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Showing contexts for: software in M/S Ge India Technology Centre Pvt. ... vs Department Of Income Tax on 14 February, 2012Matching Fragments
4. The facts of the case in brief are that the assessee was engaged in the business of export of customized electronic data, computer software, articles or things generated from engineering analysis and Research & Development, etc. The assessee filed its return of income on 30.9.2005 declaring a total income of Rs.1,02,99,700 after claiming deduction under section 10A of the Act to the extent of Rs.14,85,04,996. The said return was processed under section 143(1) of the Act. Subsequently, the case was selected for scrutiny. During the course of assessment proceedings, the Assessing Officer noticed that the assessee had incurred telecommunication expenses attributable to the delivery of software outside India. He was of the view that the said expenses should have been reduced from the export turnover but the provisions of section 10A do not provide that such expenditure should be reduced from the total turnover. He, therefore, excluded the communication expenses amounting to Rs.4,36,61,936 attributable to the delivery of software outside India from the export turnover for the purpose of computing deduction under section 10A of the Act. Accordingly, excess claim under section 10A of theAct was worked out at Rs.24,48,668 which was added to the income of the assessee.
5. Being aggrieved the assessee carried the matter to the learned CIT(A) and the submission made before him as mentioned in para 12.1.1 of the impugned order which reproduced verbatim as under :
" 12.1.1 The appellant's arguments vide its written submissions are broadly summarized as under :
i) It was submitted that the telecommunication expenses were used for connectivity within India as well as outside India and that it was practically impossible to determine the usage of the same to the extent attributable to the delivery of software outside India.
11. Similar view has been taken by the Hon'ble High Court of Bombay in the case of CIT Vs. Gem Plus Jewellery India Ltd. (2010) 330 ITR 175 (supra) wherein it has been held as under :
" Under sub-section 10A of the Income Tax Act, 1961, a deduction is allowed from the total income of the assessee of such profits and gains as are derived by an undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years commencing from the assessment year relevant to the previous year in which the undertaking begins manufacture or production. Sub-section (4) of section 10A provides the manner in which the profits derived from the export of articles or things or computer software shall be computed. Under sub-section (4) the proportion between the export turnover in respect of the articles or things, or, as the case may be, computer software exported, to the total turnover of the business carried over by the undertaking is applied to the profits of the business of the undertaking in computing the profits derived from export. In other words, the profits of the business of the undertaking are multiplied by the export turnover in respect of the articles, things or, as the case may be, computer software and derived by the total turnover of the business carried on by the undertaking. The expression "total turnover" has not been defined at all by Parliament for the purposes of section 10A. However, the expression "export turnover" has been defined. The definition of "export turnover"
12. A similar view has been taken by the Hon'ble jurisdictional High Court in the case of CIT Vs. Tata Elexi (2011) TIOL - 684 (Karn.) and the relevant finding given therein reads as under :
"The total turnover of the business carried on by the undertaking would consist of the turnover from export and the turnover from local sales. The export turnover constitutes the numerator in the formula prescribed by sub-section (4). Export turnover also forms a constituent element of the denominator in as much as the export turnover is a part of the total turnover. The export turnover, in the numerator must have the same meaning as the export turnover which is constituent element of the total turnover in the denominator. The legislature has provided a definition of the expression "export turnover" in Expln.2 to s.10A which the expression is defined to mean the consideration in respect of export by the undertaking of articles, things or computer software received in or brought into India by the assessee in convertible foreign exchange but so as not to include inter alia freight, telecommunication charges or insurance attributable to the delivery of the articles, things or software outside India. Therefore in computing the export turnover the legislature has made a specific exclusion of freight and insurance charges. The submission which has been urged on behalf of the revenue is that while freight and insurance charges are liable to be excluded in computing export turnover, a similar exclusion has not been provided in regard to total turnover. The submission of the revenue, however, misses the point that the expression "total turnover" has not been defined at all by Parliament for the purposes of s.10A. However, the expression "export turnover" has been defined. The definition of "export turnover" excludes freight and insurance. Since export turnover has been defined by Parliament and there is a specific exclusion of freight and insurance, the expression "export turnover" cannot have a different meaning when it forms a constituent part of the total turnover for the purposes of the application of the formula. Undoubtedly, it was open to Parliament to make a provision which has been enunciated earlier must prevail as a matter of correct statutory interpretation. Any other interpretation would lead to an absurdity. If the contention of the Revenue were to be accepted, the same expression viz. 'export turnover' would have a different connotation in the application of the same formula. The submission of the Revenue would lead to a situation where freight and insurance, though these have been specifically excluded from 'export turnover' for the purposes of the numerator would be brought in as part of the 'export turnover' when it forms an element of the total turnover as a denominator in the formula. A construction of a statutory provision which would lead to an absurdity must be avoided. Moreover, a receipt such as freight and insurance which does not have any element of profit cannot be included in the total turnover. Freight and insurance charges do not have any element of turnover. For this reason in addition, these two items would have to be excluded from the total turnover particularly in the absence of a legislative prescription to the contrary - CIT v Sudarshan Chemicals Industries Ltd. (2000) 163 CTR (Bom) 596: (2000) 245 ITR 769 (Bom) applied; CIT v Lakshmi Machine Works (2007) 210 CTR (SC) 1: (2007) 290 ITR 667 (SC) and CIT v Catapharma (India) (P) Ltd. (2007) 211 CTR (SC) 83: