The ITO, Ward-4(1), Ahmedabad V. Elegant Microweb Technologies Pvt. Ltd., Ahmedabad

ITA 1140/AHD/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9855 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 13-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: A C SHAH
• Keywords: Benefit of exemption

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABA D (BEFORE HON'BLE SHRI G.D. AGRAWAL, V.P.(AZ) & HON BLE SHRI T.K. SHARMA, J.M. ) I.T.A. NO. 1140/AHD./2010 ASSESSMENT YEAR : 2006-2007 INCOME TAX OFFICER, WARD-4(1), -VS.- M/S. ELEGANT MICROWEB TECHNOLOGIES PVT. LTD., AHMEDABAD AHMEDABAD (PAN : AAACE 3459 J) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI C.K. MISHRA, S R. D.R. RESPONDENT BY : SHRI A.C. SHAH O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE CO MMON ORDER DATED 04.01.2010 OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -VIII, AHMEDABAD ALLOWING THE CLAIM OF ASSESSEE UNDER SECTION 10A OF THE INCOME TAX ACT, 1 961 FOR THE ASSESSMENT YEAR 2006-07. 2. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF R EVENUE SHRI C.K. MISHRA, LD. SR. D.R. APPEARED AND CONTENDED THAT THE LEARNED COMMISSIONE R OF INCOME TAX (APPEALS) HAS NOT APPRECIATED THE FACT THAT THE ASSESSEE HAS GOT THE WORK DONE THROUGH CONSULTANTS AND PAID CONSULTANCY CHARGES TO THEM. THE ASSESSEE HAS NOT P RODUCED OR MANUFACTURED ANY ITEM WHICH WILL ENTITLE THEM TO CLAIM DEDUCTION UNDER SECTION 10A OF THE INCOME TAX ACT AND LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE HELD THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION UNDER SECTION 10A. 3. ON THE OTHER HAND, SHRI A.C. SHAH, LD. COUNSEL A PPEARING ON BEHALF OF THE ASSESSEE VEHEMENTLY SUPPORTED THE ORDER OF LEARNED COMMISSIO NER OF INCOME TAX (APPEALS). THE LD. COUNSEL OF THE ASSESSEE POINTED OUT THAT FACTS AND CIRCUMSTANCES OF THE CASE IN THE ASSESSMENT YEAR UNDER APPEAL ARE SAME AS IN THE EARLIER TWO AS SESSMENT YEARS. IN THE EARLIER TWO ASSESSMENT YEARS, LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FOLLOWING THE DECISION DATED 23.10.2009 OF ITAT, B BENCH, AHMEDABAD IN ASSESSEES OWN CAS E IN ITA NOS. 2138/AHD/2006 & 2 ITA NO. 1140/AHD/2010 2509/AHD/2007 FOR THE ASSESSMENT YEARS 2003-04 & 20 04-05 RESPECTIVELY HELD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 10A OF THE A CT. IN THE ASSESSMENT YEAR UNDER APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ME RELY FOLLOWED THE DECISION OF THE TRIBUNAL IN THE ASSESSMENT YEARS 2003-04 AND 2004-0 5 (SUPRA), THEREFORE, THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) BE UPHE LD. 4. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THE IMPUGNED ORDER, THE LEARNED COMMISSIO NER OF INCOME TAX (APPEALS) HAS RECORDED A FINDING OF FACT THAT ASSESSEE IS ENGAGED IN THE B USINESS OF DEVELOPMENT AND EXPORT OF SOFTWARE FROM CUSTOM BONDED WAREHOUSES RECOGNIZED BY THE STP I. THE ASSESSING OFFICER HAS REJECTED THE ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 10A ON THE GROUND THAT IT DID NOT PRODUCE THE SOFTWARE ITSELF AND IT ENGAGED PROFESSIONALS. IT IS PERTINENT TO NOTE THAT IN THE EARLIER TWO ASSESSMENT YEARS ALSO, FACTS ARE IDENTICAL WITH THA T OF THE ASSESSMENT YEAR UNDER APPEAL. IT IS EVIDENT FROM THE OBSERVATION OF THE ITAT, B BENCH , AHMEDABAD VIDE ORDER DATED 23.10.2009 IN PARA 8 IN ASSESSEES OWN CASE IN ITA NOS. 2138/A HD/2006 & 2509/AHD/2007 