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TMI Blog2022 (2) TMI 823X X X X Extracts X X X X X X X X Extracts X X X X ..... "(i) Whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the expenditure of Rs. 8,46,55,916/- incurred in foreign exchange for providing technical services outside India by way of onsite development of computer software should not be excluded from the export turnover for the purpose of computing deduction u/s.10B without properly applying the provisions of Explanation 2(iii) to Section 10B? (ii) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that even if the expenditure referred to in the preceding question was to be excluded from the export turnover, then the same should be excluded from the total turnover also? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or insurance attributable to the delivery of computer software outside India or expenses if any incurred in foreign exchange in providing technical service outside India. In other words out of the said export turnover the following amounts have to be deducted; a. freight b. telecommunication charges c. insurance attributable to the delivery of computer software outside India; d. expenses, if any, incurred in foreign exchange in providing technical services outside India; 19. If the assessee is engaged in the business of providing technical services outside India in connection with the development or production of computer software then expenses if any incurred in foreign exchange in providing technical services outside India is liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total turnover for arriving at deduction under Section 80HHE of the Act. The assesee is engaged in the business of export out of India of computer software and its 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 subsection (1) of section 80HHE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tionment of profits on the basis of turnover was accepted as a method of arriving at export profits. In the case of Section 80HHC, the export profit is to be derived from the total business income of the assessee, whereas in Section 10-A, the export profit is to be derived from the total business of the undertaking. Even in the case of business of an undertaking, it may include export business and domestic business, in other words, export turnover and domestic turnover. The export turnover would be a component or part of a denominator, the other component being the domestic turnover. In other words, to the extent of export turnover, there would be a commonality between the numerator and the denominator of the formula. In view of the commona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legislative intent and impermissible. If that were the intention of the legislature, they would have expressly stated so. If they have not chosen to expressly define what the total turnover means, then, when the total turnover includes export turnover, the meaning assigned by the legislature to the export turnover is to be respected and given effect to, while interpreting the total turnover which is inclusive of the export turnover. Therefore the formula for computation of the deduction under Section 10-A, would be as under: Profits of the business Export turn over x of the undertaking [Export turnover + domestic turn over) Total turn over" 5. Accordingly, the said substantial question of law is answered in favour of the assessee and ag ..... X X X X Extracts X X X X X X X X Extracts X X X X
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