TRINTY COMPUTER PROCESSING (I) P. LTD, MUMBAI V. ACIT 2(3), MUMBAI

ITA 4329/MUM/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 4519 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 13-07-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 20-06-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUSUM INGLE
• Keywords: Revenue expenditure
• Section: 143(3); 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'J' BENCH, MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 4329/MUM/2008 (ASSESSMENT YEAR: 2004-05) M/S. WILLIS PROCESSING SERVICES (INDIA) P. LTD (FORMERLY TRINITY COMPUTER PROCESSING (I) P. LTD.) ACIT 2(3) AAYAKAR BHAVAN, M.K. ROAD C/O. S.P. CHOPRA & CO. 15A HORNIMAN MUMBAI 400020 CIRCLE, BHARAT INSURANCE BLDG. VS. MUMBAI 400023 PAN - AAACT 1796 R APPELLANT RESPONDENT APPELLANT BY: SHRI FARROKH V. IRANI RESPONDENT BY: SMT. KUSUM INGLE O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)- XXX, MUMBAI DATED 23.03.2008. ASSESSEE VIDE LETTER DATED 9 TH DECEMBER 2009 HAD BROUGHT TO THE NOTICE OF THE ITAT THE CHANGE IN THE NAME OF THE COMPANY FROM TRINITY COMPUTER PROCESSING (INDIA) PV T. LTD. TO WILLIS PROCESSING SERVICES (INDIA) PVT. LTD. AND ENCLOSED THE PAN CARD ISSUED BY THE DEPARTMENT IN SUPPORT. THE PAN CONTINUES TO BE THE SAME. ACCORDINGLY THE CHANGE OF NAME WAS INCORPORATED. 2. ASSESSEE HAS RAISED THE FOLLOWING TWO GROUNDS WITH REFERENCE TO EXCLUSION OF SATELLITE EXPENSES FROM THE EXPORT TUR NOVER: _ 1. DEDUCTION UNDER SECTION 10A SATELLITE EXPENSES A. THE LEARNED CIT(A) ERRED IN CONFIRMING THE COMPUTAT ION OF DEDUCTION U/S. 10A OF THE ACT BY EXCLUDING THE SATE LLITE EXPENSES OF RS.2,04,15,912/- WHILE COMPUTING THE EX PORT TURNOVER. B. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT T HE EXPENDITURE WAS INCURRED IN INDIAN CURRENCY AND ACC ORDINGLY CANNOT BE EXCLUDED FROM EXPORT TURNOVER. C. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT SUCH S ATELLITE EXPENSES DO NOT SEPARATELY FORM PART OF THE RECEIPT FROM ITA NO. 4329/MUM/2008 M/S. TRINITY COMPUTER PROCESSING (I) P. LTD. 2 INCOME. THE APPELLANT RELIED ON THE DECISION IN THE CASE OF PATNI TELECOM P. LTD. V. INCOME TAX OFFICER (22 SOT 26) ( HYD TRIBUNAL). D. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE SU BMISSIONS OF THE APPELLANT IN THE CORRECT PERSPECTIVE. E. THE APPELLANT THEREFORE PRAYS THAT THE LEARNED ASSE SSING OFFICER BE DIRECTED NOT TO EXCLUDE THE SATELLITE EX PENSES WHILE COMPUTING THE EXPORT TURNOVER FOR THE PURPOSE OF DE DUCTION UNDER SECTION 10A OF THE ACT. 2. WITHOUT PREJUDICE TO THE ABOVE, A. THE LEARNED CIT(A) ERRED IN NOT EXCLUDING THE SATELLITE EXPENSES WHILE COMPUTING TOTAL TURNOVER FOR THE PURPOSE OF D EDUCTION UNDER SECTION 10A OF THE ACT. B. