2017 (11) TMI 1205 - AT - Income Tax

Eligibility of deduction 10A - Held that - Identical issue came before this hon ble Tribunal for the assessment years 2008-09 and 2009-10 in the own case of the assessee the assessee there is no dispute that it is a call centre engaged in managing accounts receivable and recovery. The calls are made by the predictive dialer software and after the call the inputs of the relevant information obtained from the data of the US financial institution is made in real time system which is transmitted to the customer outside India electronically using the internet system. In view of the explanation of the assessee, it is evident that customised electronic data is being transmitted outside India electronically. Assessing Officer has also mentioned that the assessee is using the internet lines for telephone calls to its international customer rather than traditional telephone lines. This observation also supports that the activities of the assessee are in the nature of call centre and therefore in our considered opinion, the assessee is entitled for deduction under section 10A of the Act. In prior assessment years, the Assessing Officer has accepted the claim of the assessee and deductions have been allowed. In the year under consideration, there is no change in the business activity of the assessee, thus, in our view, the principle of consistency also demand that this deduction should be allowed to the assessee.

Issues Involved:
1. Deduction under section 10A of the Income-tax Act.
2. Exclusion of telecommunication and insurance expenses from export turnover for the purpose of deduction under section 10A.

Detailed Analysis:

Issue 1: Deduction under section 10A of the Income-tax Act

Facts and Background:
The assessee, a private limited company registered under the Software Technology Parks of India (STPI) scheme, claimed a deduction of ?53,68,155 under section 10A of the Income-tax Act for the assessment year 2010-2011. The Assessing Officer disallowed this deduction, following the disallowances made in the assessment years 2008-09 and 2009-10.

Commissioner of Income-tax (Appeals) Decision:
The Commissioner of Income-tax (Appeals) allowed the deduction, noting that similar deductions had been allowed in the earlier assessment years 2006-07, 2007-08, and 2008-09. The Commissioner directed the Assessing Officer to allow the deduction claimed by the assessee.

Tribunal’s Findings:
The Tribunal observed that the identical issue had been decided in favor of the assessee in the assessment years 2008-09 and 2009-10. The Tribunal noted that the assessee was engaged in providing BPO/outsourcing and call center services related to debt collections, using sophisticated software such as web application CCC (e-access), AS400, and predictive dialer software. These activities were covered under the definition of computer software in terms of clause (b) of item (i) of Explanation 2 to section 10A of the Act. The Tribunal found no inconsistency in the nature of services provided by the assessee and confirmed that the assessee was eligible for the deduction under section 10A.

Conclusion:
The Tribunal upheld the order of the Commissioner of Income-tax (Appeals), confirming the deduction under section 10A for the assessee. The grounds of appeal raised by the Revenue were dismissed.

Issue 2: Exclusion of Telecommunication and Insurance Expenses from Export Turnover

Facts and Background:
The Assessing Officer worked out the deduction under section 10A without excluding the telecommunication and insurance expenses from the export turnover.

Commissioner of Income-tax (Appeals) Decision:
The Commissioner of Income-tax (Appeals) directed the Assessing Officer to allow the deduction under section 10A without excluding the telecommunication and insurance expenses from the export turnover, consistent with the decisions in the earlier assessment years 2006-07, 2007-08, and 2008-09.

Tribunal’s Findings:
The Tribunal noted that a similar issue had been decided in favor of the assessee in the assessment years 2008-09 and 2009-10. The Tribunal found that the expenses on communication and insurance had not been incurred in foreign exchange and were not included in the invoices issued to the foreign customer. Therefore, these expenses were not required to be excluded while computing the export turnover for the purpose of determining the deduction under section 10A.

Conclusion:
The Tribunal upheld the order of the Commissioner of Income-tax (Appeals), confirming that the telecommunication and insurance expenses should not be excluded from the export turnover for the purpose of deduction under section 10A. The grounds of appeal raised by the Revenue were dismissed.

Final Order:
The Tribunal dismissed the appeal filed by the Revenue and upheld the order of the Commissioner of Income-tax (Appeals), confirming the deduction under section 10A and the inclusion of telecommunication and insurance expenses in the export turnover for the purpose of deduction calculation. The order was pronounced in the open court on September 27, 2017.

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