A soft ruling on software export turnover

Recently, the Income-tax Appellate Tribunal (ITAT), Bangalore, passed a favourable decision in the MphasiS Ltd case, granting relief to the assessee in respect of the deduction under Section 10B of the Income-Tax Act, 1961. According to the Tribunal, where the assessee is not involved in providing technical services, expenses incurred in foreign currency need not be excluded from the export turnover. Section 10A, 10B Most software companies claim deduction under Section 10A/10B of the Act, which postulates deduction in respect of the profits and gains derived from the export of computer software. The deduction would be in the proportion that the export turnover of the undertaking bears to the total turnover of the undertaking. ‘Export turnover’ is defined in Section 10A/10B. The definition provides that telecommunication, insurance and freight attributable to the delivery of software outside India would be required to be excluded from the export turnover. Further, expenses incurred in foreign exchange in providing technical services outside India should also be excluded.