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TMI Blog2010 (12) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... m the Reserve Bank of India to open non-trading branch in Tokyo, Japan to facilitate communication between NEPZ unit and the company in Japan - The documents filed by the assessee including RBI permission in their favour, that is, on the basis of some documents the assessee claims that Explanation 3 of Section 10A of the Act is satisfied whereas the Revenue feels otherwise – Appeal are disposed of and remit the case back to AO to decide the issue afresh - 507 of 2008 , 160 of 2009 - - - Dated:- 24-12-2010 - Through : Mr. N.P. Sahni, Sr. Standing Counsel. Through: Mr. Ajay Vohra, Advocate with Ms. Kavita Jha, Advocate and Mr. Somnath Shukla, Advocate. MR. JUSTICE A.K. SIKRI, MR. JUSTICE SURESH KAIT A.K. SIKRI, J. 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the succeeding assessment years i.e. 2002-03 with which we are concerned, the Assessing Officer disallowed the same. That would be additional ground to hold that the assessee was entitled to such deduction claimed by the assessee under Section 10A of the Act. 3. In so far as issue No. (2) is concerned, it is factual inasmuch as the assessee submitted documentary evidence before the CIT (A) to prove that it had brought in India the foreign exchange within the extended time. 4. Accordingly, the appeal was heard on 3rd question of law at length. The counsel for both the parties filed their written synopsis as well. 5. We now propose to decide this question of law. As is clear from the aforesaid question, it pertains to allowing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s exemption under Section 10A on profits derived by an assessee from a foreign branch with reference to onsite services for development of computer software provided by the said company". His argument was that the relevant documents would clearly demonstrate that the trading branch at Tokyo is an independent and separate branch office and, therefore, profits incurred in respect of that branch would not qualify for deduction under Section 10A of the Act. He drew distinction between a branch office and a liaison office submitting that a branch office is one which may meet all commercial requirements. A liaison office is only permitted to do what its name suggests - act as an intermediary between the foreign principal enterprise and the India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the two authorities below that the Japan Branch was an onsite office. There was no development of computers software provided by the assessee company and, therefore, profits derived from the said unit were entitled to exemption under Section 10A of the Act. He submitted that it was clear from the facts that the assessee had sought permission from the Reserve Bank of India to open non-trading branch in Tokyo, Japan to facilitate communication between NEPZ unit and the company in Japan, assist in marketing efforts, help procure orders, render assistance to professionals deputed there on off-shore assignments, attend to validation and testing of the products, if required and providing other requisite comforts to customers. He also argued that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outside India shall be deemed to be the profits and gains derived from the export of computer software outside India." 10. As per this Explanation, even if the profits and gains derived from on site development of computer software outside India, they are also treated as profits and gains from the export of computer software outside India. In the backdrop of this provision, what is to be examined is as to whether Japan Office of the assessee would be treated as an onsite development of computer software or it is to be treated as separate branch functioning independently. 11. As noted above, the submission of learned counsel for the Revenue is that to qualify the "on site development", it should be only a Liaison Office acting as an in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een opened by the appellant as per the agreement with the Japanese company to also provide onside development service with approval of RBI and also noted by Noida Special Economic Zone that the appellant unit located at NSEZ has opened a new trading branch at Tokyo. Therefore that profit derived by the appellant company from its Japan Branch in reference to the onsite service provided quality for exemption u/s 10A of the IT act and the AO is directed to consider the same as exempt u/s 10A of the Act." 14. The ITAT simply reproduced the above quoted order of the CIT (A) and affirmed the same without viewing this issue on right perspective. 15. Before us an attempt was made by counsel for both the sides to interpret the documents filed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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