Appeal details
Counselvise Citation
[2011] 134 COUNSELVISE.COM (IT) 3898 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 month(s) 21 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
27-05-2011
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
E
Next Hearing Date
05-05-2011
Assessment Year
2007-2008
Appeal Filed On
08-03-2011
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A NO. 1204/DEL/11 ASSTT. YEAR 2007-08 M.L. OUTSOURCING SERVICES PVT. LTD., B-137/1, EAST OF KAILASH, NEW DELHI. AADCM9508K VS. ITO, WARD 6 (1), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI S.C. VASUDEVA & SHRI SACHIN VA SUDEVA, CAS RESPONDENT BY: SHRI KISHORE B, SR. DR ORDER PER RAJPAL YADAV, JM: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF LD. CIT(A) DATED 30 TH NOVEMBER, 2010 PASSED FOR ASSTT. YEAR 2007-08. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE NOT IN CONSONANCE WITH RULE 8 OF ITAT RULES. THEY ARE DESCRIPTIVE AND ARGU MENTATIVE IN NATURE. IN BRIEF, THE GRIEVANCE OF ASSESSEE RELATES TO DENI AL OF DEDUCTION U/S 10A OF THE ACT. ITA NO. 1204/DEL/11 ASSTT. YEAR 2007-08 2 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE CO MPANY HAS FILED ITS RETURN ELECTRONICALLY ON 27.10.2007 AND DECLARED A NIL INCOME. THIS RETURN WAS PROCESSED U/S 143(1), BUT SUBSEQUENTLY, ITS CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND A NOTICE U/S 1 43(2) DATED 25 TH SEPTEMBER, 2008 WAS ISSUED AND SERVED UPON THE ASSE SSEE THROUGH REGISTERED POST. IN RESPONSE TO THE NOTICE, SHRI T R GOYAL AND MISS PARUL GUPTA, CHARTERED ACCOUNTANTS APPEARED BEFORE THE AO AND FILED THE REQUISITE DETAILS. 3. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THAT ASSESSEE HAD DECLARED A NET PROFIT OF RS. 88,49,972/-. IN TH E TAX AUDIT REPORT IT HAS CLAIMED THAT ASSESSEE IS INVOLVED IN THE BUSINESS O F EXPORT OF IT ENABLED SERVICES AND THEREFORE, IT IS ENTITLED FOR EXEMPTI ON U/S 10A @ 100% . AFTER CLAIMING THE ALLEGED EXEMPTION U/S 10A ASSESS EE HAS DECLARED NIL INCOME. LD. AO HAD ISSUED A SHOW CAUSE NOTICE VIDE QUESTIONNAIRE DATED 30 TH JULY, 2009, WHEREBY ASSESSEE WAS ASKED TO JUSTIFY ITS CLAIM FOR EXEMPTION U/S 10A OF THE ACT. IN RESPONSE TO TH E QUERY OF AO, IT WAS CONTENDED BY THE ASSESSEE THAT IT IS A 100% EXPORT ORIENTED UNIT REGISTERED UNDER STPI. IT WAS POINTED OUT TO THE AO THAT ASSESSEE WAS ENGAGED IN HIRING OVERSEAS IT CONSULTANTS FOR ITS C LIENTS MINDLANCE INC. USA. THE ASSESSEE HAS POINTED OUT THAT ITS ACTIVITI ES FALLS WITHIN THE AMBIT OF SUB CLAUSE B OF EXPLANATION 2 ATTACHED WIT H SECTION 10A READ ITA NO. 1204/DEL/11 ASSTT. YEAR 2007-08 3 WITH NOTIFICATION BEARING NO. SO.890(E) ISSUED