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TMI Blog2015 (3) TMI 503X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the returned income of Rs. 1,10,87,680 in view of various additions / disallowances. 2.2 Aggrieved by the order of assessment for Assessment Year 2009-10 dt.30.11.2011, the assessee preferred an appeal before the CIT (Appeals) - III, Bangalore. The learned CIT(A) disposed off the assessee's appeal by order dt.20.9.2013 allowing the assessee's appeal. 3. Revenue, being aggrieved by the order of the CIT (Appeals) - III, Bangalore dt.20.9.2013 for Assessment Year 2009-10, has preferred this appeal raising the following grounds :- "1. The order of the learned CIT (Appeals) is opposed to law and facts of the case. 2. On the facts and in the circumstances of the case the learned CIT (Appeals) erred in law in directing the Assessing Officer to exclude the reimbursement of expenditure incurred in foreign currency towards foreign travel and insurance expenses both from the export turnover as well as from total turnover for the purpose of computation of deduction under Section 10A, without appreciating the fact that the statute allows exclusion of such expenditure only from export turnover by way of specific definition of export turnover as envisaged by sub-clause (4) of Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter are that, in the course of assessment proceedings, the Assessing Officer observed that the assessee had claimed an amount of Rs. 15,20,33,464 as deduction under Section 10A of the Act. On examination of the assessee's claim, the Assessing Officer excluded the following expenditure incurred in foreign currency i.e. Rs. 1,45,39,312 on telecommunications; Rs. 63,026 on insurance and Rs. 66,75,816 on technical services outside India from export turnover and recomputed the deduction under Section 10A of the Act at Rs. 10,43,32,376. On appeal, the learned CIT(A), following the decision of the Hon'ble High Court of Karnataka in the case of Tata Elxsi Ltd. (supra) directed the Assessing Officer to exclude the above expenditure amounting to Rs. 2,12,78,154 from both export turnover as well as total turnover and recompute the deduction under Section 10A of the Act accordingly. 5.3.2 We have heard both sides and perused and carefully considered the material on record and the judicial decision cited. On perusal thereof we find that the issue before us for adjudication i.e. if expenditure incurred in foreign currency on foreign travelling, insurance and provision of technica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the denominator. The legislature has provided a definition of the expression "export turnover" in Expln.2 to s.10A which the expression is defined to mean the consideration in respect of export by the undertaking of articles, things or computer software received in or brought into India by the assessee in convertible foreign exchange but so as not to include inter alia freight, telecommunication charges or insurance attributable to the delivery of the articles, things or software outside India. Therefore in computing the export turnover the legislature has made a specific exclusion of freight and insurance charges. The submission which has been urged on behalf of the revenue is that while freight and insurance charges are liable to be excluded in computing export turnover, a similar exclusion has not been provided in regard to total turnover. The submission of the revenue, however, misses the point that the expression "total turnover" has not been defined at all by Parliament for the purposes of s.10A. However, the expression "export turnover" has been defined. The definition of "export turnover" excludes freight and insurance. Since export turnover has been defined by Parliament a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an assessee, having export business and domestic business, the legislature intended to have a formula to ascertain the profits from export business and domestic business, the legislature intended to have a formula to ascertain the profits from export business by apportioning the total profits of the business on the basis of turnovers. Apportionment of profits on the basis of turnover was accepted as a method of arriving at export profits. In the case of section 80HHC, the export profit is to be derived from the total business income of the assessee, whereas in section 10A, the export profit is to be derived from the total business of the undertaking. Even in the case of business of an undertaking, it may include export business and domestic business, in other words, export turnover and domestic turnover. The export turnover would be a component or part of a denominator, the other component being the domestic turnover. In other words, to the extent of export turnover, there would be a commonality between the numerator and the denominator of the formula. In view of the commonality, the understanding should also be the same. In other words, if the export turnover in the numerator is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon'ble High Court of Karnataka in the case of Tata Elxsi Ltd. (supra), we uphold the order of the learned CIT (Appeals) in directing the Assessing Officer to reduce the expenditure incurred in foreign currency on travelling, insurance and provision of technical services abroad from both export turnover and total turnover for the purpose of computing the deduction under section 10A of the Act in the case on hand. Consequently the ground raised at S.Nos.2 by revenue is dismissed. 6. Ground No.3 - Subscription for Broadband facility. 6.1 In this Ground, Revenue assails the decision of the learned CIT(A) in holding that subscription for broadband services are not in the nature of fees for technical services ('FTS') and therefore there is no requirement for TDS to be made under Section 194J of the Act. The learned Departmental Representative was heard in support of the grounds raised. The learned Departmental Representative also submitted that the judicial pronouncements relied on by the learned CIT(A) while allowing the assessee's appeal on this issue were not rendered by jurisdictional Courts and Tribunals and that the matter had not attained finality. 6.2 Per contra, the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee company. Therefore, the amount of Rs. 17,94,830 is to be allowed as an expenditure. As regards the non-deduction of tax on payment of Rs. 3,37,080. It is seen that the payment is towards a subscription of broadband facility. I find considerable merit in the contention of the AR that the services are not in the nature of technical services and TDS need not to be made as per provisions of section 194J. The decisions relied upon by the appellant reported in CIT V Bharti Cellular Ltd. (2008) 175 taxman573 (Delhi), Skycell Communication Ltd. V CIT (2001) 119 taxman 496 (Mad), Expeditors International (India) (P) Ltd. V CIT (2008) 118 TTJ (Delhi) 652 and Pacific Internet (India) (P) Ltd. V ITO (2009) 27 SOT 524 (Mum) support this view." 6.3.2 On perusal of the grounds raised and after having heard the learned Departmental Representative, we find that Revenue, except for raising this ground challenging the order of the learned CIT(A) in following judicial pronouncements that are not of jurisdictional courts and tribunals (supra), has failed to bring on record any material evidence or place before us any judicial decision that controverts the finding of the learned CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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