KSB Tech Private Ltd., Pune V. DCIT, Pune

ITA 1647/PUN/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0977 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 03-09-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 06-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR; DR HARSHVARDHINI BUTY
• Assessee Lawyers: P J AP TE
• Section: 143(3); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 1647/PN/2012 %' ( ')( / ASSESSMENT YEAR : 2007-08 KSB TECH PRIVATE LIMITED, 104 TH MILE STONE, MUMBAI PUNE ROAD, PIMPRI, PUNE 411018 PAN : AACCK4815G ....... / APPELLANT ' / V/S. DY. COMMISSIONER OF INCOME TAX, CIRCLE 9, PUNE / RESPONDENT / ITA NO. 1714/PN/2012 %' ( ')( / ASSESSMENT YEAR : 2007-08 ASST. COMMISSIONER OF INCOME TAX, CIRCLE 9, PUNE ....... / APPELLANT ' / V/S. KSB TECH PRIVATE LIMITED, 104 TH MILE STONE, MUMBAI PUNE ROAD, PIMPRI, PUNE 411018 PAN : AACCK4815G / RESPONDENT / ITA NO. 115/PN/2013 %' ( ')( / ASSESSMENT YEAR : 2008-09 KSB TECH PRIVATE LIMITED, 104 TH MILE STONE, MUMBAI PUNE ROAD, PIMPRI, PUNE 411018 PAN : AACCK4815G ....... / APPELLANT ' / V/S. ASST. COMMISSIONER OF INCOME TAX, CIRCLE 9, PUNE / RESPONDENT 2 ITA NOS. 1647 & 1714/PN/2012 AND 115/PN/2013, A.YS. 2007-08 & 2008-09 ASSESSEE BY : SHRI P.J. APTE REVENUE BY : DR. HARSHVARDHINI BUTY & SHRI B.C. MALAKAR / DATE OF HEARING : 03-09-2015 / DATE OF PRONOUNCEMENT : 30-10-2015 * / ORDER PER VIKAS AWASTHY, JM : THE ASSESSEE HAS FILED AN APPEAL IN ITA NO. 1647/PN/2012 AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) -V, PUNE DATED 28-05-2012 FOR THE ASSESSMENT YEAR 2007-08. TH E REVENUE HAS FILED CROSS APPEAL IN ITA NO. 1714/PN/2012 AGAINST THE SAM E ORDER OF COMMISSIONER OF INCOME TAX (APPEALS). THE ASSESSEE HAS FILED ANOTHER APPEAL IN ITA NO. 115/PN/2013 AGAINST THE ASSESSMENT O RDER DATED 12-10-2012 PASSED U/S. 143(3) R.W.S. 144C(13) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR THE ASSE SSMENT YEAR 2008-09. SINCE, THE ISSUES INVOLVED IN ALL THE THREE APPEA LS ARE SIMILAR AND ARE ARISING FROM SIMILAR SET OF FACTS, THESE APPEALS ARE TAKEN UP TOGETHER FOR ADJUDICATION. 2. THE ASSESSEE IN BOTH THE APPEALS HAVE IMPUGNED THE FINDINGS OF LOWER AUTHORITIES IN HOLDING THAT THE EXPENDITURE INCURRED IN FOREIGN CURRENCY BY ASSESSEE SHOULD BE REDUCED WHILE COMPUTING EXPORT TURNOVER FOR THE PURPOSE OF DEDUCTION U/S. 10A THEREBY REDUCING THE BENEFIT OF DEDUCTION U/S. 10A TO THE ASSESSEE. THE ASSESSEE HAS FURTHER IMPUGNED THE FINDINGS OF THE LOWER AUTHORITIES IN HOLDING THA T THE ASSESSEE IS ENGAGED IN PROVIDING TECHNICAL SERVICES OUTSIDE INDIA. 