DCIT, Bangalore v. M/s Torry Harris Business Solutions Pvt. Ltd.,, Bangalore

PAGE 1 OF 13 ITA NO.860/BANG/2010 & C.O.NO.58/BANG/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SHRI GEORGE GEORGE K. J.M. AND SHRI A MOHAN ALANKAMONY A.M. ITA NO.860/BANG/2010 (ASST. YEAR 2005-06) THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-12(4) BANGALORE. - APPELLANT VS M/S TORRY HARRIS BUSINESS SOLUTIONS PVT. LTD. #71 SONA TOWERS MILLERS ROAD BANGALORE-52. - RESPONDENT C.O.NO.58/BANG/2010 (IN ITA NO.860/BANG/2010) (BY ASSESSEE) REVENUE BY : SMT. SWATHI S PATIL CIT-II ASSESSEE BY : SHRI R SRINIVASAN FCA O R D E R PER GEORGE GEORGE K : THIS APPEAL INSTITUTED BY THE DEPARTMENT AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DIRECTED AGAINS T THE CIT(A)-III'S ORDER DATED 03.07.2009. THE RELEVANT ASSESSMENT YE AR IS 2005-06. 2. THE APPEAL AND THE CROSS OBJECTION ARE HEARD TO GETHER AND DISPOSE OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. PAGE 2 OF 13 ITA NO.860/BANG/2010 & C.O.NO.58/BANG/2010 2 3. THE CROSS OBJECTION IS BELATEDLY FILED BY 49 DAYS. THE ASSESSEE HAS FILED AN AFFIDAVIT FOR CONDONING THE D ELAY IN FILLING THE CROSS OBJECTION. WE HAVE PERUSED THE REASON STATED IN THE AFFIDAVIT FOR CONDONING THE DELAY IN FILING THE CROSS OBJECTIO N. WE ARE SATISFIED WITH THE SAME AND CONDONED THE DELAY IN FILING THIS CROSS OBJECTION AND THE SAME IS TAKEN ON RECORD. 4. THE EFFECTIVE GROUNDS RAISED IN THE APPEAL ARE AS FOLLOWS:- I) THE LEARNED CIT(A) ERRED IN DIRECTING THE AO TO EXCLUDE EXPENSES INCURRED ON TELECOMMUNICATION CHARGES FOR DELIVERY OF SOFTWARE OF RS.26 52 337/- FROM TOTAL TURNOVER FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 10A OF THE I T ACT 1961. II) THE LEARNED CIT(A) ERRED IN HOLDING THAT CONSULTANCY CHARGES ONSITE MARKETING CHARGES TRAVELLING EXPENSES AND OTHER EXPENSES INCURRED IN FOREIGN CURRENCY AGGREGATING TO RS.22 51 29 162/- ARE NOT IN THE NATURE OF EXPENDITURE INCURRED IN PROVIDING TECHNICAL SERVICES AND THEREFORE ARE NO T TO BE EXCLUDED FROM EXPORT TURNOVER FOR THE PURPOSES OF COMPUTATION OF DEDUCTION U/S 10A. III) THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACT THAT THE PERSONNEL ENGAGED BY ENTERPRISE CONSULTING BUSINESS SOLUTIONS THE ASSESSEES ESTABLISHMENT IN U.K. ARE HIGHLY QUALIFIED IN TECHNICAL WHO ASSIST THE ASSESSEE IN ONSITE DEVELOPMENT AND DELIVERY OF SOFTWARE FOR WHICH THE ASSESSEE PAID CONSULTANCY CHARGES AND