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TMI Blog2018 (5) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... the delivery of computer software under Section 10A of the IT Act are allowed only in Export Turnover but not from the Total Turnover then, it would give rise to inadvertent, unlawful, meaningless and illogical result which would cause grave injustice to the Respondent which could have never been the intention of the legislature. - Civil Appeal Nos. 8489-8490 of 2013 - - - Dated:- 24-4-2018 - CIVIL APPEAL NO. 8535 of 2013 CIVIL APPEAL NO. 8555-8556 of 2013 CIVIL APPEAL NO.7853 of 2012 CIVIL APPEAL NO.8789 of 2012 CIVIL APPEAL NO.8559 of 2013 CIVIL APPEAL NO.8558 of 2013 CIVIL APPEAL NOs.8529-8530 of 2013 CIVIL APPEAL NO.8515 of 2013 CIVIL APPEAL NO.8557 of 2013 CIVIL APPEAL NO.8524 of 2013 CIVIL APPEAL NO.8518 of 2013 CIVIL APPEAL NO.8525 of 2013 CIVIL APPEAL NO.8539 of 2013 CIVIL APPEAL NO. 4392 OF 2018 (Arising out of Special Leave Petition (C) NO. 5345 OF 2014) CIVIL APPEAL NO.8562 of 2013 CIVIL APPEAL NO.8533 of 2013 CIVIL APPEAL NO.7854 of 2012 CIVIL APPEAL NO.8560 of 2013 CIVIL APPEAL NO. 4393 OF 2018(Arising out of Special Leave Petition (C) NO. 31028 OF 2012)CIVIL APPEAL NO.8537 of 2013 CIVIL APPEAL NO.8543 of 2013 CIVIL APPEAL NO.8492 of 2013 CIVIL APPEAL NOS. 8540-85 ..... 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O. 26753 OF 2015) CIVIL APPEAL NOS. 646-647 of 2015 CIVIL APPEAL NO. 4398 OF 2018 (Arising out of Special Leave Petition (C) NO. 34486 OF 2014) CIVIL APPEAL NO. 4399 OF 2018 (Arising out of Special Leave Petition (C) No. 34487 OF 2014) CIVIL APPEAL NO. 77 of 2015 CIVIL APPEAL NO. 4450 OF 2018 (Arising out of Special Leave Petition (C) NO. 1923 OF 2015) CIVIL APPEAL NO. 4452 OF 2018 (Arising out of Special Leave Petition (C) NO. 312 OF 2015) CIVIL APPEAL NO. 4541 OF 2018 (Arising out of Special Leave Petition (C) NO. 1179 OF 2015) CIVIL APPEAL NO. 4455 OF 2018 (Arising out of Special Leave Petition (C) NO. 13074 OF 2015) CIVIL APPEAL NO. 1951 of 2015 CIVIL APPEAL NO. 4544 OF 2018 (Arising out of Special Leave Petition (C) NO. 26474 OF 2015) CIVIL APPEAL NO. 4458 OF 2018 (Arising out of Special Leave Petition (C) NO. 12558 OF 2015) CIVIL APPEAL NO. 4400 OF 2018 (Arising out of Special Leave Petition (C) NO. 21974 OF 2015) CIVIL APPEAL NO. 4542 OF 2018 (Arising out of Special Leave Petition (C) NO. 20515 OF 2015) CIVIL APPEAL NO. 4461 OF 2018 (Arising out of Special Leave Petition (C) NO. 24213 OF 2015) CIVIL APPEAL NO. 9250 of 2015 CIVIL APPEAL NO. 4464 OF 2018 (Arising out of Specia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer, vide order dated 28.12.2006, held that the software development charges, as claimed by the Respondent, are nothing but in the nature of expenses incurred for technical services provided outside India. Further, in view of the fact that it is not purely technical services and some element of software development is also involved in it and in the absence of such bifurcation, the Assessing Officer estimated such expense at the rate of 40% and remaining 60% for providing technical services by the Respondent in foreign exchange to its offshore clients and re-assessed the taxable income at ₹ 137,20,34,576/- and penalty to the tune of ₹ 21,81,90,239/-. (d) Being aggrieved, the Respondent preferred an appeal being No. 331/06-07 before the Commissioner of Income Tax (Appeals). Learned CIT (Appeals), vide order dated 09.05.2007, partly allowed the appeal while estimating 10% as software development charge incurred for technical services provided outside India as against 60% estimated by the Assessing Officer. (e) Being aggrieved, the Respondent as well as the Revenue, preferred cross appeals being ITAT Nos. 3199 and 3344/Del/2007 before the Tribunal. The Tribunal, vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mula would render undesirable results. Therefore, the Respondent is legally entitled to exclude the above said expenses from the total turnover as well. Hence, these appeals deserve to be dismissed at the outset. Discussion:- 8) The whole controversy revolves around the claim of certain expenses attributable to the delivery of software outside India or in providing technical services from total turnover by the Respondent under Section 10A of the IT Act. It is an undisputed fact that neither Section 10A nor Section 2 of the