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Income Tax Appellate Tribunal, BANGALORE BENCH ‘B’, BANGALORE
Before: SHRI A. K. GARODIA & SHRI VIJAY PAL RAO
This is revenue’s appeal directed against the order of the ld.
CIT(A)-I, Bangalore dated 30-05-2014 for the assessment year 2010-11.
In this appeal, the Revenue has raised the following grounds;
“l. The order of the CIT (A) is opposed to law and the facts and circumstances of the case.
2.' The CIT"(AY erred in following the decision of the ITAT in dtd.16-4-Z014 in the assessee's own case and directing to allow deduction u/s.10A without appreciating that in the relied upon order the ITAT did not specifically allow the deduction u/s.10A but set aside the order the of the CIT(A) for the A.Y.Z009-1O and remanded the issue to the AO for fresh consideration of the claim of the assessee for deduction u/s.1DA.
3. The CIT (A) erred in following the decision of the ITAT in dtd.16-4-Z014 and directing to allow deduction u/ s.10A without appreciating that the order of the ITA T has not been accepted and an appeal u/s.Z60A has been suggested against the said order. 4.The CIT (A) erred in holding that the assessee was engaged in the business of manufacture of computer software as envisaged in section 1OA/1OB without appreciating that being in the business of computer software only does not entitle an assessee to claim deduction which is specifically provided to those assessees who manufacture or produce any article or thing of computer software.
5.The CIT (A) erred in not appreciating the fact that the Clause (v) of sec.1OB states that the deduction shall not be admissible unless the assessee furnishes the prescribed form along with the return of income.
6. The CIT (A) erred in allowing the appeals of the assessee and directing the AO to allow deduction u/s.1OA even though it had originally made a claim of deduction u/s.10B without appreciating that the jurisdictional High Court in the case of BAEHAL software Ltd., which in its order dated 13-2011 in ITA 136 of 2010 has held that on the facts of the case though it was satisfied that the assessee was entitled to the benefits of deduction, it has to be denied the said benefit for non-compliance to the mandatory requirement of law.
7. The CIT(A) erred in allowing the appeals of the assessee and directing the AO to allow deduction u/s 10A even though he assessee had claimed deduction u/s 10B by filing form 56G rw rule 16E without appreciating that the assessee had not furnished form 56F rw rule 16D for claim of deduction u/s 10A along with the return, but filed it before the CIT(A) and that th4re is no provision under the Act to shift the deduction from section 10B o 10A on a being found to be not eligible for the other deduction and that the conditions for allowing deductions u/s 10B and 10A stand on different footing as held by the ITAT Hyderabad in the case of VNS MARKO Technologies Pvt.Ltd., Vs DCIT (ITA No.577/Hyd/2012) 8 For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT(A) in so far as it relates to the above grounds may be reversed and hat of the AO may be restored.
9.The appellant craves leave to add, alter, amend or delete any of the grounds that may be urged at the time of hearing of the appeal”.
The ld. DR of the revenue supported the assessment order. He submitted that in AY: 2009-10 in dated 16-04- 2014, the issue regarding the allowability of deduction u/s 10A was restored back to the file of the AO for a fresh consideration. He also submitted that in the impugned order, the ld. CIT(A) had also followed the same Tribunal order, but instead of restoring the matter to the file of the AO or deciding the matter after obtaining remand report, he has straight away allowed deduction to the assessee u/s 10A of the Act.
He also submitted that admittedly, the ld. CIT(A) had no power to restore the matter back to the file of the AO and therefore, he should have decided the issue himself after obtaining remand report from the AO in the light of the directions of the Tribunal in AY: 2009-10 or the Tribunal may restore the matter back to the file of the AO for a fresh decision in the line with the same directions as were given by the Tribunal in assessee’s own case for the AY: 2009-10. As against this, the ld. AR of the assessee supported the order of the ld. CIT(A). He also placed reliance on the judgment of Hon’ble Karnataka High Court rendered in the case of M/s Maxim India Integrated Circuit Design Pvt.Ltd., in of 2008 dated 26-07-2011,copy of which has been submitted.
We have considered rival submissions. We find that in the impugned order, ld. CIT(A) had re-produced para -17 to 22 of the Tribunal order in assessee’s own case for the assessment year 2009-10.
