RR Donnelley India Outsource Pvt. Ltd (formerly known as Astron Document Management Private Limited), CHENNAI V. DCIT, CHENNAI

CO 16/CHNY/2009

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6366 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 6 month(s) 27 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 19-08-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-08-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 23-01-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: DR SMT ANITA SUMANTH
• Keywords: Business income; Search and seizure; Services rendered outside India
• Section: 80HHC; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE SHRI SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMB ER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A. NO. 1302/MDS/2008 (ASSESSMENT YEAR : 2004-05) THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(1), CHENNAI 600 034. (APPELLANT) V. M/S ASTRON DOCUMENT MANAGEMENT P. LTD., 43A, I MAIN ROAD, R.A. PURAM, CHENNAI 600 028. PAN : AABCH1990A (RESPONDENT) C.O. NO. 16/MDS/2009 (IN I.T.A. NO. 1302/MDS/2008) ASSESSMENT YEAR : 2004-05 RR DONNELLEY INDIA OUTSOURCE PRIVATE LIMITED (FORMERLY KNOWN AS ASTRON DOCUMENT MANAGEMENT P. LTD.), 43A, I MAIN ROAD, R.A. PURAM, CHENNAI 600 028. (CROSSOBJECTOR) V. THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(1), CHENNAI 600 034. (RESPONDENT) REVENUE BY : SHRI SHAJI P. JACOB ASSESSEE BY : DR. (SMT.) ANITA SUMANTH DATE OF HEARING : 16.08.2011 DATE OF PRONOUNCEMENT : 19.08.2011 I.T.A. NO. 1302/MDS/08 C.O. NO. 16/MDS/09 2 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THESE ARE APPEAL OF THE REVENUE AND CROSS-OBJECTION OF THE ASSESSEE, BOTH DIRECTED AGAINST ORDER DATED 17.3.20 08 OF COMMISSIONER OF INCOME TAX (APPEALS)-III, CHENNAI, FOR ASSESSMENT YEAR 2004-05. SINCE THE ISSUES INVOLVED ARE INTER- RELATED, BOTH THE APPEAL AND CROSS-OBJECTION ARE DISPOSED OF THROUGH THIS CONSOLIDATED ORDER. 2. CROSS-OBJECTION FILED BY THE ASSESSEE IS DELAYED BY 73 DAYS. ASSESSEE HAS FILED AFFIDAVIT IN WHICH NUMBER OF REA SONS HAVE BEEN CITED FOR THE DELAY INCLUDING THE RECESSIONARY PROB LEMS FACED BY IT. NO SERIOUS OBJECTION WAS RAISED BY THE LEARNED D.R. WE FIND THE REASONS TO BE ACCEPTABLE. DELAY IS CONDONED. 