3 ITA NOS. 1647 & 1714/PN/2012 AND 115/PN/2013, A.YS. 2007-08 & 2008-09 3. THE REVENUE IN ITS APPEAL FOR THE ASSESSMENT YEAR 20 07-08 HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN HOLDING THAT THE FOREIGN CURRENCY EXPENSES EXCLUDED FROM THE EXPORT TURNOVER WHILE COMPUTING DEDUCTION U/S. 10A SHOULD ALSO BE EXCLUDED FROM TOTAL TURNOVER. 4. THE BRIEF FACTS OF THE CASE AS EMERGING FROM THE RECOR DS ARE: THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND IS ENGAGED IN TH E BUSINESS OF PROVIDING COMPUTER SOFTWARE AND IT-ENABLED SERVICES TO IT S PARENT COMPANY AND OTHER GROUP COMPANIES. THE ASSESSEE IS WH OLLY OWNED SUBSIDIARY OF KSB AG, GERMANY. THE ASSESSEE IS AN EXPORT ORIENTED UNIT REGISTERED AS A SOFTWARE TECHNOLOGY PARK LOCATED AT PUNE. DURING THE IMPUGNED ASSESSMENT YEARS, THE ASSESSEE CLAIMED DED UCTION U/S. 10A. IN ASSESSMENT YEAR 2007-08, IN SCRUTINY ASSESSMEN T PROCEEDINGS, THE ASSESSING OFFICER HELD THAT THE ASSESSEE IS PROVIDING T ECHNICAL SERVICES OUTSIDE INDIA AND IS NOT ENGAGED IN EXPORT OF AN Y ARTICLES OR THINGS OR COMPUTER SOFTWARE AS ENVISAGED IN SECTION 10A OF THE ACT. THE ASSESSING OFFICER DISALLOWED THE AMOUNT OF RS.4,04,29,000/- I.E. THE EXPENDITURE INCURRED BY ASSESSEE IN FOREIGN CURRENC Y IN PROVIDING TECHNICAL SERVICES OUTSIDE INDIA. THE ASSESSING OFFICER RED UCED THE SAME FROM EXPORT TURNOVER FOR THE PURPOSE OF COMPUTIN G ALLOWABLE DEDUCTION U/S. 10A OF THE ACT. AGGRIEVED BY THE ASSESSMENT ORDER DATED 31-12-2009, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF I NCOME TAX (APPEALS). BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) TH E ASSESSEE MADE FIRST PRAYER IN REVERSING THE FINDINGS OF TH E ASSESSING OFFICER IN TREATING THE AMOUNT OF RS.4,04,29,000/- TOWARDS TE CHNICAL SERVICES OUTSIDE INDIA AND RESTORE THE DEDUCTION U/S. 10 A THEREON. IN 4 ITA NOS. 1647 & 1714/PN/2012 AND 115/PN/2013, A.YS. 2007-08 & 2008-09 AN ALTERNATE PRAYER THE ASSESSEE PRAYED FOR REDUCING T HE AMOUNT OF RS.4,04,29,000/- FROM THE EXPORT TURNOVER AS WELL AS TOT AL TURNOVER FOR COMPUTING DEDUCTION U/S. 10A. THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE IMPUGNED ORDER REJECTED THE FIRST PRAYER OF THE ASSESSEE AND UPHELD THE FINDINGS OF ASSESSING OFFICER THAT THE AMOUNT OF RS.4,04,29,000/- RELATES TO EXPENSES INCURRED IN FOREIGN C URRENCY IN PROVIDING TECHNICAL SERVICES OUTSIDE INDIA AND THUS, THE S AID AMOUNT IS NOT ELIGIBLE FOR DEDUCTION U/S. 10A OF THE ACT. HOWEVER, THE COMMISSIONER OF INCOME TAX (APPEALS) ACCEPTED THE ALTERNAT E SUBMISSIONS OF THE ASSESSEE AND DIRECTED THE ASSESSING O FFICER TO COMPUTE DEDUCTION U/S. 10A AFTER EXCLUDING RS.4,04,29,000/- FROM EXPORT TURNOVER AS WELL AS TOTAL TURNOVER. 