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TMI Blog2013 (2) TMI 901X X X X Extracts X X X X X X X X Extracts X X X X ..... d exports. For the A.Y. 2005-06, the assessee filed return of income on 31.10.05 declaring a total income of ₹ 1,27,54,870. The assessment was completed and order u/s. 143(3) of the Act and an order of assessment dated 26.12.2008 was passed by the Assessing Officer. One of the issues that the AO considered in the course of assessment proceedings was the computation of export turnover for the purpose of allowing deduction u/s. 10A of the Act. The AO found that the assessee has not excluded satellite link charges of ₹ 79,50,467 towards delivery of software outside India. According to the AO, the aforesaid sum ought to have been excluded from the export turnover. The assessee in reply submitted that the definition of export turnove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and they ought to have been excluded from the export turnover for the purpose of deduction u/s. 10A of the Act. Accordingly, a show cause notice was issued to the assessee. In reply, the assessee pointed out as follows:- 1. That the company Aztec Software and Technology Ltd., has merged with Mind Tree Ltd., from 01/04/2009 consequent to the order of High Court of Karnataka. The company is not in existence as on day of issue of notice u/s 263 of the Act and no proceedings can be initiated against a non-existent company. If at all proceedings have to be initiated it can only be against the entity which survives after the merger. Consequently, proceedings may be dropped at the outset as no purpose will be served in perpetuating a notice whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xt of export turnover. After all, total turnover is a derivative of export turnover. Hence, what applied to export turnover must also apply to total turnover. On the basis of parity principle, the same has to be excluded from the total turnover. The Assessee pointed out that the above view has been upheld by ITAT in the following cases I) I Gate Global Solutions Ltd., V ACIT 0112 TTJ 1002 ii) Tata Elxsi Ltd., V ACIT - 115 TTJ 423 iii) ACIT V Infosys Ltd., - ITA No.653 969/Bang/2006 iv) ITO V Sak Soft Ltd. -20 DTR 0514 (SB) 4. The CIT was, however, not convinced with the explanation offered by the assessee. On the question that Aztech Software and Technology Ltd. had already merged with Mindtree Ltd. w.e.f. 1.4.2009 and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oviding technical services and therefore the aforesaid expenses ought to be excluded from the export turnover. 7. With regard to the contention of the assessee that if the aforesaid expenses are excluded from the export turnover, the same should also be excluded from the total turnover; the CIT was of the view that section 10A of the Act does not contain any definition of total turnover and therefore it is not possible to exclude the expenses in question from the total turnover. For the above reasons, the CIT directed the AO to exclude a sum of ₹ 11,16,00,074 from the export turnover and compute deduction u/s. 10A of the Act. 8. Aggrieved by the aforesaid order of the CIT, the assessee has preferred the present appeal befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applied his mind on this issue. 11. We have considered the rival submissions. We are of the view that the order u/s. 263 of the Act cannot be sustained. The order of the AO was passed on 26.12.2008. On this date, there were decisions of the Tribunal in which a view has been expressed that expenditure in foreign currency on travelling, professional charges and onsite service charges which are incurred for development of software at client s site outside India, cannot be said to be expenses incurred in foreign currency outside the country for rendering of any technical services outside India. In other words, Explanation 2(iv) of section 10A of the Act which defines export turnover has been interpreted by the Tribunal to mean that the afore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... views possible on an issue and the view expressed by the CIT was one of the possible view. It has been held that jurisdiction u/s.263 of the Act cannot be exercised to substitute a possible view of the AO with that of another contrary possible view of the CIT. 12. Apart from the above, we find that the Hon ble Karnataka High Court in the case of Tata Elxsi Ltd., 349 ITR 98 (Karn), has taken a view that whatever is excluded from the export turnover has to be excluded from the total turnover as well. If the aforesaid decision is applied, then there would be no effect on the claim of deduction u/s. 10A of the Act, as allowed by the AO. In other words, the order of the AO cannot be said to be erroneous or prejudicial to the interests of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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