INCURRED OTHER EXPENSES AND THEREFORE THESE EXPENSES OF RS.22 51 29 162/- HAVE BEEN INCURRED FOR PROVIDING TECHNICAL SERVICES WHICH HAVE TO BE EXCLUDED FROM PAGE 3 OF 13 ITA NO.860/BANG/2010 & C.O.NO.58/BANG/2010 3 EXPORT TURNOVER AS PER THE DEFINITION OF TOTAL TURNOVER IN SECTION 10A. IN THE ABSENCE OF SPECIFIC DEFINITION OF TOTAL TURNOVER IN SECTION 10 A EXCLUSION OF SUCH EXPENDITURE FROM TOTAL TURNOVER IS NOT PERMISSIBLE. FURTHER KEEPING IN VIEW THAT DEDUCTION U/S 10A IS BENEFICIAL PROVISION MEANT FOR NET FOREIGN EXCHANGE EARNERS THE EXCLUSION OF EXPENDITURE INCURRED IN FOREIGN CURRENCY FROM EXPORT TURNOVER ONLY IS IN ACCORDANCE WITH THE SPIRIT OF THE SECTION. 5. SHORT FACTS RELATING TO THE FIRST GROUND MENTIO NED ABOVE ARE AS FOLLOWS:- THE ASSESSEE IS A COMPANY. FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 10A OF THE I T ACT IT HAD DISCLOSED AN EXPORT TURNOVER AMOUNTING TO RS.47 79 47 707/-. TH E AO IN THE COURSE OF SCRUTINY ASSESSMENT FOUND THAT THE ASSESS EE COMPANY HAD INCLUDED WITHIN THE EXPORT TURNOVER THE FOLLOWING EXPENSES:- TELECOMMUNICATION RS.26 52 337/- INSURANCE RS. 3 10 000 TOTAL = RS.29 62 337/- THE AO WHILE COMPLETING THE SCRUTINY ASSESSMENT HE LD THE ABOVE EXPENSES OF RS.29 62 337/- AS EXPENSES ATTRIBUTABLE TO THE DELIVERY OF COMPUTER SOFTWARE OUTSIDE INDIA. THEREFORE IN ACCORDANCE WITH CLAUSE (IV) OF EXPLANATION 2 APPEARING BELOW SUB-SE CTION 8 OF SECTION 10A OF THE ACT THE AO REDUCED THE SAID EXPENSES FR OM THE EXPORT TURNOVER WHILE COMPUTING DEDUCTION U/S 10A OF THE A CT. PAGE 4 OF 13 ITA NO.860/BANG/2010 & C.O.NO.58/BANG/2010 4 6. THE ASSESSEE BEING AGGRIEVED BY THE COMPUTATION MADE BY THE AO CARRIED THE MATTER IN APPEAL BEFORE THE F IRST APPELLATE AUTHORITY. 7. IT WAS SUBMITTED BEFORE THE FIRST APPELLATE AUT HORITY THAT THE ABOVE SAID TWO EXPENSES OUGHT NOT TO HAVE BEEN REDUCED FROM THE EXPORT TURNOVER WHILE CALCULATING DEDUCTIO N U/S 10A OF THE ACT. ALTERNATIVELY IT WAS ARGUED THAT IF THE EXPEN SES ARE TO BE REDUCED FROM THE EXPORT TURNOVER THE SAME OUGHT TO BE REDUCED FROM THE TOTAL TURNOVER ALSO WHILE CALCULATING DEDU CTION U/S 10A OF THE ACT. 8. THE CIT(A) AFTER ELABORATELY CONSIDERING THE IS SUES HELD THAT OUT OF THE TOTAL EXPENSES OF RS.29 62 337 /- EXCLUDED BY THE AO FROM THE EXPORT TURNOVER INSURANCE AMOUNT O F RS.3 10 000/- SHOULD BE INCLUDED IN THE EXPORT TURNOVER FOR THE P URPOSE OF COMPUTATION OF DEDUCTION U/S 10A OF THE ACT. HOWEV ER