9911796707
TMI Blog2014 (11) TMI 1202X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Income Tax Act, 1961 (hereinafter referred to as 'the Act') and deduction of Rs. 19,01,72,212 u/s. 80 JJA of the Act. The return was processed u/s.143(1) of the Act and the case was subsequently taken up for scrutiny. The assessment was completed under section 143(3) of the Act vide order dt.28.12.2011 wherein the income of the assessee was determined at Rs. 71,92,02,988 as against the returned income of Rs. 20,68,31,450 due to the following additions thereto / disallowances made : i) Software expenses disallowed : Rs. 10,22,55,000. ii) Disallowance of deduction u/s.80JJA : Rs. 91,01,72,212. iii) Deduction u/s.10A of the Act was also restricted to Rs. 89,56,43,144 as against Rs. 92,54,15,257 claimed by the assessee. 2.2 Aggrieved by the order of assessment for Assessment Year 2008-09 dt.28.12.2011, the assessee preferred an appeal in respect of the above issues before the CIT(Appeals) - I, Bangalore. The learned CIT (Appeals) disposed off the assessee's appeal by order dt.27.3.2013 allowing the assessee partial relief. In this impugned order, the learned CIT (Appeals), (i) deleted the disallowance made by the Assessing Officer in respect of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground at S.No.1, the assessee has challenged the action of the learned CIT (Appeals) in disallowing the payments related to software expenses amounting to Rs. 3,05,16,386 on which TDS has been withheld on the grounds that the assessee was not granted opportunity of personal hearing or presenting technical / factual arguments in that regard. 5.2 However, in the course of appellate proceedings before us, this ground was not urged. We, therefore, dismiss this ground for non-prosecution. 6. Ground No.2 : Software Expenses held as capital expenditure. 6.1 In Ground No.2 of its appeal, the assessee has challenged the action of the learned CIT (Appeals) in upholding the finding of the Assessing Officer in capitalising software expenses amounting to Rs. 7,73,99,445, by holding these expenses to be in the nature of capital expenditure. 6.2 Before us, the learned Authorised Representative of the assessee submitted that the assessee itself had capitalised those software expenses which are capital in nature and only those software expenses which do not provide any enduring benefit have been debited to profit and loss account and claimed as revenue expenditure. To substantiate its claim th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra) and the decision of the Karnataka High Court in Toyota Kirloskar Motors P. Ltd. (supra), after giving effective opportunity of hearing to the assessee. Thus, this issue is allowed for statistical purpose. It is ordered accordingly." Following this decision of the co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2007-08, we also deem it proper to restore this issue back to the file of the Assessing Officer to examine and reappraise the additional evidence filed by the assessee in respect of expenditure incurred on purchase of software of Rs. 10 lakhs and above and decide the issue in accordance with the decisions of the Hon'ble High Court of Karnataka in the case of Toyota Kirloskar Motors P. Ltd. (supra) and of the Hon'ble High Court of Delhi in the case of Amway India Enterprises (supra), after affording the assessee adequate opportunity of hearing and to file required details in the matter. It is ordered accordingly. Thus, the assessee's Ground No.2 is treated as allowed for statistical purposes. 7. Ground No.3 : Initiation of penalty proceedings u/s.271(1)(c) of the Act. 7.1 In the Ground at S.No.3, the assessee chal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. The CIT (Appeals) ought to have considered the fact that the jurisdictional High Court decision relied upon by him has not been accepted by the department and a SLP has been filed before the Hon'ble Supreme Court which is pending. 9. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the CIT (Appeals) be reversed and that of the Assessing Officer be restored. 10. The appellant craves leave to add, to alter, amend or delete any of the grounds that may be urged at the time of hearing of the appeal." 10. The grounds raised at S.Nos.1, 9 and 10 of revenue's appeal are general in nature and therefore no adjudication is called for thereon. 