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TMI Blog2016 (5) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... iness of export of software and has incurred expenses in foreign exchange, claimed the same to be included in total turnover. The assessee has claimed deduction of Rs. 92,59,70,672 under section 10A of the Income-tax Act, 1961 (for short the "Act") and placed reliance on the decisions of the various High Courts before the Assessing Officer. The Assessing Officer took the view that those decisions are rendered in the context of section 80HHE of the Act and declined to allow the claim of deduction made by the assessee. 3. On appeal, the Commissioner of Income-tax (Appeals) allowed the claim of the assessee holding that expenditure incurred in foreign currency outside India in execution of software project or software business cannot be exclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o dispute regarding the legal position as observed by this court in the case of CIT v. Motor Industries Co. Ltd. (I. T. A. Nos. 776 of 2007 with connected cases disposed off on June 13, 2014 and Mphasis Limited (I. T. A. Nos. 1075 c/w 196 of 2009) that the software engineers deputed abroad by the assessee-company have to do testing, installation and monitoring of software supplied to the client, though the said services are technical in nature, it does not fall within the ambit of technical services outside India in connection with the development or production of computer software and the said expenditure cannot be excluded in computing export turnover. It is strongly emphasized by the learned counsel that the activity carried out by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tely considered the material placed by the assessee as well as the reports furnished by the Assessing Officer and thereafter, has rightly arrived at the conclusion that the pre- execution and post execution of software project could not be regarded as technical services which is distinguishable from computer software as these works are integral to the overall work of computer software and it cannot be bifurcated as separate components. The learned counsel invited our attention to Explanation 3 to section 10A of the Act to contend that the profits and gains derived from onsite development of computer software (including services for development of software) outside India shall be deemed to be the profits and gains derived from the export of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iv) to section 10A defines "export turnover" which is reproduced hereunder : Explanation 2.- . . . "(iv) 'export turnover' means the consideration in respect of export by the undertaking if 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), but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India ;" 10. Explanation 3 to section 10A reads thus : "For the removal of doubts, it is hereby declared that the profits and gains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve to do testing, installation and monitoring of software supplied to the client. Though the said services are technical in nature it does not fall within clause (ii) of sub-section (1) of section 80HHE of the Act of providing technical services outside India in connection with the development or production of computer software. It falls under clause (i) of sub-section (1) of section 80HHE of the Act. Therefore, the said expenditure cannot be excluded in computing export turnover. In that view of the matter we do not see any merit in this appeal." 11. This judgment has been followed in the case of Mphasis Limited (supra). There is no cavil regarding this legal position. In the present case, we find from the order of the Assessing Officer t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal following the judgment of an identical case, wrongly mentioned as assessee's case as submitted by both the parties, confirmed the order of the Appellate Commissioner treating expenses incurred in foreign currency to be taken along with total turnover of the assessee. 13. We find that the Tribunal's finding is not based on any examination of available and relevant material to come to a conclusion as to whether the activity related to the computer software as defined under Explanation 2 to section 10A or involving technical services which has to be excluded from the export turnover as per Explanation 4 to section 10A, more particularly, when the assessee had reduced the said expenditure incurred in foreign currency from t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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