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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 ..... he finding of the Tribunal that the expenditure incurred in foreign currency by the appellant needs to be excluded from the export turnover for the purpose of computation of deduction under Section 10AA of the Income Tax Act, 1961 vitiated by perversity and arbitrariness?" 3. We have heard Mr.N.V.Balaji, learned counsel appearing for the appellant/assessee, and M/s. R.Hemalatha, learned Standing Counsel appearing for the respondent/revenue. 4. The assessee is a Private Limited Company incorporated under the Companies Act, on 21st September 2007 as a joint venture between Renault Group B.V ("RGBV") and Nissan International Holding B.V ("NIHBV"). The assessee is an undertaking registered as a Special Economic 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 Rs. 5,83,39,429/-, after claiming a deduction of Rs. 29,96,00,054/- under Section 10AA of the Act. The assessment was completed under Section 143(3) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned order allowed the Revenue's appeal and aggrieved by the same, the assessee is before this Court by way of this Tax Case Appeal. 7. We have perused the order passed by the Tribunal and we find that the Tribunal did not assign any reason as to why the finding / directions issued by the DRP are not sustainable. The finding rendered by the Tribunal on the above issue is in paragraph no.4 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 tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;' on this count. In the draft Assessment Order, the Assessing Officer refers to the show cause notice issued to the assessee, calling upon the assessee to explain as to why the expenditure incurred in foreign exchange be not excluded from the ''export turnover'', while computing deduction under Section 10 AA of the Act. In response to the said show cause notice, 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 provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer was directed to delete the exclusion of foreign exchange from the export turnover of the business and the deduction under Section 10 AA to be recomputed as follows: PARTICULARS AMOUNT (INR) Travel Expenses 41,199,254 IT & Technical Support Services 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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