5. IN THE ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2008-09, SIMILAR VIEW WAS TAKEN BY THE TPO IN RESPECT OF FOREIGN CUR RENCY EXPENDITURE FOR PROVIDING TECHNICAL SERVICES TO THE HOLDING COMPANY IN GERMANY. THE TPO VIDE ORDER DATED 28-10-2011 REDUCE D THE AMOUNT OF FOREIGN CURRENCY EXPENDITURE (RS.5,05,60,467/-) FROM EXPORT TURN OVER ONLY, WITHOUT REDUCING THE SAME FROM TOTAL TURNOVER. THE ASSESSEE FILED OBJECTIONS BEFORE THE DRP, PUNE AGAINST DRAFT ASSESSMENT ORDER DATED 05-12-2011. THE DRP VIDE DIREC TIONS DATED 02-09-2012 ACCEPTED THE ALTERNATE PRAYER OF THE ASSES SEE AND DIRECTED THE ASSESSING OFFICER TO REDUCE THE AMOUNT OF FOREIGN CURR ENCY EXPENSES FROM EXPORT TURNOVER AND TOTAL TURNOVER FOR COMPUTING DEDUCTION U/S. 10A OF THE ACT. 6. AGAINST THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (AP PEALS) IN ASSESSMENT YEAR 2007-08, BOTH THE ASSESSEE AND REV ENUE ARE IN 5 ITA NOS. 1647 & 1714/PN/2012 AND 115/PN/2013, A.YS. 2007-08 & 2008-09 APPEAL. WHEREAS, IN THE ASSESSMENT YEAR 2008-09, ONLY THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL ASSAILING THE FINDINGS OF ASSESSIN G OFFICER ON SAME ISSUE IN ORDER PASSED U/S. 143(3) R.W.S. 144C OF THE ACT. 7. SHRI P.J. APTE APPEARING ON BEHALF OF THE ASSESSEE SUBM ITTED, THAT THE ASSESSEE IS PROVIDING IT-ENABLED SERVICES TO I TS PARENT AND OTHER GROUP COMPANIES. THE ASSESSEE IS CHARGING ON GRO SS BASIS FOR THE SERVICES PROVIDED TO THE SAID COMPANIES. THE ASSESSEE IS USING THE SERVER OF HOLDING COMPANY LOCATED IN GERMANY. HOWEVER, NO SEPARATE PAYMENTS ARE MADE TO THE HOLDING COMPANY FOR USE OF SER VER. THE BILLING IS DONE FOR THE ACTUAL WORK PERFORMED. THE ASSESSEE IS NOT SUPPORTING THE PARENT COMPANY BUT IS PROVIDING FINAL PRODU CT. THE ASSESSEE IS PROVIDING TECHNICAL SERVICES TO THE HOLDING COM PANY FROM ITS ESTABLISHMENT IN INDIA. THE LD. AR CONTENDED THAT THE AUT HORITIES BELOW HAVE ERRED IN COMING TO THE CONCLUSION THAT THE A SSESSEE IS ENGAGED IN PROVIDING TECHNICAL SERVICES OUTSIDE INDIA. THE LD. AR FILED DETAILED WORK FLOW EXPLAINING THE ACTIVITIES CARRIED ON BY THE ASSESSEE FOR ITS HOLDING COMPANY. THE WORK FLOW OF THE ACTIVITIES PERFO RMED BY THE ASSESSEE IS REPRODUCED HERE-IN-UNDER: A) THE NATURE OF ACTIVITIES CARRIED OUT BY KSB TEC H IS EXPLAINED BELOW. GENERAL OVERVIEW OF THE ACTIVITIES AT KSB TECH PVT. LTD. 1. CREATION OF 3D/2D CAD DRAWINGS, 2. CARRYING OUT FLOW/STRESS ANALYSIS, 3. DEVELOPING PUMP/VALVE SELECTION SOFTWARE, 4. DESIGNING OF PUMPS AND VALVES FOR THE PARENT COMPANY KSB AG, GERMANY. REPRESENTATIVE WORK FLOW: STEP 1 . IDENTIFICATION OF TASK FOR KSB TECH, PUNE & COMM UNICATION WITH RELEVANT DEPARTMENT AT KSB TECH, PUNE - DONE BY KSB AG THROUGH E-MAIL, TELEPHONIC CONVERS ATION ETC. - IN THIS STEP THE