TMI Blog2007 (10) TMI 627X X X X Extracts X X X X X X X X Extracts X X X X ..... sment years 2001-02 to 2003-04 held that; ''Annual subscription was an access fee to Gartner database maintained outside India. Fee was payable even if no service was utilized. It was like a gate pass or entry fee and could not be treated as imparting of information. The payment was for obtaining data and use in the way assessee wanted it to be used. It was for use of a copyrighted article and not for transfer of right in the copyright in the article. Just as a book it is a copyright article. Purchase of the book allows use of information contained therein but does not transfer of the copyright therein. Even if the payment for use of any copyright is covered the copyright should be of a literary, artistic or scientific work and no other . '' Applying the same, we confirm the order of the learned CIT (A) . It is ordered accordingly. Deduction u/s 80HHE - Exchange variation gain in EEFC Account - assessee did not exclude expenditure in foreign currency both from export turnover as well as total turnover - HELD THAT:- This issue is also covered by the decision of this Tribunal in the case of the assessee for assessment year 1998-99 held that; ''Thoug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lows: The assessee is a company engaged in development and export of software. For exporting software, the company utilized the services from M/s. AT T and MCT Telecommunications by using bandwidth provided for down-linking signals in foreign countries. The Assessing Officer was of the view that the down-linking charges paid by the assessee without deducting any tax under section 195 of the Act. Therefore, it was held that the assessee is a defaulter within the meaning of section 201 (1) of the Act. Accordingly, the Assessing Officer passed an order under section 201 (1) of the Act against the assessee for the assessment years 1997-98 to 2001-02. Further interest under section 201 (1A) was also levied for the said default. Commissioner of Income-tax (A) by the impugned order confirmed the finding of the ITO (TDS) . 3. We have heard both the sides. It appears that in similar circumstances, in the case of Wipro Ltd. v. ITO [2003] 80 TTJ 191, the Bangalore Bench of the Tribunal held (that such services provided by the telecom operator to the customer would not amount to technical service or royalty under section 9 (1) (vii) of the Act. The Tribunal referred to the decision of M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l wherein it was held thus:- It was undisputed that the GG was web based publishing house giving access to the data base to all those who were willing to pay. Those payments were towards obtaining of market data and clients strategy details, etc. Those were publications and not an Information or advice given individually. The information was available on subscription to anyone willing to pay. Further, it was a copy-righted information and could not be passed on to anyone else. There was no license granted to the assessee to use in any manner or quote to anyone else. Even the access was restricted to specific individuals named by the assessee and did not extend to anyone wanting to use. Annual subscription was an access fee to Gartner database maintained outside India. Fee was payable even if no service was utilized. It was like a gate pass or entry fee and could not be treated as imparting of information. The payment was for obtaining data and use in the way assessee wanted it to be used. It was for use of a copyrighted article and not for transfer of right in the copyright in the article. Just as a book it is a copyright article. Purchase of the book allows use of infor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the order of the learned CIT (A) . It is ordered accordingly. 6. The next issue relates to exchange variation gain in EEFC Account. The assessee-company had claimed deduction under section. 80HHE. While doing so, the assessee did not exclude expenditure in foreign currency both from export turnover as well as total turnover. According to the Assessing Officer, exchange variation in EFFC account has to be reduced from the export turnover and the total turnover. The Explanation offered by the assessee was not accepted by the Assessing Officer on the ground that similar explanation was not accepted by the department. However, on first appeal, the claim of the assessee was allowed. This issue is also covered by the decision of this Tribunal in the case of the assessee for assessment year 1998-99 in ITA Nos.1022/Bang/2003 dated 7-4-2006. In the aforesaid decision, in paras. 12.1 to 12.3 the issue has been discussed as under: 12.1 The Assessing Officer while computing deduction under section 80HHE, held that the amount received by way of exchange rate fluctuation is not to be included in export turnover. Learned CIT (A) following his own order for assessment year 1999-2000, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed CIT (A) . 7. The next issue relates to exclusion of certain expenditure from export turnover and total turnover while computing deduction under section 80HHC. The claim was disallowed by the Assessing Officer but allowed by the learned CIT (A) . The learned counsel for assessee submitted that this issue is squarely covered by the decision of this Tribunal in the case of the assessee in ITA Nos.50/Bang/2001, 793 to 795, 742 and 732 to 734/Bang/1998 dated 31-3-2005 for assessment years 1993-94 to 1996-97. The learned counsel for assessee submitted that though the aforesaid decision is with reference to section 80HHE, it is applicable to the provisions of section 80HHC as well. In the aforesaid decision, it has been held as under: 4.6 We have gone through the arguments of the counsel for the appellant company as well as those of the learned departmental representative. We have also perused the relevant portions of law and gone into the facts of the case. As already stated, deduction under section 80HHE is available in respect of profits derived from export of computer software or by the provision of technical services outside India. The amount