FOX AUTOMATION ,MUMBAI vs. ITO 22 (1)(3), MUMBAI

O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. The grievance of the assessee in all the aforesaid appeals for Assessment Years (AY) 2011-12 to 2014-15 is common. In fact, the

1. 1. The Commissioner (Appeals) has went beyond the scope of law by disallowing the exemption u/s 80-IC on illogical considerations notwithstanding accepting in Para 4.1.8 of appeal order that conditions prescribed u/s 80-IC are fulfilled.

2. The Commissioner (Appeals) erred in concluding that there are inconsistencies in names of employees submitted during Assessment proceedings, Appeal proceedings and in reply to remand report.

3. The Commissioner (Appeals) failed to understand that software development is a specialized work and one cannot judge the manpower days, infrastructure required for software development by applying any yardstick.

4. The Commissioner (Appeals) has erred in concluding that the said business receipts are not arising from Baddi because of the following additional reasons: a) The appellant firm has no bank account in Baddi district of Himachal Pradesh. b) The appellant firm has not hired any employees directly in Baddi.

5. The Commissioner (Appeals) has erred in concluding that there is no nexus between the income earned at Baddi and business activity undertaken at Baddi.

6. The Commissioner (Appeals) has erred in concluding that business activity at Baddi was not genuine by questioning the business decision of the appellant of closing down the Baddi unit to avoid litigation and going beyond the scope of law.

7. The Commissioner (Appeals) has erred in not granting exemption u/s 80IC even though the appellant has not violated any of the conditions as prescribed u/s 80IC.

As evident, the assessee is aggrieved by denial of deduction u/s 80-IC with respect to Baddi unit at Himachal Pardesh. 2. The Ld. AR, drawing attention to various documents as placed in the paper-book, assailed the conclusions drawn by lower authorities. The Ld. DR, on the other hand, submitted that the impugned order is a reasoned order and the same should be upheld.

3 M/s Fox Automation Assessment Years: 2011-12 to 2014-15 3. We have carefully heard the rival submissions and perused relevant material on record including documents placed in the paper-book. Our adjudication to the subject matter of appeal would be as given in succeeding paragraphs. Assessment Proceedings 4.1 The material facts are that the assessee being resident partnership firm is stated to be engaged in the business of software development & export. The assessee firm is part of Fox group which is engaged in providing complete automation solutions. The assessee carries out development of software whereas the other concerns are engaged in manufacturing & trading activities. The software developed by the assessee is loaded into CPUs being manufactured by the other group concern i.e., Fox Solutions who also has plant at Baddi. The finished goods are exported from that unit at Baddi. The partners of the assessee firm have stated to have developed a software prototype which requires further customization to bring it in saleable condition. For the same, the assessee has engaged software professionals at Baddi Unit. 4.2 An assessment was framed for AY 2011-12 u/s 143(3) on 14/03/2014. During assessment proceedings, it transpired that the assessee firm was registered as a STPI unit in Nerul, Thane in 2000. During AY 2011-12, the assessee had two units i.e., one in Mumbai and another one at Baddi, Himachal Pardesh. In its return of income, it claimed deduction of Rs.597.15 Lacs u/s 80-IC with respect to Baddi unit. This was the first year of operation of business at Baddi.