BY T HE CBDT. THE AO WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSES SEE. HE ISSUED A FRESH QUERY ON 30 TH SEPTEMBER, 2009 WHEREBY HE DISCUSSED THAT ASSESSEE CLAIMED ITSELF ENGAGED IN HUMAN RESOURCE SERVICES B Y HIRING OVERSEAS IIT CONSULTANTS FOR CLIENTS. SERVICE RENDERED INCLU DES SOURCING, SCREENING AND INTERVIEWING EMPLOYEES IT SKILLS FOR RECRUITME NT ON BEHALF OF OVERSEAS CUSTOMERS. ACCORDING TO THE UNDERSTANDING OF AO, THIS DESCRIPTION OF SERVICE IS SIMPLY SIMILAR TO THAT OF A RECRUITMENT AGENT. IN RESPONSE TO THE QUERY OF THE AO, ASSESSEE HAS DEMON STRATED THE VARIOUS STEPS WHICH WERE UNDERTAKEN FOR COLLECTING THE DATA IN RESPECT OF ELIGIBLE EMPLOYEES, WHO COULD BE EMPLOYED BY THE US COMPANY. AFTER SHORT LISTING THE QUALIFICATION, THE POTENTIALITY O F THE CANDIDATE AND OTHER DETAILS, ASSESSEE TRANSMIT THOSE DATA TO ITS CLIENT IN USA. IN LIEU OF THAT SERVICES, IT RECEIVED THE PAYMENT. THE ASSESSEE HAS PREPARED A FLOW CHART EXHIBITING THE VARIOUS STEPS TAKEN BY IT IN P ROCESSING THIS DATA. THE FLOW CHART HAS BEEN NOTICED BY THE LD. AO ON PAGE 2 AND 3 OF THE IMPUGNED ORDER WHILE TAKING COGNIGENCE OF THE ASSES SEES SUBMISSION. THE LETTER OF THE ASSESSEE DATED 22 ND OCTOBER, 2009 READ AS UNDER :- ASSESSEE COMPANY PROVIDES RECRUITMENT SERVICES BY EXTENSIVELY USING INFORMATION TECHNOLOGY SKILLS. THE SERVICES PROVID ED BY THE ASSESSEE COMPANY ARE DIFFERENT AS IT USES VARIOUS SOFTWARES AND IT ENABLED TECHNOLOGY ITA NO. 1204/DEL/11 ASSTT. YEAR 2007-08 4 FOR PROVIDING SUCH SERVICES. MINDLANCE INC. USA REQ UIRED IT CONSULTANTS FOR THE DEVELOPMENT OF SOFTWARE ETC. IN U.S. THE ASSESS EE COMPANY WAS APPOINTED TO HIRE THE CONSULTANTS FOR MINDLANCE. TH E ASSESSEE COMPANY HAS A TEAM OF TECHNICAL RECRUITERS WHO PROVIDES THE CANDI DATES INFORMATION ETC. THROUGH ONLINE APPLICATION TRACKING TOOLS CALLED CA TS. THE USERID AND PASSWORD IS PROVIDED TO EACH ML RECRUITER. THE RECRUITMENT PROCESS INVOLVES THE FOLLOWING STA GES :- A) PLACEMENT OF ORDERS FROM MINDLANCE INC. TO MLOS FOR PLACEMENT OF IT CONSULTANTS IN USA DURING A SPECIFIC PERIOD. B) SOURCING OF TECHNICAL CONSULTANTS FROM US JOB BO ARDS LIKE MONSTER.COM. CAREERBUILDER.COM AND DICE.COM C) TECHNICAL INTERVIEWING OF SUCH CANDIDATES AND ON LINE TECHNICAL ASSESSMENT OF THE PASSED CANDIDATES BY USING INTERN ET SITES LIKE SKILLOMETER.COM. D) SUBMITTING OF SHORTLISTED TECHNICAL CANDIDATES T O MINDLANCE, INC, APPLICANT TRACKING SOFTWARE CALLED CATS E) MANAGING THE WORKFLOW OF THE CANDIDATE USING THE SAME CATS APPLICATION ALL THE ABOVE STEPS INVOLVE ITES TOOLS LIKE INTERES T, VOIP PHONE, PROPRIETARY SOFTWARE AND SUBSCRIPTION-BASED