FOR THE ASSESSMENT YEARS 2003-04 & 2004-05 RESPECTIVELY, WH ICH IS AS UNDER :- '8 THE FACTS AS POINTED OUT BY THE LEARNED AUTHOR ISED REPRESENTATIVE OF THE ASSESSEE CLEARLY INDICATED THAT THE SOFTWARE WE RE DEVELOPED IN-HOUSE BY THE ASSESSEE. THERE IS NO BAR IN APPOINTING CONSULT ANT ON THE JOB AND, FURTHER, MERELY BECAUSE CONSULTANTS ARE EMPLOYEES O F SISTER CONCERN, ASSESSEE CANNOT BE DENIED THE BENEFIT OF EXEMPTION U/S.10A OF THE I.T. ACT, 1961 BY HOLDING THAT SOFTWARE WERE NOT DEVELOPED IN -HOUSE. FOR THE PURPOSE OF DEVELOPMENT OF SOFTWARE, THE ASSESSEE IS REQUIRED TO HIRE EMPLOYEES/PROFESSIONALS OR MAY OUTSOURCE PART OF TH E JOB. MOST IMPORTANT IS THAT THE BASIC DESIGN, THEME, STRUCTURE SHOULD B ELONG TO THE ASSESSEE. THE NEGOTIATIONS WITH THE CLIENTS; HOW THE PAYMENT ARE RECEIVED BY THE ASSESSEE. AND LEGAL ACCOUNTABILITY FOR CORRECTNESS OF THE SOF TWARE SHOULD VEST ON THE ASSESSEE. MERELY BECAUSE PART OF THE SOFTWARE WAS D EVELOPED IN-HOUSE WITH THE HELP OF CONSULTANT OF SISTER CONCERN, IT IS INC ORRECT TO INFER THAT ASSESSEE HAS HIMSELF NOT DEVELOPED THE SOFTWARES. THE ASSESS ING OFFICER HAS CONVENIENTLY IGNORED OTHER FACTORS, SUCH AS, IN-HOU SE DEVELOPMENT OF SOFTWARE, AGREEMENT WITH SISTER CONCERN, PAYMENT OF THE CONSULTANCY CHARGES BY THE ASSESSEE TO THE SISTER CONCERN FOR U TILIZING ITS CONSULTANTS, AND FURTHER, THAT ONLY PART OF THE TOTAL EXPORTS WE RE DEVELOPED WITH THE HELP OF CONSULTANTS OF THE SISTER CONCERN AND, THEREFORE , ENTIRE EXPORT RECEIPTS AND INCOME THEREFROM SHOULD NOT BE SUBJECTED TO DIS ALLOWANCE OF EXEMPTION. NOTWITHSTANDING, WE DO NOT UPHOLD THE ST AND OF THE ASSESSING OFFICER AND OF LEARNED D.R. THAT ASSESSEE HAS NOT H IMSELF DEVELOPED THE SOFTWARE. THE ASSESSEE IS RECOGNIZED SOFTWARE DEVEL OPING CONCERN. ACCORDINGLY, THE FIRST REASON ADVANCED BY THE LD D. R. DISALLOWING THE EXEMPTION IS REJECTED. REGARDING NON-TRANSMISSION O F SOFTWARES, IT IS 3 ITA NO. 1140/AHD/2010 WORTHWHILE TO POINT OUT THAT HE HAS RECEIVED PAYMEN TS IN CONVERTIBLE FOREIGN EXCHANGE WHICH IS CERTIFIED BY RBI. IT IS, THEREFOR E, DIFFICULT TO HOLD THAT THE SOFTWARES SO DEVELOPED BY THE ASSESSEE WERE NOT TRA NSMITTED TO FOREIGN CLIENTS. FURTHER, THE DATA SUBMITTED BY THE ASSESSE E AS TO HOW AND WHEN SOFTWARES SO DEVELOPED WERE TRANSMITTED WERE CONVEN IENTLY IGNORED BY THE ASSESSING OFFICER. THE FACT OF TRANSMISSION OF THE DATA AND SOFTWARE IS ALREADY PLACED ON RECORD AND THERE IS NOTHING BROUG HT ON BY THE ASSESSING OFFICER TO COUNTER THE DATA SUBMITTED BY THE ASSESS EE. EVEN STPI HAS CONFIRMED THE TRANSMISSION OF SOFTWARE TO FOREIGN C LIENTS. ACCORDINGLY, THIS REASON OF THE ASSESSING OFFICER IS ALSO REJECTED.' 5. IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS MERELY FOLLOWED THE DECISION DATED 23.10.2009 OF THE TRIBU NAL IN ASSESSEES OWN CASE IN ITA NOS. 2138/AHD/2006 & 2509/AHD/2007 FOR THE ASSESSMENT YE ARS 2003-04 & 2004-05 RESPECTIVELY. IN THE ASSESSMENT YEAR UNDER APPEAL, FACTS ARE IDEN TICAL WITH THAT OF THE EARLIER YEARS WE THEREFORE, INCLINE TO UPHOLD THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 01.10.201 0 SD/- SD/- (G.D. AGRAWAL) (T.K. SHARMA ) VICE-PRESIDENT (AZ) JUDICIAL MEMBER DATED : 01/10 / 2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A.) CONCERNED (4) CIT CONCERNED, (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGIS TRAR, ITAT, AHMEDABAD LAHA/SR.P.S.