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING TH AT IF THE SAID EXPENSES WERE TO BE EXCLUDED FROM THE EXPORT TURNOV ER, THE SAME WOULD ALSO BE REQUIRED TO BE EXCLUDED FROM THE TOTAL TURNOVER. THE APPELLANT RELIES ON THE DECISION IN T HE CASE OF CIT V. SURDARSHAN CHEMICALS INDUSTRIES LTD. 245 ITR 769 (BOM). 3. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF PROCESSING INFORMATION RELATING TO INSURANCE CLAIMS RECEIVED FROM TRINITY PROCESSING SERVICES LTD. (TSPL). THE I NFORMATION PROCESSED IS VIEWED EITHER BY TPSL OR WILLIS LIMITED (WILLIS) WH ICH IS A CLIENT OF TPSL. IN THE BUSINESS OPERATIONS THE RAW DATA RECEIVED BY IS PROCESSED AND THEN SENT BACK TO TPSL VIA COMPUTERS/ LEASED LINES. THE RETUR N OF INCOME DECLARING TOTAL INCOME OF ` 2,99,83,335/- WAS FILED ON 29.10.2004. THE RETURN W AS PROCESSED UNDER SECTION 143(1)(A) OF THE ACT ON 07. 02.2005. SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS (SC ORE BASED) AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OR TH E ACT ON 30.11.2006 DETERMINING THE TOTAL INCOME AT ` 3,47,00,432/-. WHILE DETERMINING THIS INCOME THE ASSESSING OFFICER RECOMPUTED DEDUCTION U NDER SECTION 10A BY REDUCING THE EXPENSES RELATING TO TECHNICAL FEES AN D SATELLITE CHARGES TO ARRIVE AT THE EXPORT TURNOVER AS DEFINED UNDER SECT ION 10A EXPLANATION 2(IV). AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). IT WAS THE SUBMISSION OF THE ASSESSEE THAT THE SATELLITE CHARG ES ARE NOT TELECOMMUNICATION CHARGES AND THE SAME HAS NOT BEEN INCURRED IN FOREIGN CURRENCY AND THE SAME WERE NOT RECOVERED FROM THE F OREIGN COMPANY TSPL, HENCE THE SAME CANNOT BE EXCLUDED FROM EXPORT TURNO VER AND FURTHER IF THE ITA NO. 4329/MUM/2008 M/S. TRINITY COMPUTER PROCESSING (I) P. LTD. 3 SATELLITE CHARGES ARE TO BE CONSIDERED AS TELECOMMU NICATION CHARGES THE SAME ARE TO BE EXCLUDED FROM THE TOTAL TURNOVER AS WELL. THE CIT(A), VIDE PARA 6 OF THE ORDER ANALYSED THE ISSUE AND HELD THA T SATELLITE CHARGES ARE TO BE CONSIDERED AS TELECOMMUNICATION CHARGES ATTRIBUT ABLE TO DELIVERY OF PROCESSED DATA AND ACCORDINGLY UPHELD THE ACTION OF THE A.O. 4. THE LEARNED COUNSEL IN THE COURSE OF DETAILED ARGUM ENTS MADE THE FOLLOWING PROPOSITIONS: - 1A NO PART OF THE SATELLITE EXPENSES CAN BE EXCLUDED WHILE DETERMINING EXPORT TURNOVER, INTER ALIA AS: (A) THE SATELLITE EXPENSES ARE NOT INVOICED TO THE OVERSEAS CLIENTS [SEE PATNI TELECOM (P) LTD. V. ITO 92008) 2 2 SOT 26 (HYD. ITAT) (SEE PARTICULARLY PAGES 37 TO 40)] (B) THE SATELLITE EXPENSES ARE COMPLETELY FIXED CHARGES AND ARE NOT DEPENDENT UPON USAGE AND HENCE CANNOT BE REGARD ED AS ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES OR THINGS OR COMPUTER SOFTWARE OUTSIDE INDIA .. (C) THE SATELLITE EXPENSES ARE NOT INCURRED IN FOREIGN EXCHANGE B IN ANY EVENT THE ENTIRE SATELLITE EXPENSES CANNOT BE EXCLUDED BECAUSE EXPLANATION 2(IV) SANCTIONS THE EXCLUSION O NLY OF .. TELECOMMUNICATION CHARGES .. ATTRIBUTABLE TO THE DELIVERY OF THE ARTICLES OR THINGS OR COMPUTER SOFTWARE OUTSIDE INDIA .. II WITHOUT PREJUDICE TO ABOVE, IF IT IS HELD THAT T HE SATELLITE EXPENSES OR ANY PART THEREOF ARE TO BE EXCLUDED FROM THE EXPORT TURNOVER, THE SAID SATELLITE EXPENSES OR PART THEREOF MUST AL SO BE EXCLUDED FROM TOTAL TURNOVER [SEE M/S. TCE CONSULTING ENGINEERS LTD. V. ADDL. CIT (SE E PARTICULARLY PAGES 2, 3 TO 6 AND 16) ITO V. SAK SOFT LTD. 313 ITR 353 (AT)(SB)] 5. THE LEARNED D.R., HOWEVER, RELIED ON THE ORDERS OF THE A.O. AND THE CIT(A). 6. AS SEEN FROM THE FACTS OF THE ASSESSEE THE A.O. HAS ORIGINALLY ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE WHY SATELLITE CHA RGES PAID BY THE ASSESSEE COMPANY SHOULD NOT BE TREATED AS CAPITAL EXPENDITUR E FOR WHICH THE ASSESSEE HAS FURNISHED THE FOLLOWING REPLY: - ITA NO. 4329/MUM/2008 M/S. TRINITY COMPUTER PROCESSING (I) P. LTD. 4 TRINITY COMPUTER PROCESSING (INDIA) PVT. LTD. (TH E COMPANY) IS ENGAGED IN THE BUSINESS OF PROCESSING INFORMATION R ELATING TO INSURANCE CLAIMS RECEIVED FROM TRINITY PROCESSING SERVICES LI MITED (TSPL). IN THE BUSINESS OPERATIONS, THE RAW DATE RECEIVED BY IS PR OCESSED AND THEN SENT BACK TO THE TPSL VIA COMPUTERS. AS STATED ABOVE, THE RAW DATA RECEIVED BY THE COMPA NY IS PROCESSED AND THEN SENT BACK VIA COMPUTES. FOR PROVIDING SUCH SERVICES, THE COMPANY REQUIRES VERY HIGHLY EFFECTIVE INTERNET CON NECTIVITY. THE COMPANY HAS ACCORDINGLY PAID FEES TO THE VIDESH SANCHAR NIGAM LIMITED (VSNL), SOFTWARE TECHNOLOGY PARKS OF INDI A (STPI) AND MAHANAGAR TELEPHONE NIGAM LIMITED (MTNL) FOR INTE RNATIONAL LEASE LINES CIRCUIT CHARGES. IN VIEW OF THE ABOVE, YOUR GOODSELF WILL APPRECIATE THAT IN ORDER TO RECEIVE THE RAW DATA AND PROVIDE THE PROCESSED INFORMATION BACK TO THE CLIENT, THE COMPANY HAS TO OBTAIN THE INTERNATIONAL LEASE L INES FROM VSNL/STPI /MTNL. IN OTHER WORDS, FOR GETTING EFFECTIVE CONNEC TIVITY OF THE INTERNET, THE COMPANY HAS PAID CHARGES FOR LEASE LINE CIRCUIT . YOUR GOODSELF WILL APPRECIATE THAT THE COMPANY IS REQUIRED TO OBTAIN S UCH LEASED LINES FOR THE CONDUCT OF ITS DAY-TO-DAY BUSINESS. IN OTHER WO RDS, INTERNATIONAL LEASE LINE CHARGES PAID TO VSNL/STPI/MTNL IS AN INT EGRAL PART OF THE PROFIT EARNING PROCESS AND NOT FOR ACQUISITION OF A NY ASSET. YOUR GOODSELF WILL THEREFORE APPRECIATE THAT THE SAID EXPENDITURE IS A REVENUE EXPENDITURE. MOREOVER, YOUR GOODSELF WILL APPRECIATE THAT