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Income Tax Appellate Tribunal, DELHI BENCH: ‘D’ NEW DELHI
Before: SHRI H.S. SIDHU & SHRI O.P. KANT, ACCOUTANT MEMBER
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.
The Revenue has raised the following grounds:-
"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."
"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."
"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."
"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."
"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."
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:
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.
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.
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.
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.
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 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.
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 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.
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
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.).
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.”
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.
In the result, both the Appeals filed by the Revenue as well
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"