WITH REFERENCE TO TELECOMMUNICATION CHARGES AMOUNTING TO RS.26 52 337/- THE CIT(A) AFFIRMED THE VIEW OF THE AO THAT THE SAM E SHOULD BE EXCLUDED FROM THE EXPORT TURNOVER. BUT THE ALTERNA TIVE SUBMISSION OF THE ASSESSEE WAS ACCEPTED BY THE CIT(A). HE DIRECTE D THE AO TO EXCLUDE THE TELECOMMUNICATION CHARGES NOT ONLY FROM THE EXPORT TURNOVER BUT ALSO FROM THE TOTAL TURNOVER WHILE CO MPUTING DEDUCTION U/S 10A OF THE ACT. THE CIT(A) IN TAKING THE ABOVE VIEW FOLLOWED THE ORDER OF THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF TATA ELXSI LIMITED V ACIT 115 TTJ 423. PAGE 5 OF 13 ITA NO.860/BANG/2010 & C.O.NO.58/BANG/2010 5 9. THE REVENUE BEING AGGRIEVED BY THE DIRECTION OF THE CIT(A) TO EXCLUDE RS.26 52 337/- FROM THE TOTAL TUR NOVER WHILE CALCULATING DEDUCTION U/S 10A OF THE ACT IS IN APP EAL BEFORE US. 10. THE LEARNED DR SUPPORTED THE ORDER OF THE ASSE SSING OFFICER WHEREAS THE LEARNED AR REITERATED THE SUBMI SSION MADE BEFORE THE INCOME-TAX AUTHORITIES. IT WAS SUBMITTE D THAT THE ISSUE IN QUESTION IS SQUARELY COVERED BY THE ORDER OF SPECI AL BENCH OF TRIBUNAL IN THE CASE OF ITO V SAK SOFT LTD. 313 ITR (AT) 353. 11. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN QUESTION IS DIREC TLY COVERED BY THE ORDER OF THE SPECIAL BENCH OF TRIBUNAL IN THE CASE OF ITO V SAK SOFT LTD. 313 ITR (AT) 353. THE RELEVANT FINDING OF THE SPECIAL BENCH CHENNAI IS AS UNDER:- 'TO SAY THAT THAT IN THE ABSENCE OF ANY DEFINITION OF 'TOTAL TURNOVER' FOR THE PURPOSE OF SECTION 10B THERE IS NO AUTHORITY TO EXCLUDE ANYTHING FROM THE EXPRESSION AS UNDERSTOOD IN GENERAL PARLANCE WOULD BE WRONG AS THERE HAS TO BE AN ELEMENT OF TURNOVER IN THE RECEIPT IF IT HAS TO BE INCLUDED IN THE TOTAL TURNOVER. THAT ELEMENT IS MISSING IN THE CASE OF FREIGHT TELECOM CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE GOODS OUTSIDE INDIA AND EXPENSES INCURRED IN FOREIGN EXCHANGE IN CONNECTION WITH THE PROVISION OF TECHNICAL SERVICES OUTSIDE INDIA. THESE RECEIPTS CAN ONLY BE RECEIVED BY THE ASSESSEE AS REIMBURSEMENT OF SUCH EXPENSES INCURRED BY HIM. MERE REIMBURSEMENT OF EXPENSES CANNOT HAVE AN ELEMENT OF TURNOVER. IT IS ONLY IN RECOGNITION OF THIS POSITION THAT IN THE PAGE 6 OF 13 ITA NO.860/BANG/2010 & C.O.NO.58/BANG/2010 6 DEFINITION OF 'EXPORT TURNOVER' IN SECTION 10B THE AFORESAID TWO ITEMS HAVE BEEN DIRECTED TO BE EXCLUDED. SECONDLY THE DEFINITION OF EXPORT TURNOVER CONTEMPLATES THAT THE AMOUNT RECEIVED BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE SHOULD REPRESENT 'CONSIDERATION' IN RESPECT OF THE EXPORT. ANY REIMBURSEMENT OF THE TWO ITEMS OF EXPENSES MENTIONED IN THE DEFINITION CAN UNDER NO CIRCUMSTANCES BE CONSIDERED TO REPRESENT 'CONSIDERATION' FOR THE EXPORT OF THE COMPUTER SOFTWARE OR ARTICLES OR THINGS. THUS THE EXPRESSION 'TOTAL TURNOVER' WHICH IS NOT DEFINED IN SECTION 10B SHOULD ALSO BE INTERPRETED IN THE SAME MANNER. THUS THE TWO ITEMS OF EXPENSES REFERRED TO IN THE DEFINITION OF 'EXPORT TURNOVER' CANNOT FORM PART OF THE TOTAL TURNOVER SINCE THE RECEIPTS BY WAY OF RECOVERY OF SUCH EXPENSES CANNOT BE SAID TO REPRESENT CONSIDERATION FOR THE GOODS EXPORTED SINCE TOTAL TURNOVER IS NOTHING BUT THE AGGREGATE OF THE DOMESTIC TURNOVER AND THE EXPORT TURNOVER. IN THE FORMULA PRESCRIBED BY SECTION 10B(4) THE FIGURE OF EXPORT TURNOVER HAS TO BE THE SAME BOTH IN THE NUMERATOR AND IN THE DENOMINATOR OF THE FORMULA. IT FOLLOWS THAT THE TOTAL TURNOVER CANNOT INCLUDE THE TWO ITEMS OF EXPENSES RECOVERED BY THE ASSESSEE AND REFERRED TO IN THE DEFINITION OF 'EXPORT TURNOVER'. THE HONBLE SPECIAL BENCH FURTHER HELD AS FOLLOWS:- 'THE COMMON THREAD RUNNING THROUGH SECTIONS 80HHC 80HHE AND 80HHF IS THAT THEY ARE ALL PROVISIONS GRANTING RELIEF TO THE ASSESSEES IN RESPECT OF PROFITS DERIVED FROM EXPORT. THE DIFFERENCE BETWEEN CHAPTER III IN WHICH SECTION 10B FALLS AND CHAPTER VI-A IN WHICH THESE SECTIONS FALL IS THAT WHILE THE FORMER EXCLUDES TH E INCOME IN QUESTION TOTALLY FROM THE PURVIEW OF TOTAL PAGE 7 OF 13 ITA NO.860/BANG/2010 & C.O.NO.58/BANG/2010 7 INCOME AND GIVES TOTAL EXEMPTION FROM TAX THE LATTER GIVES DEDUCTION OF A PART OF THE PROFITS AND GAINS OF THE CONCERNED BUSINESS FROM THE GROSS TOTAL INCOME. BOTH HOWEVER ARE CHAPTERS WHICH GIVE RELIEF TO ASSESSEES FROM TAXATION SUBJECT TO THE CONDITIONS BEING FULFILLED AND IN THAT SENSE THEY ARE OF THE SAME GENRE. THE OBJECT OF THESE SECTIONS IS TO ENCOURAGE THE EARNING OF FOREIGN EXCHANGE AND PROVIDE INCENTIVE TO PROMOTE EXPORTS. IF SOME OF THE SECTIONS SUCH AS SECTIONS 80HHE AND 80HHF PROVIDE FOR A FORMULA FOR CALCULATING THE DEDUCTION WHICH IS IDENTICAL WITH THE FORMULA PRESCRIBED BY SECTION 10B IT WOULD BE INCONGRUOUS TO INTERPRET SECTION 10B IN A MANNER DIFFERENT FROM THOSE TWO SECTIONS MERELY BECAUSE THERE IS NO DEFINITION OF 'TOTAL TURNOVER' IN THAT SECTION. 