TMI Blog2015 (5) TMI 811X X X X Extracts X X X X X X X X Extracts X X X X ..... clude the travelling expenditure from total turnover also. Thus, we uphold the order of the Commissioner of Income Tax (Appeals) on this issue. Excluding 50% of telecommunication expenditure incurred in Indian rupee from the export turnover - Held that:- only if telecommunication charges were incurred in foreign exchange, the same can be excluded fom the export turnover. However, in the instant case, the entire telecommunication were incurred in Indian Rupees and hence requires no exclusion from the export turnover and the Hon'ble jurisdictional Tribunal in the case of California Software Company Ltd. [2008 (8) TMI 430 - ITAT MADRAS-A] has confirmed this view. Therefore, the action of the AO is not justified in excluding the said expenditure from the export turnover as it was not incurred in foreign exchange. - I .T.A.No.1839/Mds/2014 & C.O.No.97/Mds/2014, I .T.A.No.1893/Mds/2014 - - - Dated:- 20-5-2015 - SHRI A.MOHAN ALANKAMONY AND SHRI CHALLA NAGENDRA PRASAD, JJ. For The Appellant : Mr. G.Baskar, Advocate For The Respondent : Mr. S.Das Gupta,JCIT ORDER Per Challa Nagendra Prasad, JM: These two appeals are filed by the Revenue and assessee respectivel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o profit and loss account and allowed in the assessment. Placing reliance on the decision of the Supreme Court in the case of Sutluj Cotton Mills Ltd. Vs. CIT (116 ITR 1), counsel for the assessee submits that where profit or loss arises to an assessee on account of appreciation or depreciation in the value of foreign currency, such profit or loss would ordinarily be treated as profit or loss if the foreign currency is held by the assessee on revenue account, but if the foreign currency is held as capital asset or fixed asset, profit or loss would be capital nature. He submits that this position was also reiterated in the case of CIT Vs. Woodward Governor India Pvt. Ltd. (312 ITR 254). Counsel for the assessee submits that loan having been raised for working capital requirements, it is certainly a business transaction, any gain or loss in the said transaction is to be considered as business income or expenditure, more so when the interest on loan was allowed as business expenditure. Counsel for the assessee submits that reason adduced for denying exemption under section 10A of the Act to this gain is that it is not derived from industrial undertaking and that there is no direct nex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant's revenue. There could be an exchange rate gain or loss arising out of turnover as well. However the :exchange gain in discussion above has not arisen, out of turnover. The said gain had arisen out of transactions 'in the capital field. Therefore, the gain on foreign exchange has been derived not in the ordinary course of the business. Deduction u/s.10A granted only on the profits derived from the 'export of, computer software. However, the gain on foreign exchange on repayment or lean taken in foreign exchange and hence there is no direct nexus between the origin of the gain and the export turnover of the appellant. When there is no direct nexus, the said gain cannot be said to be derived from the activities of the appellant. Therefore/the said gain has to be assessed under Income from other sources', In this regard, reliance is placed on the following case laws: (i) Indian Leather Corpn. Pvt.ltd vs. CIT (SC) 227 ITR 552 The Phrase derived from is different from Attributable to - It is no .doubt true that the words 'attributable to' have a wider meaning than the words 'derived from But at the same time it cannot be ignored that norm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. At the time of hearing, counsel for the assessee submits that the issue is squarely covered by the decision of Special Bench of this Tribunal in the case of Safsoft Ltd (supra), wherein the Special Bench held that the travelling expenses incurred in foreign currency if excluded from the export turnover have to be excluded from the total turnover on a parity of reasoning. 10. Departmental Representative supports the order of Assessing Officer . 11. Heard both sides. Perused orders of lower authorities and the decision relied on. The Assessing Officer while completing the assessment excluded the travelling expenditure incurred in foreign currency from the export turnover but not from total turnover. This issue has been considered by the Commissioner of Income Tax (Appeals) observing as under:- 7.2 I have perused the Assessing Officer s observations and the appellant s contentions in this regard. For the purpose of computation of deduction eligible u/s.10A, the Assessing Officer excluded ₹ 23,08,352/- being travelling expenditure from the export turnover. At the same time, the Assessing Officer has not excluded the same for the purpose of arriving at the total turno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer while completing the assessment excluded 50% of telecommunication charges from export turnover in computing relief under section 10Aof the Act. The Commissioner of Income Tax (Appeals) considered this issue at para 8.2 of his order and allowed the claim of the assessee following the co-ordinate Bench of this Tribunal in the case of California (supra) observing as under:- 8.2. I have perused the AO's observations and the appellant's contentions in this regard. AO held that 50% of the telecommunication charges should be excluded from export turnover while computing the deduction u/s l0A. However, the total turnover was not given the same treatment by the AO. In this regard, the appellant contended that the telecommunication charges as reflected in the profit and loss account consist of broadband charges(paid to STPI and VSNL) incurred in Indian Rupees .. As per the Clause (iv) of the Explanation 2 of Section l0A defines export turnover as under: Export turnover means the consideration in respect of export By the undertaking of articles or things or computer software received in, or brought into, India by the assessee in convertible foreign exchange ..... X X X X Extracts X X X X X X X X Extracts X X X X
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