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Issues Involved:
1. Eligibility for deduction u/s 10A/10B for AY 2002-03 to 2004-05. Summary: Issue 1: Eligibility for deduction u/s 10A/10B for AY 2002-03 to 2004-05 Facts and AO's Findings: - The assessee company claimed deduction u/s 10A/10B for AY 2003-04, which was denied by the AO amounting to Rs. 82.20 lacs. - The AO, guided by the ACIT's opinion, concluded that the assessee was not eligible for deduction u/s 10A/10B as the company did not have a regular running office in the Software Technology Park (STP) and was merely supplying manpower, not developing software. - The AO observed that the agreement with M/s Alpharma was for manpower supply, not software development, and the company was referred to as 'the supplier' in the agreement. - The AO also noted that the negotiations were not recorded, and the consultant was the son of the directors, leading to the denial of the deduction claim. Assessee's Arguments: - The assessee argued that it satisfied all conditions for exemption u/s 10A/10B, including being a 100% export-oriented unit (EOU) and exporting computer software onsite. - The assessee provided bank advices and a report in the prescribed form F-56G signed by a Chartered Accountant to support its claim. - The assessee relied on Explanation 3 to sec. 10A/10B, which allows onsite software development carried out outside India, and notification no. 11521 dated 26.9.2000, which includes IT-enabled services for deduction u/s 10A/10B. - The assessee contended that having only one employee does not negate the company's existence or its eligibility for deduction. CIT(A)'s Findings: - The CIT(A) found that the assessee complied with all prerequisites stipulated in section 10A/10B and that the main contention of the AO regarding the nature of services was unfounded. - The CIT(A) noted that the agreement was for IT consulting services, and procuring manpower was incidental to rendering these services. - The CIT(A) highlighted that the company had possession of the premises approved by the Customs Department and that the projections given to STPI were not relevant for determining eligibility. - The CIT(A) concluded that the contract was not for manpower supply but for software services, and the assessee was entitled to the benefit of exemption u/s 10A/10B. Tribunal's Decision: - The Tribunal upheld the CIT(A)'s order, finding no infirmity in the CIT(A)'s conclusions. - The Tribunal noted that the CIT(A) had considered each objection raised by the AO and provided detailed reasoning for allowing the deduction. - The Tribunal referenced a similar case (Information Architects) where the assessee was allowed deduction u/s 80HHE, which is similar to u/s 10A/10B. - The Tribunal confirmed the CIT(A)'s order for AY 2002-03 and 2004-05 based on the same reasoning. Conclusion: - The appeals filed by the department were dismissed, and the assessee was allowed the deduction u/s 10A/10B for the assessment years in question.
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