BEST SI TES. 4. THE AO DID NOT ACCEPT THE CONTENTION. HE PRIMARI LY HELD THAT ASSESSEE IS NOT CARRYING OUT ANY ACTIVITY WHICH COM ES WITHIN THE AMBIT OF ELIGIBILITY CRITERIA PROVIDED IN SECTION 10A. APART FROM THE NON FULFILLMENT OF THE MAIN CRITERIA, THE AO HAD MADE A REFERENCE TO T WO PERIPHERAL CIRCUMSTANCES. IN THE FIRST PERIPHERAL CIRCUMSTANCE S, HE RAISED THE SUSPICION WITH REGARD TO ITS POTENTIALITY FOR PROV IDING SUCH SERVICES AT ITS BANGALORE OPERATIONS. IN THE SECOND CIRCUMSTANCE, H E MADE A REFERENCE ABOUT CONSTITUTION OF THE ASSESSEE COMPANY AND HE H AS A SUSPICION THAT AMOUNT HAS BEEN TRANSFERRED BY THE FAMILY MEMBERS OF THE ASSESSEE WORKING IN USA. ITA NO. 1204/DEL/11 ASSTT. YEAR 2007-08 5 5. DISSATISFIED WITH THE ORDER OF AO, ASSESSEE CARR IED THE MATTER IN APPEAL BEFORE LD. CIT(A). BUT THE APPEAL DID NOT BR ING ANY RELIEF TO THE ASSESSEE. 6. LD. COUNSEL FOR THE ASSESSEE APPRISED US WITH TH E ACTIVITIES CARRIED OUT BY THE ASSESSEE. HE POINTED OUT THAT ASSESSEE C OMPANY IS INCORPORATED IN INDIA AND IS ENGAGED IN PROVIDING O UT SOURCED HUMAN RESOURCE SERVICES TO MINDLANCE INC. USA . MINDLANCE INC. IS A COMPANY INCORPORATED IN USA AND IS ENGAGED IN THE BUSINESS OF PROVIDING MANPOWER TO CLIENTS WHO ARE ENGAGED IN DEVELOPMENT OF SOFTWARE IN USA. WHENEVER A CLIENT REQUIRED MANPOWER IT CONTACT ED WITH MINDLANCE INC. WHO OUTSOURCED THE RECRUITMENT ACTIVITY TO THE ASSESSEE IN INDIA. IT SEARCHES CANDIDATES IN USA FROM INDIA FOR US EMPLOY ER. IN THAT ACTIVITY IT CONDUCT ONLINE TEST, PRELIMINARY INTERVIEW THEN FINAL INTERVIEW THEN ASSESSED THEIR ELIGIBILITY AND THEIR POTENTIALITY F OR EMPLOYMENT IN ANY SOFTWARE DEVELOPMENT COMPANY. HE POINTED OUT THAT A FLOW CHART EXHIBITING OF ALL THE ACTIVITIES WAS SUBMITTED BEFO RE THE AO WHICH IS AVAILABLE AT PAGE 60 OF THE PAPER BOOK. LD. COUNSEL FOR THE ASSESSEE FURTHER POINTED OUT THAT CASE OF THE ASSESSEE FALLS WITHIN THE AMBIT OF SECTION 10A EXPLANATION 2 (B) READ WITH NOTIFICATIO N NO. SO890(F) ISSUED ON 26 TH SEPTEMBER, 2000. LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT CLAUSE I OF EXPLANATION 2(A) DEFINES THE EXPRESSION COMPUTER SOFTWARE. ITA NO. 1204/DEL/11 ASSTT. YEAR 2007-08 6 ACCORDING TO IT, A COMPUTER SOFTWARE IS ANY COMPUTE R PROGRAMME RECORDED ON A DISK, TAPE PERFORATED MEDIA OR OTHER INFORMATION STORAGE DEVICE. HE FURTHER POINTED OUT THAT SUB CLAUSE B EXPLANATION 2 FURTHER PROVIDE THAT ANY CUSTOMIZE ELECTRONIC DATA OR ANY P RODUCT OR SERVICE OF SIMILAR NATURE, AS MAYBE NOTIFIED BY THE BOARD WOUL D COME WITHIN THE AMBIT OF EXPRESSION COMPUTER OR SOFTWARE. HE TOO K US THROUGH THE NOTIFICATION OF THE BOARD ISSUED UNDER SUB CLAUSE B OF CLAUSE I OF SECTION 10A, EXPLANATION 2 AND POINT OUT THAT AT S. NO. 8 O F THIS NOTIFICATION HUMAN RESOURCE SERVICES HAS BEEN RECOGNIZED AS IN FORMATION TECHNOLOGY ENABLED PRODUCT OR SERVICES BY THE BOARD . ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE, LD. REVENUE AUTHORITI ES HAVE FAILED TO CONSTRUE THE PROVISION IN ITS TRUE PERSPECTIVE. THE ASSESSEE IS NOT WORKING AS A RECRUITMENT AGENT OR IT IS NOT RECRUIT ING THE CANDIDATE. IT IS JUST PROCESSING THE POTENTIALITY OF CANDIDATES EMPL OYABLE BY ANY SOFTWARE DEVELOPMENT COMPANY. IN PARTICULAR, SUCH D ATA WAS CUSTOMIZE FOR ITS US COMPANY I.E. MINDLANCE INC. THE ASSESS EE IS CLAIMING DEDUCTION U/S 10A ON THE GROUND OF EXPORT / TRANSMI SSION OF THE DATE. IT HAS COLLECTED ON LINE IN RESPECT OF ELIGIBLE EMPLOY EES THAT DATA IS THE PRODUCT / SERVICE EXPORTED BY THE ASSESSEE WHICH EN ABLE IT TO CLAIM DEDUCTION U/S 10A OF THE INCOME TAX ACT WITH REGARD TO THE OTHER OBJECTIONS POINTED OUT BY THE AO. HE SUBMITTED THAT AO HAS RAISED AN ITA NO. 1204/DEL/11 ASSTT. YEAR 2007-08 7 OBJECTION ABOUT ITS OPERATION AT BANGALORE. HE SUBM ITTED THAT ASSESSEE HAD STARTED ITS OPERATION FROM GURGAON ON STPI. IT HAS TAKEN REGISTRATION FOR STPI NOIDA AS WELL AS GURGAON FOR CARRYING OUT IT AND IT ENABLED EXPORT SERVICE FROM GURGAON OFFICE. THE ASSESSEE WA S FACING DIFFICULTY FOR HANDLING ASSIGNMENTS FROM THE FOREIGN CLIENTS. IT HAS DECIDED TO SHIFT ITS OPERATION FROM GURGAON TO BANGALORE, WHERE THER E IS A LARGE POOL OF SKILLED PROFESSIONALS AVAILABLE. THE ASSESSEE WAS H AVING 11 EMPLOYEES IN THE MONTH OF AUGUST 2006 WHO WERE INCREASED TO 2 2 TILL THE MONTH OF MARCH, 2007. IT HAS PAID SALARY OF RS. 45.28 LACS D URING THIS PERIOD. THE ASSESSEE HAS ALSO PLACED ON RECORD COPY OF THE PURC HASE ORDERS FOR DEVELOPMENT OF SOFTWARE. IT TOOK THE BUILDING ON RE NT VIDE AGREEMENT EXECUTED IN THE MONTH OF AUGUST, 2006 AT BANGALORE FROM M/S. S J R INFRASTRUCTURE PVT. LTD. THE ASSESSEE HAS MADE AN A PPLICATION TO THE STPI BANGALORE AUTHORITIES FOR REGISTRATION ON 23 RD JANUARY, 2007. THE REGISTRATION HAS BEEN GRANTED ON 31 ST MARCH, 2007. ACCORDING TO THE ASSESSEE, IT WAS CARRYING OUT ITS ACTIVITY AND RAIS ED INVOICE ONLY WHEN REGISTRATION WAS RECEIVED I.E. ON THE LAST DATE OF THE ACCOUNTING YEAR. AS FAR AS THE OTHER OBSERVATION MADE BY THE AO IN PARA GRAPH NO. 5.4 AT PAGE 8 OF THE ASSTT. ORDER, HE POINTED OUT THAT ASS ESSEE IS AN INDEPENDENT ENTITY DULY CONSTITUTED UNDER THE COMP ANY LAW OF INDIA. IT IS PROVIDING SERVICES TO INDEPENDENT ENTITY INCORPORAT ED IN US ACCORDING TO ITA NO. 1204/DEL/11 ASSTT. YEAR 2007-08 8 THE LAWS OF THAT LAND THE AO HAD NOT POINT OUT ANY ILLEGALITY OR IRREGULARITY AS FAR AS JURIDICAL STATUS OF THE COMPANY AS SUCH. HE HAS JUST MADE PASSING REFERENCE FOR GIVING RISE TO SUSPICION ONLY . HE DID NOT COLLECT ANY SPECIFIC MATERIAL IN SUPPORT OF HIS SUSPICION. 