3. IN THE APPEAL FILED BY THE REVENUE, THERE ARE FI VE GROUNDS OUT OF WHICH, 1 AND 5 ARE GENERAL NEEDING NO ADJUDICATION. VIDE ITS GROUND NO.2, REVENUES GRIEVANCE IS THAT LD. CIT(APPEALS) HELD GAIN ON I.T.A. NO. 1302/MDS/08 C.O. NO. 16/MDS/09 3 ACCOUNT OF EXCHANGE FLUCTUATION IN RESPECT OF AMOUN TS TRANSFERRED FROM EEFC ACCOUNT TO INDIAN RUPEE ACCOUNT TO BE ELI GIBLE FOR DEDUCTION UNDER SECTION 10B OF INCOME-TAX ACT, 1961 (IN SHORT THE ACT). 4. SHORT FACTS APROPOS ARE THAT ASSESSEE ENGAGED IN THE BUSINESS OF EXPORT OF COMPUTER SOFTWARE, HAD INCLUDED AS PAR T OF ITS BUSINESS INCOME, FOREIGN EXCHANGE REALIZATION GAIN. FROM TH E DETAILS FURNISHED BY THE ASSESSEE, ASSESSING OFFICER NOTED THAT SOME SUCH GAINS AROSE ON ACCOUNT OF TRANSFER OF ACCUMULATED F OREIGN EXCHANGE IN EEFC ACCOUNT TO INDIAN RUPEE ACCOUNT. AS PER TH E A.O., THIS WAS DIFFERENT FROM A GAIN ARISING OUT OF FLUCTUATION IN FOREIGN EXCHANGE ON ACCOUNT OF DIFFERENCE IN RATES AS ON THE DATE OF IN VOICE AND AS ON THE DATE OF REALIZATION OF EXPORT PROCEEDS. HE HELD AN OPINION THAT GAIN ARISING TO THE ASSESSEE ON ACCOUNT OF EXCHANGE RATE DIFFERENCE AT THE POINT OF TIME OF TRANSFER OF AMOUNTS HELD IN EEFC A CCOUNT TO INDIAN RUPEE ACCOUNT COULD NOT BE CONSIDERED AS PROFITS DE RIVED FROM THE EXPORT ACTIVITY. THE NET RESULT WAS THAT ON SUCH I NCOME, ASSESSEE WAS DENIED DEDUCTION UNDER SECTION 10B OF THE ACT. I.T.A. NO. 1302/MDS/08 C.O. NO. 16/MDS/09 4 5. IN ITS APPEAL BEFORE LD. CIT(APPEALS), ARGUMENT OF THE ASSESSEE WAS THAT THE EXCHANGE FLUCTUATION ON TRANSFER OF BA LANCE FROM EEFC ACCOUNT TO INDIAN RUPEE CURRENT ACCOUNT HAD TO BE C ONSIDERED AS PART OF PROFITS ELIGIBLE FOR THE PURPOSE OF DEDUCTI ON UNDER SECTION 10B OF THE ACT. AS PER THE ASSESSEE, SUCH GAINS WERE R EVENUE IN NATURE. RELIANCE WAS PLACED BY THE ASSESSEE ON THE DECISION OF MUMBAI BENCH OF THIS TRIBUNAL IN THE CASE OF M/S RISHABH I NTERNATIONAL (I.T.A. NO. 2788 & 2789/MUM/2004). LD. CIT(APPEALS) WAS AP PRECIATIVE OF THIS CONTENTION. ACCORDING TO HIM, THE EEFC ACCOUN T WAS OPENED PRINCIPALLY FOR PROVIDING OPERATIONAL FLEXIBILITY A ND THE FUNDS THEREIN REPRESENTED EXPORT PROCEEDS. HENCE, ACCORDING TO H IM, GAINS ARISING THEREFROM COULD ONLY BE CONSIDERED AS BUSINESS INCO ME. HE, THEREFORE, HELD SUCH FOREIGN EXCHANGE FLUCTUATION G AIN AS PART OF ELIGIBLE PROFIT OF BUSINESS OF ASSESSEE FOR THE PUR POSE OF DEDUCTION UNDER SECTION 10B OF THE ACT. 6. NOW BEFORE US, LEARNED D.R., STRONGLY ASSAILING THE ORDER OF LD. CIT(APPEALS), SUBMITTED THAT THE AMOUNTS IN EEFC AC COUNT REPRESENTED EXPORT PROCEEDS, WHICH HAD ALREADY REAC HED THE ASSESSEE AND AT A LATER POINT OF TIME, WHEN SUCH