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2016 (10) TMI 255

Telecommunication expenses, insurance charges, personnel expenses, professional expenses, branch office expenses and other expenses incurred in foreign exchange - exclusion from the export turnover for the purpose of computing deduction under Section 10B - Held that:- In the instant case, the order for software and hardware are placed separately, though in the same order, for different costs. The sale invoice of software and hardware was also raised separately on different dates. The mode of pay .....

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n which it has been held that whatever has been excluded from the export turnover had to be excluded from the total turnover also, since total turnover includes export turnover as well. In light of these findings, we uphold the order of the CIT(Appeals) that sale of hardware component would be excluded from the export turnover and for the recomputation of deduction u/s. 10A, the matter is restored to the Assessing Officer in the terms indicated above. - Decided partly in favour of assessee. - IT .....

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e High Court of Karnataka are as under:- a. Whether the telecommunication expenses, insurance charges, personnel expenses, professional expenses, branch office expenses and other expenses incurred in foreign exchange should not be excluded from the export turnover for the purpose of computing deduction under Section 10B of the Income Tax Act, 1961? b. If the said expenses are to be excluded from the export turnover, then the same should also be excluded from the total turnover for the purpose of .....

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,10,234 being the sale of hardware components from the export turnover for the purpose of computing deduction u/s. 10A of the Act? (2) Whether the telecommunication expenses, insurance charges, personnel expenses, professional expenses, branch office expenses and other expenses incurred in foreign exchange should not be excluded from the export turnover for the purpose of computing deduction under Section 10B of the Income Tax Act, 1961? (3) If the said expenses are to be excluded from the expor .....

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of the overall sale of software products, the assessee company procures the required hardware and onward sells them after integrating the software into them as a part of sale of software. The hardware is in the nature of servers that have been procured, as only with these servers, the software products sold by the assessee company operate, and hence it is a composite contract and the assessee was required to supply the said software along with the hardware. The ld. counsel for the assessee has a .....

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the AO and the CIT(Appeals), has contended that the assessee does not manufacture or produce hardware and the meaning of software cannot be stretched to hardware, however essential it may be for functioning of the computer software. He has also invited our attention to Explanation 2 of section 10A in which the word computer software has been defined, according to which, computer software means any computer programme recorded on any disc, tape, perforated media or other information storage devic .....

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are cannot be included in the export turnover for the purpose of computing deduction u/s. 10A of the Act. 6. Having carefully examined the orders of lower authorities in the light of rival submissions and the judgments referred to by the parties, we find that undisputedly the assessee is not a manufacturer of the hardware. The hardware was purchased from the market and was sold to its buyer. The ld. counsel for the assessee has put an emphasis during the course of hearing that the assessee procu .....

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05.2016. From the invoices, it is evident that the software was sold on 25.3.2005 for a value of USD 272,000 and the hardware was sold on 19.9.2005 by separate invoice. For the sake of reference, we extract the Purchase Order as well as Invoice issued by the assessee:- 7. From the above details, it is abundantly clear that the assessee has got the order of hardware and software separately for different costs and was also sold by raising invoices on different dates. It is also evident that the bu .....

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the fact appears to be different. 8. We have carefully perused the judgments of the Hon'ble jurisdictional High Court in the case of Wipro Ltd. v. DCIT (supra) in which the issue in dispute was, whether monitors sold along with computers were a part of the computer? In that case, Their Lordships have held that wherever the monitors are sold separately, they are not part of the computer, but wherever they are sold along with the computers, it would be a part of computer as the computer canno .....

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7,736 monitors were sold as a part of the computer. The assessee has pleaded its inability to give the value of the said monitor because the said monitor was sold as a part of the composite value of the computers and the assessee is claiming benefit under Section 80IB in respect of the total consideration. As set out earlier the assessee is carrying on the manufacturing of computers and sale of computers. He has satisfied all the requirements stipulated in sub-section (2) of Section 80IB and he .....

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rities that the assessee is not entitled to the benefit of deduction under Section 80IB in respect of the monitors which form part of the computer is hereby set aside. Both the substantial questions are answered in favour of the assessee and against the revenue. 9. From a perusal of the judgment of the Hon ble Supreme Court in the case of Hindustan Shipyard Ltd. (supra), we find that Their Lordships of the Apex Court have examined the word sale for the purpose of Sale of Goods Act and Their Lord .....

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uct being brought into existence by the investment of skill and labour of the supplier, the transaction would be a contract for work and labour. 10. Again in the case of Hindustan Aeronautics Ltd. v. State of Karnataka (1984) 55 STC 314 (SC), Their Lordships have observed that it is well settled that the difference between the contract of service and contract of sale of goods is that in the former, the person performing the work or rendering services, no property in the things produced as a whol .....

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hardware. Moreover, the order was not placed for supply of particular hardware and software only. The order was placed for the supply of software as well as hardware and nothing has been established on record that the said software cannot be used without hardware. In light of these facts, we are of the considered opinion that sale of hardware cannot be a part of software exported by the assessee. Thus, we have no hesitation in holding that sale of hardware cannot be a part of export turnover. 1 .....

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