'EXPORT TURNOVER' AS DEFINED IN THESE SECTIONS EXCLUDES FREIGHT TELECOM CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE COMPUTER SOFTWARE OUTSIDE INDIA OR EXPENSES IF ANY INCURRED IN FOREIGN EXCHANGE IN PROVIDING TECHNICAL SERVICES OUTSIDE INDIA. THUS STATUTORILY PARITY IS MAINTAINED BETWEEN EXPORT TURNOVER AND TOTAL TURNOVER IN THESE SECTIONS. THERE IS NO REASON WHY SUCH PARITY CANNOT BE MAINTAINED BETWEEN EXPORT TURNOVER AND TOTAL TURNOVER IN SECTION 10B JUST BECAUSE 'TOTAL TURNOVER' HAS NOT BEEN DEFINED IN THAT SECTION. WHERE THE LEGISLATURE USES THE SAME EXPRESSION IN THE SAME STATUTE AT TWO PLACES OR MORE THE SAME INTERPRETATION SHOULD BE GIVEN TO THAT EXPRESSION UNLESS THE CONTEXT REQUIRES OTHERWISE. 11.1 IN CONFORMITY WITH THE ABOVE FINDING OF THE SP ECIAL BENCH OF THE TRIBUNAL WE HOLD THAT THE CIT(A) IS J USTIFIED IN DIRECTING THE AO TO REDUCE THE TELECOMMUNICATION CH ARGES AMOUNTING PAGE 8 OF 13 ITA NO.860/BANG/2010 & C.O.NO.58/BANG/2010 8 TO RS.26 52 337/- NOT ONLY FROM THE EXPORT TURNOVER BUT ALSO FROM THE TOTAL TURNOVER WHILE CALCULATING DEDUCTION U/S 10A OF THE ACT. 12. WITH REFERENCE TO GROUND NOS.2 AND 3 MENTIONED ABOVE THE FACTS OF THE ISSUE ARE AS FOLLOWS:- THE ASSESSEE COMPANY WHILE CALCULATING DEDUCTION U /S 10A OF THE ACT HAD REFLECTED THE AMOUNT OF RS.47 79 47 707/- AS EXPORT TURNOVER. IN THE SAID EXPORT TURNOVER THE FOLLOWING EXPENSES IN FOREIGN EXCHANGE WERE INCLUDED BY THE ASSESSEE CO MPANY:- CONSULTANCY CHARGES (ENTERPRISE COMPUTING BUSINESS SOLUTIONS) RS.18 44 96 913 ONSITE MARKETING RS. 19 04 474 TRAVEL EXPENSES RS. 2 87 55 574 OTHERS RS. 99 72 201 RS.22 51 29 162 12.1 THE AO WHILE COMPLETING THE SCRUTINY ASSESSMEN T HELD THAT THE ABOVE EXPENSES OF RS.22 51 29 162/- ARE EX PENSES INCURRED TOWARDS PROVIDING TECHNICAL SERVICES OUTSIDE INDIA. THEREFORE THE AO CONCLUDED THAT BY VIRTUE OF CLAUSE (IV) OF EXPLANATI ON 2 TO SECTION 10A(8) OF THE ACT THE SAID EXPENDITURE IS TO BE RE DUCED FROM THE EXPORT TURNOVER WHILE CALCULATING DEDUCTION U/S 10A OF THE ACT. 12.2 AGGRIEVED BY THE REDUCTION OF THE ABOVE EXPEND ITURE FROM THE EXPORT TURNOVER WHILE CALCULATING DEDUCTIO N U/S 10A THE ASSESSEE COMPANY CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. PAGE 9 OF 13 ITA NO.860/BANG/2010 & C.O.NO.58/BANG/2010 9 12.3 IT WAS SUBMITTED BEFORE THE FIRST APPELLATE A UTHORITY THAT EXCLUSION OF FOUR EXPENSES AMOUNTING TO RS.22 51 29 162/- INCURRED IN FOREIGN EXCHANGE FROM THE EXPORT TURNOV ER FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 