7. LD. COUNSEL FOR THE ASSESSEE IN THE LAST, SUBMIT TED THAT ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESS EE BY THE ORDER OF THE THIRD MEMBER BENCH CHENNAI RENDERED IN THE CASE OF ITO VS. ACCURUM INDIA PVT. LTD. REPORTED IN 128 TTJ (CHENNAI TM) 24 9. HE SUBMITTED THAT IN THIS CASE, A SIMILAR SERVICE WAS PROVIDED. THER E WAS A DIFFERENCE OF OPINION BETWEEN THE LD. MEMBERS OF THE BENCH AND MA TTER WAS REFERRED TO THE THIRD MEMBER. THE MAJORITY VIEW IS THAT DED UCTION U/S 10A OF THE ACT WOULD BE ADMISSIBLE TO THE ASSESSEE. THE VIEW C ANVASSED BY THE LD. CIT(A) IN THE IMPUGNED ORDER IS SIMILAR TO THE VIEW EXPRESSED IN THE MINORITY VIEW OF THAT DECISION. LD. CIT(A) HAS ASSI GNED THE REASONS WHICH WERE THE ARGUMENTS OF THE LD. DR BEFORE THE CHENNAI BENCH. 8. LD. DR ON THE OTHER HAND, RELIED UPON THE ORDER OF REVENUE AUTHORITIES BELOW . HE POINTED OUT THAT ASSESSEE AS SUCH IS NOT MANUFACTURING OR DEVELOPING ANY COMPUTER OR SOFTWAR E. THE ALLEGED SERVICE OF HUMAN RESOURCE WOULD BE CONSTRUED IN THE LIGHT OF THE DEFINITION OF COMPUTER SOFTWARE PROVIDED IN EXPLANA TION 2 CLAUSE (IA). ITA NO. 1204/DEL/11 ASSTT. YEAR 2007-08 9 9. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. SECTION 10A AND EXPLANATION 2 APPENDED TO THIS SECTION HAVE A DIRECT BEARING ON THE CONTROVERSY. T HEREFORE, IT IS SALUTARY UPON US TO TAKE NOTE OF THE RELEVANT CLAUSES OF THI S SECTION. SECTION 10A (1) SUBJECT TO THE PROVISIONS OF THIS SECTION, A D EDUCTION OF SUCH PROFITS AND GAINS AS ARE DERIVED BY AN UNDERTAKING FROM THE EXP ORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE FOR A PERIOD OF 10 CONSECUTIVE AS SESSMENT YEARS BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS Y EAR IN WHICH THE UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE SUCH A RTICLES OR THINGS OR COMPUTER SOFTWARE, AS THE CASE MAY BE SHALL BE ALLO WED FROM THE TOTAL INCOME OF THE APPELLANT. X X X X X X X X X X X X X X (2) THIS SECTION APPLIES TO ANY UNDERTAKING WHICH F ULFILLS ALL THE FOLLOWING CONDITIONS, NAMELY :- (I) IT HAS BEGUN OR BEGINS TO MANUFACTURE OR PRODUC E ARTICLES OR THINGS OR COMPUTER SOFTWARE DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR: (A) COMMENCING ON OR AFTER THE 1 ST DAY OF APRIL, 1981 IN ANY FREE TRADE ZONE; OR (B) COMMENCING ON OR AFTER THE 1 ST DAY OF APRIL, 1994 IN ANY ELECTRONIC HARDWARE TECHNOLOGY PARK, OR AS THE CASE MAY BE, SO FTWARE TECHNOLOGY