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2018 (7) TMI 354 - AT - Income TaxEligibility to deduction u/s 10A - profit derived by the activities performed by third party/freelancers abroad on which the assessee has no control supervision - work outsourced - Held that - Assessee hired the services of freelancers on internet for the work of Transcription, Summarization, Translation, Editing, Proofreading, Data entry which is much related to the business of the assessee. The assessee out- sourced job works activity from freelancers for its main object of business activities. The object of the assessee company covered the job work services of the out-source company freelancers to its object. The assessee company was engaged in the business of Transcription, Summarization, Translation, Editing, Proofreading, Data entry which is an IT enabled service. If the out- source work is connected to the object of the company then in the said circumstances, the out-source work cannot be said separately to the object of the company and the exemption u/s 10A of the Act is not required to be denied only on this basis. However the income from other source of company such as interest income etc., has been assessed separately which were not claimed u/s 10A of the Act. No doubt this type of income nowhere covered the claim u/s 10A of the Act. The provision of Section 10A of the Act nowhere bar the claim if the work out-sourced. - Decided in favour of assessee.
Issues Involved:
1. Disallowance of claim u/s 10A of the Act for profits arising from activities of freelancers. 2. Failure to demonstrate eligibility for exemption and nature of critical activities. 3. Justification of allowing deduction u/s 10A for profits from activities by freelancers abroad. Issue Nos. 1 & 2: The Revenue appealed against the CIT(A)'s order deleting the disallowance of the claim u/s 10A for profits from activities of independent freelancers. The Revenue contended that the activities were not carried out at the eligible Unit and did not qualify as on-site services for software development. The CIT(A) allowed the claim based on the principle that if the out-sourced work is connected to the main work/object of the assessee, the claim u/s 10A is valid. The CIT(A) relied on the decision in the case of ITO Vs. M/s. Gebbs Infotech Ltd. to support this reasoning. The ITAT upheld the CIT(A)'s decision, stating that the out-source service, when connected to the main work of the assessee, does not warrant denial of the claim u/s 10A. The ITAT found the CIT(A)'s decision judicious and correct, supported by relevant legal precedents, and dismissed the Revenue's appeal. Issue No. 3: The Revenue filed an appeal against the CIT(A)'s decision allowing deduction u/s 10A for profits derived from activities performed by freelancers abroad. The ITAT found the matter to be similar to the previous appeal and applied the same reasoning as in ITA No. 219/M/2016. The ITAT dismissed the appeal of the Revenue, affirming the CIT(A)'s decision. The ITAT concluded that the CIT(A) had appropriately adjudicated the matter, and all issues were decided in favor of the assessee against the Revenue. In conclusion, the ITAT upheld the CIT(A)'s decision in both appeals, emphasizing the connection between out-sourced work and the main activities of the assessee as a valid basis for allowing the claim u/s 10A. The judgments were delivered on 29.06.2018, dismissing the Revenue's appeals in both cases.
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