THE IN TERNATIONAL LEASE LINES FEES PAID IS AN ANNUAL FEES, WHICH HAS TO BE PAID EVERY YEAR. IT IS A RECURRING EXPENDITURE, WHICH IS INCURRED IN THE COU RSE OF BUSINESS AND DOES NOT BRING INTO EXISTENCE AN ASSET OR ADVANTAGE OF AN ENDURING BENEFIT. IN VIEW OF THE ABOVE, YOUR GOODSELF WILL APPRECIATE THAT THE SATELLITE LINK CHARGES OF RS.20,415,912 PAID TO THE VSNL/STPI/MTNL IS IN THE NATURE OF REVENUE EXPENDITURE. 7. HOWEVER, WHILE COMPLETING THE ASSESSMENT THE A.O. T REATED THE ABOVE SATELLITE LINK CHARGES AS PART OF TELECOMMUNICATION CHARGES. THIS ISSUE WAS DISCUSSED ELABORATELY BY THE COORDINATE BENCH IN TH E CASE OF PATNI TELECOM (P.) LTD. VS. ITO (WHEREIN ONE OF US, THE J.M. WAS A MEMBER) 22 SOT 26 (HYD) WHEREIN ON SIMILAR FACTS THE ISSUE WAS CONSIDERED W ITH REFERENCE TO EXPORT TURNOVER AS DEFINED IN CLAUSE (IV) OF SECTION 10A A ND HELD AS UNDER: - EXPORT TURNOVER HAS BEEN DEFINED IN CLAUSE (IV) O F THE EXPLANATION 2 TO SECTION 10A. THE MEANING OF EXPORT TURNOVER IS AL SO PROVIDED IN OTHER SECTIONS OF THE ACT, SAY CLAUSE (C) OF SECTION 80HH E AND EXPLANATION (B) TO SECTION 80HHC. ACCORDING TO EXPLANATION (B) TO S ECTION 80HHC, EXPORT TURNOVER MEANS THE SALE PROCEEDS RECEIVABLE IN FORE IGN EXCHANGE AS PER SUB-SECTION 2(A) OF SECTION 80HHC OF ALL GOODS WHIC H ARE EXPORTED OUT OF ITA NO. 4329/MUM/2008 M/S. TRINITY COMPUTER PROCESSING (I) P. LTD. 5 INDIA, BUT WHICH DOES NOT INCLUDE FREIGHT AND INSUR ANCE. SIMILARLY, TOTAL TURNOVER FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80HHC, WHICH IS DEFINED IN EXPLANATION (BA) AT THE END OF SECTION 8 0HHC IN THE NEGATIVE TERM, MEANS AS NOT INCLUDING FREIGHT AND INSURANCE ATTRIBUTABLE TO TRANSPORT OF GOODS OR MERCHANDISE BEYOND THE CUSTOM STATION AND PROFIT ON SALE OF LICENCE, CASH ASSISTANCE, DUTY DRAWBACK, ETC. THUS, THE TERM EXPORT TURNOVER DOES NOT INCLUDE FREIGHT AND INSU RANCE ATTRIBUTABLE TO TRANSPORT. EXPLANATION (C) TO SECTION 80HHE IS SIMI LAR TO CLAUSE (IV) OF EXPLANATION 2 TO SECTION 10A. ON AN ANALYSIS OF DEFINITION OF EXPORT TURNOVER A S PROVIDED IN CLAUSE (IV) OF THE EXPLANATION 2 TO SECTION 10A, IT IS CLE AR THAT FOR THE PURPOSE OF NOT INCLUDING IN THE CONSIDERATION RECEIVED IN OR B ROUGHT INTO INDIA IN CONVERTIBLE FOREIGN EXCHANGE THERE ARE TWO TYPES OF EXPENDITURES. THE FIRST TYPE OF EXPENDITURE IS FREIGHT, TELECOMMUNICA TION CHARGES, OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF ARTICLE O R THING OR COMPUTER SOFTWARE OUT OF INDIA. THE SECOND TYPE OF EXPENDITU RE IS EXPENDITURE, IF ANY, INCURRED IN FOREIGN EXCHANGE IN PROVIDING TECH NICAL SERVICES OUTSIDE INDIA. THE BASIC IDEA OR INTENTION FOR DEDU CTING THE FIRST TYPE OF EXPENDITURE, I.E. FREIGHT, TELECOMMUNICATION