ENGINEERS AT KSB AG REVIEW DEVEL OPMENT PROJECTS PLANNED OR UNDERWAY AT THEIR END & IDENTIFY THE TAS KS TO BE DONE FROM 6 ITA NOS. 1647 & 1714/PN/2012 AND 115/PN/2013, A.YS. 2007-08 & 2008-09 KSB TECH, PUNE E.G. CREATION OF NEW 3D/2D CAD DRAWI NGS OR CARRYING OUT FLOW/STRESS ANALYSIS OR PUMPS / VALVES TO BE IN CLUDED IN THE SELECTION SOFTWARE OR DESIGNING OF PUMPS & VALVES. - A SUMMARY OF TASKS TO BE DONE AT KSB TECH, PUNE I S PREPARED BY KSB AG & DISCUSSED WITH THE ENGINEERS FROM KSB TECH, PU NE THROUGH E-MAIL, TELECONFERENCES OR VIDEO CONFERENCES OR PERSONAL VI SIT OF GERMAN ENGINEERS TO PUNE. STEP 2. REVIEW OF THE TASKS IDENTIFIED FOR KSB TECH, PUNE - IN THIS STEP ENGINEERS AT KSB TECH, PUNE REVIEW T HE IDENTIFIED TASKS FOR TECHNICAL FEASIBILITY, INTERACT WITH GERMAN ENGINEE RS TO GET CLARITY ON THE TASKS - ENGINEERS AT KSB TECH, PUNE EVALUATE EFFORTS REQU IRED TO DO THE TASKS & PREPARE THE WORK SCHEDULE - THE PROPOSED EFFORTS & SCHEDULE IS SUBMITTED BY E NGINEERS AT KSB TECH, PUNE TO KSBAG - ENGINEERS AT KSB AG REVIEW THE PROPOSAL & PROVIDE COMMENTS, SUGGESTIONS. - ENGINEERS AT KSB TECH, PUNE REVIEW THE COMMENTS, MODIFY THE PROPOSAL, IF REQUIRED & RESUBMIT FOR APPROVAL OF KS B AG - ENGINEERS AT KSB AG FINALLY APPROVE THE PROPOSAL SENT BY KSB TECH, PUNE STEP 3. PROVIDE NECESSARY TECHNICAL INFORMATION (INPUTS) FO R EXECUTING THE TASKS - DONE BY KSB AG THROUGH E-MAIL, TELEPHONIC CONVERS ATION ETC & DATA TRANSFER VIA COMPUTER SERVER AT KSB AG. - IN THIS STEP ENGINEERS AT KSB AG PREPARE THE INFO RMATION (INPUTS) REQUIRED FOR EXECUTION OF THE TASKS AT KSB TECH, PU NE & PROVIDE THE SAME TO ENGINEERS AT KSB TECH, PUNE - ENGINEERS AT KSB TECH, PUNE STUDY THE INPUTS RECE IVED FROM KSB AG, SEEK CLARIFICATIONS FROM KSB AG ENGINEERS WHEREVER REQUIRED. STEP 4. EXECUTION OF THE TASK AT KSB TECH, PUNE - DONE BY ENGINEERS FROM RELEVANT DEPARTMENT AT KSB TECH, PUNE USING APPROPRIATE IT INFRASTRUCTURE, HARDWARE AND SOFTWAR E VIA COMPUTER SERVER AT KSB AG. - IN THIS STEP ENGINEERS AT KSB TECH, PUNE WORK ON THE ASSIGNED TASKS AS PER THE TECHNICAL PROCEDURES & ON THE COMPUTERS PRO VIDED TO THEM IN THE PREMISES OF KSB TECH, PUNE - DURING THE EXECUTION OF THE TASKS AT KSB TECH, PU NE, ENGINEERS AT KSB TECH, PUNE DISCUSS THE TECHNICAL DIFFICULTIES WITH ENGINEERS AT KSB AG AS PER NEED & SEEK THEIR GUIDANCE IN RESOLVING THE SAM E. 7 ITA NOS. 1647 & 1714/PN/2012 AND 115/PN/2013, A.YS. 2007-08 & 2008-09 STEP 5. TRANSFER THE RESULT (OUTPUT) IN THE FORM OF COMPUTE R FILES / SOFT DATA TO KSB AG - DONE BY ENGINEERS OF RELEVANT DEPARTMENT AT KSB T ECH, PUNE BY DATA TRANSFER VIA COMPUTER SERVER AT KSB AG. - IN THIS STEP ENGINEERS AT KSB TECH, PUNE COMMUNIC