of deduction available under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the appellant was involved in the creation of computer software and export thereof, has been accepted by the Assessing Officer himself while agreeing to the claim of exemption under section 10A of the Act. We are also in agreement with the learned counsel for the appellant when he states that 80HHE confers a deduction in respect of two types of activities. It has accordingly prescribed two separate sub clauses for them. The exclusion from export turnover and total turnover, of expenditure incurred in foreign currency is only where an assessee is involved in rendering of technical services outside India. Such exclusion is not required to be made when a company incurs expenditure in foreign currency in connection with the computer software development. The explanation to 80HHE which has incorporated the principle in circular No. 694 also indicates that the software development activity done at the clients place, outside India, should be regarded as an equivalent to the export of software developed in India. The appellant company being involved in development of a part of the computer software life cycle outside India, will fit into the meaning of the said explanation. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) . 8. The next issue in both the appeals is in respect of deduction of expenses in foreign currency from export turnover for the benefit of section 10A. This was not allowed by the Assessing Officer but the learned CIT (A) granted relief to the assessee. In our view, this issue is also squarely covered by the decisions of this Tribunal cited in para 7 of this order. Applying the same, we confirm the order of the learned CIT (A) 9. The next issue relates to deduction under section 80HHE. The assessee adopted total turnover relating to 80HHE units only. According to the Assessing Officer, as per the provisions of section 80HHE (3) profits derived from business shall be the amount which bears to the profits of the business the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee. Aggrieved with the finding the matter was carried before the learned CIT (A) wherein the assessee was granted relief. The learned counsel for assessee had relied on the decision of this Tribunal in the case of Wipro Ltd. v. Dy. CIT [2005] 96 TTJ (Bang.) 211. In the aforesaid decision, this Tribunal held that: The total turnover of eligibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) Wanson (India) Ltd. v. ITO ( 5 ITD 102) (Pune) . (4) Majestic Auto v. ITO (47 ITD 1) . (5) Voltas Ltd. v. Dy. CIT ( 64 ITD 232 ) (Mum.) . (6) Jaybee Industries v. Dy. CIT (1998) ( 61 TTJ 403 ) . (7) CIT v. Brema Mfrs. (P.) Ltd. [2003] 130 Taxman 400. (8) Wipro GE Medical Systems [2003] (81 TTJ 457 (Bang.) . (9) Hamilton on Research Technology v. ITO (88 TTJ 891) . Later on Hon ble Kerala High Court in the case of CIT v. Indian Transformers Ltd. ( 270 ITR 259) and Hon ble Delhi High Court in the case of CIT v. Vinitec Corporation (P.) Ltd. ( 278 ITR 337 ) held that provision made for the three years was based on an ascertained liability and that it could not be treated as a contingent liability. In view of the above, we hold that the liability cannot be considered as contingent liability as held in the case by ITAT, Pune. Since the liability is a accrued liability and the estimate is on sound accounting principle, the liability is allowable. The disallowance of ₹ 46,77,452 is deleted. Applying the same, we confirm the order of the learned CIT (A) . 11. ITA Nos. 632 8662/Bang./2006: These two appeals are by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... export turnover as compared to the total turnover, section 10A has incorporated In entirety the philosophy, of section 80HHE. The definition of the terms computer software and convertible foreign exchange in section 10A are the same as in section 80HHE. However, from out of the three terms relevant for applying the formula, section 10A defines only one term namely export turnover . The other two terms profits of the business and total turnover are not defined. Since the section proceeds broadly on lines similar to section 80HHE in the absence of the definition of any term in section 10A, one could refer to the definition of a similar term in section 80HHE. Thus, the term total turnover for section 10A purposes, should be the same as understood for the purposes of section 80HHE. 10. The term total turnover no doubt is not defined in section 10A. However, the term total turnover would be an enlargement of the term export turnover . In other words, the sum total export turnover and domestic turnover would constitute total turnover . The formula for computation of the deduction under section 10A, when restated in the above manner, would be as under: Profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e profits from exports. In the circumstances, the above two items, namely, sales tax and excise duty cannot form part of the total turnover. In fact, if the denominator was to include the above two items and if the numerator excluded the above two items then the formula would become unworkable. [Emphasis supplied] 11 (b) In the case of Chloride India Ltd., reported in 256 ITR 625 at page 630 the Hon ble Calcutta High Court held as under: We find no reason to differ from the view of the Division Bench of the Bombay High Court expressed in the above noted case (CIT v. Sudarshan Chemicals Industries Ltd.) In our view, octroi, excise duty and sales tax cannot have any element of profit and as such those items cannot be included in the total turnover. If contrary view is taken that will make the object sought to be achieved by the Legislature nugatory. [Emphasis supplied] 11 (c) In the case of Bharat Earth Movers Ltd. reported in 268 ITR 232 at page 238 the Hon ble Karnataka High Court held as under: Consequently, it follows that if the export turnover does not have the elements of sales tax or excise duty, the total turnover should also not have the said inputs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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