11. Grounds No.2 to 5 : Deduction claimed u/s.80 JJA of the Act. 11.1 In the course of assessment proceedings, the Assessing Officer noted that during the year the assessee had claimed an amount of Rs. 19,01,72,212 as deduction under section 80 JJA of the Act. The Assessing Officer disallowed the assessee's claim for deduction under section 80 JJA of the Act as the assessee could not substantiate the claim, particularly with respect to the definition of "workmen" as it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; not be a casual workman; - not be a worker employed through contract labour; - be employed for at least 300 days during the relevant previous year; - an audit report should be furnished along with the return of income. (iii) If the above conditions are fulfilled, the eligible assessee would be able to claim 30% of the 'additional wages' as a deduction, which would be over and above the expenditure which is otherwise allowable as business expenditure to the company. Further, the deduction would be allowable for three years including the Assessment Year relevant to the previous year in which such employment is provided to the assessee company. (iv) The basis for deduction under section 80 JJA of the Act is the salary paid to the 'new regular workmen'. The section contains the definition of 'workmen', and is defined to have the same meaning assigned to it in clause (5) of section 2 of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him to produce something as a creation of his own, he would be employed on 'technical work' even though in carrying out that work he may have to go through a lot of manual labour or routine / repetitive work. (ix) In the case of a person employed in a technical capacity, the application of knowledge of a particular craft or work is the distinguishing feature. It is not necessary that the work that such a person does must be inventive, but it must necessarily be a work the contours of which are not pre-determined before that work is actually performed by the person employed in a technical capacity. This principle was brought out by the Hon'ble High Court of Bombay in the case of Bombay Dyeing and Manufacturing Co. Ltd. V R.A. Bidoo (q) (1991) I LLJ 98, 101-02. (x) Exclusion from the definition of 'workmen'. As mentioned above clause (iv) of section 2(3) of the Industrial Disputes Act, 1947 requires that the following conditions are to be fulfilled for a person to be excluded from the definition of a 'workman', namely : (a) he has to be employed mainly in a managerial or administrative capacity; or (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, the section would have to be interpreted in a purposive manner. (xvi) The co-ordinate bench of this Tribunal in the case of On Mobile Global Ltd. In ITA No.1163/Bang/2012 dt.21.2.2014 has held that the assessee, who was engaged in the development of computer software / ITES would be eligible for deduction u/s. 80 JJA of the Act in respect of salaries paid to its employees who qualified as 'workman'. The ld. A.R. prays that in view of the above submissions on fact and law, the grounds raised by revenue be dismissed. 11.5.1 We have heard the rival contentions and perused and carefully considered the material on record, including the judicial decisions cited. We find that this issue in question has been examined and considered by a co-ordinate bench of this Tribunal in the assessee's own case for Asst. Year 2007-08 in IT(TP)A No.1344/Bang/2011 dt.28.3.2013, wherein at para 36 thereof it was held as under :- " 36. We also find that the Tribunal in the case of Texas Instruments P. Ltd. In ITA No.1/Bang/2011, dt.7.9.2012, for the assessment year 2005-06, at para No.10.7, has remitted the matter back to the CIT(A) for fresh consideration. Hence, we are inclined t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... technical services abroad from export turnover. He recomputed the deduction under section 10A of the Act reducing the expenses on telecommunication charges and provision of technical services incurred in foreign currency without correspondingly reducing them from total turnover. On appeal, the learned CIT (Appeals) had allowed the assessee's appeal following the decision of the Hon'ble High Court of Karnataka in the case of Tata Elxsi Ltd. (supra). We find that the issue is covered in favour of the assessee by the decision of the Hon'ble High Court of Karnataka in the case of Tata Elxsi Ltd. (cited supra). The Hon'ble Court has held that for the purposes of computing deduction under section 10A of the Act, when the Export Turnover is to be arrived at by excluding expenses incurred on telecommunication charges, etc. incurred in foreign currency, the same expenses should be excluded from total turnover also. In the legal and factual matrix as discussed above, we find that the decision of the Hon'ble Karnataka High Court in the case of Tata Elxsi Ltd. (cited supra) is applicable to the case on hand and accordingly direct the Assessing Officer to recompute the deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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