AM OUNTS LYING IN I.T.A. NO. 1302/MDS/08 C.O. NO. 16/MDS/09 5 SAID ACCOUNT WAS TRANSFERRED TO AN INDIAN RUPEE ACC OUNT, GAINS ARISING ON SUCH TRANSFER COULD NOT BE TERMED AS ANY WAY RELATED TO THE EXPORT ACTIVITY OF THE ASSESSEE. ACCORDING TO HIM, RELIANCE PLACED BY THE ASSESSEE ON THE DECISION OF MUMBAI BENCH OF THIS TRIBUNAL IN THE CASE OF M/S RISHABH INTERNATIONAL (SUPRA) WOULD NOT BE RELEVANT IN VIEW OF THE DECISION OF HON'BLE BOMBAY HIGH COURT I N THE CASE OF CIT V. SHAH ORIGINALS (327 ITR 19). 7. PER CONTRA, THE LEARNED A.R. SUPPORTING THE ORDE R OF LD. CIT(APPEALS), SUBMITTED THAT THE DECISION GIVEN BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SHAH ORIGINALS (SU PRA) WAS IN THE CONTEXT OF SECTION 80HHC OF THE ACT WHERE CONVERSIO N OF BALANCE IN EEFC ACCOUNT TO INDIAN RUPEE ACCOUNT HAD HAPPENED I N A YEAR LATER TO THE YEAR OF CREDIT OF EXPORT PROCEEDS. ACCORDIN G TO HER, IN THE CASE OF THE ASSESSEE HERE, THE CONVERSION FROM EEFC ACCO UNT TO INDIAN RUPEE ACCOUNT HAD TAKEN PLACE IN THE SAME PREVIOUS YEAR. 8. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. DEDUCTION UNDER SECTION 10B OF THE ACT, AS PER SUB- SECTION (1) THEREOF, IS ON THE PROFITS AND GAINS DERIVED BY A 1 00% EXPORT ORIENTED I.T.A. NO. 1302/MDS/08 C.O. NO. 16/MDS/09 6 UNDERTAKING FROM THE EXPORT OF ARTICLES OR THINGS O R COMPUTER SOFTWARE. IF WE HAVE A LOOK AT SECTION 80HHC OF THE ACT, SUB- SECTION (1) THEREOF CLEARLY MENTIONS THAT DEDUCTION THEREUNDER IS AVAIL ABLE ONLY ON THE PROFITS DERIVED BY THE ASSESSEE FROM EXPORT OF GOOD S OR MERCHANDISE. SO, BOTH THE SECTIONS 10B AND 80HHC OF THE ACT SPEC IFICALLY STIPULATE THAT THE PROFIT FOR BEING ELIGIBLE FOR DEDUCTION, S HOULD BE DERIVED FROM THE EXPORT. IN THIS RESPECT, THERE IS NO DIFFERENC E BETWEEN THESE TWO SECTIONS. HENCE, WE CANNOT ACCEPT THE ARGUMENT OF THE LEARNED A.R. THAT THE DECISION OF HON'BLE BOMBAY HIGH COURT IN S HAH ORIGINALS (SUPRA) GIVEN IN THE CONTEXT OF SECTION 80HHC WOULD NOT HAVE ANY APPLICABILITY. IT WAS CLEARLY HELD BY HON'BLE BOMB AY HIGH COURT IN THE CASE OF SHAH ORIGINALS (SUPRA) THAT EXCHANGE FLUCTU ATION IN EEFC ACCOUNT ARISING AFTER COMPLETION OF EXPORT ACTIVITY , DID NOT BEAR A PROXIMATE AND DIRECT NEXUS WITH THE EXPORT TRANSACT ION SO AS TO FALL WITHIN THE EXPRESSION DERIVED BY THE ASSESSEE. N O DIFFERENTIATION HAS BEEN MADE OUT AS TO THE POINT OF CONVERSION OF BALANCE IN EEFC ACCOUNT TO INDIAN RUPEE ACCOUNT. WHATSOEVER, THIS POINT MAY