ATE WITH ENGINEERS AT KSB AG REGARDING COMPLETION OF THE TASKS & SHARE S RESULTS WITH THEM ENGINEERS AT KSB AG REVIEW THE RESULTS & PROVIDE CO MMENTS TO ENGINEERS AT KSB TECH, PUNE - ENGINEERS AT KSB TECH, PUNE REVIEW THE COMMENTS R ECEIVED FROM ENGINEERS AT KSB AG & UNDERTAKE REVISION IN THE TAS KS AS PER NEED. - UPON COMPLETION OF THE TASK, ENGINEERS AT KSB TEC H, PUNE INFORM ENGINEERS AT KSB AG & TRANSFERS RESULTS TO THEM. - ENGINEERS AT KSB AG REVIEW THE RESULTS & COMMUNIC ATE THEIR APPROVAL, - THE ASSIGNED TASKS THUS GET COMPLETED. ALL COMMUNICATIONS WITH KSB AG DURING THESE STEPS T AKE PLACE VIA E- MAIL, TELECONFERENCES OR VIDEO CONFERENCES OR PERSO NAL VISIT OF GERMAN ENGINEERS TO KSB TECH, PUNE. THE LD. AR REFERRED TO PAGES 87 TO 89 OF THE PAPER BOOK NO. 4 (FOR ASSESSMENT YEAR 2007-08 - SUBMITTED ON 25-11-2014), TO SHOW THAT THE ASSESSEE IS RAISING INVOICES ON THE PARENT COMPANY ON TH E BASIS OF ACTUAL WORK DONE. IN SUPPORT OF HIS SUBMISSIONS, THE LD. A R OF THE ASSESSEE PLACED RELIANCE ON THE FOLLOWING DECISIONS: I. WILLS PROCESSING SERVICES (INDIA) (P.) LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX, 21 ITR (T) 1 (MUMBAI-TRIB.) AND II. PATNI TELECOM (P.) LTD. VS. ITO, 22 SOT 26. 8. DR. HARSHVARDHINI BUTY AND SHRI B.C. MALAKAR REPRESENTIN G THE DEPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF THE AS SESSING OFFICER AND SUBMITTED THAT THE ASSESSEE IS USING SERVER OF KSB AG, GERMANY FOR RENDERING SERVICES TO ITS HOLDING COMPANY. THE ASSESS EE IS NOT ENGAGED IN DEVELOPING OR MANUFACTURING ANY PRODUCT OR S OFTWARE. THE ASSESSEE IS MERELY PROVIDING SERVICES TO THE FOREIGN COMP ANY. THE LD. 8 ITA NOS. 1647 & 1714/PN/2012 AND 115/PN/2013, A.YS. 2007-08 & 2008-09 DR FURTHER SUBMITTED THAT A PERUSAL OF INVOICES AT PAGE S 87 TO 89 OF THE PAPER BOOK SHOWS THAT THE ASSESSEE IS PERFORMING WORK ON HOURLY BASIS. IN NONE OF THE INVOICES THE ACTUAL PRODUCT DEVELOP ED BY THE ASSESSEE OR COMPUTER SOFTWARE DEVELOPED BY THE ASSESS EE IS MENTIONED. THE LD. DR SUPPORTED THE FINDINGS OF THE COMMISSIONER OF INC OME TAX (APPEALS) TO THE EXTENT OF HOLDING THAT THE ACTIVITIES CARRIE D ON BY THE ASSESSEE ARE IN THE NATURE OF PROVIDING TECHNICAL SERVICES OUTSIDE INDIA AND THEREFORE, THE FOREIGN CURRENCY EXPENSES PAID BY TH E ASSESSEE ARE NOT ELIGIBLE FOR CLAIMING DEDUCTION U/S. 10A. THE LD. DR PRAYED FOR DISMISSING THE APPEALS OF THE ASSESSEE. 9. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF BOTH THE SIDES AND HAVE PERUSED THE ORDERS OF AUTHORIT IES BELOW. WE HAVE ALSO CONSIDERED THE DECISION ON WHICH THE LD. AR HAS PLACED RELIANCE. THE ISSUE BEFORE US IS, WHETHER THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION U/S. 10A ON THE AMOUNT OF FOREIGN CURRENC Y EXPENDITURE, RS.4,04,29,000/- IN ASSESSMENT YEAR 2007-08 A ND RS.5,05,60,467/- IN ASSESSMENT YEAR 2008-09? 