TMI Blog2021 (3) TMI 530X X X X Extracts X X X X X X X X Extracts X X X X ..... otal turnover in same proportion as well. On the issue of expenses on technical services provided outside, we have to follow the same principle of interpretation as followed in the case of expenses of freight, telecommunication etc., otherwise the formula of calculation would be futile. Hence, in the same way, expenses incurred in foreign exchange for providing the technical services outside shall be allowed to exclude from the total turnover - Decided in favour of assessee. - T.C.A. No. 795 of 2013 - - - Dated:- 2-3-2021 - M. Duraiswamy And T. V. Thamilselvi , JJ. For the Appellant : T. Ravi Kumar, Senior Standing Counsel For the Respondents : R. Venkata Narayanan JUDGMENT M. Duraiswamy, J. Challenging the order passed in I.T.A. No. 1570/Mds/2011 in respect of the assessment year 2002-03 on the file of the Income Tax Appellate Tribunal, Chennai D Bench, the Revenue has filed the above appeal. 2. The assessee - Company is engaged in the business of development of Computer Software and renders training and software development services in Chennai, Mumbai, Bangalore and also in Hyderabad. The assessee filed its return of income on 31.12.2002 declarin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 80HHE in the return of income filed. The Assessing Officer held that Hyderabad unit was not engaged in the business of software development but were providing software training and followed the order passed in the assessment year 1999-00 and excluded the same from the total turnover. 6. The next issue with regard to the software expenses amounting to ₹ 1,11,69,398/- which related to Chennai Unit-I II, Bangalore and the sum of ₹ 1,82,21,841/- was capitalized in the books of accounts and the assessee had claimed the same as revenue expenditure while computing the taxable income, the Assessing Officer followed the assessment order passed in the year 1999-00 and 2000-01 and held that software expenses of ₹ 2,93,98,239/- incurred was not eligible for deduction as revenue expenditure, but allowed depreciation at the rate of 25% on the same. On various disallowances, the Assessing Officer had arrived at a total taxable income at ₹ 15,74,66,739/-. 7. The Commissioner of Income Tax passed an order under Section 263 holding that exemption under Section 10B was granted in respect of the Chennai Unit - II and there was a mistake in computation of dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent is engaged in the activity of trading of generic software and providing customized software development services for domestic as well as for foreign clients through its two units situated in Software Technology Park, Gurgaon (Now Gurugram) which falls under the definition of the Section 10A of the IT Act. The contention of the respondent is that it incurred expenditure in foreign exchange in sending professionals abroad as per the agreements with the foreign constituents. ... 19. In the instant case, if the deductions on freight, telecommunication and insurance attributable to the delivery of computer software under Section 10A of the IT Act are allowed only in Export Turnover but not from the Total Turnover then, it would give rise to inadvertent, unlawful, meaningless and illogical result which would cause grave injustice to the Respondent which could have never been the intention of the legislature. 20. Even in the common parlance, when the object of the formula is to arrive at the profit from export business, expenses excluded from export turnover have to be excluded from total turnover also. Otherwise any other interpretation makes the formula unwo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue of allowability of deduction under Section 10A is common to all the three Assessment Years, all the three Tax Appeals are taken up together and disposed of by this common judgment. For the Assessment Year 2000-01, the assessee had filed its return of income on 29.11.2000. The assessee claimed that it was eligible for deduction under Section 10B. The return was processed on 28.03.2002. Subsequently, the Assessing Officer had reason to believe that income chargeable to tax had escaped assessment on account of the assessee Company being ineligible for deduction under Section 10A. Subsequently, a notice dated 22.03.2007 was issued under Section 148 and after giving an opportunity of hearing, the scrutiny assessment order was passed on 17.12.2007, disallowing the entire claim of deduction under Section 10B. Further, the expenditure incurred for the renovation and repairs of the rented premises of the assessee Company was disallowed by the Assessing Officer on the ground that such expenses were in the nature of capital expenditure. The Assessing Officer in his re-assessment order noted that in terms of Section 10B(ii) an undertaking in order to be eligible for deduction under S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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