4 M/s Fox Automation Assessment Years: 2011-12 to 2014-15 4.3 During the course of assessment proceedings, to confirm the genuineness of the claim, statement of one of the partners i.e., Shri Sashank Shamlal Betharia was recorded u/s 131, which is reproduced at para-5 of the assessment order. In reply to question no.10, it was submitted that 80% of business was carried out at Baddi whereas 20% business was carried out from Thane. The unit was stated to be situated in a rented building having 1000 square feet of area at single floor. To execute the projects, technical people were outsourced. The other sister concern i.e., M/s Fox Controls Private Limited was stated to be engaged in trading of PLC, Drives and providing various related services etc in India. The other concern namely Fox Engineering Pvt. Ltd. was stated to be engaged in manufacturing / assembly of control panels. It was stated that the projects were undertaken on turnkey basis in the group concern namely Fox Solutions. The assessee as well as Fox Solution had certain common clients. The assessee carried out on- site development / installation of software etc. at various airports. For the same, contractual employees were stated to be hired for commissioning the projects. In reply to question no.24, it was submitted that the technical manpower was hired from sister concern namely M/s Fox Controls Private Ltd. & M/s Fox Solution. 4.4 On the basis of the statement, Ld. AO alleged that the activities of software development were carried out at Thane or Nashik but not at Baddi location for which deduction u/s 80-IC was claimed. Upon perusal of invoices, it was alleged that the assessee was mainly engaged in installation and commissioning of software whereas deduction was available for software development. Upon 5 M/s Fox Automation Assessment Years: 2011-12 to 2014-15 perusal of sale invoices, it was also observed that the group had common format of sales invoices, quotation invoice and letter head etc. The assessed was having bank account only at Thane and Andheri. The employees employed by the assessee were residing only at Nashik. No evidence could be furnished by the assessee regarding working of these employees at Baddi Location. 4.5 Notice was issued u/s 133(6) to Fox Solutions calling for details of personnel who rendered services on their behalf to the assessee. The reply was duly responded to by that entity and the transactions were confirmed. However, the same could not convince Ld. AO who alleged that there was overlapping of the business. 4.6 Finally, it was held that there was no value addition arising from Baddi Unit. The business receipts did not arise from Baddi location and there was no sufficient nexus between the activity being carried out at Baddi unit and the business income arising in the hands of the assessee. Therefore, the deduction as claimed u/s 80-IC would not be available to the assessee. Accordingly, assessment was framed denying this deduction to the assessee.

6 M/s Fox Automation Assessment Years: 2011-12 to 2014-15 orders quantifying the amount of each activity were issued by the clients and therefore, whatever were the receipts of the assessee those would belong to assessee only. To carry out software development, software professionals were engaged on contractual basis and these professionals had actually worked at the Baddi unit which was evident from their confirmations as placed on record. Regarding nexus of receipts with business at Baddi, the assessee submitted confirmations from the clients that they had placed order on Baddi unit and they were communicating with people at Baddi. The same was also evidenced by rent agreement, service tax registration certificate and customer replies received by the assessee from time to time. The assessee also filed photograph of premises, travel tickets of the partner and declaration by technical professionals in support of the fact that work was actually carried out at Baddi unit. The assessee also submitted the copies of purchase orders. It was submitted that there was no contrary evidence on record and the deduction was denied merely on the basis of suspicion. 5.2 The additional evidences submitted by the assessee were subjected to remand proceedings wherein Ld. AO reiterated the stand that deduction was not available to the assessee. It was submitted that photographs would not conclusively prove that the assessee had operations in Baddi. The pictures do not provide concrete evidence of business operations and merely shows people sitting on a computer system which was inconclusive. The declaration could also not be accepted since they did not contain address, PAN or identification details etc. The affidavits submitted

7 M/s Fox Automation Assessment Years: 2011-12 to 2014-15 by the assessee were not supported by any corroborative evidences. Therefore, the additional evidences fail to refute the conclusions drawn in the assessment order. 5.3 The assessee assailed the same, inter-alia, by submitting that software business would require trained software professional which were engaged on contractual basis. The confirmation from the software professionals was placed on record. The confirmation from clients supporting the fact that they placed orders on Baddi Unit was also placed on record. Accordingly, the assessee assailed the action of Ld. AO in denying the deduction. 5.4 The assessee further submitted that the software developed by the unit was loaded on a CPU which was supplied by another concern. The CPU became part of control panel which was finally used by the ultimate customer for plant automation. The control panel as a whole including the software installed therein was tested by the ultimate customer at Baddi Unit. The said control panel was exported from Baddi. The sales register of the assessee with corresponding sales register of sister concern i.e., Fox Solutions would establish this link. The copies of export invoices etc. were produced in support of the claim. The particulars of software professionals and their visit to Baddi unit was also tabulated in para-5 of the submissions. The copies of purchase orders for hiring the professional from sister concern was also furnished. The total amount paid to independent consultants was stated to be Rs.22.91 Lacs whereas the amount paid to sister concern to hire the manpower was stated to be Rs.50.10 Lacs.

