Deputy Commissioner of Income tax, Bangalore V. M/s Informatics India Ltd, Bangalore

ITA 1090/BANG/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0325 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 04-05-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 22-08-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR SHANKAR PRASAD
• Assessee Lawyers: S V RAVISHANKAR
• Keywords: Opportunity of being heard
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH B, BANGALORE BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO.1090(BANG) 2014 (ASSESSMENT YEAR : 2010-11) THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-11(4), 5 TH FLOOR, RASHTROTHANA BHAVAN, BANGALORE APPELLANT VS M/S INFORMATICS INDIA LTD., , NO.194, R.V.ROAD, SOUTH END CIRCLE, BASAVANAGUDI, BANGALORE-560 004 PAN NO.AAACI3561K RESPONDENT REVENUE BY : DR. SHANKAR PRASAD, JCIT ASSESSEE BY : SHRI S.V.RAVI SHANKAR, ADVOCATE DATE OF HEARING : 04-05-2016 DATE OF PRONOUNCEMENT : 1 7-06-2016 O R D E R PER SHRI A. K. GARODIA, AM: THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDE R OF THE LD. CIT(A)-I, BANGALORE DATED 30-05-2014 FOR THE ASSESS MENT YEAR 2010-11. 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLL OWING GROUNDS; ITA NO.1090(BANG)2014 2 L . THE ORDER OF THE CIT (A) I S OPPOSED TO LAW AND THE FACTS A N D C I RCUMSTANCES OF THE CASE. 2 . ' T HE CIT ' (AY ERRED IN FOLLOWING TH E D ECISION OF THE ITAT I N ITA NO . 1504/BANG/Z013 DTD . 16-4-Z014 IN THE ASSESSEE ' S OWN CASE AND DIRECTING TO ALLOW DEDUCTION U/S . 10A WITHOUT APPRECIATING THAT IN THE RELIED UPON OR DER THE ITAT DID NOT SPECIFICALLY ALLOW THE DEDUCTION U /S . 10A BUT SET ASIDE THE ORDER THE OF THE CIT(A) FOR THE A . Y . Z009-1O AND REMANDED THE ISSUE TO THE AO FOR FRESH CONSIDER ATION OF THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S . 1DA . 3 . THE CIT (A) ERRED IN FOLLOWING THE DECISION OF THE ITAT I N ITA NO . 1504/BANG/Z013 DTD . 16-4-Z014 AND DIRECTING TO ALLOW DEDUCTION U/ S . 10A WITHOUT APPRECIATING THAT THE ORDER OF THE ITA T HAS NOT BEEN ACCEPTED A ND AN APPEAL U/S . Z60A HAS BEEN SUGGESTED AGAINST THE SAID ORDER . 4 . THE CIT (A) ERRED I N HOLDING THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURE OF COMPUTER SOFTWARE AS ENVISAGED I N SECT I ON 1OA/1OB WITHOUT APPRECIATING THAT BE I NG IN THE BUSINESS OF CO M PUTER S OFTWARE ONLY DOES NOT ENTITLE AN ASSESSEE T O CLA I M DEDUCT I ON WHICH IS SPEC I FICALLY PROVIDED TO T H OSE ASSESSEES WHO MANUFACTURE OR PRODUCE ANY ARTICLE OR TH I NG OF COMPUTER SOFTWARE. 