10. THE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSE E IS PROVIDING FINAL PRODUCT IN THE FORM OF DESIGN AND SOFTWARE TO ITS HOLDIN G COMPANY. WHEREAS, THE REVENUE IS OF THE VIEW THAT THE ASSESSEE IS PROVIDING TECHNICAL SERVICES OUTSIDE INDIA TO ITS PARENT COMPANY. BEFORE WE PROCEED WITH THE ISSUE IT WOULD BE RELEVANT TO REFER TO T HE MEANING OF TERM EXPORT TURNOVER U/S. 10A OF THE ACT. THE TERM EXPORT TURNOVER IS DEFINED IN EXPLANATION 2(IV) OF SECTION 10A OF THE ACT. THE SAME READS AS UNDER: (IV) EXPORT TURNOVER MEANS THE CONSIDERATION IN RESPECT OF EXPORT [BY THE UNDERTAKING] OF ARTICLES OR THINGS OR COMPUTER SOFTWARE RECEIVED IN, OR 9 ITA NOS. 1647 & 1714/PN/2012 AND 115/PN/2013, A.YS. 2007-08 & 2008-09 BROUGHT INTO, INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE IN ACCORDANCE WITH SUB-SECTION (3), BUT DOES NOT INCLU DE FREIGHT, TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES OR THINGS OR COMPUTER SOFTWARE OUTSIDE IND IA OR EXPENSES, IF ANY, INCURRED IN FOREIGN EXCHANGE IN PROVIDING THE TECHN ICAL SERVICES OUTSIDE INDIA; FROM THE PERUSAL OF ABOVE DEFINITION OF EXPORT TURNOVER IT IS CLEAR THAT EXPORT TURNOVER MEANS THE CONSIDERATION IN RESPECT OF EXPORT BY THE UNDERTAKING OF ARTICLES OR THINGS OR COMPU TER SOFTWARE RECEIVED IN, OR BROUGHT INTO, INDIA BY THE ASSESSEE IN CON VERTIBLE FOREIGN EXCHANGE WITHIN THE PRESCRIBED PERIOD BUT IT DOES NOT IN CLUDE THE FOLLOWING: A) FREIGHT, B) TELECOMMUNICATION CHARGES, C) INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES OR THINGS OR COMPUTER SOFTWARE OUTSIDE INDIA, AND D) EXPENSES, IF ANY, INCURRED IN FOREIGN EXCHANGE IN PROVIDING TH E TECHNICAL SERVICES OUTSIDE INDIA. 11. IN THE PRESENT CASE FROM THE WORK FLOW OF THE ACTIVITIE S PROVIDED BY THE ASSESSEE WHICH HAS BEEN REPRODUCED IN PARA 7 A BOVE, IT IS EVIDENT THAT THE ASSESSEE IS NOT PROVIDING ANY END PRO DUCT SUCH AS COMPUTER SOFTWARE OR DESIGN TO ITS PARENT COMPANY IN GE RMANY. THE ASSESSEE IS PROVIDING TECHNICAL SERVICES TO ITS HOLDING COMP ANY. IN SO FAR AS THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) O N THIS ASPECT OF THE ISSUE IS CONCERNED WE ARE IN AGREEMENT WITH HIM. 12. NOW, THE NEXT QUESTION THAT ARISES FOR CONSIDERATION IS , WHETHER THE TECHNICAL SERVICES PROVIDED BY THE ASSESSEE ARE OUT SIDE INDIA OR FROM INDIA? IT IS AN UNDISPUTED FACT THAT THE ASSESSEE COMPANY HAS BEEN INCORPORATED IN INDIA AND IS PROVIDING SERVICES INCLUD ING ITES TO ITS PARENT COMPANY IN GERMANY. IT IS ALSO AN UNDISPUTED FACT THAT THE 10 