Private Ltd., Income Tax, LTU, Divyashree Greens, No.12/1, Bangalore. 12/2A & 13/1A, Challaghatta Village, Varthur Hobli, Bangalore 560 071. PAN: AABCD 1741M APPELLANT / RESPONDENT CROSS OBJECTOR IT(TP)A Nos.1838/Bang/2013 & 1026/Bang/2014 Assessment year : 200506 The Joint Commissioner of Vs. Dell International Services India Income Tax, LTU, Private Ltd., Bangalore. Bangalore 560 071. PAN: AABCD 1741M APPELLANT RESPONDENT Assessee by : Shri K.R. Vasudevan, Advocate & Shri Sharath Rao, CA Respondent by : Ms. Neera Malhotra, CIT(DR), ITAT, Bengaluru Date of hearing : 03.10.2017 Date of Pronouncement : 13.10.2017 IT(TP)A Nos. 85 & 1026/B/14, 1838/B/13 & CO No.21/B/16 Page 2 of 36 ORDER Per N.V. Vasudevan, Judicial Member ITA No.85/Bang/2014 is an appeal filed by the assessee, while ITA 1838/B/13 is an appeal filed by the revenue. Both these appeals are directed against the order dated 20.9.2013 of the CIT(Appeals), LTU, Bangalore relating to AY 200506. The assessee has also filed Cross Objection in CO No.21/Bang/2016 against the very same order of the CIT(Appeals). All these appeals arise out of the orders passed u/s. 143(3) of the Incometax Act, 1961 ["the Act"] for the AY 200506. 2. As far as ITA No.1026/Bang/2014 is concerned, this is an appeal by the revenue against the order dated 18.4.2014 of the CIT(Appeals), LTU, Bangalore relating to AY 200506. This appeal arises out of the order of assessment passed u/s. 147 r.w.s. 143(3) of the Act in relation to AY 200506. 3. We will first take up the appeal of the revenue in ITA No. 1838/Bang/2013 for consideration for the AY 200506 arising out of assessment proceedings u/s. 143(3) of the Act. 4. Ground No.1 by the revenue is general in nature and calls for no specific adjudication. IT(TP)A Nos. 85 & 1026/B/14, 1838/B/13 & CO No.21/B/16 Page 3 of 36 5. Ground No.2 raised by the revenue reads as follows: "2. The Ld CIT(A) erred in directing the AO to deduct telecommunication expenses from total turnover and export turnover while computing the eligible deduction u/s l0A, as this is against the provisions of section 10A." 6. The Assessee is in the business of rendering software development services. It has STPI (software technology Parks of India) in Bangalore and Hyderabad, which are eligible for deduction u/s.10A of the Income Tax Act, 1961 (Act). Ground No.2 raised by the Revenue project the grievance of the Revenue regarding the action of the CIT(A) in excluding expenses incurred on telecommunication from export turnover as well as total turnover. The Assessee had incurred a sum of Rs. 17,07,43,928 in respect of the Bangalore STPI Unit and Rs. 11,82,59,570 in respect of the Hyderabad STPI Unit towards telecommunication charges, which were incurred in connection with providing call centre services to various Dell entities overseas. The telecommunication charges were considered as part of 'export turnover' while computing the deduction under section 10A of the Act. The AO excluded the said telecommunication charges amounting to Rs. 28,90,03,498 from the 'export turnover' while computing the deduction under section 10A of the Act. The plea of the Assessee was that the definition of "export turnover" under the Act excludes only freight, telecommunication charges or insurance attributable to the delivery of the IT(TP)A Nos. 85 & 1026/B/14, 1838/B/13 & CO No.21/B/16 Page 4 of 36 articles or things or computer software outside India, from the export turnover. The Assessee a