TMI Blog2016 (5) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... g the returns and thereafter has shifted to a different stance before the appellate authority, that the said services were integral part of development of computer software. Even in the order of the Appellate Commissioner, we do not see the details of remand reports said to have been submitted by the Assessing Officer and any discussion regarding any material or any agreement copies to establish the factual situation and the activities of the assessee. The Tribunal without examining any commensurate material, placing reliance on the judgment of the Tribunal dated May 30, 2008, allowed the relief claimed by the assessee. Given the circumstances, the said finding of the Tribunal is not based on any relevant material. We are therefore of the opinion that it would be proper to remand the matter to the Tribunal to examine the material on record and to record a finding as to the nature of the activity, keeping in view the settled legal position as per the judgment of this court in Motor Industries Company Limited's case (2015 (7) TMI 876 - KARNATAKA HIGH COURT) and Mphasis Limited's case (2014 (8) TMI 690 - ANDHRA PRADESH HIGH COURT). It is also made clear that what is required to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g that expenditure incurred in foreign currency is not required to be reduced from 'export turnover' as the same was incurred in foreign currency outside India in execution of software project/development of computer software and not for technical services rendered outside India, when the assessee on its own has excluded the said expenditure from 'export turnover' while filing return of income and also before the Assessing Officer and also when the assessee has not established that expenditure in foreign currency was in connection of the development of computer software which was exported and recorded a perverse finding ? 4. Heard the learned counsel appearing for the parties. 5. Learned counsel appearing for the appellant/revenue vehemently contended that there is no dispute regarding the legal position as observed by this court in the case of CIT v. Motor Industries Co. Ltd. (I. T. A. Nos. 776 of 2007 with connected cases disposed off on June 13, 2014 and Mphasis Limited (I. T. A. Nos. 1075 c/w 196 of 2009) that the software engineers deputed abroad by the assessee-company have to do testing, installation and monitoring of software supplied to the client, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofits and gains derived from onsite development of computer software (including services for development of software) outside India shall be deemed to be the profits and gains derived from the export of computer software outside India. The appellate authority and the Tribunal having extensively considered the scope of section 10A read with Explanation 3 thereof has allowed the deduction towards the export of computer software as the services for development of software is deemed to be the profits and gains derived from onsite development of computer software. 7. We have considered the rival submissions and perused the material on record. Section 10A of the Act is a special provision in respect of newly established undertaking in free trade zone, etc. This provision provides for a deduction of such profits and gains derived by an undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be, shall be allowed from the total income. 8. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts transmission to places from India outside India. Before a computer software is exported, the software engineers of the assessee would have initial discussion with regard to the requirements, specifications, etc. Thereafter computer software is manufactured and then it is transmitted from India to a place outside India. The software engineers deputed abroad who among other things have to do testing, installation and monitoring of software supplied to the client. Though the said services are technical in nature it does not fall within clause (ii) of sub-section (1) of section 80HHE of the Act of providing technical services outside India in connection with the development or production of computer software. It falls under clause (i) of sub-section (1) of section 80HHE of the Act. Therefore, the said expenditure cannot be excluded in computing export turnover. In that view of the matter we do not see any merit in this appeal. 11. This judgment has been followed in the case of Mphasis Limited (supra). There is no cavil regarding this legal position. In the present case, we find from the order of the Assessing Officer that the Assessing Officer had no occasion as such to go into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of computer software. Even in the order of the Appellate Commissioner, we do not see the details of remand reports said to have been submitted by the Assessing Officer and any discussion regarding any material or any agreement copies to establish the factual situation and the activities of the assessee. The Tribunal without examining any commensurate material, placing reliance on the judgment of the Tribunal dated May 30, 2008, allowed the relief claimed by the assessee. Given the circumstances, the said finding of the Tribunal is not based on any relevant material. 14. We are therefore of the opinion that it would be proper to remand the matter to the Tribunal to examine the material on record and to record a finding as to the nature of the activity, keeping in view the settled legal position as per the judgment of this court in Motor Industries Company Limited's case (supra) and Mphasis Limited's case (supra). It is also made clear that what is required to be excluded in the export turnover are only freight, telecommunication charges or insurance attributable to the delivery of computer software outside India or expenses, if any, incurred in foreign exchange in pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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