Is expenditure incurred on foreign currency to be reduced for the purpose of computation of deduction u/s 10 of the IT Act?

This case concerns whether expenditure incurred in foreign currency should be deducted from both export turnover and total turnover when calculating deductions under Section 10 of the Income Tax Act. The assessee argued that the law specifically allows exclusion from export turnover but not necessarily total turnover. The tribunal reviewed the Dispute Resolution Panel's directions regarding this matter.

IN THE INCOME TAX APPELLATE TRIBUNAL
‘A’ BENCH : BANGALORE

BEFORE SHRI. CHANDRA POOJARI, ACCOUNTANT MEMBER
AND
SMT. BEENA PILLAI, JUDICIAL MEMBER

IT(TP)A No.94/Bang/2016
Assessment Year : 2011-12

Radisys India Pvt. Ltd.,
6th Floor, Electra Wing B
Exora Business Park,
Behind Prestige Tech Park,
Marathahalli –
Sarjapura Outer Ring Road,
Bengaluru-560 103.
PAN – AACCC 3169 M
APPELLANT 

Vs.

The Dy. Commissioner of
Income-Tax,
Circle-5(1)(1),
Bengaluru.
RESPONDENT

IT(TP)A No.367/Bang/2016
Assessment Year : 2011-12

The Dy. Commissioner of
Income-Tax,
Circle-5(1)(1),
Bengaluru.
PAN – AACCC 3169 M
APPELLANT 

 Vs.

Radisys India Pvt. Ltd.,
6th Floor, Electra Wing B
Exora Business Park,
Behind Prestige Tech Park,
Marathahalli –
Sarjapura Outer Ring Road,
Bengaluru-560 103.
RESPONDENT

Assessee by : Shri Mahaveer C Jain, C.A
Revenue by : Ms. Neera Malhotra, CIT (DR)

Date of Hearing : 08-03-2021
Date of Pronouncement : 14-06-2021

ORDER

PER BEENA PILLAI, JUDICIAL MEMBER

 Present cross appeals has been filed by assessee against final assessment order dated 13/11/2015 passed by Ld.DCIT Circle 5(1)(1), Bangalore under section 143(3) read with 144C(3) of the Act on following grounds of appeal:

IT(TP)A No.367/Bang/2016

1. The direction of the Dispute Resolution Panel are opposed to the law and not on the facts and circumstances of the case.

2. On the facts and circumstances of the case, the Ld.DRP erred in directing the Assessing officer to reduce the expenditure incurred in foreign currency, both from the Export Turnover as well as total Turnover for the purpose of computation of deduction u/s 10 of the IT act without appreciating the fact that the statute allows exclusion of such expenditure only from ETO by way of specific definition of export turnover as envisaged by sub-clause(4) of explanation 2 below sub section 8 of section 10A. On the other hand , there is no specific provision in section 10A warranting exclusion of above expenses from total turnover also.

3. Whether the DRP is correct in excluding E-Infochips Limited while the comparable is qualifying the service income to turnover filter of 75% and the company is functionally a software development company.

4. Whether the DRP is correct in excluding ICRA Techno Analytics Limited while the comparable is qualifying all the qualitative and quantitative filters applied by the TPO.

5. Whether the DRP is correct in excluding Infosys Technologies Limited while the comparable is qualifying all the qualitative and quantitative filters applied by the TPO.

6. For these and other grounds that may be urged upon, direction of the Dispute Resolution Panel may be reversed and that assessment order be restored.

7. The appellant craves leave to add, alter, amend or delete any other grounds on or before hearing of the appeal.” 

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