M/S. WNS MORTGAGE SERVICES PVT. LTD.,MUMBAI vs. ITO, NEW DELHI

PER H.S. SIDHU, JM

These are the Cross Appeals by the Revenue as well as

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.

law the learned CIT(A) erred in holding that the

assessee company was entitled to exemption u/s

10A of the Income Tax Act."

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."

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."

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."

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."

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 following grounds of appeal are independent of, and

without prejudice to, one another:

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.

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.

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.

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.

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).

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.

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 ITA No. 236/Del/2011

(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.

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 ITA No. 236/Del/2011

(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.

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

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.

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.).

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.

dismissed.”

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.

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.

as Assessee stand dismissed.

Order pronounced on 26.05.2017

Sd/- Sd/- (O.P. KANT) (H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER

Date: 26/05/2017

"SRBHATNAGAR"