TMI Blog2010 (9) TMI 1116X X X X Extracts X X X X X X X X Extracts X X X X ..... what is to be excluded is out of what is received. In the instant case, the assessee received consideration against software, i.e., goods. For this purpose, the assessee had demonstrated by referring to invoices and agreement. The agreement, invoices and the turnover clearly showed that the assessee did not recover any such expenditure. Therefore, there was no scope for any exclusion from the export turnover on account of such expenses. If at all on presumption, it was to be excluded for the purpose of 'export turnover', then on the same assumption, reason and analogy it should be excluded from 'total turnover'. Therefore, the Assessing Officer was not correct in excluding ISP expenses from consideration received in convertible foreign exchange while calculating export turnover for the purpose of section 10A. The ISP expenses considered in the above said decision are similar to the satellite link charges paid by the assessee. As seen from the bills placed on record before the authorities the assessee has paid satellite link charges to VSNL, MTNL and also to Software Technology Park India (STPI) towards bi-monthly half circuit charges/international half circuit c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llis Processing Services (India) Pvt. Ltd. and enclosed the PAN card issued by the Department in support. The PAN continues to be the same. Accordingly the change of name was incorporated. 2. Assessee has raised the following two grounds with reference to exclusion of satellite expenses from the export turnover:- 1. Deduction under section 10A - Satellite expenses a. The learned CIT(A) erred in confirming the computation of deduction u/s. 10A of the Act by excluding the satellite expenses of ₹ 2,04,15,912/- while computing the export turnover. b. The learned CIT(A) erred in not appreciating that the expenditure was incurred in Indian currency and accordingly cannot be excluded from export turnover. c. The learned CIT(A) failed to appreciate that such satellite expenses do not separately form part of the receipt from income. The appellant relied on the decision in the case of Patni Telecom P. Ltd. V. Income Tax Officer (22 SOT 26) (Hyd Tribunal). d. The learned CIT(A) erred in not appreciating the submissions of the appellant in the correct perspective. e. The appellant therefore prays that the learned Assessing Officer be directed not to exclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned counsel in the course of detailed arguments made the following propositions:- 1A No part of the Satellite Expenses can be excluded while determining export turnover, inter alia as: (a) the Satellite Expenses are not invoiced to the overseas clients [See Patni Telecom (P) Ltd. V. ITO (2008) 22 SOT 26 (Hyd. ITAT) (see particularly pages 37 to 40)] (b) the Satellite Expenses are completely fixed charges and are not dependent upon usage and hence cannot be regarded as .... attributable to the delivery of the articles or things or computer software outside India .... (c) the Satellite Expenses are not incurred in foreign exchange B In any event the entire Satellite Expenses cannot be excluded because Explanation 2(iv) sanctions the exclusion only of .... telecommunication charges .... attributable to the delivery of the articles or things or computer software outside India .... II Without prejudice to above, if it is held that the Satellite Expenses or any part thereof are to be excluded from the export turnover, the said Satellite Expenses or part thereof must also be excluded from total turnover - [See- M/s. TCE Consulting Enginee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of revenue expenditure. 7. However, while completing the assessment the A.O. treated the above satellite link charges as part of telecommunication charges. This issue was discussed elaborately by the Coordinate Bench in the case of Patni Telecom (P.) Ltd. vs. ITO (wherein one of us, the J.M. was a member) 22 SOT 26 (Hyd) wherein on similar facts the issue was considered with reference to export turnover as defined in clause (iv) of section 10A and held as under:- Export turnover has been defined in clause (iv) of the Explanation 2 to section 10A. The meaning of 'export turnover' is also provided in other sections of the Act, say clause (c) of section 80HHE and Explanation (b) to section 80HHC. According to Explanation (b) to section 80HHC, export turnover means the sale proceeds receivable in foreign exchange as per sub-section 2(a) of section 80HHC of all goods which are exported out of India, but which does not include freight and insurance. Similarly, total turnover for the purpose of deduction under section 80HHC, which is defined in Explanation (ba) at the end of section 80HHC in the negative term, means as not including freight and insurance attributable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration of the goods only. Where such expenses are separately charged in the invoices, the consideration received in convertible foreign exchange includes the value of the goods and such expenses. If the consideration received is only against the goods, then there is no need to deduct such expenses from the consideration received in convertible foreign exchange. In case where such expenses are separately charged, the expenses are required to be reduced from the consideration received for the purpose of arriving at the export turnover. The logic and reason behind this have been explained by the CBDT vide its Circular No.564, dated 5-7-1990, that the delivery of the goods should be Free on Board (FoB). The goods exported at FOB is important in the sense that deduction under section 10A is permissible only in respect of consideration received against goods and not for the consideration received against freight, etc. All the assessees should get deduction under section 10A on consideration received against supply of goods at FoB. Therefore, the condition of delivery of goods at FoB has been put and the definition of 'export turnover' as provided in clause (iv) of the Explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annum basis where as rest of the charges were paid on annual lease agreement periodically and these are fixed charges not connected with the delivery attributable to the export of goods. Even though the assessee has utilised the satellite link for receiving data and also for transferring data this cannot be considered as telecommunication charges for delivery of goods on FOB basis. Not only that what the assessee was getting was a fixed service charge for processing data from the foreign company, Trinity Processing Services Ltd. on a monthly basis in terms of the agreement dated 16th October 2001. There are no separate charges recovered from the foreign company towards telecommunication charges which can be considered as amount recovered in foreign exchange from the foreign party. Since no such amount is recovered or included in the turnover, question of exclusion from the export turnover also does not arise on the facts of the case. 9. Assessee has made an alternate contention that the satellite link charges, in case they are considered as telecommunication charges this should also be excluded from the total turnover as considered by the Special bench in the case of ITO vs. Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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