66,80,683/- Total 2,12,48,837/- 22. It can be seen that the expenditures considered in the immediately preceding assessment years are identical to the expenditure considered during the year under consideration. A similar issue was considered by the Tribunal, Hyderabad Bench in the case of Patni Telecom (P) Ltd. Vs ITO 22 SOT 26 (Hyd) wherein the issue was that the assessee had incurred certain expenditure on account of travelling allowance for the purpose of development of Software at clients cited outside India and had also incurred certain expenditure on the delivery of software booked under Internet Service Provider (ISP), since it got leased ISP line exclusively. It was explained by the Tribunal that if the quoted price is inclusive of such expenses, then consolidated value of the goods is only mentioned in the invoice. In a case where only value of goods is quoted, exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tical to the facts of the case in hand, respectfully following the decision of the Honb ble jurisdictional High Court, we set aside the findings of the Ld. CIT(A) and direct the AO not to set off eligible unit with the profits of the ineligible unit. Ground No. 7 8 are accordingly allowed. 27. Ground No. 9,10 11 relate to the disallowance u/s. 14A r.w. Rule 8D of the Act. 28. The Ld. Counsel for the assessee stated that because of the smallness of the amount involved, he is not pressing these grounds. Ground No. 9,10 11 are accordingly dismissed as not pressed for the smallness of the amount involved. 29. In the result, the appeal filed by the assessee is partly allowed. ITA No. 2750/M/2011 - A.Y. 2006-07 30. The assessee has raised 5 grounds of appeal. Grievance raised vide ground No. 1 is identical to the grievance raised vide ground No. 4,5 6 in ITA No. 2672/M/2010. For the detailed reasons given therein, ground No. 1 is decided in favour of the assessee and against the Revenue. 31. Grievance raised vide ground No. 2 is identical to the grievance raised vide ground No. 7 8 in ITA No. 2672/M/2010. For the detailed reasons given therein, ground No. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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