Indian Kanoon - Search engine for Indian Law

"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"

31.3 The reading of the aforesaid definition makes it very clear that it is only expenses incurred in foreign exchange in providing technical services outside India that have to be excluded from export turnover. In this regard, the Ld. Counsel has placed reliance on the decision of the Hon'ble Karnataka High Court in the case of Kshema Technologies Ltd. (supra). The Hon'ble Karnataka High Court in the aforesaid decision held as follows:

 'Export turnover' is defined under Explanation (2)(iv) to section 10A. The said export turnover as per Explanation (2)(iv) to section 10A 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.

 What is relevant to be noticed as per this provision is that the consideration in respect of export of computer software received in or brought into India by the assessee in convertible foreign exchange is an export turnover and what is excluded from this clause is (a) freight, (b) telecommunication charges or insurance attributable to the delivery of the articles or things or computer software outside India (c) expenses, if any, incurred in foreign exchange in providing the technical services outside India. Explanation (3) inserted by Finance Act, 2001 with effect from 1-4-2001 explains that the profits and gains derived from on site development of computer software including services for development of software, outside ITA Nos.1980 to 1982/Bang/2018 M/s. Harman Connected Services Corporation India Pvt. Ltd., Bangalore India shall be deemed to be the profits and gains derived from the export of computer software outside India. Thus, it is clarified by the legislature by inserting Explanation (3) to section 10A that the profits and gains derived from on site development of computer software including services for the development of such software outside India is deemed to be the profits and gains derived from the export of computer software outside India. In other words, the services rendered by the assessee relating to the development of computer software is deemed to be part of export turnover of computer software outside India. [Para 13]  An identical issue relating to section 80HHE was considered by this court in the case of CIT v. Motor Industries Co. Ltd. [20151 55 taxmann.com 377 (Kar.) and this court has held that though the services rendered in deputing the software engineers abroad who among other things have to do testing, installation and monitoring of software supplied to the client, appears to be technical in nature, it does not fall within the clause of providing technical service outside India in connection with the development or production of computer software and, accordingly, such expenditure cannot be excluded in computing export turnover.