2012 (6) TMI 350 - HC - Income Tax

Review petitions - business of development of software and sale of software packages - Tribunal held that the assessee company had only marketing offices outside India Court set aside the Tribunal Order on the basis of certificate required to be given by the Chartered Accountant under Section 80HHE(4) r.w.r.18BBA(7) Held that - All the three authorities have concurrently held that the assessee is not in the business of providing technical services - the material on record clearly shows that except for these three years, rest of the certificates are correctly issued showing the amount involved in the production and export of the software at Clause 3(i) - it is only in these three years certificates as against the Clause 3(i) nothing is typed and it is typed against Clause 3(ii) held to a bona fide typographical error as the Chartered Accountant without carefully looking into those entries has issued the certificates, which has resulted in confusion - there is an error apparent on the face of the order passed by the Court it calls for review.

Summary

Issues:
1. Interpretation of provisions related to deduction under Section 80HHE for a software development and sales business.
2. Determination of whether expenses incurred for technical services outside India should be excluded from export and total turnover.
3. Consideration of certificates issued by a Chartered Accountant in determining eligibility for deduction under Section 80HHE.
4. Review of the Tribunal's decision regarding the nature of the business conducted by the assessee.

Issue 1:
The High Court considered the interpretation of provisions under Section 80HHE concerning the eligibility for deduction in a case involving a software development and sales business. The Tribunal had held that the assessee was not engaged in providing technical services outside India but was involved in the development of computer software, thus qualifying for the deduction under Section 80HHE(1)(i).

Issue 2:
The dispute centered around whether expenses incurred for technical services outside India should be excluded from export and total turnover. The Tribunal, after examining the material on record, concluded that the assessee was not providing technical services outside India but was primarily engaged in marketing offices abroad. Consequently, the Tribunal directed that no exclusion be made for such expenses in computing export and total turnover for the application of the formula under Section 80HHE(3).

Issue 3:
The Court analyzed the certificates issued by a Chartered Accountant to determine the eligibility for deduction under Section 80HHE. The certificates indicated that for certain assessment years, the expenses were incurred for providing technical services outside India in connection with the development of computer software. This led the Court to find that the expenses were not related to the export of software but to technical services, thus impacting the eligibility for the deduction.

Issue 4:
The Court reviewed the Tribunal's decision on the nature of the business conducted by the assessee. The Tribunal's finding was challenged based on the interpretation of the certificates issued by the Chartered Accountant. The Court noted a typographical error in three certificates that led to confusion regarding the nature of the services provided. Consequently, the Court set aside the Tribunal's decision and directed a review of the appeals on their merits, considering the business activities and expenses involved.

In summary, the High Court reviewed the Tribunal's decision on the eligibility for deduction under Section 80HHE in a case involving a software development and sales business. The Court analyzed the nature of the services provided, the expenses incurred, and the certificates issued by the Chartered Accountant to determine the correct application of the provisions. Ultimately, the Court set aside the Tribunal's decision, highlighting the importance of accurately assessing the business activities and expenses to determine the eligibility for the deduction under Section 80HHE.