BE, WHETHER IN THE PREVIOUS YEAR OR SUBSEQUENT YEAR, TH E SITUATION REMAINS VERY SAME. CONVERSION GAINS WERE NOT ARISI NG ON ACCOUNT OF I.T.A. NO. 1302/MDS/08 C.O. NO. 16/MDS/09 7 THE EXPORT ACTIVITY AND DID NOT HAVE ANY PROXIMATE OR DIRECT NEXUS WITH EXPORT TRANSACTION. WE ARE, THEREFORE, OF THE OPINION THAT THE DECISION OF MUMBAI BENCH OF THIS TRIBUNAL IN THE CA SE OF M/S RISHABH INTERNATIONAL RELIED ON BY LD. CIT(APPEALS), DID NO T HAVE ANY APPLICABILITY IN VIEW OF THE DECISION OF HON'BLE BO MBAY HIGH COURT IN THE CASE OF SHAH ORIGINALS (SUPRA). THUS GAINS DER IVED BY THE ASSESSEE ON CONVERSION OF FUNDS LIKE EEFC ACCOUNT T O INDIAN RUPEE ACCOUNT, WOULD NOT BE ELIGIBLE FOR DEDUCTION UNDER SECTION 10B OF THE ACT. GROUND NO.2, THEREFORE, STANDS ALLOWED. 9. GROUND NOS.3 AND 4 IN THE REVENUES APPEAL AS WE LL AS THE GROUNDS RAISED BY THE ASSESSEE IN ITS CROSS-OBJECTI ON ARE CLOSELY RELATED. GRIEVANCE OF THE REVENUE IS THAT LD. CIT( APPEALS) DIRECTED THE ASSESSING OFFICER TO REDUCE THE TELECOMMUNICATI ON EXPENDITURE AND EXPENDITURE INCURRED BY THE ASSESSEE IN FOREIGN CURRENCY, WHICH WERE EXCLUDED FROM THE EXPORT TURNOVER OF THE ASSES SEE, FROM THE TOTAL TURNOVER ALSO FOR THE PURPOSE OF COMPUTING DE DUCTION UNDER SECTION 10B OF THE ACT. AS AGAINST THIS, GRIEVANCE OF THE ASSESSEE IS THAT THE A.O. HAD EXCLUDED THE TELECOMMUNICATION EX PENDITURE AND EXPENDITURE INCURRED IN FOREIGN CURRENCY FROM EXPOR T TURNOVER WHILE I.T.A. NO. 1302/MDS/08 C.O. NO. 16/MDS/09 8 CALCULATING ITS DEDUCTION UNDER SECTION 10B OF THE ACT AND THIS TREATMENT WAS CONFIRMED BY LD. CIT(APPEALS). AT TH E TIME OF ARGUMENTS, LEARNED A.R. SUBMITTED THAT SHE WAS NOT PRESSING GROUND NO.2 OF THE CROSS-OBJECTION, RELATING TO EXCLUSION OF EXPENDITURE INCURRED IN FOREIGN CURRENCY FOR COMPUTATION OF DED UCTION UNDER SECTION 10B OF THE ACT. 10. DURING THE COURSE OF ASSESSMENT, IT WAS NOTED B Y THE ASSESSING OFFICER THAT ASSESSEE HAD DEBITED A SUM O F ` 1,93,13,446/- AS DATA TRANSMISSION CHARGES. HE ALSO NOTED THAT A SSESSEE HAD INCURRED IN FOREIGN CURRENCY EXPENSES OF 217291/- B RITISH POUNDS EQUIVALENT TO ` 1,76,22,308/- WHICH WERE REIMBURSED TO IT BY ITS CUSTOMERS ABROAD. AS PER THE A.O., THE DEFINITION OF EXPORT TURNOVER GIVEN IN SUB-CLAUSE (IV) OF EXPLANATION 2 TO SECTIO N 10A CLEARLY STIPULATED EXCLUSION OF FREIGHT, TELECOMMUNICATION OR INSURANCE ATTRIBUTABLE TO DELIVERY OF ARTICLES OR THINGS OR C OMPUTER SOFTWARE OUTSIDE INDIA AND ALSO EXPENSES INCURRED