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(iii) ―export turnover‖ means the consideration in respect of export [by the undertaking] of articles or things or computer software received in, or brought into, India by the assessee in convertible foreign exchange in accordance with sub-section (3), but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India;

9. Sub-section (2) stipulates that Section 10B would only apply to an undertaking which manufactures or produces, articles or things or computer software. Such undertaking should not be formed by splitting, reconstruction of existing business and not formed by transfer to new business, machinery or plant previously used. Explanation 2 - clause (iv) states that 100% export oriented undertaking means an undertaking approved as 100% export oriented undertaking by the Board appointed in this behalf by the Central Government in exercise of powers under Section 14 of Industries (Development and Regulation) Act, 1951. Sub-section (3) states that sale proceeds of articles and things or computer software exported outside India should be received in India in convertible form within the time limit so stipulated. Sub-section (4) prescribes the method to compute profits derived from export of articles and things, which shall be the proportionate amount which bears to the profit of the business of the undertaking, as turnover of such article or thing or computer software bears to the total turnover of business. The term ‗export turnover' has been defined for the purposes of said section in clause (iii) to explanation 2 and means consideration received in convertible foreign exchange in respect of exports by the undertaking, of articles or things of computer software, received or brought into India. It does not include freight, telecommunication charges or insurance attributable to delivery or expenses, if any, incurred in foreign exchange for providing technical services outside India. In Explanation 3, for removal of doubts, it has been declared that profits and gains derived from on site development of computer software, services for development of software outside India shall be deemed to be profits and gains derived from computer software exported outside India. Thus, on site development of computer software including services for development of software outside India would be treated as profits and gains derived from export of computer software. The aforesaid explanation begins with the expression ‗for removal of doubts'. Use of this expression is significant and important. The said explanation was added by Finance Act, 2001 w.e.f. 1 st April, 2001. In Explanation 4, the expression ‗manufacture or produce', it has been elucidated, would include cutting and polishing of precious or semi precious stones.

13. We have referred to Explanation 2 clause (iii) which defines the term ‗export turnover' to mean consideration in respect of export by the undertaking of articles or things and excludes freight, telecommunication, insurance charges attributable to delivery of articles and lastly expenses incurred in foreign exchange in providing technical services outside India. Thus, expenses for providing technical services incurred outside India in foreign exchange are to be excluded from export turnover. In other words, expenses incurred in providing technical services outside India but not incurred in foreign exchange, form part of the turnover and are not to be excluded. This is inspite of the fact that under sub-section (1) and (2) there is direct reference to profits and gains derived from export of articles or things or computer software by 100% export oriented unit. The profits are to be computed with respect to export turnover under sub-section (4) in respect of such articles, things or computer software in proportion to the total turnover of the business carried on by the undertaking. Thus, while computing export turnover in terms of clause (iii) to Explanation 2, expenses incurred for providing technical services outside India in connection with articles or things so exported would be included and added, provided the said expenditure was not incurred in foreign exchange. The Legislature was conscious that an assessee engaged in export of articles or things may have to incur expenditure in nature of technical services in connection with the said exports and in a given case would be reimbursed or paid for the said expenditure. The payment received for the aforesaid expenditure would be included in the export turnover, provided the expenditure was not incurred in foreign exchange. The explanation only excludes expenses incurred in foreign exchange in providing technical services outside India. The services must be provided by the assessee, i.e. in respect of services provided by the assessee outside India. Explanation 3 which uses the expression ‗for removal of doubts' in the case of computer software states that on site development including services for development of software outside India shall be deemed to be profits and gains derived from export of computer software outside India. The use of expression ‗for removal of doubts' has to be contrasted from the term ‗deemed' used in the same explanation but we feel that the said expression shows the underlying objective and purpose behind the provision i.e. Section 10B of the Act. Software developed outside India or even services for development of software outside India is to be and regarded as export.