10A IS UNWARRANT ED. THE ASSESSEE COMPANY ALTERNATIVELY URGED IF THE EXPENSES IN QUEST ION ARE SO EXCLUDED THE SAME SHOULD ALSO BE EXCLUDED FROM THE TOTAL TURNOVER WHILE COMPUTING DEDUCTION U/S 10A OF THE ACT. 12.4 THE CIT(A) DIRECTED THE AO NOT TO EXCLUDE THE ABOVE EXPENDITURE AMOUNTING TO RS.22 51 29 162/- FROM THE EXPORT TURNOVER WHILE CALCULATING DEDUCTION U/S 10A OF THE ACT. SI NCE MAIN ARGUMENT OF THE ASSESSEE WAS ADDRESSED IN ITS FAVOUR THE AL TERNATIVE SUBMISSION OF THE ASSESSEE THAT THE EXPENDITURE RED UCED FROM THE EXPORT TURNOVER SHOULD ALSO BE REDUCED FROM THE TOT AL TURNOVER WHILE CALCULATING DEDUCTION U/S 10A OF THE ACT WAS NOT AD JUDICATED UPON. 12.5 WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSE D THE MATERIAL ON RECORD. THE FIRST APPELLATE AUTHORIT Y HAS ELABORATELY CONSIDERED THE ISSUE. HE HAS DELIBERATED ON EACH O F THE EXPENSES THAT WERE REDUCED BY THE AO FROM THE EXPORT TURNOVER . IT WAS CATEGORICALLY HELD BY THE CIT(A) THAT THE ASSESSEE H AD NOT PROVIDED ANY TECHNICAL SERVICES OUTSIDE INDIA WITH REFERENCE TO THESE EXPENDITURES INCURRED. THE DEPARTMENT HAS NOT BEEN ABLE TO PRODUCE ANY MATERIAL/EVIDENCE TO DISPEL THE FINDING OF THE C IT(A). THEREFORE WE ARE OF THE VIEW THAT THE CIT(A)S DIRECTION TO A O NOT TO EXCLUDE THESE EXPENDITURES FROM THE EXPORT TURNOVER WHILE C ALCULATING THE PAGE 10 OF 13 ITA NO.860/BANG/2010 & C.O.NO.58/BANG/2010 10 DEDUCTION U/S 10A OF THE ACT IS IN ORDER AND IN ACC ORDANCE WITH LAW AND NO INTERFERENCE IS CALLED FOR. 13. IN THE RESULT THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. 14. IN THE CROSS OBJECTION THE ASSESSEE HAS RAISE D THE FOLLOWING EFFECTIVE GROUNDS:- I) WITHOUT PREJUDICE IF THE TELECOMMUNICATION CHARGES ARE REQUIRED TO BE EXCLUDED IN TOTO FROM THE EXPORT TURNOVER THE LEARNED CIT(A) OUGHT TO HAVE DIRECTED THAT SUCH EXPENSES ARE REQUIRED TO BE EXCLUDED FROM THE TOTAL TURNOVER. II) SIMILARLY IF THE CIT(A) ORDER WITH REGARD TO THE NON-EXCLUSION OF CONSULTANCY CHARGES ONSITE MARKETING CHARGES TRAVELING EXPENSES AND OTHER EXPENSES INCURRED IN FOREIGN CURRENCY AGGREGATING TO RS.22 51 29 162/- IS NOT GOING TO BE APPROVED THE SAID EXPENSES TO THE TUNE OF RS.22 51 29 162/- ARE REQUIRED TO BE EXCLUDED FROM THE TOTAL TURNOVER OF THE RESPONDENT AS HELD BY THE SPECIAL BENCH OF THE TRIBUNAL WHICH WAS ALSO FOLLOWED BY THE JURISDICTIONAL BENCH WHILE COMPUTING THE DEDUCTION U/S 10A OF THE ACT. 