ITA NOS. 1647 & 1714/PN/2012 AND 115/PN/2013, A.YS. 2007-08 & 2008-09 ASSESSEE IS USING SERVER OF THE PARENT COMPANY LOCATED IN GERMANY. UNDISPUTEDLY, THE ASSESSEE FOR THE PURPOSE OF PROVIDING T ECHNICAL SERVICES AND ITES TO ITS PARENT COMPANY IN GERMANY HAS SET UP AN ESTABLISHMENT IN INDIA AND IS USING ITS WORK FORCE IN INDIA. THE ASSESSEE HAS ITS SITUS AND WORK PLATFORM IN INDIA. THUS, IN OUR CONSIDERED OPINION THE ASSESSEE IS PROVIDING TECHNICAL SERV ICES TO ITS PARENT COMPANY FROM INDIA. 13. THE ASSESSEE HAS GIVEN THE SUMMARY BREAKUP OF THE EXPENSES INCURRED IN FOREIGN CURRENCY DURING THE IMPUGNED ASSESSME NT YEARS. THE SAME ARE TABULATED AS UNDER: EXPENSES INCURRED IN FOREIGN CURRENCY (IN INR) ASSESSMENT YEAR IT EXPENSES TECH. CONSULTANCY SERVICES REIMBURSEMENTS TOTAL (IN RS.) AY 2007-08 30,715,878 4,334,779 5,378,343 40,429,000 AY 2008-09 42,594,907 4,881,044 3,084,516 50,560,467 14. AS FAR AS FIRST TWO COMPONENTS OF THE EXPENSES I.E. IT EXPENSES AND TECHNICAL CONSULTANCY SERVICES, ARE CONCERNED UNDOUB TEDLY THEY ARE THE PART OF THE EXPENDITURE REQUIRED FOR THE TECHNIC AL SERVICES PERFORMED BY THE ASSESSEE TO ITS AE. THESE EXPENSES AS PER THE CONTENTIONS OF THE ASSESSEE ARE MAINLY WITH RESPECT TO SETTING UP OF WORKSTATIONS I.E. DESKTOPS/LAPTOPS, WIDE AREA NETWORK, LEAS ED LINE FOR DATA TRANSFER BETWEEN KSB AG AND THE ASSESSEE, PRINTER S, INTERNET ETC. APPLICATIONS SUCH AS UNIGRAPHICS, AUTOCAD, SAP, MS-OFFICE, VAR IOUS OTHER SOFTWARES, ETC. PAYMENT FOR TECHNICAL CONSULTANCY S ERVICES INCLUDE, TECHNICAL CONSULTANCY FEES, OFF-SHORE SALARY PAID BY KSB AG TO ITS TECHNICAL REPRESENTATIVE DEPUTED WITH THE ASSESSEE, E TC. AS FAR AS THE THIRD ELEMENT I.E. REIMBURSEMENT IS CONCERNED THEY RELA TE TO 11 ITA NOS. 1647 & 1714/PN/2012 AND 115/PN/2013, A.YS. 2007-08 & 2008-09 EXPENSES INCURRED BY HOLDING COMPANY ON BEHALF OF THE EMP LOYEES OF THE ASSESSEE WHEN THEY VISITED GERMANY FOR TRAINING. THE SE EXPENSES INCLUDE MAINLY RENT, ACCOMMODATION, CONVEYANCE, TRAINING ET C. THEREFORE, THESE REIMBURSEMENTS DO NOT FORM PART OF THE EXPENDITURE ELIGIBLE FOR DEDUCTION U/S. 10A. IN THE DEFINITION OF THE TERM EXPORT TURNOVER IT HAS BEEN SPECIFICALLY STATED THAT EXPENSES INCURRED IN FOREIGN EXCHANGE IN PROVIDING TECHNICAL SERVICES OUTSIDE IND IA. THUS, THE SCOPE OF THE EXCLUSION FROM THE WORD EXPORT TURNOV ER CANNOT BE ENLARGED BY EXCLUDING THE EXPENSES INCURRED IN FOREIGN EXC HANGE IN PROVIDING THE TECHNICAL SERVICES FROM INDIA. 