5 . THE CIT (A) ERRED IN NOT APPRECIATING THE FACT THAT THE CLAUSE (V) OF SEC .1 OB STATES THAT THE DEDUCTION SHALL NOT BE ADMISSIBLE UNLESS THE ASSESSEE FURNISHES THE PRESCR IBED FORM ALONG WITH THE RETURN OF INCOME. ITA NO.1090(BANG)2014 3 6 . THE C IT (A) ERRED IN ALLOWING THE APPEALS OF THE ASSESSEE AND DIRECTING THE AO TO ALLOW DEDUCTION U/ S.1OA EVEN THOUGH IT HAD ORIGINALLY MADE A CLAIM OF DEDUC TION U/S . 10B WITHOUT APPRECIATING THAT THE JURISDICTIONAL HI GH COURT IN THE CASE OF BAEHAL SOFTWARE LTD., WHICH IN ITS ORDER DATED 13-2011 IN ITA 136 OF 2010 HAS HELD THA T ON THE FACTS OF THE CASE THOUGH IT WAS SATISFIED THAT THE ASSESSEE WAS ENTITLED TO THE BENEFITS OF DEDUCTION, IT HAS TO BE DENIED THE SAID BENEFIT FOR NON-COMPLIANCE TO TH E MANDATORY REQUIREMENT OF LAW. 7. THE CIT(A) ERRED IN ALLOWING THE APPEALS OF THE ASSESSEE AND DIRECTING THE AO TO ALLOW DEDUCTION U/ S 10A EVEN THOUGH HE ASSESSEE HAD CLAIMED DEDUCTION U/S 1 0B BY FILING FORM 56G RW RULE 16E WITHOUT APPRECIATING THAT THE ASSESSEE HAD NOT FURNISHED FORM 56F RW RULE 16D FO R CLAIM OF DEDUCTION U/S 10A ALONG WITH THE RETURN, BUT FIL ED IT BEFORE THE CIT(A) AND THAT TH4RE IS NO PROVISION UN DER THE ACT TO SHIFT THE DEDUCTION FROM SECTION 10B O 10A O N A BEING FOUND TO BE NOT ELIGIBLE FOR THE OTHER DEDUCTION AN D THAT THE CONDITIONS FOR ALLOWING DEDUCTIONS U/S 10B AND 10A STAND ON DIFFERENT FOOTING AS HELD BY THE ITAT HYDERABAD IN THE CASE OF VNS MARKO TECHNOLOGIES PVT.LTD., VS DCIT (I TA NO.577/HYD/2012) 8 FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT(A) IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND HAT OF THE AO MAY BE RESTORED. 9.THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND O R DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL. ITA NO.1090(BANG)2014 4 3. THE LD. DR OF THE REVENUE SUPPORTED THE ASSESSM ENT ORDER. HE SUBMITTED THAT IN AY: 2009-10 IN ITA NO.1504/BANG/2 013 DATED 16-04- 2014, THE ISSUE REGARDING THE ALLOWABILITY OF DEDUC TION U/S 10A WAS RESTORED BACK TO THE FILE OF THE AO FOR A FRESH CON SIDERATION. HE ALSO SUBMITTED THAT IN THE IMPUGNED ORDER, THE LD. CIT(A ) HAD ALSO FOLLOWED THE SAME TRIBUNAL ORDER, BUT INSTEAD OF RESTORING T HE MATTER TO THE FILE OF THE AO OR DECIDING THE MATTER AFTER OBTAINING REMAN D REPORT, HE HAS STRAIGHT AWAY ALLOWED DEDUCTION TO THE ASSESSEE U/S 10A OF THE ACT. HE ALSO SUBMITTED THAT ADMITTEDLY, THE LD. CIT(A) H AD NO POWER TO RESTORE THE MATTER BACK TO THE FILE OF THE AO AND T HEREFORE, HE SHOULD HAVE DECIDED THE ISSUE HIMSELF AFTER OBTAINING REMA ND REPORT FROM THE AO IN THE LIGHT OF THE DIRECTIONS OF THE TRIBUNAL I N AY: 2009-10 OR THE TRIBUNAL MAY RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR A FRESH DECISION IN THE LINE WITH THE SAME DIRECTIONS AS WE RE GIVEN BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE AY: 2009-10 . AS AGAINST THIS, THE LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF T HE LD. CIT(A). HE ALSO PLACED RELIANCE ON THE JUDGMENT OF HONBLE KARNATAK A HIGH COURT RENDERED IN THE CASE OF M/S MAXIM INDIA INTEGRATED CIRCUIT DESIGN PVT.LTD., IN ITA NO.465 OF 2008 DATED 26-07-2011,CO PY OF WHICH HAS BEEN SUBMITTED. 