8 M/s Fox Automation Assessment Years: 2011-12 to 2014-15 5.5 The Ld. CIT(A), after going through remand report as well as assessee’s submissions, confirmed the action of Ld. AO by observing as under: - 4.1.7 I have carefully gone through the assessment order passed by the Assessing Officer and the written submissions of the appellant on the issue. I have also considered various case laws relied upon by the appellant. Before proceeding further, it is imperative that the requirements of section 80IC of the Income tax Act, 1961 are re-visited. The same states that; 80-IC. (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (2), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains, as specified in sub-section (3). (2) This section applies to any undertaking or enterprise,— (a) which has begun or begins to manufacture or produce any article or thing, not being any article or thing specified in the Thirteenth Schedule, or which manufactures or produces any article or thing, not being any article or thing specified in the Thirteenth Schedule and undertakes substantial expansion during the period beginning— (i) on the 23rd day of December, 2002 and ending before the 1st day of April, [2007], in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or Theme Park, as notified by the Board in accordance with the scheme framed and notified^ by the Central Government in this regard, in the State of Sikkim; or (ii) on the 7th day of January, 2003 and ending before the 1st day of April, 2012, in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or Theme Park, as notified by the Board in accordance with the scheme framed and notified^ by the Central Government in this regard, in the State of Himachal Pradesh or the State of Uttaranchal; or (iii) on the 24th day of December, 1997 and ending before the 1st day of April, 2007, in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or Theme Park, as notified^ by the Board in accordance with the scheme framed and notified by the Central Government in this regard, in any of the North-Eastern States; (b) which has begun or begins to manufacture or produce any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule, or which manufactures or produces any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule and undertakes substantial expansion during the period beginning— (i) on the 23rd day of December, 2002 and ending before the 1st day of April, ^[2007], in the State of Sikkim; or 9 M/s Fox Automation Assessment Years: 2011-12 to 2014-15 (ii) on the 7th day of January, 2003 and ending before the 1st day of April, 2012, in the State of Himachal Pradesh or the State of Uttaranchal; or (iii) on the 24th day of December, 1997 and ending before the 1st day of April, 2007, in any of the North-Eastern States. (3) The deduction referred to in sub-section (1) shall be— (i) in the case of any undertaking or enterprise referred to in sub-clauses (i) and (Hi) of clause (a) or sub-clauses (i) and (Hi) of clause (b), of sub-section (2), one hundred per cent of such profits and gains for ten assessment years commencing with the initial assessment year; (ii) in the case of any undertaking or enterprise referred to in sub-clause (ii) of clause (a) or sub-clause (ii) of clause (b), of sub-section (2), one hundred per cent of such profits and gains for five assessment years commencing with the initial assessment year and thereafter, twenty-five per cent (or thirty per cent where the assessee is a company) of the profits and gains. (4) This section applies to any undertaking or enterprise which fulfils all the following conditions, namely:— (i) it is not formed by splitting up, or the reconstruction, of a business already in existence: Provided that this condition shall not apply in respect of an undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose. 4.1.8 From the above requirements of the provision of section 80IC it is seen that Fox Automation is a Software Technology Park Industry Unit, situated in Baddi, Himachal Pradesh which commenced business operations between the requisite date of 07.01.2003 to 01.04.2012 and has derived profit from the aforesaid business. The appellant has submitted rental agreement, service tax certificate, customer replies and letter from Patwari in Baddi. To this extent it appears that the appellant fulfils the requirements demanded by section 80IC. But fulfillment of legal/basic requirements is not complete proof of operations being conducted at the Baddi unit. 4.1.9 I agree with the observations and findings of the AO in his assessment order as well as in the remand report submitted that mere fulfillment of some of the requirements of section 80IC do not in itself validate that income shown as earned by the Unit is indeed earned from the unit eligible for claiming deduction under the section. The most important aspect envisaged by the section is that income should have been genuinely earned by the aforesaid unit by setting up an undertaking in the areas/region/states such that not only profits are derived by the undertakings but more essentially there is employment generation, real estate development and progress in these backward regions. This is the underlying spirit of the section as envisaged by the lawmakers. 4.1.10 The AO has noted in para 10 of the assessment order that "... ...the claim is not that the business receipt is not there but, the facts show that these business receipts don't arise from the activities taking place at Baddi, Himachal Pradesh. Further, there is no sufficient nexus between the activity taking place at Baddi Himachal Pradesh and the business income arising in the hands of the assessee.......". The assessed income and other relevant figures of the Assessee for past three years is as follows:

10 M/s Fox Automation Assessment Years: 2011-12 to 2014-15 Table A A.Y. 2009 -2010 A.Y. 2010 - 2011 A.Y. 2011 - 2012 Mumbai Mumbai Mumbai Baddi Gross Receipts 2,65,82,622 2,39,67,889 26,30,905 6,79,77,197 Net Profit 2,03,92,222 1,70,99,748 23,56,547 5,97,15,814 NP Ratio 77% 71% 89% 88% Exemption u/s 2,03,33,680 u/s 10A 1,67,92,919 u/s 10A NIL 5,97,15,814 u/s 80 - 1C 10A or 80 -1C Taxable Income 1,48,430 34 23,00,617 NIL The above table and its contents were submitted by the appellant during the course of appellant proceedings. A mere glance indicates that almost 96% (6,79,77,197 out of 7,06,08,102) of the gross receipts have been shown to emanate from the Baddi Unit in the AY-2011-12 with barely 4% gross receipt generations from Mumbai Unit as compared to 100% gross receipts generation from Mumbai in the earlier years. During the course of assessment proceedings statement of Shri Shashank Shamlal Betharia, Partner revealed that the appellant had claimed exemption u/s. 10A from the year 2000 till 2009 and that in the relevant FY 2010-11 have claimed deduction u/s. 80IC from the business generated by the Baddi Unit. There is nothing wrong in making such a claim provided that what is genuinely earned is correctly apportioned to the exempt unit. The partner in his statement confirmed that 80% of business of the appellant was emanating from the Baddi Unit and 20% from the Thane Unit. However, the facts of the case indicate a situation which is logically and practically impossible to arrive at due to the following: i) Inconsistencies about employees/software professionals -working in Baddi. In his statement the partner Shri Shamlal Betharia stated that 4 to 5 employees were working in Baddi whereas the AO in his order at para 9 page 9 mentions nine employees allegedly working in Baddi but were found to reside full time at Nashik. The names of the employees working in the firm at Baddi provided by the assessee during the assessment proceedings are— S. No. Name 1 Aarti Kothule 2 Artee Chougule 3 Depali Zure 4 Kaveri Sonawane 5 Manoj Kale 6 Nasrin Khan 7 Pradyna Thite 8 Sonali Panse 11 M/s Fox Automation Assessment Years: 2011-12 to 2014-15 9 Vishal Bhavsar ii) Vide its first submission dtd. 16.02.2015 the appellant provided affidavits of the following persons/software professionals who worked at Baddi during the FY-2010- 11. - S.No Names 1 Dhannajay Patil 2 Deependra Parikh 3 Jitendra Kocher 4 Soumitra Bhattachayya 5 Rohan Tokekar 6 Gajanan Rokade 7 Vijay Ingle 8 Prashant Sonawane iv) vide its last submission in reply to the comments of the AO in the remand report submitted on 9th September, 2018 the particulars of software professionals working during the relevant period has been shown as under; Table C Name TERN0 TER Period Amount Gajanan Rokade FSL/101 1/BTER001 29/03/10 to 10/04/10 11712 Gajanan Rokade FSL/ 101 1/BTER039 14/12/10 to 01/01/11 14753 Gajanan Rokade FSL/101 1/BTER042 01/03/11 to 10/03/11 7127 Sunil Pawar FSL/1112/TER273 18/10/10 to 22/10/10 20696 Tukaram Darekar FSL/101 1/BTER009 29/05/l0 to 05/07/10 15298 Pavan Gosavi FSL/ 101 1/BTER017 07/09/l0 to 13/09/10 4881 Pankaj Bhavsar FSL/101 1/BTER020 01/10/10 to 13/10/10 6073 Sanjay Kumar Saha FSIV101 1/KTER171 0l/10/l0 to 09/10/10 7200 Tariklslam FSL/1011/TER529 21/10/10 to 05/12/10 2777 Sameer Pathan FSL/101 1/TER530 21/10/10 to 05/12/10 3414 Kanishka Bhattacharya FSL/1011/TER637 15/01/11 to 26/01/11 8075 Vinit Taware FSL/ 101 1/TER654 13/12/10 TO 27/01/11 4947 Raju Harp ale FSL/101 1/PTER029 08/11/10 to 06/12/10 2869 12 M/s Fox Automation Assessment Years: 2011-12 to 2014-15 Samrat Datta FSL/101 1/KTER146 06/09/10 TO 12/09/10 15700 Rohan Tokekar FSL/101 1/TER705 17/02/11 TO 27/02/11 5736 Mayur Mirase FSL/ 101 1/TER665 13/12/10 TO 27/01/11 1387 Pruthviraj Toge FSL/1011/TFJ1739 07/03/11 to 22/03/11 11902 Subhas Chandra FSL/101 1/KTER255 15/01/11 to 27/01/11 5213 Kiran Shelar FSL/ 101 1/TER780 13/12/10 to 27/01/11 1387 The above details submitted at various points of time indicate that there are only two names which find mentioned in the list i.e. Gajanan Rokade & Rohan Tokekar. It must be pointed out that Gajanan Rokade is also the authorize signatory for the appellant. Why list of different names have been submitted at different junctures is anybody's guess but it indicates that these names are an afterthought. Moreover the costs incurred as the TER (Tour Expense Report) indicate that a total of Rs 1,51,147 has been spent on the software professionals through the year in sharp contrast to their declaration that that Rs 7000/- per person per day has been spent. Software professionals working in Baddi in Himachal Pradesh Sr. No. Submitted during Submitted in appeal Submitted in appeal assessment proceedings proceedings vide first proceedings vide letter dtd. letter dtd. 27.02.2015 09.09.2018