15. THE FIRST GROUND MENTIONED ABOVE IS REGARDING THE ISSUE OF REDUCTION OF TELECOMMUNICATION CHARGES FROM THE EXPORT TURNOVER WHILE CALCULATING DEDUCTION U/S 10A OF THE ACT. TH E AO REDUCED FROM THE EXPORT TURNOVER THE TELECOMMUNICATION CHARGES A ND CALCULATED DEDUCTION U/S 10A OF THE ACT. THE ACTION OF THE AO WAS AFFIRMED BY THE CIT(A). THE RELEVANT FINDING OF THE CIT(A) RE ADS AS FOLLOWS:- PAGE 11 OF 13 ITA NO.860/BANG/2010 & C.O.NO.58/BANG/2010 11 IN CONCLUSION IT IS CLEAR FROM THE ABOVE DISCUSSION THAT THE APPELLANT ALSO IN PRINCIPLE ACCEPTS THAT EXPENSES WHICH ARE ATTRIBUTABLE TO DELIVERY OF COMPUTER SOFTWARE OUTSIDE INDIA ARE TO BE EXCLUDED FROM THE DECLARED EXPORT TURNOVER AND I ALSO AGREE THAT ONLY THAT PORTION OF THE EXPENSE WHICH IS ATTRIBUTABLE TO THE DELIVERY OF COMPUTER SOFTWARE OUTSIDE INDIA IS TO BE EXCLUDED FROM THE EXPORT TURNOVER. HOWEVER THE APPELLANT HAS NOT BEEN ABLE TO QUANTIFY AS TO HOW MUCH OF THE TELECOMMUNICATION CHARGES IS ATTRIBUTABLE AND HOW MUCH IS NOT ATTRIBUTABLE TO THE DELIVERY OF COMPUTER SOFTWARE OUTSIDE INDIA. IT IS ALSO NOT POSSIBLE TO ADOPT A STANDARD ESTIMATED PERCENTAGE ON THE ISSUE. I AM THEREFORE COMPELLED TO HOLD THE ENTIRE AMOUNT OF TELECOMMUNICATION EXPENSES OF RS.26 52 337/- AS EXPENSES ATTRIBUTABLE TO THE DELIVERY OF COMPUTER SOFTWARE OUTSIDE INDIA AND THEREFORE HOLD THE ENTIRE AMOUNT AS EXCLUDIBLE FROM THE DECLARED EXPORT TURNOVER OF THE APPELLANT IN ARRIVING AT EXPORT TURNOVER FOR THE PURPOSES OF COMPUTING DEDUCTION UNDER SECTION 10A. THE ACTION OF THE AO IN THIS REGARD IS THEREFORE SUSTAINED. 16. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE CIT(A) IS RIG HT IN REDUCING THE ENTIRE TELECOMMUNICATION EXPENSES AMOUNTING TO RS.2 6 52 337/- FROM THE EXPORT TURNOVER WHILE CALCULATING DEDUCTION U/S 10A OF THE ACT. THE ASSESSEE COMPANY HAS NOT BEEN ABLE TO QUANTIFY AS TO HOW MUCH THE TELECOMMUNICATION CHARGES IS ATTRIBUTABLE AND H OW MUCH IS NOT ATTRIBUTABLE TO THE DELIVERY OF COMPUTER SOFTWARE OU TSIDE INDIA. IN SUCH FACTS AND CIRCUMSTANCES OF THE CASE THERE WAS NO OTHER OPTION BUT TO HOLD THE ENTIRE AMOUNT OF TELECOMMUNICATION CHARGES AS PAGE 12 OF 13 ITA NO.860/BANG/2010 & C.O.NO.58/BANG/2010 12 EXPENSES ATTRIBUTABLE TO THE DELIVERY OF COMPUTER SO FTWARE OUTSIDE INDIA. THEREFORE THE ACTION OF THE INCOME TAX AUT HORITIES ON THIS ISSUE IS UPHELD AND WE HOLD THAT THE TELECOMMUNICAT ION CHARGES OF RS.26 52 337/- IS TO BE REDUCED