IN FOREIGN CURRENCY FOR PROVIDING TECHNICAL SERVICE OUTSIDE INDIA. THEREFO RE, IN HIS OPINION, THESE TWO AMOUNTS COULD NOT BE CONSIDERED PART OF E XPORT TURNOVER, I.T.A. NO. 1302/MDS/08 C.O. NO. 16/MDS/09 9 FOR THE PURPOSE OF CALCULATING DEDUCTION UNDER SECT ION 10B OF THE ACT. AT THE SAME TIME, A.O. DID NOT EXCLUDE SUCH AMOUNTS FROM TOTAL TURNOVER FOR CALCULATING SUCH DEDUCTION. THE RESUL T WAS THAT NUMERATOR IN THE FORMULA APPLIED FOR WORKING OUT DE DUCTION UNDER SECTION 10B OF THE ACT, THESE AMOUNTS WERE EXCLUDED BUT NOT IN THE DENOMINATOR. 11. ASSAILING THIS TREATMENT GIVEN BY THE A.O., ASS ESSEE MOVED IN APPEAL BEFORE LD. CIT(APPEALS) WHEREIN ITS ARGUMENT WAS THAT THE TELECOMMUNICATION EXPENDITURE INCURRED FOR PROVIDIN G BPO SERVICES WERE NEVER INCLUDED BY IT IN ITS EXPORT TURNOVER. ACCORDING TO ASSESSEE, THE INVOICES RAISED BY IT TO ITS CUSTOMER S ABROAD DID NOT INCLUDE ANY TELECOMMUNICATION EXPENDITURE AT ALL. THEREFORE, THE REALIZATION ON ACCOUNT OF EXPORT PROCEEDS NEVER INC LUDED ANY TELECOMMUNICATION EXPENDITURE INCURRED BY THE ASSES SEE. HENCE, EXCLUSION OF THE AMOUNT WAS NOT CALLED FOR. ALTERN ATIVELY, IT WAS ARGUED BY THE ASSESSEE THAT IF SUCH AMOUNTS WERE EX CLUDED FROM EXPORT TURNOVER, CORRESPONDINGLY IT SHOULD BE EXCLU DED FROM THE TOTAL TURNOVER ALSO FOR CALCULATING DEDUCTION UNDER SECTI ON 10B OF THE ACT. LD. CIT(APPEALS), THOUGH WAS NOT APPRECIATIVE OF TH E CONTENTION OF I.T.A. NO. 1302/MDS/08 C.O. NO. 16/MDS/09 10 THE ASSESSEE THAT TELECOMMUNICATION EXPENDITURE AND EXPENDITURE INCURRED ON FOREIGN EXCHANGE WAS NOT TO BE EXCLUDED FROM EXPORT TURNOVER, ACCEPTED ITS CONTENTION THAT SUCH AMOUNT HAD TO BE EXCLUDED FROM TOTAL TURNOVER FOR COMPUTING DEDUCTIO N UNDER SECTION 10B OF THE ACT. 12. NOW BEFORE US, LEARNED D.R. STRONGLY ASSAILING THE ORDER OF LD. CIT(APPEALS), DIRECTING EXCLUSION OF TELECOMMUNICAT ION EXPENSES AND FOREIGN CURRENCY EXPENSES FROM TOTAL TURNOVER, SUBMITTED THAT THERE WAS NO SUCH STIPULATION IN THE STATUTE FOR EX CLUDING SUCH AMOUNTS FROM TOTAL TURNOVER FOR THE PURPOSE OF CALC ULATING DEDUCTION UNDER SECTION 10B OF THE ACT. 13. PER CONTRA, LEARNED A.R. SUPPORTING THE ORDER O F LD. CIT(APPEALS), ON THE ASPECT OF EXCLUSION FROM TOTAL TURNOVER, SUBMITTED THAT WHATEVER WAS EXCLUDED FROM EXPORT TU RNOVER WAS NECESSARILY TO BE EXCLUDED FROM TOTAL TURNOVER ALSO IN VIEW OF THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN THE C ASE OF ITO V. SAK SOFT LTD. (2009) 20 