2010 (6) TMI 817 - AT - Income Tax

Summary

Issues involved:
The judgment involves the exclusion of US Branch sales and foreign travelling expenses from the total turnover and export turnover while computing the deduction u/s 10B of the Income Tax Act, 1961.

US Branch Sales Exclusion:
The assessee contended that branch sales should be included in export turnover as per Explanation (2) and (3) to sec.10B, equating it to on-site development of exports. However, the Tribunal held that the sale proceeds must be received in convertible foreign exchange to avail the deduction u/s 10B, emphasizing the objective to encourage foreign exchange inflow. The Tribunal concluded that the branch sales in US cannot be considered as received in convertible foreign exchange by the assessee in India, thus not entitled to the benefit of Sec.10B. The argument that branch sales are on-site development of software was dismissed, and the exclusion from export turnover and total turnover was upheld.

Foreign Travelling Expenses Exclusion:
Regarding the exclusion of foreign travelling expenses, the Tribunal referred to a previous case where it was held that such expenses incurred in foreign exchange should be excluded from both export turnover and total turnover. Relying on this precedent, the Tribunal confirmed the exclusion of foreign travel expenses from both turnovers. Consequently, the Tribunal found no issue with the order of the CIT(A) on this matter and dismissed the grounds raised by both the assessee and the Revenue.

Conclusion:
Ultimately, the Tribunal dismissed the appeals of both the assessee and the Revenue, upholding the exclusion of US Branch sales and foreign travelling expenses from the total turnover and export turnover for the purpose of computing the deduction u/s 10B of the Income Tax Act, 1961.