CHARGE S, OR INSURANCE CHARGES IS THAT DELIVERY OF GOODS SHOULD BE FREE ON BOARD (FOB). THE CBDT VIDE ITS CIRCULAR NO. 564, DATED 5-7-1990 CLAR IFIED THIS ASPECT IN RESPECT OF DEDUCTION UNDER SECTION 80HHC. ON THE BA SIS OF THE ABOVE DISCUSSION, IT CAN BE SAID THAT ONLY THOSE FREIGHT, COMMUNICATION CHARGES OF INSURANCE ATTRIBUTABLE TO DELIVERY OF GO ODS OUT OF INDIA ARE TO BE CONSIDERED WHILE REDUCING FROM CONSIDERATION REC EIVED IN CONVERTIBLE FOREIGN EXCHANGE. THUS, IF SUCH EXPENSES ARE NOT AT TRIBUTABLE TO DELIVERY OF GOODS OUTSIDE INDIA, SUCH EXPENSES ARE NOT REQUI RED TO BE DEDUCTED FROM THE CONSIDERATION. NORMALLY, IN A TRANSACTION OF PURCHASE AND SALE, THERE ARE TWO TYPES OF CONDITIONS BETWEEN THE PARTI ES. ONE IS WHERE PRICE QUOTED OF GOODS IS INCLUSIVE OF ALL EXPENSES OR IN OTHER WORDS PRICE QUOTED IS ONLY IN RESPECT OF GOODS. ANOTHER CONDITI ON IS WHERE PRICE OF GOODS AND CHARGES OF EXPENSES ARE SEPARATELY STATED . IN A CASE WHERE SUCH EXPENSES ARE TO BE SEPARATELY CHARGED, INVOICE S ARE PREPARED SHOWING VALUE OF THE GOODS AND SUCH EXPENSES. IF TH E QUOTED PRICE IS INCLUSIVE OF SUCH EXPENSES, THEN CONSOLIDATED VALUE OF THE GOODS IS ONLY MENTIONED IN THE INVOICE. IN A CASE WHERE ONLY VALU E OF GOODS IS QUOTED, EXPENSE IS BORNE BY THE SUPPLIER. IN CASES WHERE EX PENSES HAVE NOT BEEN SEPARATELY CHARGED, THE CONVERTIBLE FOREIGN EX CHANGE RECEIVED IS CONSIDERATION OF THE GOODS ONLY. WHERE SUCH EXPENSE S ARE SEPARATELY CHARGED IN THE INVOICES, THE CONSIDERATION RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE INCLUDES THE VALUE OF THE GOODS AND SUCH E XPENSES. IF THE CONSIDERATION RECEIVED IS ONLY AGAINST THE GOODS, T HEN THERE IS NO NEED TO DEDUCT SUCH EXPENSES FROM THE CONSIDERATION RECE IVED IN CONVERTIBLE FOREIGN EXCHANGE. IN CASE WHERE SUCH EXPENSES ARE S EPARATELY CHARGED, THE EXPENSES ARE REQUIRED TO BE REDUCED FROM THE CO NSIDERATION RECEIVED FOR THE PURPOSE OF ARRIVING AT THE EXPORT TURNOVER. THE LOGIC AND REASON BEHIND THIS HAVE BEEN EXPLAINED BY THE CBDT VIDE IT S CIRCULAR NO. 564, DATED 5-7-1990, THAT THE DELIVERY OF THE GOODS SHOU LD BE FREE ON BOARD (FOB). THE GOODS EXPORTED AT FOB IS IMPORTANT IN TH E SENSE THAT ITA NO. 4329/MUM/2008 M/S. TRINITY COMPUTER PROCESSING (I) P. LTD. 6 DEDUCTION UNDER SECTION 10A IS PERMISSIBLE ONLY IN RESPECT OF CONSIDERATION RECEIVED AGAINST GOODS AND NOT FOR TH E CONSIDERATION RECEIVED AGAINST FREIGHT, ETC. ALL THE ASSESSEES SH OULD GET DEDUCTION UNDER SECTION 10A ON CONSIDERATION RECEIVED AGAINST SUPPLY OF GOODS AT FOB. THEREFORE, THE CONDITION OF DELIVERY OF GOODS AT FOB HAS BEEN PUT AND THE DEFINITION OF EXPORT TURNOVER AS PROVIDED IN CLAUSE (IV) OF THE