Expenditure Incurred on Foreign Currency on Telecommunications Charges and Technical Services Outside India, not Excluded from Export Turnover: ITAT Allows Income Tax Deduction to Tech Mahindra [Read Order]

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) held that expenditure incurred on foreign currency on telecommunication charges and provision of technical services outside of India should not be excluded from export turnover for the purpose of computing under Section 10A of the Income Tax Act, 1961.

The assessee company M/s. Tech Mahindra Ltd filed a miscellaneous application on the issue of transfer pricing adjustment with respect of charging interest for an extended credit period to the associated enterprises of the assessee and on the issue relating to the claim of deduction under Section 10A of the Income Tax Act.

The counsel of the assessee submitted that for the purpose of computing the export turnover under Section 10A of the Income Tax Act, the assessing officer has incorrectly reduced the expenditure incurred in foreign currency on telecommunication charges amounting to Rs 3,63,59,691 and expenses incurred in foreign currency in providing technical services outside of India amounting to Rs 303,52,68,901.

Further, the assessee has specifically submitted that the foreign currency expenses were never recovered from the customer, therefore same were not formed part of the export turnover or total turnover.

The Departmental Representative vehemently submitted that the assessee has not recovered any foreign currency expenses from the customers and it was not included in the export turnover and total turnover of the assessee company.

The Bench comprising of Amit Shukla, Judicial Member and Amarjit Singh, Accountant Member observed that expenses incurred in foreign currency on telecommunication charges and providing technical services outside India should be excluded from total turnover for the purpose of computation of deduction under Section 10A of the Income Tax Act held that the impugned expenditure has to be excluded from the total turnover.

Further, the Tribunal allowed the appeal of the assessee that expenditure incurred on foreign currency on telecommunication charges and provision of technical services outside of India should not be excluded from export turnover for the purpose of computing under Section 10A of the Income Tax Act, since this expenditure were not included in the export turnover of the assessee.

Hence, the appeal of the assessee was allowed and the appeal of the revenue was dismissed.

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