DTR 514. IN SUPPORT OF CROSS-O BJECTION FILED, LEARNED A.R. SUBMITTED THAT ASSESSEE HAD NOT INVOIC ED THE I.T.A. NO. 1302/MDS/08 C.O. NO. 16/MDS/09 11 TELECOMMUNICATION CHARGES ON ITS CUSTOMERS ABROAD. ACCORDING TO HER, NO PART OF EXPORT REALIZATION INCLUDED ANY REI MBURSEMENT OF TELECOMMUNICATION EXPENSES AND TELECOMMUNICATION EX PENSES WERE NOT PART OF THE EXPORT BILLS RAISED. THERE WAS NO REASON WHY IT HAD TO BE DEDUCTED FROM EXPORT TURNOVER. ACCORDING TO LEA RNED A.R., THE A.O. AS WELL AS LD. CIT(APPEALS) HAD INCORRECTLY AP PLIED THE DEFINITION OF EXPORT TURNOVER WHICH SPECIFIED ONLY EXCLUSION O F TELECOMMUNICATION CHARGES BUT, NEVER ANY REDUCTION. 14. IN REPLY, THE LEARNED D.R. SUBMITTED THAT INSOF AR AS ISSUE OF TELECOMMUNICATION CHARGES WERE CONCERNED, IT WAS AN ACCEPTED POSITION THAT THESE WERE INCURRED FOR DELIVERY OF C OMPUTER SOFTWARE OUTSIDE INDIA. HENCE, ACCORDING TO HIM, IN VIEW OF THE DEFINITION OF EXPORT TURNOVER AS GIVEN IN CLAUSE (III) OF EXPLA NATION 2 TO SECTION 10B OF THE ACT, SUCH TELECOMMUNICATION CHARGES WERE TO BE EXCLUDED FROM THE EXPORT TURNOVER. 15. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. THOUGH THE A.O. HAS CONSIDERED DEFINITION OF EXPOR T TURNOVER AS GIVEN IN SUB-CLAUSE (IV) OF EXPLANATION 2 TO SECTIO N 10A OF THE ACT, I.T.A. NO. 1302/MDS/08 C.O. NO. 16/MDS/09 12 ASSESSEE HERE HAD CLAIMED DEDUCTION UNDER SECTION 1 0B, AND THEREFORE, DEFINITION OF THE SAID TERM AS GIVEN IN SECTION 10B WILL BE MORE APPROPRIATE. DEFINITION OF EXPORT TURNOVER AS GIVEN IN CLAUSE (III) OF EXPLANATION 2 TO SECTION 10B OF THE ACT RU NS AS UNDER:- (III) EXPORT TURNOVER MEANS THE CONSIDERATION I N RESPECT OF EXPORT [BY THE UNDERTAKING] OF ARTICLES O R THINGS OR COMPUTER SOFTWARE RECEIVED IN, OR BROUGHT INTO, INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANG E IN ACCORDANCE WITH SUB-SECTION (3), BUT DOES NOT INCLU DE FREIGHT, TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES OR THIN GS OR COMPUTER SOFTWARE OUTSIDE INDIA OR EXPENSES, IF ANY, INCURRED IN FOREIGN EXCHANGE IN PROVIDING THE TECHN ICAL SERVICES OUTSIDE INDIA. AS PER LEARNED A.R., THE DEFINITION OF EXPORT TURN OVER DOES NOT MANDATE ANY REDUCTION OF TELECOMMUNICATION CHARGES, BUT, ONLY STIPULATES EXCLUSION OF SUCH TELECOMMUNICATION CHAR GES. SUCH TELECOMMUNICATION CHARGES WERE NEVER PART OF THE AM OUNTS INVOICED BY THE ASSESSEE AND HENCE THERE COULD BE NO EXCLUSI ON THEREOF FROM EXPORT TURNOVER. WE ARE AFRAID WE