FROM THE EXPORT TUR NOVER WHILE CALCULATING DEDUCTION U/S 10A OF THE ACT. HOWEVER SINCE THE ALTERNATIVE PLEA OF THE ASSESSEE HAS BEEN ALLOWED B Y THE CIT(A) AND THE VIEW OF THE CIT(A) HAS BEEN AFFIRMED BY US VIDE PARA 11 AND PARA 11.1 (SUPRA) WE HOLD THAT THE AMOUNT OF RS.26 52 3 37/- BEING TELECOMMUNICATION CHARGES SHOULD BE REDUCED NOT ON LY FROM THE EXPORT TURNOVER BUT ALSO FROM THE TOTAL TURNOVER WH ILE COMPUTING DEDUCTION U/S 10A OF THE ACT. THEREFORE GROUND NO . (I) MENTIONED ABOVE IS DISMISSED. 17. WITH REFERENCE TO SECOND GROUND MENTIONED ABOV E THE ISSUE WAS NOT ADJUDICATED BY THE CIT(A). THE CIT( A) HAD HELD THAT EXPENSES OF RS.22 51 29 162/- SHOULD NOT BE REDUCED FROM THE EXPORT TURNOVER WHILE CALCULATING DEDUCTION U/S 10A OF THE ACT. HENCE THE CIT(A) WAS OF THE VIEW THAT THE ALTERNATIVE PLEA OF THE ASSESSEE NAMELY EXPENSES REDUCED FROM THE EXPORT TURNOVER SH OULD ALSO BE REDUCED FROM THE TOTAL TURNOVER WHILE CALCULATING D EDUCTION U/S 10A HAS BECOME ACADEMIC. THE RELEVANT OBSERVATION OF T HE CIT(A) READS AS FOLLOWS:- IN THE CASE OF THE SECOND GROUND OF APPEAL ALSO THE APPELLANT HAD ALTERNATIVELY URGED THAT IF THE EXPENSES IN QUESTION ARE SO EXCLUDED THE SAME SHOULD ALSO BE EXCLUDED FROM THE TOTAL TURNOVER IN COMPUTING THE DEDUCTION U/S 10A. THIS ISSUE HAS PAGE 13 OF 13 ITA NO.860/BANG/2010 & C.O.NO.58/BANG/2010 13 ALREADY BEEN CONSIDERED AND ALLOWED BY ME WHILE DISCUSSING THE FIRST GROUND OF APPEAL. HOWEVER SINCE I HAVE HELD THAT THE FOUR EXPENSES INCURRED IN FOREIGN EXCHANGE ARE NOT LIABLE TO BE EXCLUDED FROM THE EXPORT TURNOVER OF THE APPELLANT FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 10A THE ISSUE IS RENDERED ACADEMIC AND THEREFORE NOT DISCUSSED ANY FURTHER. THE SECOND GROUND MENTIONED ABOVE IS SQUARELY COVERE D BY THE DECISION OF THE SPECIAL BENCH IN THE CASE OF ITO V SAK SOFT LTD. (SUPRA). FOR OUR REASONING MENTIONED IN PARA 11 AN D PARA 11.1 (SUPRA) WE ALLOW GROUND NO. (II) MENTIONED ABOVE RAISED IN THE CROSS OBJECTION. 18. IN THE RESULT THE CROSS OBJECTION FILED BY THE ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE. THE ORDER PRONOUNCED ON FRIDAY THE 11 TH DAY OF FEBRUARY 2011 AT BANGALORE. SD/- SD/- (A MOHAN ALANKAMONY) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COPY TO : 1) THE ASSESSEE (2) THE REVENUE (3) THE CIT(A) CONCERNED. (4) THE CIT CONCERNED. (5) THE DR (6) GUARD FILE. MSP/9.2. BY ORDER ASST. REGISTRAR ITAT BANGALORE.