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2016 (2) TMI 43

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..... incurred in the development or production of computer software though is in the nature of technical services, is not so, for the purposes of the Act and the said expenditure cannot be excluded in computing export turnover. Thus, we are of the view that the said Judgment is squarely applicable to the facts of the present case. Accordingly, we answer the first question in favour of the assessee and against the revenue. Exchange fluctuation loss - Tribunal held that exchange fluctuation loss should be reduced from the total turnover for the purpose of computation of deduction U/s. 10A - Held that:- section 10A of the Act is a beneficial provision. The purpose of section 10A of the Act is also to bring more foreign exchange and to encourage export and as the Government decides to give some benefit to such undertaking which is helping the nation in bringing foreign exchange, the revenue should encourage such traders by giving more benefits as contemplated under the provisions of law as enunciated in the case of Tata Elxsi Limited [2011 (8) TMI 782 - KARNATAKA HIGH COURT ] - Decided in favour of the assessee and against the revenue - ITA No. 703/2009 - - - Dated:- 8-1-2016 - N. K. .....

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..... counsel appearing for the Revenue as well as Sri. T. Suryanarayana, learned counsel appearing for the assessee. 5. Sri. K.V. Aravind, learned counsel for the revenue firstly contended that expenses incurred in foreign currency for providing software development services outside India of ₹ 17,80,68,049/- has to be excluded from the export turnover for the purpose of computation of deduction under section 10A of the Act, as the services rendered by the assessee relating to the software development has to be construed as technical service, excluded from the export turnover in terms of Explanation (2)(iv) of section 10A of the Act. 6. Secondly, it is contended that the exchange fluctuation loss of ₹ 74,25,340/- should be reduced from the total turnover for the purpose of computation of deduction under section 10A of the Act, placing reliance on sub-section [4] of section 10A of the Act. 7. In support of his contention, learned Counsel places reliance on the Judgment of the Apex Court in the case of 'COMMISSIONER OF INCOME TAX VII v. PUNJAB STAINLESS STEEL INDUSTRIES' reported in [2015] 229 TAXMAN 0423 [SC]. 8. Per contra, learned counsel appearing for .....

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..... hat the purpose of business of the assessee is to develop the software and in such process, expenditure is incurred in foreign currency to provide technical services outside India. Having held so, the assessing authority proceeded to conclude that the nature of expenditure and the nature of business are two different and distinct concepts and as per the statute, what is to be excluded is the expenses in foreign exchange for rendering technical services, though the same is forming an integral part as embedded in the process of on site development of software. This view is upheld by the Appellate Commissioner. 13. We have perused the relevant provisions of the Act i.e.,'export turnover' as defined under explanation (2)(iv) to section 10A of the Act. The said export turnover as per explanation (2)(iv) to section 10A of the Act 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 .....

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..... y before this court in ITA No.1075/2008 connected with ITA No.196/2009, wherein this court, following the Judgment of Motor Industries Co., Ltd., [supra], answered the substantial question of law in favour of the assessee and against the revenue. This court has held that the expenditure incurred in the development or production of computer software though is in the nature of technical services, is not so, for the purposes of the Act and the said expenditure cannot be excluded in computing export turnover. Thus, we are of the view that the said Judgment is squarely applicable to the facts of the present case. Accordingly, we answer the first question in favour of the assessee and against the revenue. 15. As regards question No.2, Sri. K.V. Aravind, learned counsel appearing for the revenue has vehemently argued that though section 10A explanation (2)(4) defines'export turnover' for the purposes of this section, the term'total turnover' is not defined under this provision; Section 10A of the Act provides for deduction of profits and gains derived by an undertaking from the export of computer software and such deduction shall be allowed from the total income of the .....

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