IT Act define the term total turnover . However, the term total turnover is given in clause (ba) of the Explanation to Section 80 HHC of the IT Act which defines the meaning of total turnover as follows: (ba) total turnover shall not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs stations as defined in the Customs Act, 1962 (52 of 1962). Provided that in relation to any assessment year commencing on or after the 1st day of April, 1991, the expression total turnover shall have effect as if it also included any sum referred to in clauses (iiia), (iiib), (iiic), (iiid) and (iiie) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se regarding the methodology of deduction which ought to be followed. Undisputedly, it is a matter of record that the Respondent is engaged in the activity of trading of generic software and providing customized software development services for domestic as well as for foreign clients through its two units situated in Software Technology Park, Gurgaon (Now Gurugram) which falls under the definition of the Section 10A of the IT Act. The contention of the Respondent is that it incurred expenditure in foreign exchange in sending professionals abroad as per the agreements with the foreign constituents. 11) On an analysis of the Respondent s activity taken from its website, Assessing Officer arrived at a conclusion that Respondent has been rendering technical services outside India and, therefore, expenses incurred on such activity are required to be excluded from the export turnover while working out the deduction admissible under Section 10A of the IT Act. The Assessing Officer estimated 60% of the software development charges required to be attributed towards expenses incurred for providing technical services outside India. On appeal, learned CIT (Appeals) again made a detailed an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into consideration for computing the deduction under Section 10A. When the meaning is clear, there is no necessity of importing the meaning of total turnover from the other provisions. If a term is defined under Section 2 of the IT Act, then the definition would be applicable to all the provisions wherein the same term appears. As the term total turnover has been defined in the Explanation to Section 80HHC and 80HHE, wherein it has been clearly stated that for the purposes of this Section only , it would be applicable only for the purposes of that Sections and not for the purpose of Section 10A. If denominator includes certain amount of certain type which numerator does not include, the formula would render undesirable results. 15) A Statute is the intention of the legislature who enacts it after having regard to various facts and circumstances. It is a cardinal principle of law that the interpretation by the Court shall be done in such a way that the intention of the legislature shall prevail and no injustice occurred with the parties. The rule of harmonious construction is the thumb rule to interpretation of any statute. An interpretation which makes the enactment a consist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot defined by the legislature and an ordinary meaning is to be attributed to it, the said ordinary meaning is to be in conformity with the context in which it is used. Hence, what is excluded from export turnover must also be excluded from total turnover , since one of the components of total turnover is export turnover. Any other interpretation would run counter to the legislative intent and would be impermissible. 18) Accordingly, the formula for computation of the deduction under Section10A of the Act would be as follows: Export turnover as defined in Explanation 2 (IV) of Section 10A of IT Act Export Profit = total Profit of the Business X .................................... Export turnover as defined in Explanation 2(IV) of Section 10A of the IT Act + domestic sale proceeds 19) In the instant case, if the deductions on freight, telecommunication and insurance attributable to the delivery of computer software under Section10A of the IT Act are allowed only in Export Turnover but not from the Total Turnover then, it would give rise to inadvertent, unlawful, meaningless and illogical result which would cause grave injustice to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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