9911796707
TMI Blog2016 (1) TMI 1019X X X X Extracts X X X X X X X X Extracts X X X X ..... both the appeals have impugned the findings of lower authorities in holding that the expenditure incurred in foreign currency by assessee should be reduced while computing export turnover for the purpose of deduction u/s. 10A thereby reducing the benefit of deduction u/s. 10A to the assessee. The assessee has further impugned the findings of the lower authorities in holding that the assessee is engaged in providing technical services outside India. 3. The Revenue in its appeal for the assessment year 2007-08 has assailed the findings of Commissioner of Income Tax (Appeals) in holding that the foreign currency expenses excluded from the export turnover while computing deduction u/s. 10A should also be excluded from total turnover. 4. The brief facts of the case as emerging from the records are: The assessee is a private limited company and is engaged in the business of providing computer software and IT-enabled services to its parent company and other group companies. The assessee is wholly owned subsidiary of KSB AG, Germany. The assessee is an export oriented unit registered as a Software Technology Park located at Pune. During the impugned assessment years, the assessee claime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of foreign currency expenses from "export turnover" and "total turnover" for computing deduction u/s. 10A of the Act. 6. Against the findings of the Commissioner of Income Tax (Appeals) in assessment year 2007-08, both the assessee and Revenue are in appeal. Whereas, in the assessment year 2008-09, only the assessee is in appeal before the Tribunal assailing the findings of Assessing Officer on same issue in order passed u/s. 143(3) r.w.s. 144C of the Act. 7. Shri P.J. Apte appearing on behalf of the assessee submitted, that the assessee is providing IT-enabled services to its parent and other group companies. The assessee is charging on gross basis for the services provided to the said companies. The assessee is using the server of holding company located in Germany. However, no separate payments are made to the holding company for use of server. The billing is done for the actual work performed. The assessee is not supporting the parent company but is providing final product. The assessee is providing technical services to the holding company from its establishment in India. The ld. AR contended that the authorities below have erred in coming to the conclusion that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tech, Pune - Engineers at KSB Tech, Pune study the inputs received from KSB AG, seek clarifications from KSB AG engineers wherever required. Step 4. Execution of the task at KSB Tech, Pune - Done by engineers from relevant department at KSB Tech, Pune using appropriate IT infrastructure, hardware and software via computer server at KSB AG. - In this step engineers at KSB Tech, Pune work on the assigned tasks as per the technical procedures & on the computers provided to them in the premises of KSB Tech, Pune - During the execution of the tasks at KSB Tech, Pune, engineers at KSB Tech, Pune discuss the technical difficulties with engineers at KSB AG as per need & seek their guidance in resolving the same. Step 5. Transfer the result (output) in the form of computer files / soft data to KSB AG - Done by engineers of relevant department at KSB Tech, Pune by data transfer via computer server at KSB AG. - In this step engineers at KSB Tech, Pune communicate with engineers at KSB AG regarding completion of the tasks & shares results with them Engineers at KSB AG review the results & provide comments to engineers at KSB Tech, Pune - Engineers at KSB Tech, Pune ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ency expenditure, Rs. 4,04,29,000/- in assessment year 2007-08 and Rs. 5,05,60,467/- in assessment year 2008-09? 10. The contention of the assessee is that the assessee is providing final product in the form of design and software to its holding company. Whereas, the Revenue is of the view that the assessee is providing technical services outside India to its parent company. Before we proceed with the issue it would be relevant to refer to the meaning of term "export turnover" u/s. 10A of the Act. The term "'export turnover" is defined in Explanation 2(iv) of section 10A of the Act. The same reads as under: "(iv) "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 in accordance with sub-section (3), but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India;" From the perusal of above definition of "export turnover" it is cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... echnical services performed by the assessee to its AE. These expenses as per the contentions of the assessee are mainly with respect to setting up of workstations i.e. Desktops/Laptops, Wide Area Network, leased line for data transfer between KSB AG and the assessee, printers, internet etc. Applications such as Unigraphics, Autocad, SAP, Ms-office, various other softwares, etc. Payment for technical consultancy services include, technical consultancy fees, off-shore salary paid by KSB AG to its technical representative deputed with the assessee, etc. As far as the third element i.e. reimbursement is concerned they relate to expenses incurred by holding company on behalf of the employees of the assessee when they visited Germany for training. These expenses include mainly rent, accommodation, conveyance, training etc. Therefore, these reimbursements do not form part of the expenditure eligible for deduction u/s. 10A. In the definition of the term "export turnover" it has been specifically stated that expenses incurred in foreign exchange in providing technical services outside India. Thus, the scope of the exclusion from the word "export turnover" cannot be enlarged by excluding the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