15. IN SUPPORT OF HIS SUBMISSIONS, THE LD. AR HAS PLACED RE LIANCE ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE O F WILLS PROCESSING SERVICES (INDIA) (P.) LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX (SUPRA). WE FIND THAT THE ISSUE IN THE SAID APPEAL IS AT VARIANCE FROM THE ISSUE IN APPEAL BEFORE US. THEREFORE, THE RATIO LAID DOWN IN THE SAID CASE WILL NOT BE OF ANY HELP TO THE ASSESSEE IN THE PRESENT CASE. 16. IN VIEW OF OUR ABOVE DETAILED FINDINGS THE APPEALS OF T HE ASSESSEE FOR BOTH THE ASSESSMENT YEARS 2007-08 AND 2008-09 AR E PARTLY ACCEPTED. ITA NO. 1714/PN/2012 (A.Y. 2007-08) 17. NOW, WE PROCEED TO DECIDE THE APPEAL OF REVENUE IN A SSESSMENT YEAR 2007-08. THE ONLY ISSUE RAISED BY THE REVENUE IN APPEAL IS AGAINST THE EXCLUSION OF FOREIGN CURRENCY EXPENDITURE FROM EXPORT TURNOVER AS WELL AS TOTAL TURNOVER WHILE COMPUTING DED UCTION U/S. 10A. IT IS A WELL SETTLED LAW THAT WHATEVER IS TO BE EXC LUDED FROM EXPORT TURNOVER HAS TO BE REDUCED FROM TOTAL TURNO VER AS WELL. THE COMMISSIONER OF INCOME TAX (APPEALS) BY PLACING RELIANCE ON THE 12 ITA NOS. 1647 & 1714/PN/2012 AND 115/PN/2013, A.YS. 2007-08 & 2008-09 DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V S. GEM PLUS JEWELLERY INDIA LTD., 233 CTR (BOM.) 248 HAS DIRECTED THE A SSESSING OFFICER TO EXCLUDE THE DISALLOWED AMOUNT FROM EXPORT TURNO VER AS WELL AS TOTAL TURNOVER. WE DO NOT FIND ANY INFIRMITY IN THE FIN DINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON THIS PRINCIPLE. THE A PPEAL OF THE REVENUE IS DISMISSED BEING DEVOID OF ANY MERIT. 18. BEFORE PARTING WITH THE ORDER WE WOULD LIKE TO RECOR D THAT THE ASSESSEE HAS FILED AS MANY AS 8 PAPER BOOKS IN THE PRES ENT SET OF APPEALS. HOWEVER, DURING THE COURSE OF MAKING SUBMISSIO NS, THE LD. AR OF THE ASSESSEE HAS ONLY REFERRED TO 3 PAGES I.E. PAG ES 87, 88 AND 89 OF PAPER BOOK NO. 4 FOR THE ASSESSMENT YEAR 2007-08 (SU BMITTED ON 25-11-2014). THE OTHER VOLUMES OF PAPER BOOK WERE NOT REFERRED TO AT ALL AT THE TIME OF SUBMISSIONS. THUS, EXCEPT FOR 3 PAGES REFERRED TO ABOVE, THE REMAINING VOLUME OF PAPER BOOKS SHALL NOT BE TR EATED AS PART OF THE RECORD OF THE TRIBUNAL IN TERMS OF RULE 18(6) OF THE APPELLATE TRIBUNAL RULE, 1963. 19. IN THE RESULT, THE APPEALS OF THE ASSESSEE I.E. ITA NO. 1647/PN/2012 FOR ASSESSMENT YEAR 2007-08 AND ITA NO. 115/PN/2013 FOR ASSESSMENT YEAR 2008-09 ARE PARTLY A LLOWED AND THE APPEAL OF THE REVENUE I.E. ITA NO. 1714/PN/2012 FOR ASSESS MENT YEAR 2007-08 IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 30 TH DAY OF OCTOBER, 2015. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 30 TH OCTOBER, 2015 RK 13 ITA NOS. 1647 & 1714/PN/2012 AND 115/PN/2013, A.YS. 2007-08 & 2008-09 *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-V, PUNE 4. ' / THE CIT-V, PUNE 5. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, %5 ,0 / PRIVATE SECRETARY, ,- , / ITAT, PUNE