ARE UNABLE TO AC CEPT THIS LINE OF REASONING. LEARNED A.R. HAS NOT REBUTTED WITH ANY EVIDENCE, FINDINGS OF THE A.O. THAT TELECOMMUNICATION CHARGES WERE INC URRED BY THE ASSESSEE FOR DELIVERY OF COMPUTER SOFTWARE OUTSIDE INDIA AND SUCH I.T.A. NO. 1302/MDS/08 C.O. NO. 16/MDS/09 13 EXPENSES WERE ATTRIBUTABLE TO THE DELIVERY OF COMPU TER SOFTWARE OUTSIDE INDIA. WHEN THE EXPENSES WERE INCURRED FOR DELIVERY OF COMPUTER SOFTWARE OUTSIDE INDIA, EVEN IF THE ASSESS EE HAD NOT INVOICED SUCH AMOUNTS SPECIFICALLY IN ITS BILLS RAI SED ON ITS CUSTOMERS ABROAD, THE AMOUNTS WOULD HAVE DEFINITELY BEEN FIXE D, TAKING INTO CONSIDERATION SUCH TELECOMMUNICATION EXPENSES ALSO. JUST BECAUSE THE INVOICES RAISED DID NOT SPECIFICALLY MENTION RE COVERY OF TELECOMMUNICATION CHARGES, WE CANNOT SAY THAT THE B ILLED AMOUNTS WERE EXCLUSIVE OF SUCH TELECOMMUNICATION CHARGES. ASSESSEE WHILE AGREEING FOR DELIVERY OF COMPUTER SOFTWARE AT PRICE S MUTUALLY ACCEPTED, WOULD HAVE DEFINITELY RECKONED THE TELECO MMUNICATION CHARGES WHICH WERE TO BE INCURRED BY IT FOR THE DEL IVERY OF SUCH SOFTWARE OUTSIDE INDIA. IT IS NOT THE CASE OF THE ASSESSEE THAT THE TELECOMMUNICATION EXPENSES WERE NOT CONSIDERED BY I T FOR WORKING OUT ITS PROFITS. IT IS ALSO NOT A CASE OF THE ASSE SSEE THAT SUCH EXPENSES WERE NOT CONSIDERED BY IT AS A PART OF ITS REVENUE OUTGO. HENCE, TELECOMMUNICATION CHARGES WHICH ADMITTEDLY W ERE ATTRIBUTABLE TO THE DELIVERY OF COMPUTER SOFTWARE O UTSIDE INDIA, HAD TO BE EXCLUDED FROM THE EXPORT TURNOVER WHETHER OR NOT BILLINGS OF THE I.T.A. NO. 1302/MDS/08 C.O. NO. 16/MDS/09 14 ASSESSEE SPECIFICALLY INCLUDED SUCH TELECOMMUNICATI ON EXPENSES. EFFECT OF ANY EXCLUSION FROM A GIVEN SUM WILL BE RE DUCTION OF SUCH SUM AND THE STRENUOUS EFFORT TO DIFFERENTIATE BETWE EN EXCLUSION AND REDUCTION IS, IN OUR OPINION, AN ENDEAVOUR TO STR ETCH INTERPRETATION OF ORDINARY WORDS TO OUT OF ORDINARY MEANINGS. SPECIA L BENCH IN THE CASE OF SAK SOFT LTD. (SUPRA) HELD AS UNDER AT PARA 27 OF ITS ORDER:- 27. AT THIS JUNCTURE, IT IS NECESSARY TO REFER TO ON E ASPECT OF THE MATTER. IT MAY BE AN EASY TASK TO EXCLUDE THE FREIGH T, TELECOM CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF COMPUTER SOFTWARE OUTSIDE INDIA OR EXPENSES, IF ANY, INCURRED IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICES OUTSID E INDIA FROM THE EXPORT TURNOVER AND THE TOTAL TURNOVER IF THEY ARE S EPARATELY MENTIONED IN THE INVOICE RAISED BY THE ASSESSEE. IN THE COURSE OF