Gajanan Rokade 1 Aarti Kothule Dhannajay Patil 2 Artee Chougule Deependra Parikh Sunil Powar 3 Depali Zure Jitendra Kocher Tukaram Darekar 4 Kaveri Sonawane Soumitra Bhattachayya Pavan Gosavi Rohan Tokekar 5 Manoj Kale Pankaj Bhavsar 6 Nasrin Khan Gajanan Rokade Sanjay kumar Saha 7 PradynaThite Vijay Ingle Tarik Islam 8 Sonali Panse Prashant Sonawane Sameer Pathan 9 Vishal Bhavsar Kanishka Bhattacharya 10 Vinit Taware 11 Raju Harpale 12 Samrat Datta Rohan Tokekar 13 14 Mayur Mirase 13 M/s Fox Automation Assessment Years: 2011-12 to 2014-15 15 PruthvirajToge 16 Subhas Chandra 17 Kiran Shelar • The above table depicts the inconsistencies in the submissions made by the appellant such that at each stage different software professionals were shown to be engaged and working at Baddi. Such details submitted cannot be accepted as true just for the very fact that each letter/submission contradicts the other. • The affidavits of software professionals submitted as additional evidence during appellate proceedings are vague and inconclusive as they merely state that the persons signing it worked in the Baddi unit during the AY-2010-11 but do not mention the exact time period. Some say they worked for two months, some five months and some do not mentions any specific time period. The affidavit of Rohan Tokekar and Gajanan Rokade do not specify that they are software professionals nor their qualification indicating that they were probably engaged in another capacity. • An analysis of the particulars of software professionals and their visits to Baddi submitted by the appellant in his final submission in October, 2018 as indicated in Table C above reveal that out of 17 alleged software professionals there were 5 persons who were paid between Rs.30 to Rs. 107 per day indicating that they were not full-fledged software professionals but were most likely data entry level operators. Table D Month Name of Software Professional Duration of Stay at Baddi April 2010 Gajanan Rokade 10 days May 2010 Tukaram Darekar 3 days June 2010 Tukaram Darekar 30 days July 2010 Tukaram Darekar 5 days August 2010 Nil Nil September 2010 Samrat Datta/ Pavan Gosavi 7 days October 2010 Sanjay Kumar Shah/Pankaj 26 days Bhavsar/Sunil pawar/ Tariq Islam/Sameer Pathan November 20 10 Tariq Islam/Sameer Pathan/Raju Harpale 30 days December 20 10 Tariq Islam/Sameer Pathan/Raju Harpale/ 25 days Gajanan Rokade/Vinit Taware/Mayur Mirase/Kiran Shelar January 20 11 Vinit Taware/Mayur Mirase/Kiran 27 days Shelar/Subhas Chandra/Kanishka Bhattacharya February 20 11 Rohan Tokekar 1 1 days 14 M/s Fox Automation Assessment Years: 2011-12 to 2014-15 March 2011 PruthvirajToge/Gajanan Rokade 22 days  The analysis reveal that for most of months of the year there was only one single person at the Baddi site and only October, November, December and January registered presence of five professionals or more.  The total tour expense report (TER) as reported in the table C is Rs.1,51,147/- and the total no. of work as per the table is 196 days.  It is nothing sort of a miracle to achieve the gross profit declared by the Baddi Unit of Rs.6,79,77,197/- with 17 software professionals who worked a total of 196 days combined as indicated in the table D above.  