9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2009 (11) TMI 550 - AT - Income TaxDeduction u /s 10A Export of Computer Software - Software Technology Parks of India has expressed its inability to certify the exports of the assessee in the absence of guidelines - actual exports out of India - assessee has shifted its operations from H.R. services to software development in the subsequent assessment year thereby the possibility of recruiting and sending further candidates abroad - many of the candidates allegedly recruited had denied having been trained or offered employment abroad Board s circular dt. 26th Sept., 2000 - Held that - Supreme Court in the case of UCO Bank vs. CIT (1999 -TMI - 5746 - SUPREME Court). - the Board has power, inter alia, to tone down the rigour of the law and ensure a fair enforcement of its provisions, by issuing circulars in exercise of its statutory powers under s. 119 of the Act, which are binding on the authorities - the task of interpretation of the laws is the exclusive domain of the Courts. However, the Board has the statutory power under s. 119 to tone down the rigour of the law for the benefit of the assessee by issuing circulars to ensure a proper administration of the fiscal statute and such circulars would be binding on the authorities administering the Act. Considering this ever-expanding horizon of software products and services, the Board has been given the power to notify such products and services which in its opinion should qualify for deduction under s. 10A. In other words, this power of the Board when exercised, it will ensure proper administration of the fiscal statute as observed by the Supreme Court in UCO Bank s case. It is in this sense the learned AM has observed that the Board s circular has made the job of the AO quite simple. While deciding these issues, the principle of ejusdem generis will have to be kept in mind. However, so far as services which are ITE are concerned, the assessee can take the benefit of deduction only if they are notified by the Board. If this power of notifying the services was not given to the Board, principle of ejusdem generis would have applied. Since the power is exercised under the specific provision of s. 10A, it is presupposed that the services in respect of which the assessee is claiming deduction are information technology enabled (ITE). Of course, as a matter of normal precaution taken while making an assessment, the AO will satisfy himself as to whether the customised data is in electronic form or not and whether it is electronically transmitted outside India or not. If the data of recruitment and training collected by the present assessee is in a manual form and is sent to US by post, the assessee will not be entitled to deduction under s. 10A. When undisputedly the entire data is in electronic form, the assessee is entitled to avail benefit of exemption.
Issues Involved:
1. Whether the profits of the assessee-company qualify for deduction under Section 10A of the IT Act. Detailed Analysis: Issue 1: Qualification for Deduction under Section 10A Facts and Background: The assessee, a private limited company, was incorporated on 20th June 2000, and later renamed Accurum India (P) Ltd. It was promoted by Pinnacle Systems Inc., USA, as a 100% subsidiary. The company was engaged in software development and human resource services, registered as a 100% Export Oriented Unit (EOU) under the Software Technology Parks Scheme with STPI, Chennai. Assessment and Dispute: The assessee filed a return for AY 2001-02, claiming exemption under Section 10A for profits derived from recruitment and training services provided to its parent company in the USA. The Assessing Officer (AO) disputed this claim, arguing that the activities did not qualify as export of "computer software" under Section 10A. The AO assessed the total income without allowing the full deduction claimed. CIT(A) Decision: The CIT(A) allowed the assessee's claim, stating that the assessee fulfilled the conditions for deduction under Section 10A, and the profits from human resource services, classified as ITES, were eligible for deduction. Arguments by the Department: The Department contended that: - The activities did not constitute export of "computer software" as defined under Section 10A. - The manpower recruited was not a computer program or customized electronic data. - The activities did not involve transmission or export of any service or product from India to abroad. - The principle of ejusdem generis should apply to limit the scope of "services of similar nature" to those akin to customized electronic data. Arguments by the Assessee: The assessee argued that: - The activities fell under the category of "human resource services," an ITES notified by the CBDT. - The recruitment and training data were transmitted electronically to the parent company, fulfilling the conditions of Section 10A. - The AO's restriction of deduction to one candidate was illogical and not based on sound principles. Tribunal's Analysis: The Tribunal examined the provisions of Section 10A, the definition of "computer software," and the CBDT notification listing ITES. It concluded: - The CBDT notification clarified that certain ITES, including human resource services, qualify for deduction under Section 10A. - The principle of ejusdem generis was not applicable since the Board had specifically notified the services. - The assessee's activities of recruitment and training, followed by electronic transmission of data, constituted export of customized electronic data. - The AO's restriction of deduction to one candidate was unjustified, as the assessee had provided the service and transmitted the data as required. Third Member's Opinion: Due to a difference of opinion between the members, the matter was referred to a Third Member, who concurred with the view that the assessee's profits qualified for deduction under Section 10A. The Third Member emphasized: - The role of the Board's circulars in ensuring proper administration of fiscal statutes. - The principle of ejusdem generis was not applicable where the Board had notified specific services. - The assessee's activities met the conditions for deduction, as the data was in electronic form and transmitted to the parent company. Final Decision: The majority view upheld the CIT(A)'s order, allowing the deduction under Section 10A for the assessee's profits from recruitment and training services. The appeal by the Department was dismissed. Conclusion: The Tribunal concluded that the assessee's profits from recruitment and training services qualified for deduction under Section 10A, as the activities were classified as ITES and met the statutory requirements. The appeal by the Department was dismissed, affirming the CIT(A)'s decision.
|