EXPLANATION 2 TO SECTION 10A IS REQUIRED TO BE INTE RPRETED ACCORDINGLY. IN THE INSTANT CASE, THE ASSESSING OFFICER HAD DEDU CTED THE ISP EXPENSES FROM FOREIGN EXCHANGE CONSIDERATION TREATING IT AS COMMUNICATION CHARGES. THE SAID EXPENDITURE ON INTERNET SERVICE PROVIDER (ISP) DOES NOT COME WITHIN THE SCOPE OF TELECOMMUNICATION CHAR GES AS PROVIDED IN CLAUSE (IV) OF EXPLANATION 2 TO SECTION 10A, BECAUS E ISP IS FOR TRANSMITTING THE DATA, I.E., SOFTWARE DEVELOPED BY THE ASSESSEE. THE ISP EXPENSES INCURRED WERE IN RESPECT OF DEVELOPMENT OF SOFTWARE, I.E., GOODS. THE ISP EXPENSES WERE NOT ATTRIBUTABLE TO TH E DELIVERY OF COMPUTER SOFTWARE, OUTSIDE INDIA AND, THEREFORE, SU CH EXPENSES NEED NOT BE EXCLUDED FROM CONSIDERATION IN FOREIGN EXCHANGE. HOWEVER, IF FOR THE SAKE OF ARGUMENTS IT WAS PRESUMED THAT THE EXPENDIT URE INCURRED WAS ATTRIBUTABLE TO DELIVERY OF GOODS OUTSIDE INDIA EVE N THOUGH SAME WAS NOT TO BE EXCLUDED. THE WORDS RECEIVED AND BUT NOT I NCLUDE USED IN CLAUSE (IV) OF EXPLANATION 2 TO SECTION 10A ARE SIGNIFICAN T. WHAT IS TO BE EXCLUDED IS OUT OF WHAT IS RECEIVED. IN THE INSTANT CASE, THE ASSESSEE RECEIVED CONSIDERATION AGAINST SOFTWARE, I.E., GOOD S. FOR THIS PURPOSE, THE ASSESSEE HAD DEMONSTRATED BY REFERRING TO INVOICES AND AGREEMENT. THE AGREEMENT, INVOICES AND THE TURNOVER CLEARLY SHOWED THAT THE ASSESSEE DID NOT RECOVER ANY SUCH EXPENDITURE. THEREFORE, TH ERE WAS NO SCOPE FOR ANY EXCLUSION FROM THE EXPORT TURNOVER ON ACCOUNT O F SUCH EXPENSES. IF AT ALL ON PRESUMPTION, IT WAS TO BE EXCLUDED FOR THE P URPOSE OF EXPORT TURNOVER, THEN ON THE SAME ASSUMPTION, REASON AND ANALOGY IT SHOULD BE EXCLUDED FROM TOTAL TURNOVER. THEREFORE, THE A SSESSING OFFICER WAS NOT CORRECT IN EXCLUDING ISP EXPENSES FROM CONSIDER ATION RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE WHILE CALCULATING EXPO RT TURNOVER FOR THE PURPOSE OF SECTION 10A. 8. THE ISP EXPENSES CONSIDERED IN THE ABOVE SAID DECIS ION ARE SIMILAR TO THE SATELLITE LINK CHARGES PAID BY THE ASSESSEE. AS SEEN FROM THE BILLS PLACED ON RECORD BEFORE THE AUTHORITIES THE ASSESSEE HAS P AID SATELLITE LINK CHARGES TO VSNL, MTNL AND ALSO TO SOFTWARE TECHNOLOGY PARK INDIA (STPI) TOWARDS BI-MONTHLY HALF CIRCUIT CHARGES/INTERNATIONAL HALF CIRCUIT CHARGES AND RENT FOR TMI FRAME RELAY CCT CHARGES INCLUDING PORT CH ARGES. THE PORT CHARGES, HOWEVER, WERE CALCULATED ON THE BASIS OF USD PER ANNUM BASIS WHERE AS REST OF THE CHARGES WERE PAID ON ANNUAL LE ASE AGREEMENT PERIODICALLY AND THESE ARE FIXED CHARGES NOT CONNEC TED WITH THE DELIVERY ITA NO. 4329/MUM/2008 M/S. TRINITY COMPUTER PROCESSING (I) P. LTD. 7 ATTRIBUTABLE TO THE EXPORT OF GOODS. EVEN THOUGH TH E ASSESSEE HAS UTILISED THE