TMI Blog2007 (10) TMI 630X X X X Extracts X X X X X X X X Extracts X X X X ..... ly. Alternatively, learned counsel for assessee had insisted for reduction of expenditure in foreign currency from the total turnover in case expenditure has to be reduced from export turnover. In our view, the alternative relief sought for by the assessee appears to be sound and proper. Sec. 10A has incorporated in entirety the philosophy of s. 80HHE. The definition of the terms 'computer software' and 'convertible foreign exchange' in s. 10A are the same as in s. 80HHE. However, from out of the three terms relevant for applying the formula, s. 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 s. 80HHE in the absence of the definition of any term in s. 10A, one could refer to the definition of a similar term in s. 80HHE. Thus, the term 'total turnover' for s. 10A purposes, should be the same as understood for the purposes of s. 80HHE. The term 'total turnover' no doubt is not defined in s. 10A. However, the term 'total turnover' would be an enlargement of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sult, the appeal filed by the assessee is partly allowed to the extent indicated above. - P. MOHANARAJAN, JUDICIAL MEMBER AND N.L. KALRA, ACCOUNTANT MEMBER For the Petitioner : H.P. Khincha For the Respondent : Prakash H. Adnur ORDER P. MOHANARAJAN, J.M.: This appeal is by the assessee directed against the order of the learned CIT(A)-III, Bangalore, dt. 24th Feb., 2006. 2. We have heard both sides and perused the records. The assessee is a. limited company engaged in the business of distribution of computer systems, designs and development of computer software. The assessee filed return of income for the present assessment year returning income at ₹ 9,11,36,889. The return was processed under s. 143(1) of the IT Act, 1961. Subsequently notice under s. 143(2) was issued and the assessment has been completed on 24th March, 2005. The assessee claimed benefits under s. 10A of the Act. While re-computing deduction under s. 10A, the AO had made certain adjustments as under: (a) In the return of income a sum of ₹ 9,88,87,066 was deducted by the appellant while arriving at the figure of export turnover. In addition, the assessee has deducted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers. Therefore, the assessee is not correct in claiming that they are deductible from the export turnover. The assessee has no other operations apart from providing software technical services. The learned Departmental Representative also relied on the order of the learned CIT(A). Further, he contended that the orders of the AO as well as the learned CIT (A) need not to be interfered with. To counter the alternative argument advanced by the learned counsel for assessee, the learned Departmental Representative fully relied on the orders of the authorities below. 5. We have heard the rival submissions and perused the records, Out of total expenditure of ₹ 1,372.02 lakhs in foreign currency pertaining to STP unit, the assessee itself had excluded ₹ 958.87 lakhs from export turnover in the return of income. It appears only during the course of assessment proceedings, the assessee made a claim that it was not involved in rendering of technical services and even expenditure which was reduced from the export turnover by the assessee should not have been done. Exclusion of part of expenditure incurred in foreign currency from the export turnover was obviously under the presu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee, cited supra, assessee did not involve in the business of providing technical services outside India in connection with development of computer software but only completed export obligation. The learned CIT (A), considering this aspect rightly rejected the contention of the assessee. In the present case, there are materials to show that the expenditure in foreign currency is related to technical services rendered outside India by the assessee in connection with development of computer software to the customers outside India. 7. The aforesaid three aspects clearly reveal that the expenditure incurred by the assessee in foreign currency do not relate to any of the export obligation done by the assessee. When once expenditure so incurred in foreign currency is not for purpose of export obligation, there is no substance in the assessee's claim to deduct the same from the export turnover. Considering this aspect we do not find any infirmity in the order of the learned CIT(A) in confirming the action of the AO. It is ordered accordingly. 8. Alternatively, learned counsel for assessee had insisted for reduction of expenditure in foreign currency from the total turnover in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm part of the denominator. One would have to apply consistent standards in understanding and applying a term, particularly when, such term, viz., export turnover has an independent function and at the same time a part of a larger term viz., total turnover. Thus, if some expenses, for any reason are excluded in arriving at the 'export turnover' the same should be reduced from total turnover' also. 11. Even otherwise, in the context of s. 80HHC where under a similar formula is applicable, it has been held that the components entering into export turnover and the total turnover should be the same. In other words, one should compare apples with apples and not apples with oranges. Various High Courts have held so in the following cases : (i) CIT v. Sudarshan Chemicals Industries Ltd. [2000] 163 CTR (Bom) 596 : [2000] 245 ITR 769 (Bom); (ii) CI T v. Chloride India Ltd. [2002] 178 CTR (Cal) 432 : [2002] 256 ITR 625 (Cal); (iii) CIT v. Bharat Earth Movers Ltd [2004] 188 CTR (Kar) 488 : [2004] 268 ITR 232 (Kar); (iv) CIT v. Lakshmi Machine Works [2007] 210 CTR (SC) 1 : [2007] 290 ITR 667 (SC); (v) CIT v. Lotus Trans Travels (P.) Ltd. [2007] 207 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clusion of a sum j of ₹ 1,38,40,813 from the export turnover. This amount was excluded j by the AO on the ground that foreign exchange in respect of the same was not received in time. At the time of hearing, learned counsel for assessee pointed out that M/s Canara Bank issued a letter dt. 13th Feb., 2003 by which the banker, being an authorized dealer, was authorized to permit extension as the bills raised during the relevant year by the assessee are less than USD 10000 value. Considering this, we direct the AO to verify and allow the claim of the assessee. It is ordered accordingly. 13. The next issue arises under s. 10A of the IT Act. The assessee is a STP (Software Technology Park) unit. During the relevant assessment year, the assessee had made certain sales to M/s Texas Instruments India Ltd., which is a registered STP. This transaction, assessee had claimed, as export for the purposes of s. 10A. This was not accepted by the AO and subsequently confirmed by the learned CIT(A). 13(a) The learned counsel for assessee submitted that this sale should be treated as deemed export. M/s Texas Instruments India Ltd., is a registered STP unit and sale to such company should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refers to those transactions in which goods supplied do not leave country and payment for such supplies is received either in Indian rupees or in free foreign exchange. Under cl. 8.3 benefit for deemed exports are as under : 8.3 Deemed exports shall be eligible for any/all of following benefits in respect of manufacture and supply of goods qualifying as deemed exports subject to terms and conditions as in HBP v1. (a)Supply of goods against advance authorization/advance authorization for annual requirement/DF lA. (b)Deemed export drawback. (c)Exemption from terminal excise duty where supplies are made against' ICB. In other cases, refund of terminal excise duty will be given. A cursory perusal would indicate that sale of such software by one STP to another STP within the country would be treated as deemed export only for the purpose of duty draw back and exempt from terminal excise duty. As rightly contended by the learned Departmental Representative, s. 10A, with relevant proviso, stood during the relevant time itself provides that when domestic sales of STP unit do not exceed 25 per cent, such sale should be deemed to be the profits and gains d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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