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TMI Blog2015 (10) TMI 634X X X X Extracts X X X X X X X X Extracts X X X X ..... o EOU/EHTP/STP/BTP units will be regarded as ‘deemed export’, besides being eligible for relevant entitlements under paragraph 6.12 of the Policy. They will also be eligible for the additional entitlements mentioned therein. What is of importance is when a supply is made from DTA to STP, it does not satisfy the requirements of export as defined under the Customs Act. However, for the purpose of Exim Policy, it is treated as ‘deemed export’. Therefore, when Section 10A of the Act was introduced to give effect to the Exim Policy, the supplies made from one STP to another STP has to be treated as ‘deemed export’ because Clause 6.19 specifically provides for export through Status Holder. It provides that an EOU/EHTP/STP/BTP unit may export goods manufactured /software developed by it through other exporter or Status holder recognized under this policy or any other EOU/EHTP/STP/SEZ/BTP unit. What follows from this provision is that to be eligible for exemption from payment of income tax, export should earn foreign exchange. It does not mean that the undertaking should personally export goods manufactured / software developed by it outside the country. It m ay export out of India by itse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principal to principal basis and based on the purchase orders placed by TIIPL on the asses see with the instructions to bill and deliver to TIIPL. The software development work done by the assessee for TIIPL is exported out of India by TIIPL. Therefore, the software development service s provided to TIIPL would be eligible for deduction under Section 10A of the Act, as it has satisfied both the conditions prescribed being, (a) export of computer software from India indirectly (i.e., the software development work done by the Company for TIIPL is exported out of India by TIIPL which is a registered STP unit) and (b) the consideration for the software work done by the Company is received in convertible foreign exchange within the specified period. 3. The assessee in support of its contention relied on the notification dated 30.4.1995 issued by the CBDT in respect of Software Technology Park Scheme. It provides that supplies made from a DTA to a STP unit will be regarded as deemed export and will be eligible for the benefits specified at para graphs 106 and 122 of the Export and Import Policy. The assessing authority rejected the said contention on the ground that the consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y deemed export under the Act. The Exim Policy obviously does not include in respect of benefit to be given under the Act other than the one referred to under Chapter 6.12(a). Therefore, it was held that the sales effected to the STP by the assessee would not constitute a deemed export and therefore, confirming the orders of lower appellate authorities, the appeal came to be dismissed. Aggrieved by the said order, the assessee is before this Court. 6. The learned Counsel for the assessee assailing the impugned orders contended that the word export is not defined under the Act. Therefore, it has to be understood in the context of definition contained in the Exim Policy. Section 10A of the Act being beneficial provision, it gives incentive for export and earning foreign exchange. If the assessee, being a STP, has earned foreign exchange by export of its software, Section 10A of the Act, is attracted and would be entitled to the said benefit . In the instant case, obviously the assessee exported the software to another STP unit, the said STP unit after adding value exported the same outside the country and the foreign exchange realized is shared between the two Companies and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10A. Special provision in respect of newly established undertakings in free trade zone, etc . - (1) Subject to the provisions of this section, ad education of such profits and gains as are derived by an undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee: Provided that where in computing the total income of the undertaking for any assessment year, its profits and gains had not been included by application of the provisions of this section as it stood immediately before its substitution by the Finance Act, 2000, the undertaking shall be entitled to deduction referred to in this sub-section only for the unexpired period of the aforesaid ten consecutive assessment years: Provided further that where an undertaking initially located in any free trade zone or export processing zone is subsequently located in a special economic zone by reason of conversion of such free t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nge, within a period of six months from the end of the previous year or, within such further period as the competent authority may allow in this behalf. Explanation 1.-For the purposes of this sub-section , the expression competent authority means the Reserve Bank of India or such other authority as is authorised under any law for the time being in force for regulating payments and dealings in foreign exchange. Explanation 2.-The sale proceeds referred to in thi s sub-section shall be deemed to have been received i n India where such sale proceeds are credited to a separate account maintained for the purpose by the assessee with any bank outside India with the approval of the Reserve Bank of India. xxx xxx xxx Explanation 2.-For the purposes of this section,- (i) computer software means- (a) any computer programme recorded on any disc, tape, perforated media or other information storage device; or (b) any customized electronic data or any product or service of similar nature, as may be notified by the Board, which is transmitted or exported from India to any place outside India by any means; (ii) convertible foreign exchange means foreign exchange which is f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge. 14. Explanation 2 (iv) to Section 10A defines export turnover for the purpose of this Section as the consideration in respect of export by the undertaking of articles or things or computer software received in, or brought into, India by the assessee in convertible foreign exchange in accordance with Sub- Section (3) . Further, it makes it clear that export turnover does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or thi ngs or computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India. 15. Sub-Section (2) of Section 10A makes this pro vision applicable to undertakings which have begun or begin to manufacture or produce articles or things or computer software during the previous year relevant to the assessment year commencing on or after the 1 st day of April, 1981, in any free trade zone; or commencing on or after the 1 st day of April, 1994, in any electronic hardware technology park, or, as the cas e may be, software technology park; commencing on or after the 1 st day of April, 2001, in any special economic zone. 16. The softwar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditions are fulfilled, then the object of enacting Section 10A is fulfilled and the assess ee would be entitled to the benefit of exemption from payment of Income Tax Act on the profits and gains derived by the Undertaking from the export. 21. Clause 6.11 of Exim Policy dealing with entitlement for supplies from the DTA states that supplies from the DTA to EOU/EHTP/STP/BTP units will be regarded as deemed export , besides being eligible for relevant entitlements under paragraph 6.12 of the Policy. They will also be eligible for the additional entitlements mentioned therein. What is of importance is when a supply is made from DTA to STP, it does not satisfy the requirements of export as defined under the Customs Act. However, for the purpose of Exim Policy, it is treated as deemed export . Therefore, when Section 10A of the Act was introduced to give effect to the Exim Policy, the supplies made from one STP to another STP has to be treated as deemed export because Clause 6.19 specifically provides for export through Status Holder. It provides that an EOU/EHTP/STP/BTP unit may export goods manufactured /software developed by it through othe r exporter or Status holder recogni ..... 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