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TMI Blog2007 (3) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned CIT(A) was right in holding that the total turnover shall not include expenses incurred in foreign exchange in providing technical services outside India - In result, the appeal is dismissed. - P.K. MALHOTRA, J.M. AND K.G. BANSAL, A.M. For the Appellant : Purushotam Tripuri For the Respondent : Ajay Vohra ORDER K.G. BANSAL, A.M. 1. This appeal of the revenue emanates from the order of the Commissioner (Appeals)-IV, New Delhi, passed on 8-11-2004. The order of assessment was passed by the Assistant Commissioner, Circle 3(1), New Delhi (hereinafter called the assessing officer), under the provisions of Section 143(3) of the Income Tax Act, 1961 (the Act for short), on 24-12-2003, assessing the total income at Rs. 2,95,55,170. The revenue has taken two grounds in the appeal to the effect that on the facts and in the circumstances of the case, the learned Commissioner (Appeals) erred in directing to exclude from the total turnover : (i) expenditure incurred in foreign exchange in making payments to software professionals outside India; (ii) expenditure incurred in foreign exchange in sending software professional abroad, while computing deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich has not been received in or brought into India in convertible foreign exchange. Thus, while computing the total turnover, payments made to foreign professionals in USA could not have been excluded. Accordingly he took the total turnover by taking into account the payments made to foreign professionals in the USA. 3. Aggrieved by this order, the assessee moved an appeal before the Commissioner (Appeals)-IV, New Delhi. The case of the assessee before the first appellate authority was that the terms export turnover and total turnover ought to be understood in the same manner. Thus, if expenses incurred in foreign exchange are not to be included in the export turnover, they should also not be included in the total turnover. Otherwise, complexion of the numerator will be different from the complexion of the denominator in the ratio used in Section 10A for the purpose of computing the deduction under the section. The learned Commissioner (Appeals) considered the assessment order and the assessee's submission. He agreed with the assessee that if expenses incurred in foreign exchange for providing technical services outside India, are to be excluded from the export turnover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid definition of the total turnover, it was contended that even when export turnover has not been defined under Section 10A, its contextual meaning will have to be found out by taking into account the definition of the term export turnover . In other words, his case was that notwithstanding the fact that both the terms have not been defined under Section 10A as done in Section 80HHC, yet by following the analogy of the definitions in Section 80HHC, the contextual meaning of the total turnover will have to be taken for the purpose of Section 10A also. If that is done, then, items excluded from the export turnover in the definition will also have to be excluded from the total turnover. 5.1 Coming to the decided cases on the issue, he relied on the decision of Hon'ble Delhi High Court in the case of Jaypee Hotels Ltd. in IT Appeal Nos. 1146 and 1223 of 2006, dated 4-1-2007, a copy of which was placed before us. The question before the Hon'ble court was whether, the expression total receipts of the business in Section 80HHD(3) of the Income Tax Act relates only to the receipts concerning the services provided by the assessee to foreign tourists or the receipts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be excludible from the total turnover by following the decision in the case of Sudarshan Chemicals Ltd. (supra). 5.3 The learned counsel also relied on the decision of Hon'ble Supreme Court in the case of J.B. Boda Co. (P) Ltd. vs. CBDT (1997) 137 CTR (SC) 287 : (1997) 223 ITR 271 (SC). The Hon'ble Court, at p. 281, pointed out that the facts brought out in the case are clear as to how the remittance to the foreign reinsurance company was made through the RBI in conformity with the agreement between the assessee and the foreign reinsurers, and that the remittance statement filed along with Annex. 'A' which evidences that the amount due to the foreign reinsurers as also the brokerage to the assessee and the balance due to the foreign reinsurers was remitted. It was common ground that the entire transaction, effected through the medium of RBI, was expressed in foreign exchange and in effect the reduction of the fee due to the assessee was in dollars. This amounted to receipt of income in convertible foreign exchange. The Hon'ble court further pointed out that a two-way traffic was unnecessary. To insist on a formal remittance to the foreign reinsurers first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfronted the Hon'ble Bombay High Court under Section 80HHC. In that section the profits derived from the export business had to be worked out on the basis of a formula which involved the finding out the ratio of export turnover to the total turnover. Excise duty of sales-tax were not payable in respect of the export turnover while the duty are the tax were payable in respect of inland turnover, which formed part of the total turnover. The Hon'ble court pointed out that Section 80HHC is a code by itself and, therefore, general definition of the word turnover or the cases under the sales-tax could not have been imported while interpreting the term tot; turnover . Thus, even when the definition was given in the section, which di not exclude excise duty and sales-tax from the turnover, the Hon'ble Court came to the conclusion that the aforesaid two levies will have to be exclude from the total turnover on the ground that the deduction cannot be reduce artificially by including statutory levies in the denominator, namely, tot: turnover while the same did not find a place in the numerator, namely, the export turnover. In other words, to arrive at a fair computation of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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