DCIT 9(1), MUMBAI vs. DIVYA DRISHTI MEDICAL P.LTD, MUMBAI

Brief facts of the case are that the assessee company engaged in providing medical consultancy such as to interpret X-rays, CT-Scans, MRI’s and Ultrasounds for US and Europe based hospitals, filed its return of income for the Asst. year 2010-11 on 05/07/2010 declaring total income at NIL under normal provisions of the Act, after claiming exemption u/s 10A of the Income Tax Act, 1961 (for short ‘the Act’) amounting to Rs. 40,12,267/-. The assessee also mentioned the book profit u/s 115JB at Rs. 38,63,521/-. The assessee also filed revised return on 06/08/2010. The return of income was processed u/s 143(1) of the Act and the A.O assessed the total income of the assessee at Rs. 40,12,267/- after disallowing the deduction claimed by the assessee under the normal provisions of the Act. In appeal the Ld. CIT(A) allowed the deduction claimed by the assessee u/s 10A of the Act. The revenue is in appeal before the Tribunal against the impugned order on the following effective ground:-

Before us the Ld. Departmental Representative (DR) submitted that the Ld. CIT(A) has wrongly allowed the claim u/s 10A without appreciate the facts that with the aid of specially designed software, the work of medical consultation can be made without involvement of a medical practitioner and STPI certification is not a qualification for claiming deduction u/s 10A of the IT Act, 1961.

On the other hand the Ld. Counsel for the assessee submitted that the similar claim for the A.Y. 2009-10, has been accepted by the revenue. The CBDT itself has interpreted the term computer software appearing in Explanation 2 to Section 10A of the Act in an extensive rather than narrow manner. Once data is stored in an electronic form, it becomes a customized electronic data falling under the ambit of Explanation 2(i)(b) to Sec. 10A which can be exported to qualify for deduction under section 10A.

We have heard the rival submissions and perused the documents in the light of respective submissions of the parties. The assessee is engaged in Computer Software/ IT Enabled Services of acting as a data processing centre to International companies. The assessee used to receive DICOM images and through software, processes the same into 3D & MIO images which are used by Doctors in hospitals. As per the directions of Ld. CIT(A) the A.O physically visited the business premises of the company and verified both the business as well as STP registration of the assessee and incorporated the following words:- “On verification, it was found that assessee receives medical images from US and it converts them into readable form and then transmits the same back to US. Further, the undersigned still feels that the nature of the business of the assessee falls within the ambit of consultation…..”

The remand report submitted by the assessee further corroborates the contention of the appellant that during the relevant period appellant was using certain software to process certain data in the form of images which were being received from foreign hospitals. The Ld CIT(A) has further pointed out that some of the raw images sent by the foreign hospitals and the processed images finally created after using software were also produced by the assessee during appellate proceedings. After taking into consideration, the Ld. CIT(A) has come to the conclusion that no element of human intervention is involved in the said work. The CIT(A) further mentioned that this is the third year of appellant’s business and benefit under section 10A of the Act has been granted to the appellant in the earlier two years. The claim could still be denied even in the third year, if the material facts are available which point towards the appellant’s disentitlement. However, it can be seen that the appellant is registered with the STPI at Mumbai which has also granted the permission to operate out of its premises. As such registration cannot be granted by STPI in case of actual medical consultation. Hence in our considered view the Ld. CIT(A) has allowed the claim of the assessee after properly appreciating evidence on record in the light of the provisions of the law.

In view of the above discussion, the order passed by the Ld. CIT(A) is founded on sound reasoning and evidence on record. Hence, the impugned order does not suffer from any legal or factual infirmity to interfere with. We, therefore, uphold the impugned order and dismissed the ground of appeal of the revenue.

In the result appeal filed by the revenue for A.Y. 2010-11 is dismissed.