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(ii)Whether on the facts and in the circumstances of the case, the Tribunal was right in law in upholding the exclusion of expenditure incurred in foreign currency in relation to on-site software development from the purview of export turnover for the purpose of computation of deduction under Section 10A and 80HHE of the Income Tax Act?

(iii)Whether on the facts and in the circumstances of the case, the Tribunal was right in law in not noting the distinction between 'manufacture of computer software' and the provision of 'technical services'?

(i) export out of India of computer software or its transmission from India to a place outside India by any means;

(ii) providing technical services outside India in connection with the development or production of computer software.

44. During the period in dispute which pertains to the Assessment Year 2003-2004, the benefit under Section 80HHE of the Act was confined to 50% of the profit derived from export of computer software or its transmission from India to a place outside India or for providing technical services outside India in connection with the development or production of computer software.

62. The operative portion of the Order dated 23.10.2018 of the Division Bench of this Court in the aforesaid decision in T.C.A. Nos. 961 and 962 of 2008 reads as under:-

“13.Be that as it may. We may point out that the CITA did not endeavour to examine the scope of the agreement. In fact, certain observations made by the CITA would enure in favour of the assessee. By way of illustration, in paragraph No.10(c) of the Order of the CITA, he would state that computer software cannot be defined or understood in a narrow sense of the term to mean only software in the form of product/goods as claimed. As the assessee is engaged in developing, transmitting and providing software to meet the needs and requirements of the clients, it encompasses providing all the relevant technical services necessary and attendant with the development and export of computer software. If this was the finding of the CITA, the resultant conclusion should have been that the assessee is only engaged in the development of the computer software and not rendering any technical services on 'standalone basis'. However, we find that the conclusion arrived at by the CITA stating that the assessee is rendering technical services is an incorrect conclusion not supported by any reasons. We would add by stating that the CITA was required to examine the documents produced by the assessee to find out as to whether there was any technical services rendered on 'standalone basis'. This is more so because, the CITA accepted that the 'development of software' encompasses 'providing of technical services'. Therefore, unless and until there was a material available in the hands of the CITA or the Assessing Officer to come to a conclusion that there is technical services on 'standalone basis' rendered by the assessee, the Assessing Officer and the CITA were not justified in coming to a conclusion that the technical services were rendered by the assessee and the amounts paid need to be excluded.

69. The learned Counsel for the Appellant/Assessee as well as the learned counsel for the Respondent/Income Tax Department also submitted that the above Substantial Questions of Law was covered in favour of the Appellant/Assessee and against the Revenue as per the unreported decision of this Court in T.C.A.Nos.1193 and 1194 of 2008 dated 12.10.2018.

70. Since there is difference between manufacturing of 'computer software' and providing 'technical services', the Substantial Quesiton of Law No. (iii) has to be answered in favour of the Appellant/Assesee in view of express language in Seciton 80HHE of the Act.