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS. WE FIND T HAT IN THE IMPUGNED ORDER, LD. CIT(A) HAD RE-PRODUCED PARA -17 TO 22 OF THE ITA NO.1090(BANG)2014 5 TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR THE ASSES SMENT YEAR 2009-10. FOR THE SAKE OF READY REFERENCE, THESE PARAS OF THE TRIBUNAL ORDER ARE REPRODUCED BELOW: 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERUSAL OF THE ORDER OF ASSESSMENT SHOWS THAT THE QUESTION WHETHER THE NATURE OF SERVICES RENDERED BY THE ASSESSEE CAN BE SAID TO BE DATA PROCESSING AND CON TENT DEVELOPMENT FALLING WITHIN THE NOTIFICATION ISSUED U/S. 10A OF THE ACT, HAS NOT BEEN EXAMINED BY THE AO IN THE PROPER PERSPECTIVE. ON THE ABSTRACTING AND INDEXIN G SERVICES, THE AO HAS RELIED ON THE REVENUE RECOGNIT ION AS EXPLAINED IN THE NOTES TO ACCOUNTS OF THE ASSESSEE WHEREIN THERE IS A REFERENCE TO SALE OF PRINTED E- JOURNALS SUBSCRIPTIONS. FROM THE SAME, HE HAS CONCLUDED TH AT THE ASSESSEE WAS IN THE BUSINESS OF E-TRADING. WE F AIL TO SEE AS TO HOW THE REVENUE RECOGNITION BY AN ASSESSE E WITH REFERENCE TO SALE OF PRINTED E-JOURNALS SUBSC RIPTION WILL HAVE ANY BEARING ON THE NATURE OF SERVICES REN DERED BY THE ASSESSEE. AS WE HAVE ALREADY SEEN THE ASSESSEE WAS IN THE BUSINESS OF DISTRIBUTION OF JOU RNALS, CD ROM, DATA BASES AND ELECTRONIC DATA. THE ASSESS EE ALSO SET UP A STP UNIT FOR EXPORT OF CONTENT DEVELO PMENT SERVICES. THE ASSESSEE HAS AN APPROVAL FOR SETTING UP OF STP UNIT. THE AO HAS CLEARLY PROCEEDED ON A WRONG BASIS IN CONCLUDING THAT THE ABSTRACTING & INDEXIN G SERVICES WERE NOT IN THE NATURE OF DATA PROCESSING OR CONTEND DEVELOPMENT. WE ARE OF THE VIEW THAT THE EXPRESSION DATA PROCESSING WILL HAVE TO RECEIVE A BROAD MEANING, KEEPING IN VIEW THE PURPOSE BEHIND T HE ITA NO.1090(BANG)2014 6 PROVISIONS OF SEC.10A/10B OF THE ACT WHICH IS TO AU GMENT FOREIGN EXCHANGE EARNINGS. 18. WITH REGARD TO THE DIRECTORY COMPILATION AND UPDATING SERVICES, THE AO HAS MERELY OBSERVED THAT THE SAME IS NOTHING BUT PROVIDING TECHNICAL SERVICES TO CLIENTS. IN OUR VIEW THE ABOVE SERVICE GOING BY TH E VERY NATURE OF SERVICE WILL BE DATA PROCESSING. THE DAT A RECEIVED IN ONE FORM IS CONVERTED INTO ANOTHER FORM AND DELIVERED ABROAD. THERE IS CERTAINLY VALUE ADDITIO N TO THE DATA RE-TRANSMITTED ABROAD. IT IS FOR THIS VALUE A DDITION AND GETTING BACK THE DATA IN A DIFFERENT FORM THAT THE ASSESSEE RECEIVES REMUNERATION. CLEARLY THE SAME W ILL BE IN THE NATURE OF DATA PROCESSING. 