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TMI Blog2012 (7) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... company in India – Held that:- Assessee was rendering service from India, which service was being made use of by the foreign enterprise outside the country. Therefore, it is not a case of service being rendered inside India - Assessee has not rendered any service in India in connection with the entire project - Service is rendered from India to a foreign enterprise and therefore, Section 80-O is attracted and the Tribunal rightly extended the said benefit - In favour of the assessee Whether the Tribunal was correct in proceeding to hold that Section 80-IA and 80-O deduction operate under two different spears and the assessee would be entitled to claim both the deduction on the same income of project – Held that:- Section 80-IA and Section 80-O both fall under the heading deductions in respect of certain incomes both are independent of each other - assessee is entitled to claim deduction under both the Sections - overall claim under both Sections has to be restricted to the total profits and gains of eligible accounts from the total profits and gains - provision 9A to Section 80-IA was inserted by Finance Act No.2, 1988, which came into effect from 1.4.1998 that limitation was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellate Commissioner who granted partial relief. In the appeal filed by the assessee before the Tribunal the deduction under Sections 80-IA, 80-O and 80-HHB as well as deduction both under Sections 80-IA and 80-O was partly allowed. The Tribunal also held in so far as Section 80-O is concerned, the assessee is entitled to benefit only on the net income. Thus, rejected the claim of the assessee for deduction on the gross receipts. Therefore, the assessee is before this Court by way of cross-objection whereas the revenue has challenged the granting of those deductions under the aforesaid provisions of law. 3. The substantial questions of law framed for consideration are as under:- "1) Whether the Tribunal was right in proceeding to grant relief in favour of the assessee that it was entitled for deduction under Section 80-IA of the Act without examining the various reasons recorded by the Appellate Commissioner in holding that the assessee was not manufacturing any article or thing nor did it have workers consisting of ten or more as per Section 80-IA(2)(V) of the Act? 2) Whether the Tribunal was correct in proceeding to hold that the assessee would be entitle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... included in the total gross income of the assessee in the manner provided in the said Section. This Section was made applicable to industrial undertakings, which fulfills the conditions which are mentioned in the sub - section(2). More importantly the assessee should be in the business of manufacturing or production or any article or thing and he must have employed ten or more workers in the said manufacturing process, it is carried on with the aid of power and twenty or more workers in the manufacturing process carried on without the aid of power. The benefit under Section was declined by the Appellate Commissioner to the assessee on the ground that the activities carried on by the assessee is neither manufacturing activity nor involves production and that he has not employed more than ten workers in the said manufacturing process. However, the Tribunal has held that the activities which the assessee is carrying on falls within the word "produces" and that he has employed more than ten workers and working with the aid of power. Therefore, the conditions prescribed in the aforesaid provisions are fulfilled. It is that finding, which is assailed by the revenue in these appeals. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. 20. Issue of inspection release notes. 9. The Appellate Commissioner after taking note of all these activities has categorically held that most of these activities fall in the category of preparing engineering drawings, designs and other technical know how as claimed by the assessee. In addition to this, the assessee has offered certain other facilities to a foreign concern, which do not fall under Section 80-IA. 10. The Supreme Court in the decision of Commissioner of INCOME TAX Vs ORACLE SOFTWARE INDIA LTD., reported in (2010) 320 ITR 546 (SC) has held that Section 80-IA, occurs in Chapter VI-A which deals with deductions in respect of certain incomes. Where the gross total income of an assessee includes any profits, derived from any business of an industrial undertaking to which Section 80-IA applies, there shall in accordance with and subject to the provisions of Section 80-IA, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to a specific percentage for such number of assessment years as specified in Section 80-IA. For deciding the present controversy, it would be sufficient to notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al form, the question is whether these documents satisfy the functional test indicated above. Obviously, the purpose of rendering such documentation service by supplying these documents to the assessee was to enable it to undertake its trading activity of manufacturing theodolites and microscopes and there can be no doubt that these documents had a vital function to perform in the manufacture of these instruments; in fact it is with the aid of these complete and up-to-date sets of documents that the assessee was able to commence its manufacturing activity and these documents really formed the basis of the business of manufacturing the instruments in question. True, by themselves, these documents did not perform any mechanical operations or processes but that cannot militate against their being a plant since they were in a sense the basic tools of the assessee's trade having a fairly enduring utility, though awing to technological advances, they might or would in course of time become obsolete. We are, therefore, clearly of the view that the capital asset acquired by the assessee, namely, the technical know-how in the, shape-of drawings, designs, charts, plans processing data and ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve years (it has a limited life). Hence such "rights" would certainly fall in the category of articles of trade and commerce, hence, merchandise." 