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Income Tax Appellate Tribunal, DELHI BENCH: ‘D’ NEW DELHI
Before: SHRI H.S. SIDHU & SHRI O.P. KANT, ACCOUTANT MEMBER
Assessee challenging the order dated 28/03/2012 by the Commissioner of Income Tax (Appeals)-XXI, New Delhi relating to assessment year 2007-08. Since the issued involved in these appeals are connected, hence, the appeals were heard together and are being disposed of by this common order for the sake of convenience.
The Revenue has raised the following grounds:-
1. "On the facts and circumstances of the case and in law the learned CIT(A) erred in holding that the assessee company was entitled to exemption u/s 10A of the Income Tax Act."
2. "On the facts and circumstances of the case and in law the learned CIT (A) erred in not appreciating the fact that the assessee company had not produced or manufactured computer software, which is sane qua non for invoking provisions of section 10A in its favour."
3. "On the facts and circumstances of the case and in law the learned CIT(A) erred in deleting the addition of Rs. 23,11,986/- made out of sales promotion etc. without going into the merits of the disallowance and holding that since the assessee is eligible for exemption u/s 10A, this addition is irrelevant."
4. "On the facts and circumstances of the case and in law the learned CIT (A) erred in deleting the disallowance of Rs.6,48,095/- out of Misc. advance written off without going into the merits of the disallowance and holding that since the assessee is eligible for exemption u/s 10A, this addition is irrelevant."
5. "On the facts and circumstances of the case and in law the learned CIT (A) erred in deleting the addition of Rs.85,99,734/- made u/s 40(a)(ia) for having not deducted tax at source without going into the merits of the disallowance and holding that since the assessee is eligible for exemption u/s 1OA, this addition is irrelevant."
6. On the facts and circumstances of the case and in law the learned CIT(A) erred in deleting the addition of Rs.26,89,545/- on account of excess depreciation without going into the merits of the disallowance and holding that since the assessee is eligible for exemption u/s 10A, this addition is irrelevant."
The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of appeal.”
The Assessee has raised the following grounds:-
The following grounds of appeal are independent of, and without prejudice to, one another:
1. On the facts, and in the circumstances of the case, and in law, the Ld. CIT(A) has grossly erred in confirming the action of the AO by disallowing the sales promotion, client petty expenses and client meeting expenses of Rs. 3,78,433/-, Rs. 9,56,100/- and Rs. 9,78,453/- respectively.
2. On the facts, and in the circumstances of the case, and in law, the CIT(A) grossly erred in confirming the action of the AO by disallowing the miscellaneous advances written off and sundry balances written off of Rs. 2,85,939/- and Rs. 3,62,156/- respectively.
3. On the facts, and in the circumstances of the case, and in law, the CIT(A) grossly erred in confirming the action of the AO by disallowing the Rs. 85,99,734/- under Section 40(a)(ia) of the Act.
4. On the facts, and in the circumstances of the case, and in law, the CIT(A) grossly erred in confirming the action of the AO by not allowing depreciation @60% applicable to “computers and computer software” on input / output devices attached to computer like printer, UPS etc. reslutling in disallowance of INR 26,89,545/-.
The appellant craves lave to add, alter, amend and / or withdraw the grounds of appeal on or before the date of hearing.
The brief facts of the case are the assessee filed its e-return of income declaring income of Rs. 2,25,864/- in respect of AY 2007-08 on 30.10.2007. The case of the assessee was processed u/s. 143(1) of the I.T. Act, 1961. Consequent to selection of the case for scrutiny, statutory notice under section 143(2) of the Act dated 15.9.2008 was issued and served on the assessee. Relevant details, documents and explanations were called for vide notice u/s. 142(1) dated 25.6.2009, vide questionnaire dated 30.10.2009, vide notice u/s. 142(1) of the Act dated 18.11.2010 and during hearings. In response to the notices, the A.R. of the assessee attended the proceedings from time to time and filed the requisite details, documents and explanation. In the assessment order the Assessing Officer observed that the name of the assessee is M/s Trinity Business Process Management Pvt. Ltd. was held by M/s Trinity Partners Inc., USA, the shares of M/s WNS Mortgage Services Pvt. Ltd. are held by M/s WNS (Holdings) Ltd. as is mentioned in the tax audit report in Form 3CD. He further observed that the assessee has not been able to prove satisfactorily that there was actual manufacture of software or export thereof, since the alleged transactions are entirely with its parent company and it is not known as to exactly what is the nature of services the foreign inward remittances had been received from the parent company. According to him even if the benefit of doubt is given and it is considered that the part of the foreign inward remittances that have been received is in connection with export of manufactured material/software, deduction u/s 10A of the Act will not be allowable since as per the provisions of that section 100% of the articles, things, software should have been manufactured.
Accordingly, the AO has assessed the income of the assessee at an income INR 16,20,64,310 vide his assessment order dated 27.12.2010 passed u/s. 143(3) of the Act as against income of INR 2,25,864/- as returned by the assessee in its return of income (after claiming deduction of INR 14,64,62,392/- under section 10A of the Income Tax Act, 1961).
