INCOME TAX ACT, 1961

Section 10B & Section 10AA

Deductions under section 10B and section 10AA - Treatment of - Expenditure incurred in foreign currency for providing software development services outside India and telecommunication charges attributable to delivery of computer software outside India -

Assessee-company was engaged in development of computer software, which was exported outside India. AO excluded expenditure incurred in foreign currency and telecommunication charges from export turnover under section 10B and section 10AA. Assessee contended that foreign currency expenditure incurred for providing software development services outside India could not be excluded from export turnover of software development. Held: In view of Explanation 2(iii) to section 10B, the expression 'export turnover' does not include any expenses incurred in foreign exchange in providing technical services outside India. Further, Explanation 2 to section 10AA provides that profits and gains derived from on site development of computer software (including services for development of software) outside India shall be deemed to be the profits and gains derived from the export of computer software outside India. Therefore, the expenditure incurred in foreign currency for providing software development services outside India could not be excluded from export turnover of software development. Similarly, the telecommunication charges attributable to delivery of computer software outside India could not be excluded from the export turnover of software development.

REFERRED : CIT & Anr. v. MPHASIS Ltd. (Formerly Known As Mphasis Bfl Ltd.) SLP (C) No.766/2015 : 2020 TaxPub(DT) 0458 (SC) CIT v. Tata Elxsi Ltd [I.T.A. No. 386, 387 & 388/2015 Decided On 15-2-2016] : 2016 TaxPub(DT) 1680 (Karn-HC) CIT v. MPHASIS Ltd. (2016) 74 TAXMANN.COM 274 (Karnataka) : 2019 TaxPub(DT) 0939 (Karn-HC)

FAVOUR : In assessee's favour

A.Y. :

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