13. In the instant case, as it is clear from the copy of the agreement, the activities of the assessee involves various activities as per the requirement of their clients. It is client specific as it involves incorporation of clients data in engineering drawing, documents detailed design engineering of the specimen facilities, preparation of technical know-how, review of installation related engineering, fabrication equipment specific for legal system, testing procedure and assurance of technical services. As rightly held by the Appellate Commissioner these activities fall in the category of preparing engineering drawings, designs and other technical know how. Therefore, the assesses brings into existence new and distinguished product and designs which are client specific as per their requirement and thereafter advise the clients in manufacture production according to the designs and also advise the client in its installation after the manufactured goods are brought into country for installation. In other words, what is transferred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terprise in consideration for the use outside India of any patent, invention, model, design, secret formula or process, or similar property right, or information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided or agreed to be made available or provided to such Government or enterprise by the assessee, or in consideration of 2[technical or professional services] rendered or agreed to be rendered outside India to such Government or enterprise by the assessee, 1[...] and such income is received in convertible foreign exchange in India, or having been received in convertible foreign exchange outside India, is brought into India, by or on behalf of the assessee in accordance with any law for the time being in force for regulating payments and dealings in foreign exchange, there shall be allowed, in accordance with and subject to the provisions of this section, a deduction of and amount equal to fifty per cent of the income so received in, or brought into India in computing the total income of the assessee: 2[...]; 2[...]; 3 Provided 4[...] that such income is received in India within a period of six months from the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... COME TAX AND ANTOTHER Vs. M/S MILLIPORE INDIA PVT LIMITED, wherein the question was as to whether the assessee is entitled to the benefit of Section 80-HHC and 80-I of the Act. In that case this court held as under:- "From the aforesaid statutory provisions and the law declared by the Courts it is clear all the Sections which fall under the heading " 'C' - deductions in respect of certain incomes" are independent of each other. Therefore, Section 80-HHC and 80-I are independent of each other. A new industrial unit can claim deduction under both Sections on the gross total income independently. Sub Section (9) of Section 80-IA makes it clear that such profits and gains which is allowed deductions under Section 80-IA makes it clear that such profits and gains which is allowed deductions under Section 80-IA cannot be agains allowed deduction under any other provisions of the Chapter under the heading " 'C' deductions in respect of certain income." The stress on the profits and gains of such eligible business in the case of Section 80-HHC, is the profits and gains from export business. Under the provisions of Chapter VI-A of the Act, various deductions from the profits and gains are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances of the case, the additional allocation of general overheads and business costs is not called for. The Tribunal has relied on the principles of the decision of the Tribunal in the case of M.N. DASTUR CO. ITA Nos.452/ Bang /97 and others, which it has followed under Section 80-O. The allocation, therefore, has been upheld by the Tribunal on the ground that no allocation of overheads in computing, the deduction is necessary and that even to the extent of 20% has to be allowed in the facts of these cases. We are also satisfied that there is no error committed by the Tribunal on this issue of deduction under Section 80-HHB. The substantial question of law as framed do not arise for consideration. Accordingly, we decline to answer the said substantial question of law. Re Substantial question of law No.5: 19. In the cross objection filed by the aasessee it was contended that the assessee is entitled to the benefit of Section 80-O on the gross total income which he has earned as a foreign exchange. The intention behind the aforesaid Section is to extend the benefit of the said Section in respect of the foreign exchange earned. Even otherwise, it was contended that if the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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