2014 (8) TMI 943 - AT - Income Tax

Determination of export turnover - whether the expenditure on telecommunication and other heads incurred in foreign exchange excluded from the export turnover has also to be reduced from the total turnover or not - Held that - Special Bench of the Tribunal in the case of ITO v. Sak Soft Ltd. 2009 (3) TMI 243 - ITAT MADRAS-D had already decided this question against the Revenue. On being granted opportunity the appellant/Revenue fails to point out any distinguishing features - Decided against Revenue.

Summary

Issues:
- Appeal against reduction of telecommunication charges, insurance, and foreign exchange expenses from export turnover for deduction under section 10A.
- Whether expenses excluded from export turnover should also be reduced from total turnover.

Analysis:

*Issue 1: Appeal against reduction of expenses from export turnover for deduction under section 10A*
The Revenue appealed against the direction of the Commissioner of Income-tax (Appeals) to reduce telecommunication charges, insurance, and expenses incurred in foreign exchange from the export turnover for calculating the deduction under section 10A of the Income-tax Act, 1961. The Revenue contended that the expenses attributed to providing technical services outside India should not be excluded from the export turnover as per section 10A(8) Explanation 2(iv) of the Act. The Assessing Officer had observed various expenses, including telecommunication charges, insurance, and other heads, forming part of the export turnover, and held that expenses related to providing technical services outside India should be excluded from the export turnover.

*Issue 2: Reduction of expenses from total turnover*
The Commissioner of Income-tax (Appeals) held that expenses incurred in foreign exchange, excluded from the export turnover, should also be reduced from the total turnover. The Commissioner relied on previous decisions and highlighted that for the claim of benefit under section 10A, expenses in foreign currency should be excluded both from the export turnover and the total turnover. The Commissioner referred to the decision of the Special Bench of the Income-tax Appellate Tribunal in the case of ITO v. Sak Soft Ltd., which emphasized the exclusion of certain expenses from both the export and total turnover for calculating the deduction under section 10A.

In the final judgment, the Tribunal considered whether the expenses on telecommunication and other heads incurred in foreign exchange, excluded from the export turnover, should also be reduced from the total turnover. The Tribunal noted that a Special Bench had previously decided against the Revenue on this matter in the case of ITO v. Sak Soft Ltd. The Tribunal found no distinguishing features pointed out by the Revenue and, therefore, rejected the Revenue's appeal. Consequently, the Tribunal dismissed the Revenue's appeal against the reduction of expenses from the export turnover and upheld the direction to reduce these expenses from both the export and total turnover for calculating the deduction under section 10A.