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TMI Blog2015 (3) TMI 930X X X X Extracts X X X X X X X X Extracts X X X X ..... which does not mean that the books seller has not sold the books or customers has not purchased the books. Similarly it can be said about the usage of law journals which are being sold or purchased on licence basis. From the case of Tata Consultancy Services v. State of Andhra Pradesh [2004 (11) TMI 11 - Supreme Court] it is clear that transfer of right to use the software in media form, i.e., in the form of compact disc, etc., was held to be sale of goods. Thus even the usage of the rights in a product would amount to export, therefore, in our opinion when the assessee has developed and sold the software on licence basis, the same would amount to sale for the purpose of deduction under section 10B, accordingly we set aside the order of the learned Commissioner of Income-tax (Appeals) and direct the Assessing Officer to allow the deduction under section 10B of the Act. - Decided in favour of assessee. Benefit of exemption under section 10B - CIT(A) allowed the claim as the company is doing data entry work as per agreement and does not fulfil the condition laid down under section 10B? - Held that:- As relying on case of Bebo Technologies P. Ltd. [2011 (4) TMI 870 - ITAT, Chandigarh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 1. That the worthy Commissioner of Income-tax (Appeals), Chandigarh, has erred in confirming the action of the Assessing Officer that sup plying of computer software solution to various shipping companies is not export income from sale of such softwares, thereby disallowing exemption under section 10B on this ground. 2. That the worthy Commissioner of Income-tax (Appeals), Chandigarh, has not considered properly our submissions along with various judicial pronouncement/circulars, etc., cited by us to substantiate our stand. 3. That the worthy Commissioner of Income-tax (Appeals), Chandigarh has not considered the fact that the assessee-company, who is engaged in developing of computer softwares is registered with Software Technology Park of India, Department of Communication and Information Technology, Government of India is 100 per cent. export-oriented unit under STPI and provisions of exemption under section 10B has rightly been claimed and which has not properly been interpreted by the Commissioner of Income-tax (Appeals), Chandigarh. 4. That the worthy Commissioner of Income-tax (Appeals), Chandigarh has not considered the fact that sale of computer software is most ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not conducting sales and, therefore, was not entitled to deduction under section 10B. 5. On appeal, the submissions made before the Assessing Officer were reiterated and it was emphasised that agreement entered into by the assessee for sale of software to the end user and to the distributor were normal agreement prevalent in the case of sale of software. It was further pointed out that software export is canned software and sold in the compact discs or through electronic media. In licence sale agreement words "buyer" and "sale" are used to denote the contracting parties. In the consideration clause the "price" is mentioned in both the agreements. It was pointed out that software was developed in STPI area and invoices were reported to STPI, RBI and Customs Department. Reliance was also placed on the following decisions- (i) The judgment of the hon'ble Supreme Court of India in Tata Consultancy Services v. State of Andhra Pradesh [2004] 271 ITR 401 (SC). (ii) Sonata Information Technology Ltd. v. Additional CIT, International Taxation [2006] 103 ITD 324 (Bang) (iii) Samsung Electronics Co. Ltd. v. ITO [2005] 276 ITR (AT) 1 (Bang) (iv) Motor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es [2004] 271 ITR 401 (SC) wherein the sale of software was held to be "sale of goods". He also strongly relied on another decision of the hon'ble Supreme Court in the case of CIT v. B. Suresh [2009] 313 ITR 149 (SC) wherein even exploitation of a film rights to export outside India was held to be export and allowable for deduction under section 80HHC. 9. On the other hand, the learned Departmental representative strongly supported the order of the Assessing Officer and the Commissioner of Income-tax (Appeals). 10. After considering the rival submissions, we find force in the submissions of learned counsel for the assessee. Software is generally developed by the software company and then the same is sold to various customers. The normal procedure for such sale is through a licence agreement by which the customer get to use the software. But the source code is normally not provided because that will enable the customer to make any number of copies and the developer would lose the premium which it can receive by selling it to various customers. We are of the opinion that example of selling of a book would clarify the situation. Whenever a person buys a book, he gets t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of paintings or books or music or films the buyer is purchasing the intellectual pro perty and not the media, i.e., the paper cassette or disc or compact disc. A transaction of sale of computer software package off the shelf is clearly a sale of 'goods' within the meaning of that term in section 2(n) of the Andhra Pradesh General Sales tax Act, 1957. The term 'all materials, articles and commodities' in section 2(h) of the Act includes both tangible and intangible/incorporeal property which is capable of abstraction, consumption and use and which can be transmitted, transferred, delivered, stored, possessed, etc. The software programmes have all these attributes." From the above it is clear that transfer of right to use the software in media form, i.e., in the form of compact disc, etc., was held to be sale of goods. The hon'ble Supreme Court in the case of B. Suresh [2009] 313 ITR 149 (SC) where the issue arose whether exploitation of a film right which were transferred by the assessee in India to abroad would constitute export for the purposes of deduction under section 80HHC of the Act, it was observed as under (headnote) : "Held, affi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utside India by any means ;" In view of the above it is clear that if the data is simply customised as per requirements of the customer then the requirement of the provision of section 10B is fulfilled. Therefore, bare reading of the said provisions clears the issue. However, we are putting some other supporting documents in support of the claim. (a) Software export declaration form (SOFTEX form) This form is filled up by the exporter company and three copies of this form along with copy of invoice are sent to STPI within the stipulated time from the date of exports. After completing the relevant formalities STPI keeps one copy with them, sends another copy to the Reserve Bank of India and third copy to exporter of software. This SOFTEX form is the basic requirement of the Reserve Bank of India and has duly been approved by the Ministry of Finance, Government of India. In this form, the Reserve Bank of India has written Code No. 906 regarding data entry services which narrates as given below : "Data entry jobs and conversion software data processing" (b) Software Technology Park of India This body represents the Department of Information Technology, Ministry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of the agreement, it is found that the word written is 'data entry'. It is well known that the words in the agreement are meticulously written keeping in view the nature of the job. Mere mention of the words data entry would indicate that it is not data processing. On examination of the agreement, I find that the assessee is to simply extract data from various cells of excel sheet which is to be provided by MODEC and then to enter the extracted data into related fields of AMOS M and P software. In my opinion, it is merely copying of data from one source to other software. It cannot come within the meaning of data processing. As regards the alternative submissions, that the same should be considered within the ambit of back office operations, the Assessing Officer did not entertain the plea of the assessee on the ground that the assessee cannot take any alternative submissions. In my opinion, the Assessing Officer is not justified in not entertaining the alternative submissions for the reasons that the assessee does not know what would be the view of the Assessing Officer at the time of filing of Income-tax return. If the assessee can satisfy the Assessing Officer th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs were purchased by the asses see for carrying on its business is also not correct-Assessee was carrying on its business in two units at Chandigarh while its registered office is located in Mohali where no business activity was carried out-There was no restructuring of business-assessee has carried out its work on loaned equipments and evidence in this regard has been considered by Commissioner of Income-tax (Appeals)-There is no merit in the observation of the Assessing Officer that non-mentioning of the location from where invoices were issued disentitled the assessee to the claim of exemption under section 10B-There is no requirement to furnish the addresses of the individual places from where services were rendered as against mention of registered office on the invoices-Assessee has furnished the registration under the STPI as a 100 per cent. export-oriented unit. Therefore, the assessee is entitled to deduction under section 10B." 21. In our opinion, the issue regarding data entry work stand covered by the above decision and, therefore, we confirm the order of the learned Commissioner of Income-tax (Appeals). I.T.A. No. 652/Chd/2011 22. In this appeal the Revenue has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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