The submissions of the appellant stating that Rs.7,000/- Per day is given for hiring of manpower from sister concerns and payment to independent consultant of Rs.22,91,290/- & Rs.50,10,929/- is not reflected as per the table C submitted by the appellant.  The facts of the case and the statement of the partner reveal that for a company hugely and solely reliant on internet and software have only one Basic Dongle for internet access i.e. there is no LAN/Broadband provision.  The partner has also confirmed that the office premises in Baddi wherein such huge software development projects/contracts are being undertaken consists of only one room with one Air conditioner dedicated for the development of software. The photographs submitted of the Baddi premises reveal a single barren room with six tables and six computers with no indication of any work being undertaken.  The AO has recorded in his order that the website of Fox Group and Fox Automation bears no mention of the unit at Baddi. Yet in spite of this the appellant has claimed generation of new business and the development of software in Baddi. The observation of the AO that all Banks operated by the group and Fox Automation in particular were located at Thane, Mumbai is noteworthy as it indicates that most of the functions were still controlled and managed by the head office in Mumbai. The payments for all software development done were received in Mumbai and not in Baddi.  The most important requirement for claiming deduction u/s. 80IC is that the income which is being claimed as exempt should have originated from the aforesaid unit. The purposes of the section gets defeated if income earned from a nonexempt unit is allowed to be shown as the income of the exempt unit. In this case, it is apparent that the income earned from units in Mumbai were being diverted and shown as income from the Baddi unit when in reality no worthwhile software development work was being accomplished in Baddi.  The Intention of the appellant is paramount in determining whether the Baddi unit was set up only for diverting profit and claiming ineligible deduction u/s. 80IC or that it was set up as a serious, committed business venture in keeping with the requirements of the Law. During the appellate proceedings the AR informed that the Baddi unit has closed shop for the last 3-4 years and the reason for winding up was stated to be the litigations pending with the judicial authorities. The reasoning given for winding up is not acceptable and it reveals the true intention of the appellant was to divert profits and evade taxes because a genuine undertaking will not close operations only for the reasons that cases were in various stages of litigation.  For the reasons cited above after considering the facts of the case and the various of submissions of the appellant, I find no infirmity to interfere with the 15 M/s Fox Automation Assessment Years: 2011-12 to 2014-15 decision of the Assessing Officer and therefore uphold the assessment order disallowing an amount of Rs.5,97,15,814/- u/s. 80IC. Hence, the grounds of appeal nos. 1 to 4 is Dismissed. Aggrieved as aforesaid, the assessee is in further appeal before us. Our findings & Adjudication