THE ARGUMENTS ADDRESSED ON BEHALF OF M/S SAK SOFT LTD. A QUESTION AROSE AS TO WHAT WOULD HAPPEN IF THESE ITEMS ARE NOT SEPA RATELY SHOWN IN THE INVOICE AND ARE INCLUDED IN THE TOTAL AMOUNT RA ISED BY THE INVOICE. IT WAS CONCEDED ON BEHALF OF THE ASSESSEE BY ITS LEA RNED REPRESENTATIVE THAT IN SUCH A CASE, THE A.O. WILL H AVE THE POWER TO GO BEHIND THE INVOICE AND FIND OUT HOW MUCH OF THE INV OICE AMOUNT PERTAINS TO THE RECOVERY OF THE AFORESAID ITEMS. WE ARE ALSO OF THE VIEW THAT IN AN APPROPRIATE CASE IT WOULD BE OPEN T O THE A.O. TO EXERCISE SUCH A POWER IN ORDER TO APPLY THE FORMULA IN MEANINGFUL MANNER. AS ALREADY MENTIONED BY US, IN THE CASE BEFORE US I T IS AN ADMITTED POSITION THAT TELECOMMUNICATION CHARGES, WHICH WAS NOT CONSIDERED BY THE A.O. FOR WORKING OUT DEDUCTION UNDER SECTION 10B OF THE ACT, I.T.A. NO. 1302/MDS/08 C.O. NO. 16/MDS/09 15 WERE ATTRIBUTABLE TO DELIVERY OF COMPUTER SOFTWARE OUTSIDE INDIA. HENCE, THERE WAS NO NECESSITY TO GO BEHIND THE INVO ICES RAISED BY THE ASSESSEE AT ALL. WITH REGARD TO THE EXPENSES I NCURRED IN FOREIGN EXCHANGE FOR PROVIDING TECHNICAL SERVICES OUTSIDE I NDIA, LEARNED COUNSEL FOR THE ASSESSEE, AS EARLIER STATED BY US, DID NOT PRESS THE RELATED GROUND IN THE CROSS-OBJECTION. COMING TO T HE CASE OF THE REVENUE THAT SUCH AMOUNTS SHOULD NOT HAVE BEEN EXCL UDED FROM TOTAL TURNOVER, WE ARE UNABLE TO ACCEPT. THE SPECI AL BENCH OF THIS TRIBUNAL IN THE CASE OF SAK SOFT LTD. (SUPRA) HAS C LEARLY HELD THAT WHATEVER HAS BEEN EXCLUDED FROM EXPORT TURNOVER HAD TO BE EXCLUDED FROM TOTAL TURNOVER ALSO SINCE TOTAL TURNOVER INCLU DED EXPORT TURNOVER AS WELL. WE ARE FORTIFIED IN TAKING THIS VIEW BY T HE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. GEM PLUS JE WELLERY INDIA LTD. (330 ITR 175). THEREFORE, WE DO NOT FIND ANY MERIT S IN THE ARGUMENTS ADVANCED BY THE ASSESSEE OR THE REVENUE I N RESPECT OF THEIR RESPECTIVE GROUNDS IN THIS REGARD. 17. IN THE RESULT, GROUND NOS. 3 AND 4 OF THE REVEN UE AS WELL AS CROSS-OBJECTION FILED BY THE ASSESSEE STAND DISMISS ED. I.T.A. NO. 1302/MDS/08 C.O. NO. 16/MDS/09 16 18. TO SUMMARISE, REVENUES APPEAL IS PARTLY ALLOW ED WHEREAS CROSS-OBJECTION FILED BY THE ASSESSEE IS DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 19 TH AUGUST, 2011. SD/- SD/- (GEORGE MATHAN) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 19 TH AUGUST, 2011. KRI. COPY TO: APPELLANT/RESPONDENT/CIT(A)-III, CHENNAI/ CIT, CHENNAI-I, CHENNAI/D.R./GUARD FILE