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58. Without prejudice, the amount of telecommunication expenses excluded by the learned AO from export turnover ought to have been excluded from total turnover as well."

14.2 The assessee company had primarily two categories / methods for realizing its price (i) Time and Material Contracts, which means that the price realized is linked to the efforts for the computer software delivered and the tools and equipment used for the same; and (ii) Fixed Price Conracts, wherein the price realized is with reference to milestones for delivery of computer software. The assessee submitted that it realized in convertible foreign exchange for the export of computer software accounted under various heads viz., assets reimbursement, travel reimbursements, incentive awards and other reimbursements and deductions under section 10A, 10B and 10AA of the Act were computed by the assessee including the said amounts in the 'export turnover' of the undertakings. The assessee also received communication link reimbursements in convertible foreign exchange as a component in the realization of the sales price for the computer software exported. The assessee submitted to the Assessing Officer that the nomenclature of the reimbursement is only representative of the customers having paid the price for the computer software developed and delivered in terms of identified expenses which are reimbursed pursuant to the contract of sale of computer software and that the amounts realized in convertible foreign exchange by way of reimbursements and incentive rewards are to be included as part of 'export turnover'. The learned counsel for the assessee submitted that the Assessing Officer dd not concur with the assessee's claim and held that reimbursements and incentive rewards cannot be turnover of the assessee, and least of all a part of 'export turnover', as it is not consideration received for export of computer software. As regards the communication link reimbursement, the Assessing Officer held that these are in the nature of telecommunication charges attributable to delivery of computer software and are therefore to be excluded only from 'export turnover'. The DRP in its directions concurred with the views and findings of the Assessing Officer.

49. The learned AO erred in excluding an aggregate sum of Rs. 3238,12,53,173/- from the export turnover by erroneously holding that the said expenditure has been incurred in providing technical services outside India. The AO committed gross error in failing to understand that the appellant company has exported computer software and that the on-site development of computer software (including services for development of software) outside India is deemed to be export of computer software outside India.
50. The learned DRP in giving its directions and the learned AO have erred fundamentally in as much as before making an exclusion of any item, it was necessary to determine whether there was an inclusion of the item in the first place.
51. The learned authorities below erred in proceeding with a presumption that expenses are embedded in the export turnover whereas in appellant's case there is no dispute that the items sought to be excluded are business expenditure incurred in foreign currency for on-site development of computer software (including services for development of computer software) which were not specifically included in turnover.