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TMI Blog2014 (1) TMI 1751X X X X Extracts X X X X X X X X Extracts X X X X ..... before us. We do not know as to whether the entire export turnover is in relation to this client alone or there were other clients for whom the Assessee rendered computer software development services. A perusal of the SPA filed before us shows that the Assessee agreed to carry out software development work for Robert Bosch Germany at Germany also. The terms of the agreement for rendering services on-site at clauses-5.2 to 5.2.6 of the agreement does not involve rendering of any technical services. The question as to whether the entire expenditure incurred in foreign exchange outside India relates to providing technical services outside India cannot be decided in the absence of the required information as stated above. If the claim of the Assessee that the entire expenditure incurred in foreign exchange outside India does not relate to providing technical services outside India, then the same cannot be excluded from the export turnover. Since the factual verification is required for adjudicating the aforesaid issue, we deem it appropriate to set aside the order of the CIT(A) and remand the issue to him with a direction to decide the issue - Decided in favour of assessee for statist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luded from the export turnover need not be reduced from the total turnover. Following the aforesaid decision, the AO refused to exclude communication charges and expenses incurred in foreign currency from the total turnover and computed deduction u/s. 10A of the Act by reducing the communication charges and expenses incurred in foreign currency from the export turnover alone. Consequently, deduction u/s. 10A was allowed by the AO at a sum of ₹ 81,62,37,207. 5. Aggrieved by the order of the AO, the assessee preferred appeal before the CIT(Appeals). The assessee raised specific ground of appeal before the CIT(A) regarding exclusion of expenditure incurred in foreign currency from the export turnover. According to the assessee, the expenditure incurred in foreign currency in the first place ought to be excluded from the export turnover also. Grounds No.2 3 raised by the assessee before the CIT(A) in this regard read as follows:- 2. That the Assessing Officer ought not to have excluded Expenditure in Foreign Currency in a sum of ₹ 92,43,87,701 from the Export Turnover relating to Export of Computer Software. 3. That the Assessing Officer ought to have held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not required to be made when expenditure was incurred in connection with development of software:- - Hon ble ITAT, Bangalore Bench s decision in the case of M/s Infosys Ltd. Vs JCIT/DCIT (ITA Nos. 50,793 to 795,742 to 734 dt. 31.03.2005). - Hon ble ITAT, Hyderabad Bench s decision in the case of M/s Patni Telecom Pvt. Ltd. Vs ITO (2009) 308 ITR (A.T.) 414. 8. It was submitted that in the aforesaid orders the jurisdictional ITAT as well as the Hyderabad Bench of the Tribunal held that exclusion of expenses incurred in foreign exchange from the export turnover was not required to be made when the assessee did not render any independent technical services but instead incurred the same for the development of software. A copy of the Software Projects Agreement ( SPA ) entered into between Robert Bosch GmbH Germany and the assessee was furnished during the course of appellate proceedings. Pointing out to the aforesaid agreements it was submitted that the object of the SPA was performance of software development work to be undertaken by the assessee. Attention was also drawn to Annexure A to Form No. 56F produced by the assessee which indicated that the nature of business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of computation of deduction u/s. 10A of the Act, the AO excluded the expenses incurred in foreign exchange. The AO treated this expenditure as expenditure incurred in foreign exchange in providing technical services outside India. The correctness of the action of the AO was considered by the Tribunal. The Tribunal analysed the terms of the Agreement by which the Assessee agreed to render on-site and off-shore services related to software development. Onsite services were rendered at customer s place by the assessee s employee sent there. The offsite services are rendered at the assessee s place locally. The activities of the assessee company amounted to sale of goods in the form of computer software. The assessee received consideration in convertible foreign exchange for both types of services. The travel and allowance expenses of ₹ 1,16,61,307 were treated by the AO as expenditure incurred in foreign exchange for providing technical services outside India and same was reduced from convertible foreign exchange received by the assessee. The Tribunal held that the expenditure was not in connection with providing technical services and that the assessee did not render any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges or insurance attributable to the delivery of software outside India. The claim for exclusion from the export turnover is made by the assessee only in respect of expenses incurred in foreign currency in providing technical services outside India. We however do not have the break-up of the item of expenditure incurred in foreign currency outside India. A copy of the agreement between the Assessee and Robert Bosch, Germany titled software project agreement (SPA) has been filed before us. We do not know as to whether the entire export turnover is in relation to this client alone or there were other clients for whom the Assessee rendered computer software development services. A perusal of the SPA filed before us shows that the Assessee agreed to carry out software development work for Robert Bosch Germany at Germany also. The terms of the agreement for rendering services on-site at clauses-5.2 to 5.2.6 of the agreement does not involve rendering of any technical services. The question as to whether the entire expenditure incurred in foreign exchange outside India relates to providing technical services outside India cannot be decided in the absence of the required information a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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