19. WITH REGARD TO DATA CONVERSION SERVICES, THE AO HAS MERELY OBSERVED THAT CONVERTING SCANNED CONTENT TO READABLE TEXT WOULD BE ONLY RENDERING OF TECHNICAL SERVICES. WE ARE OF THE VIEW THAT THE SAID SERVICE WOULD BE IN THE NATURE OF CONTENT DEVELOPMENT AS ENVISA GED IN THE CBDT CIRCULAR REFERRED TO IN THE EARLIER PAR T OF THIS ORDER. 20. WITH REGARD TO METADATA COMPILATION AND UPDATING SERVICES, HE HAS MERELY OBSERVED THAT THE ASSESSEE WAS ONLY PROVIDING DATA AND THAT WOULD BE ONLY PROVIDING TECHNICAL SERVICES. IN OUR VIEW THE SAID SERVICE WOULD FALL EITHER WITHIN THE EXPRESSION CONTENT DEVELOPMENT OR DATA PROCESSING ENVISAGED BY THE CBDT CIRCULAR REFERRED TO IN THE EARLIER PART OF TH IS ORDER. 21. IT IS CLEAR THAT THE AO HAS NOT EXAMINED THE CBDT CIRCULAR DATED 26.9.2000. IN OUR VIEW, THE TER M DATA PROCESSING WOULD BE WIDE ENOUGH TO COVER THE ITA NO.1090(BANG)2014 7 SERVICES RENDERED BY THE ASSESSEE. THE CIT(APPEALS ) HAS ONLY APPROVED THE FINDINGS OF THE AO AND HAS NO T GIVEN HIS INDEPENDENT VIEW ON THE ISSUE. WE THEREF ORE HOLD THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS MANUFACTURE OF COMPUTER SOFTWARE AS ENVISAGED IN SEC.10A/10B OF THE ACT. 22. ADMITTEDLY THE ASSESSEE DID NOT HAVE THE REQUIRED APPROVAL AS ENVISAGED U/S.10B OF THE ACT. THE ASSESSEE HOWEVER CLAIMS IT HAS THE REQUIRED APPROVA L FOR ALLOWING DEDUCTION U/S.10A OF THE ACT. WITH REGARD TO THE QUESTION AS TO WHETHER THE ASSESSEE CAN BE ALLOWED TO SHIFT THE CLAIM FOR DEDUCTION FROM SECTION 10B TO S ECTION 10A OF THE ACT, WE HAVE ALREADY SEEN THAT IN THE PA ST THE ASSESSEE HAD BEEN CLAIMING DEDUCTION U/S. 10A OF TH E ACT. IN OUR VIEW, THE DECISION RENDERED BY THE ITA T BANGALORE BENCH IN THE CASE OF ANSR SOURCE INDIA PVT. LTD. (SUPRA), SQUARELY COVERS THE ISSUE AND THE CLAIM OF THE ASSESSEE SHOULD BE DIRECTED TO BE EXAM INED IN THE LIGHT OF THE PROVISIONS OF SECTION 10A OF TH E ACT AND FOR THIS PURPOSE THE REPORT OF THE AUDITOR IN FORM 56F OF THE ACT FILED BEFORE THE CIT(A) IS ADMITTED AS ADDI TIONAL EVIDENCE. WE ARE OF THE VIEW THAT, IN THE INTEREST OF JUSTICE, THE ISSUE SHOULD BE DIRECTED TO BE EXAMINE D BY THE ASSESSING OFFICER AFRESH U/S. 10A OF THE ACT IN THE LIGHT OF THE OBSERVATIONS MADE BY US IN THE EARLIER PART OF THIS ORDER. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(APPEALS) AND REMAND THE ISSUE TO THE ASSESSING OFFICER FOR FRESH CONSIDERATION CLAIM OF THE ASSESS EE FOR DEDUCTION U/S.10A OF THE ACT. THE ASSESSING OFFICE R WILL DECIDE THE ISSUE AFRESH AFTER AFFORDING THE ASSESSE E OPPORTUNITY OF BEING HEARD. ITA NO.1090(BANG)2014 8 5. FROM THE ABOVE PARAS OF THE TRIBUNAL ORDER IN A Y: 2009-10, IT IS SEEN THAT IN THAT