In Qvantel Software Solutions, Hyderabad v. ITO, the ITAT Hyderabad held that the internet charges are eligible to be excluded both from the export turnover as well as from the total turnover while computing deduction under section 10A of the Income Tax Act.
The assessee company is engaged in the business of software development service. The AO, while completing assessment against the assessee disallowed the amount incurred towards internet charges from the export turnover of the assessee. The assessee maintained that they had incurred the internet charges for the day to day operations and performing the exports of software services. To them, internet charges are the integral part of the business of assessee company.
Allowing the appeal, the bench noted that “The Hon’ble Courts and the coordinate benches of ITAT have consistently held that the internet charges have to be excluded both from the export turnover as well as from the total turnover while computing deduction under section 10A of the Income Tax Act. The Hon’ble Bombay High Court in case of CIT vs. Gem Plus Jewellery (330 ITR 175) as well as different Benches of Tribunal including ITAT, Chennai Bench (SB) in the case of ITO vs. Sak Soft (313 ITR (AT) 853) have held that communication charges attributable directly to the export of article or thing outside India has to be excluded both from export turnover as well as total turnover while computing exemption under section 10A of the Income Tax Act.”