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TMI Blog2020 (8) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... eded to make a draft assessment. Before the DRP, which is a fact finding expert body, the assessee placed all materials and established that the assessee did not render any services outside India and they operate on a cost plus model and the reimbursement constitute a part of the operating cost which was recovered by the assessee from their associated enterprises. This factual matrix had not been examined by the Tribunal. No useful purpose would be served in remanding the matter to the Tribunal for fresh consideration as submitted by the Revenue as an alternate submission. The principal submission of the Revenue is to support the order passed by the Tribunal and seeking for dismissal of this appeal. Even in the grounds of appeal filed by the Revenue before the Tribunal, a cost plus model of functioning by the assessee appears to be have not been disputed but their contention was that the definition of ''export turnover'' in explanation 1 to Section 10 AA does not distinguish or exclude reimbursement or advances. In our considered view, the issue is not as to whether reimbursement or advances, but the issue is whether these were incurred by the assessee in foreign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic Zone ( SEZ ) which is eligible to claim deduction under Section 10AA of the Income Tax Act, 1961 and it renders services out of this SEZ premises in Chennai. The assessee filed its Return of Income for the assessment year 2009 10 (hereinafter 'under consideration' for brevity) on 30.09.2009, returning a total income of ₹ 5,83,39,429/-, after claiming a deduction of ₹ 29,96,00,054/- under Section 10AA of the Act. The assessment was completed under Section 143(3) of the Act and the Assessing Officer proposed to exclude the following expenditure incurred in foreign currency from the 'export turnover' of the assessee for the purpose of computing deduction under Section 10AA of the Act. Particulars Amount Travel Expenses 41,199,254 IT Technical support services 115,521,782 Professional and consultation fees 5,364,145 Reimbursement to Renault Global Management 69,851,671 Reimbursement to Nissan Motor Co., Ltd ( NML ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the impugned order. The Tribunal opined that the foreign currency expenditures cannot be considered as a part of 'export turnover' and at the same time it also cannot form part of the 'total turnover'. The Tribunal referred to the decision in the case of ITO Vs. Saksoft Limited [(2009) 121 TTJ 865 (ITAT) Chennai] and directed the Assessing Officer not to exclude the same in the 'export turnover' as well as in the 'total turnover' while computing deduction under Section 10AA of the Act. 8. We find that the Tribunal did not specifically adjudicate the contention raised by the Revenue before it. The Revenue Appeal was on the ground that the DRP erred in deleting the exclusion of foreign currency expenditures from the 'export turnover' by holding that they are either reimbursed or advanced to employees; that the expenditures incurred are not in respect of services rendered by the assessee outside India; when the definition of 'Export Turnover' as per Section 10AA neither distinguishes nor excludes reimbursements or advances. 9. This contention raised by the Revenue was not decided by the Tribunal. Therefore, it is the submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee once again reiterated the definition of ''export turnover'' in Explanation 1 to Section 10 AA of the Act and submitted that a term 'expense' used in the above context would be only expenses in the nature of freight, telecommunication or insurance and not any other expenses. The assessee also relied upon certain decisions of the Hon'ble Supreme Court and other High Courts and Tribunals. The Assessing Officer did not agree with the assessee in referring to the decisions and explanation 1 to Section 10 AA of the Act, though noted that the explanation states that the expenses should be incurred in foreign exchange in rendering of service outside India, without considering whether any services was rendered by the assessee outside India, holding that the said provision is patent and clear and the expenditures incurred by the assessee in foreign exchange should be excluded from the 'export turnover' for the purpose of computing deduction under Section 10 AA of the Act. 13. The assessee filed an application before the DRP, in which, on this specific issue they have stating that the assessee operates on a cost plus model, the total turno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 115,521,782 Reimbursement to Renault Global management 69,851,671 Reimbursement to Nissan Motor Company Ltd., 29,635,976 14. The Revenue filed an appeal before the Tribunal. To be noted the main ground on which the Revenue were on appeal before the Tribunal was on the direction of the DRP to exclude the foreign exchange expenditure. Unfortunately, the Tribunal did not discuss the matter but proceeded on the basis that foreign currency expenditures cannot be considered as part of 'export turnover' and at the same time, it cannot form part of 'total turnover'. The Tribunal did not decide as to whether it was expenses incurred by the assessee in respect of services rendered by the assessee outside India. The assessee was faced with this issue at the very first instance before the Assessing Officer. The assessee has explained, nevertheless, the Assessing Officer did not take into consideration as to whether there were any services outside India and held against the assessee and proceeded to make a draft assessment. Before the DRP, which is a fact finding exp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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