For the sake of ready reference, these paras of the Tribunal order are reproduced below:
“17. We have considered the rival submissions. A perusal of the order of assessment shows that the question whether the nature of services rendered by the assessee can be said to be ‘data processing and content development’ falling within the Notification issued u/s. 10A of the Act, has not been examined by the AO in the proper perspective. On the abstracting and indexing services, the AO has relied on the revenue recognition as explained in the Notes to Accounts of the assessee wherein there is a reference to sale of ‘printed e-journals subscriptions’. From the same, he has concluded that the assessee was in the business of e-trading. We fail to see as to how the revenue recognition by an Assessee with reference to sale of “Printed e-journals subscription” will have any bearing on the nature of services rendered by the Assessee. As we have already seen the Assessee was in the business of distribution of journals, CD ROM, data bases and electronic data. The assessee also set up a STP Unit for export of content development services. The assessee has an approval for setting up of STP Unit. The AO has clearly proceeded on a wrong basis in concluding that the “Abstracting & Indexing Services” were not in the nature of Data Processing or contend development. We are of the view that the expression “Data Processing” will have to receive a broad meaning, keeping in view the purpose behind the provisions of Sec.10A/10B of the Act which is to augment foreign exchange earnings.
With regard to the ‘directory compilation and updating services’, the AO has merely observed that the same is nothing but providing technical services to clients. In our view the above service going by the very nature of service will be data processing. The data received in one form is converted into another form and delivered abroad. There is certainly value addition to the data re-transmitted abroad. It is for this value addition and getting back the data in a different form that the Assessee receives remuneration. Clearly the same will be in the nature of data processing.
With regard to ‘data conversion services’, the AO has merely observed that converting scanned content to readable text would be only rendering of technical services. We are of the view that the said service would be in the nature of “Content Development” as envisaged in the CBDT circular referred to in the earlier part of this order.
With regard to ‘metadata compilation and updating services’, he has merely observed that the assessee was only providing data and that would be only providing technical services. In our view the said service would fall either within the expression “Content Development” or “Data Processing” envisaged by the CBDT Circular referred to in the earlier part of this order.
It is clear that the AO has not examined the CBDT Circular dated 26.9.2000. In our view, the term ‘data processing’ would be wide enough to cover the services rendered by the assessee. The CIT(Appeals) has only approved the findings of the AO and has not given his independent view on the issue. We therefore hold that the Assessee was engaged in the business manufacture of computer software as envisaged in Sec.10A/10B of the Act.
Admittedly the Assessee did not have the required approval as envisaged u/s.10B of the Act. The Assessee however claims it has the required approval for allowing deduction u/s.10A of the Act. With regard to the question as to whether the assessee can be allowed to shift the claim for deduction from section 10B to section 10A of the Act, we have already seen that in the past the assessee had been claiming deduction u/s. 10A of the Act. In our view, the decision rendered by the ITAT Bangalore Bench in the case of ANSR Source India Pvt. Ltd. (supra), squarely covers the issue and the claim of the assessee should be directed to be examined in the light of the provisions of section 10A of the Act and for this purpose the report of the auditor in Form 56F of the Act filed before the CIT(A) is admitted as additional evidence. We are of the view that, in the interest of justice, the issue should be directed to be examined by the Assessing Officer afresh u/s. 10A of the Act in the light of the observations made by us in the earlier part of this order. Accordingly, we set aside the order of the CIT(Appeals) and remand the issue to the Assessing Officer for fresh consideration claim of the Assessee for deduction u/s.10A of the Act. The Assessing Officer will decide the issue afresh after affording the assessee opportunity of being heard”.
From the above paras of the Tribunal order in AY: 2009-10, it is seen that in that year, the matter was restored back to the file of the AO for a fresh decision regarding assessee’s claim for deduction u/s 10A of the IT Act, 1961, instead of Sec.10B of the IT Act, 1961 claimed earlier.
In the present year also, the entire discussion in the assessment order is regarding allowability of deduction u/s 10B of the IT Act and there was no claim before the AO for deduction u/s 10A of the Act in the present year also. Hence, we find force in the submissions of the ld. DR of the revenue that the matter should go back to the file of the AO in the present year also as has been restored back by the Tribunal in AY:
2009-10.
Regarding the judgment of Hon’ble Karnataka High Court in the case of CIT Vs M/s Maxim India Integrated Circuit Design Pvt.Ltd.(Supra) on which reliance has been placed by the ld. AR of the assessee, we find that in our considered opinion, this judgment is not applicable in the present case because in that case, the issue in dispute was whether the undertaking of the assessee in question was formed by splitting up or not. In the present case, there is no such dispute and therefore, in our considered opinion, this judgment of the Hon’ble Karnataka High Court is not relevant for the issue in dispute before us in the present case. Hence respectfully following the Tribunal order in assessee’s own case for AY: 2009-10 of which the relevant paras are reproduce above, we hold that in the present year also, the matter should go back to the file of the AO for a fresh decision and accordingly, we set aside the order of the learned CIT (A) and restore the matter back to the AO for a fresh decision with the same direction as were given by the Tribunal in AY: 2009-10.
In the result, the appeal filed by the revenue stands allowed for statistical purposes.
Order pronounced in the open court on the date mentioned on the caption page.