Case Law Details
ACIT Vs M/s Aftek Infosys Limited (ITAT Mumbai)- Whether when assessee provides software services, expenses incurred on development of software are revenue ?
Assessee’ s business is that of computer software services and products development. In order to supply software to its customers as per their requirements, the assessee has necessarily to incur certain expenses which go in making the product customised. When the sale proceeds are considered as revenue receipt, there is no reason for taking such expenses as not revenue because of the fact that there is no enduring benefit to the assessee by incurring such expenses.
As and when this amount is spent in developing software for a particular customer, the tools and materials become useless. In other words this expenditure is input cost for the development of software which is in the nature of stock in trade of the assessee. In our considered opinion the learned CIT(A) was right in holding that software development expenses of Rs. 16.60 crores were allowable as revenue expenses.
Whether for treating an amount of sale proceeds as part of “export turnover” it is sine qua non that the same must be brought into India within six month otherwise such an amount is to be excluded from the figure of ‘export turnover” though it is part of “total turnover” ?
It is fairly admitted by the learned A.R. that the amount in question was brought into India beyond a period of six months from the end of the previous year. He relied on the order passed by the Mumbai Bench of the Tribunal in M/s. Shangold India Ltd. Vs. ITO – ITA No. 6041/Mum/2002 dated 6th May, 2009 in which the Tribunal noted that for the assessment year 2004-2005 the Reserve Bank of India, being the competent authority as per sub-section (3), has extended the period. Though this order was passed in the context of section 10A, the learned A.R. contended that the same would be applicable for calculating relief u/s. 10B also. On a specific query, the learned A.R. could not place on record the full text of Circular of Reserve Bank of India on which he has placed reliance. The ld. AR candidly accepted that the matter be restored to the file of Assessing Officer with the direction to decide this aspect in the light of the RBI Circular as well as the mandate of sub-section (3) of section 10B in the light of the definition of export turnover in Explanation 2(iii) of section 10B. No serious objection was taken by the learned Departmental Representative. Under such circumstances, we, set aside the impugned order on this issue and direct the Assessing Officer to re-compute the relief u/s. 10B by initially not including the sum of Rs.8.1 1 crores in the export turnover, which was realised beyond the period of six months from the close of the previous year. If however as per RBI Circular there is some scope for the extension of the above said period of six months and the assessee has realized the sale proceeds in foreign exchange within such extended period, then the resultant amount should be included in the amount of `export turnover’ . However the figure of total turnover, in any case, shall continue to include the amount of Rs.81 1 crores as discussed above.
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