Aggrieved with the assessment order, the assessee carried the matter in appeal before the Ld. CIT(A) and the Ld. CIT(A) having considered the Notification No. SO 890(E), dated 26.09.2000 issued by the Central Board of Direct Taxes, and also the other circumstantial material available on record held that the case of the assessee squarely falls u/s. 10A of the Act in respect of the claim for deduction. Accordingly, Ld. CIT (A) deleted the addition of Rs. 16,07,11,752/- made by the AO and partly allowed the appeal of the assessee vide his order dated 28.3.2012.
6. Challenging this order of the Ld. CIT(A), the Revenue and Assessee are in cross appeals before us. Ld. DR relied upon the order of the AO and stated that Ld. CIT(A) has erred in allowing the deduction when it was not established that the assessee company had developed or manufactured and exported any software at all.
However, Ld. Counsel of the assessee stated that the issue in dispute is squarely covered by the ITAT, New Delhi decision dated 10.2.2017 in assessee’s own case passed in (AY 2006-07) in Revenue’s Appeal wherein the Tribunal has upheld the action of the Ld. CIT(A) in allowing the exemption u/s. 10A of the Act in the immediately preceding assessment year i.e. AY 2006-07.
We have heard both the parties and perused the records especially the impugned order as well the order of the Tribunal in assessee’s own case for the AY 2006-07, as aforesaid. We find that the Coordinate Bench, ITAT, New Delhi vide its decision dated 10.2.2017 in assessee’s own case passed in (AY 2006-07) in Revenue’s Appeal has decided the exactly similar and identical issue and adjudicated the same vide para no. 5 to 9 at page no. 4 to 7 relating of exemption u/s. 10A in favour of the assessee and against the Revenue. For the sake of convenience, the finding of the Tribunal in the aforesaid decision are reproduced as under:-
“5. Point for determination is whether the order of the Ld. CIT(A) suffers any legal infirmity or a regularity warranting any interference.
A perusal of Section 10A Explanation 2(b) shows that computer software means any customized electronic data or any product or service of similar nature as may be notified by the Board.
Under this provision the Board has issued a notification referred to by the Ld. CIT (A) at page nos. 9 & 10 of his order which covers as many as 15 activities which are as follows: i. Back-office Operations; ii. Call Centres; iii. Content Development or Animation; iv. Data Processing; v. Engineering & Design; vi. Geographic Information System Services; vii. Human Resources Services; viii. Insurance Claim Processing; ix. Legal Databases; x. Medical Transcription; xi. Payroll; xii. Remote Maintenance; xiii. Revenue Accounting; xiv. Support Centres; and xv. Webs-site Services
7. In so far as the actual rendering of the service is concerned the Transfer Pricing Officer in his order dated 15/10/2009 in respect of the assessment year 2006-07 categorically recorded that the assessee has provided these services to the parent company. Further vide paragraph no. 5.8 the Ld. CIT (A) observed that the assessee drew his attention to the summary of invoices and copy of the SOFTEX forms submitted to the STPI Authorities along with a copy of invoices raised during FY 2005- 06 and these documents were also submitted during the course of assessment proceedings before the AO vide its submission dated December 29, 2009.
In the circumstances, we will find it difficult to hold that the assessee could not prove the actual development or export of the software.
Reliance is placed by the AR on a decision of a coordinate bench of this Tribunal in Kiran Kapoor vs. ITO 150 ITD 237 (Del.), wherein at page no. 8 paragraph no. 15 it was held that “in our considered opinion the meaning of phrase or word had to be seen in the framework of the context in which it has been used. Phrase “Manufacture or produce” will have a different contextual meaning when it is read in a statute let us say for e.g. the Excise law, since the parliamentary intention there will be to attract levy of tax, however, in the present case we are called upon to interpret this phrase as applicable to a statute grating benefit of an exemption/deduction from taxable total income. In the instant case the intention of legislature is to provide benefit of deduction to enterprises which are not simply engaged in manufacture or produce any article or thing, but even to those assesses whose end product is any customized electronics data.
Benefit of deduction u/s 10B of the Act, is also available on rendering of any of the services as notified by the Board like the item (ii) in the notification (supra) wherein even call centers, animation, etc. which are brought in the sweep of any product or services stated in clause (b) of item (i)
Explanation 2 to Section 10B”. It is pertinent to note that this decision of the Tribunal was upheld by the Hon’ble Jurisdictional High Court in CIT vs. Kiran Kapoor 372 ITR 321 (Del.).
9. In view of the above facts and law, we find that the material on record amply justifies the reasoning and conclusions reached by the Ld. CIT (A) and the findings of learned CIT(A) are unassailable and do not warrant any interference.
We, therefore, uphold the same.
In the result, the appeal of the Revenue is dismissed.”
8. After perusing the Tribunal’s finding in assessee’s own case for the assessment year 2006-07, as aforesaid, we are of the considered opinion, that the issue in dispute is squarely covered by the aforesaid decision of the ITAT in assessee’s own case, and therefore, respectfully following the precedent, as aforesaid, we find that Ld. CIT(A) has rightly allowed the exemption u/s. 10A of the Act and passed a well reasoned order on the issue in dispute, which does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) on the issue in dispute and accordingly dismiss the Revenue’s Appeal.
Since we have already dismissed the Revenue’s appeal as aforesaid by following the Tribunal’s order and upholding the action of the Ld. CIT(A), the Assessee’s Appeal No. 2716/Del/2012 (AY 2007-08) has become infructuous, hence, the same is dismissed as such.
10. In the result, both the Appeals filed by the Revenue as well as Assessee stand dismissed.