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2020 (9) TMI 876 - HC - Income TaxRevision u/s 263 - Deduction u/s 10A - not excluding the expenditure incurred in foreign currency from export turnover for computing deduction - HELD THAT - The assessee is engaged in the business of computer software development and services. The expenditure incurred in foreign currency on traveling, professional charges and onsite service charges are for development of software at clients site outside India, the assessee has neither rendered any technical services nor has earned any receipt from rendering technical services. Therefore, there is no need to exclude the expenditure incurred in foreign currency from the export turnover. See CHANGEPOND TECHNOLOGIES (P) LIMITED. 2008 (2) TMI 486 - ITAT MADRAS-A and PATNI TELECOM (P) LIMITED. 2008 (1) TMI 452 - ITAT HYDERABAD-A View taken by the Assessing Officer was a plausible view and the view taken by him cannot be said to be erroneous. Therefore, in view of well settled legal position, invocation of powers in the fact situation of the case under Section 263 of the Act could not have been held to be justified. - Decided in favour of assessee.
Issues:
1. Interpretation of Section 10A of the Income Tax Act regarding exclusion of expenditure incurred in foreign currency from export turnover. 2. Application of Section 263 of the Income Tax Act in determining if an order is erroneous and prejudicial to the revenue. Analysis: Issue 1: Interpretation of Section 10A The case involved a dispute regarding the exclusion of expenditure incurred in foreign currency from export turnover for computing deduction under Section 10A of the Income Tax Act. The appellant, engaged in software development services and exports, claimed deduction under Section 10A without excluding such expenditure. The Commissioner of Income Tax (Appeals) found the Assessing Officer's order erroneous and prejudicial to revenue for not excluding the foreign currency expenditure. However, the Tribunal held that the Assessing Officer's view was plausible, citing precedents where exclusion was not required when no technical services were rendered or receipts earned. The Tribunal's decision was based on the principle that where two views are possible, the Assessing Officer's view cannot be considered erroneous. Consequently, the Tribunal set aside the Commissioner's order, ruling in favor of the appellant. Issue 2: Application of Section 263 The Tribunal's decision was challenged on the grounds that the Assessing Officer's failure to exclude foreign currency expenditure was erroneous and prejudicial to revenue, as per Section 263 of the Act. The court analyzed Section 263, emphasizing that for revisional jurisdiction to apply, two conditions must be met: the order must be erroneous and prejudicial to revenue. Referring to legal precedents, the court highlighted that mere disagreement between the Assessing Officer and Commissioner does not make the order erroneous. As the Assessing Officer's view was plausible and in line with legal interpretations, the court upheld the Tribunal's decision, stating that the invocation of powers under Section 263 was not justified in this case. Consequently, the court dismissed the appeal, ruling against the revenue and in favor of the assessee. In conclusion, the court's detailed analysis of Section 10A and Section 263 of the Income Tax Act led to the dismissal of the appeal, affirming the Tribunal's decision in favor of the assessee based on the interpretation of relevant legal provisions and precedents.
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