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2015 (9) TMI 169 - ITAT BANGALORE

2015 (9) TMI 169 - ITAT BANGALORE - TMI - Telecommunication expenses, insurance charges, personnel expenses, professional expenses, branch office expenses and other expenses incurred in foreign exchange - whether should not be excluded from the export turnover for the purpose of computing deduction under section 10B - Held that:- Respectfully following the judgment of the jurisdictional High Court in the case of Motor Industries Co. Ltd. (2015 (7) TMI 876 - KARNATAKA HIGH COURT) to which both of .....

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- Smt. P. Madhavi devi And Shri Jason P.Boaz JJ. For the Appellant : Shri Sudheendra, CA. For the Respondent : Dr.K.Shankar Prasad, JCIT(DR) ORDER Per Smt. P.Madhavi Devi, JM: All these appeals and the cross-objections are fixed for hearing on account of one of the issues being remanded to the file of the Tribunal for re-consideration. 2. The Hon ble High Court of Karnataka vide its judgment dated 16/09/2014 in ITA Nos.40 to 42 of2014 and others had remanded one of the grounds of appeal raised b .....

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er(AO) and the CIT(A) had excluded the travelling expenses incurred in foreign exchange from the export turnover while computing deduction u/s 10A of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short]. The learned counsel for the assessee submitted that the assessee had made an alternative claim before the Tribunal that if such expenditure was to be excluded from the export turnover the same should also be excluded from the total turnover as held by the Hon ble jur .....

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ering the judgment of the Hon ble High Court in the case of CIT vs. Motor Industries Co. Ltd.in ITA No.1172/2006 dated 13/06/2014 as well as the decision of the Hon ble High Court of Karnataka in the case of CIT vs. Elxsi Ltd. in ITA No.660 of 2008 dated 16/9/2014 has held that the assessee is eligible for exemption u/s 10A of the Act if it is in the business of manufacture and export of computer software and the travelling of the employees of the assessee is the integral part of the software de .....

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es of deputed employees etc. Before the AO, the assessee submitted that these expenses represent the salary payment outside India in foreign currency to the employees on deputation abroad which comes to ₹ 34,07,89,280/- while travelling expenses of the employees for being deputed abroad in providing software services comes to ₹ 2,49,87,302/-. The AO held that the services rendered by the engineers abroad would squarely fall within technical services and therefore they have been speci .....

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ering the definition of export turnover u/s 80HHC of the Act, has at para. 19 of its order held as under: 19. If the assessee is engaged in the business of providing technical services outside India in connection with the development or production of computer software then expenses if any incurred in foreign exchange in providing technical services outside India is liable to be deducted out of export turnover. The said provision has no application in the case of export out of India of computer s .....

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ver do not fall within clause (ii) of subsection (1) of section 80HHE of the Act. Such a turnover falls within sub-clause (i) of subsection (1) of section 80HHE of the Act, that is export out of India of computer software or its transmission from India to a place outside India by any means. The expenditure incurred in the form of foreign exchange for such services cannot be excluded in computing the export turnover as it forms part of the export turnover. In the instant case as is clear from the .....

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ut of India of computer software and its transmission to places from India outside India. Before a computer software is exported, the Software Engineers of the assessee would have initial discussion with regard to the requirements, specifications etc. Thereafter computer software is manufactured and then it is transmitted from India to a place outside India. The software Engineers deputed abroad who among other things have to do testing, installation and monitoring of software supplied to the cl .....

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of law is answered in favour of the assessee and against the revenue. Ordered accordingly. This decision was further followed by the Hon ble High Court in the case of Emphasis Ltd. in ITA No.1075/2008 and 196/9 dated 01/08/2014 wherein the issue was the exclusion of expenditure incurred in foreign currency for providing software development services outside India for computation of deduction u/s 10B of the Act. The Hon ble High Court has followed the decision of the coordinate bench of the Hon .....

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ndustries Co. Ltd. (cited supra) as well as the decision of the coordinate bench of the Tribunal in the case of Softtek India Pvt. Ltd, to which both of us are signatories, we direct the AO not to exclude the expenditure incurred in foreign currency towards travelling and also salary of the employees of the assessee deployed abroad for development of, testing, installation and monitoring of software outside India, after verification of the exact nature of expenditure while computing deduction u/ .....

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