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TMI Blog2018 (4) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... Dated:- 4-4-2018 - SHRI MAHAVIR SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM For The Assessee : H.P.Mahajani And Prasad Bapat, Ld. ARs For The Revenue : Rajat Mittal, Ld. DR ORDER Per Manoj Kumar Aggarwal (Accountant Member) 1. The captioned appeal by assessee for Assessment Year [AY] 2009-10 contest the order of Ld. Commissioner of Income-Tax (Appeals)-4 [CIT(A)], Mumbai, Appeal No.CIT(A)-4/IT-122/DCIT- 2(1)/2013-14 dated 02/03/2016. The assessment for impugned AY was framed by Ld. Deputy Commissioner of Income Tax, Circle-2(1), Mumbai [AO] u/s 143(3) of the Income Tax Act, 1961 on 14/03/2013. The assessee has raised the following effective grounds of appeal before us:- 1. On the facts and in the circumstances of the case and in law, whether the Assessing/Appellate authorities have power to decide whether or not assessee appellant has carried out manufacturing and export of software when the specialized authority, The Software Technology Park Authorities have certified both manufacturing of software as well as export of software by the appellant 2. On the facts and in the circumstances of the case and in Law, the learned CIT(A) err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.On the facts and in the Circumstances of the case and in Law, the learned CIT(A) erred in not adjudicating the ground in relation to addition made by AO on account of dividend income of ₹ 15,000 without appreciating that appellant had not claimed the said income as exempt. 2.1 Briefly stated the assessee being resident corporate assessee engaged in rendering software services was assessed at ₹ 558.48 Lacs under normal provisions as against returned income of ₹ 23.01 Lacs e-filed by the assessee on 26/09/2009. The returned income was later revised on 29/03/2011 to ₹ 141.95 Lacs. 2.2 During assessment proceedings, it was noted that the assessee was national implementation partner for SAP in India and engaged in rendering software services, software development customization and trading in Software / Hardware. The assessee company was wholly owned subsidiary company of Bristlecone Ltd., Cayman Islands . The Assessee was global provider of customized, scalable enterprises and e-business solutions and operated through development centers at Mumbai, Pune Bangalore . The assessee was active both in domestic as well as in overseas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the assessee was computed at ₹ 558.48 Lacs under normal provisions whereas the Book Profit u/s 115JB was computed as ₹ 1215.60 Lacs. 3. Aggrieved, the assessee contested the same without any success before Ld. CIT(A) vide impugned order dated 02/03/2016 where Ld. CIT(A) noted that the assessee was not manufacturing or producing any computer software / program etc. but engaged in providing services in the nature of professional services, managed services system integration services and hence, not entitled to claim any deduction at all u/s 10A. The assessee contended that it was engaged in production of computer software as well as rendering of notified software services to both domestic as well as overseas customers. It was further contended that the assessee rendered four types of notified services i.e. Back Office Operations, Engineering Design, Remote Maintenance and Support Center Services as per the customer requirements. The attention was drawn to the fact that 206 software technicians were employed in the eligible STP unit out of total employee strength of 1086 employees and the services rendered for STP unit was separately and distin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not entitle him to claim the said deduction and further, other assessment years have been reopened, wherever possible, by the revenue, to deny the deduction to the assessee and therefore, the stand of Ld. CIT(A) as quite justified. 5.1 We have carefully heard the rival contentions and perused relevant material on record. Ground No. 1 has not been contested before us. In Ground Nos. 8 to 11, the assessee is aggrieved by non-adjudication of certain quantum additions / claims by Ld. CIT(A). The remaining Grounds from 2 to 7 are inter-connected grounds which are related with deduction u/s 10A and computation thereof. The same are taken up first. 5.2 Upon perusal of orders of lower authorities and documents placed in the paper book, we find that the premises situated at 201-2224, 2nd Floor, Tower-B, Diamond District, Kodihally Village Airport Road, Bangalore was being shared by STP units as well as non-STP units and both units were engaged in providing similar kind of software services. The Ld. AO disputed the computation of profits derived by the assessee whereas Ld. CIT(A) opined that the assessee was not eligible to claim any deduction u/s 10A at all since the natur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial case law which holds that software recorded on any tape, disc or perforated media are goods. The term computer software has been defined, for the purpose of the said Section, in Explanation 2 to Section 10A. Clause (a) refers to computer programmes recorded in disc, tape or perforated media or other information storage device. Clause (a) refers to the general or common meaning associated with the term, 'computer software . However, clause (b) expands the meaning of the term 'computer software and broadens it to include any customized electronic data or any product or service of similar nature, as may be notified by the Board. The expression, 'any customized electronic data would mean data, which is customized; but it need not be computer software. Processing or customisation, normally would involve assimilation, correction, filtration, etc. of the data. The requirement is that it should be customised. However, clause (b) does not end with 'customized electronic data and the legislature wanted to further expand the scope of the term, 'computer software and thus the wide and broad expression, any product or service of similar nature, as may be notified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c data, as generally understood. Any product or service of similar nature would include in its ambit, product and services which were enabled by, i.e. would rely upon, or are driven by information technology. This becomes clear when we refer to the wide ambit of the divergent and varied services covered in the different clauses like, (ii) call centres ... (vii) human resources services ... (viii) insurance claim processing ... (xii) remote maintenance and, (xiv) support centres . These services would not necessarily and primarily involve customised data processing, but nevertheless, these are information technology enabled services. In case of call centres, queries and questions from a customer of a third company are answered by an employee of the assessee based in India. The said task is performed with the aid and help of information technology but it would not be a case of customised electronic data service or export thereof. Similar exercise may be undertaken in case of remote maintenance or support centres, which answer queries and gives suggestions by e-mails or through voice and/or video communications. These services would not normally involve processing or sending custom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... country to earn foreign exchange. 11. Appropriate, in this regard, would be to refer to three decisions of the Supreme Court starting with Rainbow Steels Ltd. Muzaffarnagar Anr. Vs. C.S.T.; U.P. Anr. (1981) 2 SCC 141, wherein the court cautioned that the principle of noscitur a sociis, in general should be restricted, but applied the same stating that the word, 'old occurring in Entry No. 15 should be given a restricted meaning - a sense analogous to that of less general words clubbed with it. It was specified that the said principle would be applicable where there are two or more words, susceptible of analogous meaning, clubbed together and the intention is that they would be understood to be used in their cognate sense, taking colour from each other, thereby meaning that more general being restricted to that of a less general. Reference was made to two decisions in State of Bombay vs. Hospital Mazdoor Sabha AIR 1960 SC 610 and Corporation of the City of Nagpur v. Employees AIR 1960 SC 675 where the said doctrine had not been applied in construing the definition of 'industry because the Legislature had deliberately used wider words and defined the word correspon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruction of the statute or its provisions but the intent of the legislature cannot be altogether ignored and the construction which really subserves the purpose of the enactment, must be adopted rather than one which defeats it. No part of the provision should be rendered surplus or otiose. 14. The Board has issued a notification as per the mandate and empowerment under Section 10A and this is not a case of issue of circular under Section 119 which are issued for different purposes and have another purport. Notification is a piece of delegated legislation and to that extent cannot be contrary to the principal enactment nor can it whittle down the effect of the same. Albeit, clause (b) of Explanation 2 to Section 10A has been worded in a manner which enforces the view and the opinion that Legislature, in their wisdom, has left it to the Board to decide which product or services of similar nature would qualify and should be treated as falling under clause (b), in addition to customised data processing. The intention of the Legislature was not to constrain or restrict but to enable the Board to include several services or products of similar nature in the ambit of the provision. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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