SATELLITE LINK FOR RECEIVING DATA AND ALSO FOR TRANSFERRING DATA THIS CANNOT BE CONSIDERED AS TELECOMMUNICATION CHARGES FOR DELI VERY OF GOODS ON FOB BASIS. NOT ONLY THAT WHAT THE ASSESSEE WAS GETTING WAS A FIXED SERVICE CHARGE FOR PROCESSING DATA FROM THE FOREIGN COMPANY, TRIN ITY PROCESSING SERVICES LTD. ON A MONTHLY BASIS IN TERMS OF THE AGREEMENT D ATED 16 TH OCTOBER 2001. THERE ARE NO SEPARATE CHARGES RECOVERED FROM THE FO REIGN COMPANY TOWARDS TELECOMMUNICATION CHARGES WHICH CAN BE CONSIDERED A S AMOUNT RECOVERED IN FOREIGN EXCHANGE FROM THE FOREIGN PARTY. SINCE NO S UCH AMOUNT IS RECOVERED OR INCLUDED IN THE TURNOVER, QUESTION OF EXCLUSION FROM THE EXPORT TURNOVER ALSO DOES NOT ARISE ON THE FACTS OF THE CASE. 9. ASSESSEE HAS MADE AN ALTERNATE CONTENTION THAT THE SATELLITE LINK CHARGES, IN CASE THEY ARE CONSIDERED AS TELECOMMUNI CATION CHARGES THIS SHOULD ALSO BE EXCLUDED FROM THE TOTAL TURNOVER AS CONSIDERED BY THE SPECIAL BENCH IN THE CASE OF ITO VS. SAK SOFT LTD. 313 ITR 353 (AT)(SB) WHEREIN IT WAS HELD THAT PARITY TO BE MAINTAINED WITH EXPORT T URNOVER TO THAT OF TOTAL TURNOVER AND WHERE EXPENSES ON TELECOMMUNICATION CH ARGES OR INSURANCE ATTRIBUTABLE TO DELIVERY OF ARTICLES OR THINGS OR C OMPUTER SOFTWARE OUTSIDE INDIA OR EXPENSES INCURRED IN FOREIGN EXCHANGE IN P ROVIDING TECHNICAL SERVICES OUTSIDE INDIA REQUIRED TO BE EXCLUDED FROM EXPORT TURNOVER, THEY ARE ALSO TO BE EXCLUDED FROM TOTAL TURNOVER. SINCE WE H AVE CONSIDERED THAT THE SATELLITE LINK CHARGES CANNOT BE CONSIDERED AS TELE COMMUNICATION CHARGES TO BE EXCLUDED AS PER THE DEFINITION OF EXPORT TURNOVE R THERE IS NO NEED TO CONSIDER THE ALTERNATE CONTENTION. ACCORDINGLY, THI S ALTERNATE GROUND RAISED IS NOT CONSIDERED AS IT BECOMES ACADEMIC IN NATURE. 10. AFTER CONSIDERING THE FACTS OF THE CASE AND THE PRI NCIPLES ESTABLISHED BY THE COORDINATE BENCH IN THE CASE OF PATNI TELECO MMUNICATION (P) LTD. VS. ITO 22 SOT 26 (HYD), IT IS HELD THAT THE EXPENSES O N SATELLITE LINK CHARGES DOES NOT COME WITHIN THE SCOPE OF TELECOMMUNICATIO N CHARGES AS PROVIDED IN CLAUSE (IV) OF EXPLANATION 2 TO SECTION 10A AND ACCORDINGLY, THE A.O. IS DIRECTED NOT TO EXCLUDE THE SAME FROM EXPORT TURNOV ER. A.O. IS DIRECTED TO ITA NO. 4329/MUM/2008 M/S. TRINITY COMPUTER PROCESSING (I) P. LTD. 8 RECALCULATE THE DEDUCTION UNDER SECTION 10A. ASSESS EES GROUNDS ARE CONSIDERED ALLOWED. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER 2010. SD/- SD/- (D.K. AGARWAL) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 30 TH SEPTEMBER 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXX, MUMBAI 4. THE CIT II, MUMBAI CITY 5. THE DR, J BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.