6. Upon perusal of para 4.1.8 of the impugned order as extracted above, it is quite evident that the assessee is a Software Technology Park Industry unit situated in Baddi, Himachal Pardesh. It has commenced business operations during the prescribed period and derived profits from the eligible business. In support of the fact that work was actually carried out at that unit, the assessee has furnished rental agreement, service tax registrations, customer replies as received from time to time and letter from patwari in Baddi. Thus, apparently, the assessee fulfils all the prescribed conditions of claiming deduction u/s 80-IC. As per the rent agreement dated 20/02/2010, the assessee has agreed to take on rent first floor of a premise having approx. area of 850 square feets situated at Baddi. The said premises have been registered as per Service Tax Rules which is evident from Form ST-2 as placed on record.

7. The assessee is engaged in the business of software under information and communication technology industry. This software is related to PLC, Drives, SCADA and Automation IT. The other group concerns of the assessee carry out manufacturing activity and trading activity whereas the assessee has carried out software activity. The operations may be overlapping in nature since the client would require all the three services. However, separate 16 M/s Fox Automation Assessment Years: 2011-12 to 2014-15 purchase orders quantifying the amount of each activity were issued by the clients which has been booked as revenue in respective concerns. The software developed by the unit was loaded on a CPU which was supplied by another concern. The CPU became part of control panel which was finally used by the ultimate customer for plant automation. The control panel as a whole including the software installed therein was tested by the ultimate customer at Baddi Unit. The said control panel was exported from Baddi. The documentary evidences, in this regard, have already been submitted by the assessee during assessment proceedings as well as during appellate proceedings. The sales register of the assessee as well as corresponding sales register of Fox Solutions for establishing the link between the software developed and its further export was also furnished.

8. It is quite evident that the assessee furnished confirmation letters from various customers specifying that the orders were placed on Baddi Unit and they visited Baddi unit for inspection of the software developed by the assessee. The sample purchase orders, invoices raised by the assessee and the confirmations of various customers have also been placed before us on page nos. 31 to 86 of the paper-book. It is categorical confirmation by the customers that the orders for software development were placed on Baddi Unit and they also confirmed having visited Baddi unit for software Factory Acceptance Tests (FAT) purposes.

18 M/s Fox Automation Assessment Years: 2011-12 to 2014-15 5. Shri Sai Software RAJU RAUT FOX AUTOMATION Khasara No 437, Kashav Complex, Solutions Development NH-21 A, Pinjore Nalagarh 2,90,425 Road.Village Surajmajra Labana. Prg Dharampur.Tehsil Baddi.District Solan.Himachal Pradesh.

10. SSB Software SOUMITRA FOX AUTOMATION Khasara No 437, Kashav Complex, Consultancy Development BHATTACHARRYA NH-21 A, Pinjore Nalagarh Services Road.Village Surajmajra Labana. Prg Dharampur.Tehsil 4,81,595 Baddi.District Solan.Himachal Pradesh.

Thus, it could be seen that the assessee engaged the services of software professionals from sister concern as well as from outside agencies at different rates. The manpower is hired at Rs.7000/- per day including travelling from sister concerns. This rate is Rs.9500/- per day for outside agencies. The amount paid to independent professional was Rs.22.91 Lacs whereas amount paid for manpower hired from sister concern was Rs.50.10 Lacs. Thus, the manpower was sourced from various streams viz. independent consultants directly hired by the assessee himself and the manpower hired from sister concerns and outside agencies. This fact has not been fully appreciated by Ld. CIT(A) and hence, the observations that the assessee supplied different names at different point of time and there were inconsistencies in the information 19 M/s Fox Automation Assessment Years: 2011-12 to 2014-15 supplied by the assessee. However, upon perusal of above table, it becomes clear that these employees were contractual employees whereas the details submitted before Ld. AO was with respect to employees directly hired by the assessee. In the above table, the assessee has specified the nature of work done, details of manpower as well as work sheets showing utilization of the professionals to carry out the work of software development. The sample copies of timesheets have also been placed before us on page nos. 84 to 86 of the paper-book. Upon perusal of the same, it could be seen that elaborate timesheets have been maintained for time spent by software professionals on various projects. The invoices raised by various agencies for supply of manpower to the assessee has also been placed on page nos. 89 to 100 of the paper book. It could be seen that these agencies have supplied technical manpower to the assessee to carry out software development work at Baddi.

Order pronounced on 1st September, 2021.

Sd/- Sd/- (Amarjit Singh) (Manoj Kumar Aggarwal) न्याययक सदस्य / Judicial Member लेखा सदस्य / Accountant Member मुंबई Mumbai; यदनांक Dated : 01/09/2021 Sr.PS, Dhananjay आदेशकीप्रधिधलधपअग्रेधर्ि/Copy of the Order forwarded to : 1. अपीलाथी/ The Appellant 2. प्रत्यथी/ The Respondent 3. आयकरआयुक्त(अपील) / The CIT(A) आयकरआयुक्त/ CIT– concerned 4. यवभागीयप्रयतयनयध, आयकरअपीलीयअयधकरण, मुंबई/ DR, ITAT, Mumbai 5. गार्डफाईल / Guard File 6.