YEAR, THE MATTER WAS RESTORED BAC K TO THE FILE OF THE AO FOR A FRESH DECISION REGARDING ASSESSEES CLAIM FOR DEDUCTION U/S 10A OF THE IT ACT, 1961, INSTEAD OF SEC.10B OF THE IT ACT, 1961 CLAIMED EARLIER. IN THE PRESENT YEAR ALSO, THE ENTIRE DISCUSSION IN THE ASSESSMENT ORDER IS REGARDING ALLOWABILITY OF DEDUCTION U/S 10B OF THE IT ACT AND THERE WAS NO CLAIM BEFORE THE AO FOR DEDUCTION U/S 10A OF TH E ACT IN THE PRESENT YEAR ALSO. HENCE, WE FIND FORCE IN THE SUBMISSIONS OF THE LD. DR OF THE REVENUE THAT THE MATTER SHOULD GO BACK TO THE FILE OF THE AO IN THE PRESENT YEAR ALSO AS HAS BEEN RESTORED BACK BY THE TRIBUNAL IN AY: 2009-10. 6. REGARDING THE JUDGMENT OF HONBLE KARNATAKA HIG H COURT IN THE CASE OF CIT VS M/S MAXIM INDIA INTEGRATED CIRCUIT D ESIGN PVT.LTD.(SUPRA) ON WHICH RELIANCE HAS BEEN PLACED B Y THE LD. AR OF THE ASSESSEE, WE FIND THAT IN OUR CONSIDERED OPINION, T HIS JUDGMENT IS NOT APPLICABLE IN THE PRESENT CASE BECAUSE IN THAT CASE , THE ISSUE IN DISPUTE WAS WHETHER THE UNDERTAKING OF THE ASSESSEE IN QUES TION WAS FORMED BY SPLITTING UP OR NOT. IN THE PRESENT CASE, THERE IS NO SUCH DISPUTE AND THEREFORE, IN OUR CONSIDERED OPINION, THIS JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT IS NOT RELEVANT FOR THE ISSUE IN DISPUTE BEFORE US IN THE PRESENT CASE. HENCE RESPECTFULLY FOLLOWING T HE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR AY: 2009-10 OF WHICH THE RE LEVANT PARAS ARE ITA NO.1090(BANG)2014 9 REPRODUCE ABOVE, WE HOLD THAT IN THE PRESENT YEAR A LSO, THE MATTER SHOULD GO BACK TO THE FILE OF THE AO FOR A FRESH DE CISION AND ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LEARNED CIT (A) AND R ESTORE THE MATTER BACK TO THE AO FOR A FRESH DECISION WITH THE SAME DIRECT ION AS WERE GIVEN BY THE TRIBUNAL IN AY: 2009-10. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/ - (VIJAY PAL RAO) SD/ - (A.K. GARODIA) JUDICAL MEMBER AC C OUNTANT MEMBER BANGALORE: D A T E D : 17.06.2016 AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER, AR, ITAT, BANGALORE ITA NO.1090(BANG)2014 10 1. DATE OF DICTATION .. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P. S. .. 4 DATE ON WHICH THE ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT .. 5. DATE ON WHICH THE ORDER COMES BACK TO THE SR. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WE BSITE .. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO . 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER DOES FOR XEROX & ENDORSEMENT . 10. DATE ON WHICH THE FIL E GOES TO THE HEAD CLERK. 11 THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER. 12 THE DATE ON WHICH THE FILE GOES TO THE DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER 13 DATE OF DISPATCH OF OR DER