Travel, Telecommunication Expenses & Ex-Pat Salary paid in Foreign Currency are Excludable from both Export & Total Turnover: ITAT [Read Order]

The division bench of the ITAT, Bangalore, in ACIT v. M/s Century Link Technology India Pvt. Ltd, has held that the payments made in foreign currency towards foreign travel, telecommunication expenses & ex-pat salary are excludable from both export & total turnover under the provisions of the Income Tax Act.

In the instant case, the Assessing Officer held that the payments made in foreign currency towards foreign travel, telecommunication expenses, ex-pat salary etc is can be excluded only from export turnover. He thereby restricted the income tax relief to the assessee by allowing deduction u/s 10A only.

On appeal, the first appellate authority directed the AO to reduce the expenses from both export and total turnover. Revenue preferred an appeal before the Tribunal against the appellate order.

It was contended on behalf of the Revenue that there is no provision in sec. 10A of the Act that mandates that such expenses should be reduced from the total turnover and that clause (iv) of the Explanation to Sec. 10A provides that such expenses are to be reduced only from export turnover.

Dismissing the departmental appeal, the bench observed that the expenditure incurred in foreign currency on foreign travel, telecommunication charges etc. are attributable to the delivery of software outside India and in rendering of technical services outside India.

The bench noticed that the decision of the jurisdictional High Court of Karnataka in the case of Tata Elxsi Ltd., Vs. ACIT, has held that when certain expenses are excluded from the export turnover for the purposes of claiming deduction admissible under the Act, like u/s. 10A of the Act, such expenses are also to be excluded from total turnover, as export turnover forms part of total turnover. It was further noticed that in the case of Tata Elxsi Ltd., the High Court has also been held that if any expenditure is sought to be reduced from export turnover, then it should also be reduced from total turnover for the purposes of computing the eligible deduction u/s 10A of the Act.

Read the full text of the Order below.

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