PARK (C) X X X X X X EXPLANATION 2 TO SECTION 10A COMPUTER SOFTWARE MEANS- (A) ANY COMPUTER PROGRAMME RECORDED ON ANY DISC, TA PE, PERFORATED MEDIA OR OTHER INFORMATION STORAGE DEVICE; OR (B) ANY CUSTOMIZED ELECTRONIC DATA OR ANY P RODUCT OR SERVICE OF A SIMILAR NATURE, AS MAY BE NOTIFIED BY THE BOARD ITA NO. 1204/DEL/11 ASSTT. YEAR 2007-08 10 10. THE BOARD WAS SUPPOSED TO NOTIFY CERTAIN PRODUC T OR SERVICES WHICH ARE OF SIMILAR NATURE UNDER SUB CLAUSE B OF EXPLANATION 2, I.E. ANY CUSTOMIZE ELECTRONIC DATA IS QUALIFIED FOR TREATMEN T AS A COMPUTER SOFTWARE ON WHOSE EXPORT DEDUCTION WOULD BE ADMISSI BLE TO AN ASSESSEE. THIS SUB CLAUSE FURTHER CLASSIFY THAT ANY OTHER SERVICE IF NOTIFIED BY THE BOARD THEN THOSE SERVICES WOULD AL SO QUALIFY FOR TREATMENT AS COMPUTER SOFTWARE. THE BOARD BY EXERCI SING ITS POWER HAS NOTIFIED 15 SERVICES FOR THE PURPOSE OF THIS CLAUSE . THE NOTIFICATION BEARING NO. SO890(E) READ AS UNDER :- S.O.890(E) IN EXERCISE OF THE POWERS CONFERRED B Y CLAUSE (B) OF ITEM (I) OF EXPLANATION 2 OF SECTION 10A, CLAUSE (B) OF ITEM (I ) OF EXPLANATION 2 OF SECTION 10B AND CLAUSE (B) EXPLANATION TO SECTION 80HHC OF THE INCOME-TAX ACT, 1961 (43 OF 1961) THE CENTRAL BOARD OF DIRECT TAXES HEREBY SPEC IFIES THE FOLLOWING INFORMATION TECHNOLOGY ENABLED PRODUCTS OR SERVICES AS THE CASE MAY BE FOR THE PURPOSE OF SAID CLAUSES NAMELY :- I) BACK-OFFICE OPERATIONS II) XXXX III) XXXX IV) XXXX V) XXXX VI) XXXX VII) HUMAN RESOURCES SERVICES VIII) XXXX IX) XXXX X) XXXX XI) XXXX XII) XXXX XIII) XXXX XIV) XXXX XV) XXXX [NOTIFICATION NO. 11512/F.NO.142/49/2000-TPL] ITA NO. 1204/DEL/11 ASSTT. YEAR 2007-08 11 11. FROM THE ABOVE DISCUSSION, IT EMERGES OUT THAT BASIC ISSUE REQUIRED ADJUDICATION BY US IS WHETHER INCOME DERIV ED BY THE ASSESSEE FROM TRANSMISSION OF DATA IN RESPECT OF ELIGIBLE EM PLOYEES FOR APPOINTMENT IN SOFTWARE DEVELOPMENT COMPANY IN THE UNITED STATE OF AMERICA WOULD QUALIFY THE DEDUCTION U/S 10A OF THE ACT OR NOT. WE ARE REQUIRED TO ADJUDICATE THIS ISSUE IN THE LIGHT OF M EANING FLOWING OUT FROM THE EXPRESSION COMPUTER SOFTWARE AS EXPLAINED IN EXPLANATION 2 (I) OF THE SECTION 10A OF THE ACT AND THE EXPRESSION HUMA N RESOURCE SERVICES EMPLOYED IN THE NOTIFICATION ISSUED BY TH E CBDT (EXTRACTED SUPRA).A BARE PERUSAL OF SECTION 10A OF THE INCOME TAX ACT WOULD INDICATE THAT IT PROVIDE A DEDUCTION ON PROFIT AND GAIN DERIVED BY AN UNDERTAKING FROM EXPORT OF ARTICLES OR THINGS OR CO MPUTER SOFTWARE. AS PER THE CLAUSE A OF THE EXPLANATION 2 OF SECTION 10A OF THE ACT, COMPUTER SOFTWARE MEANS ANY COMPUTER PROGRAMME RECO RDED ON ANY DISK, TAPE, PERFORATED MEDIA FROM OTHER STORAGE DEV ICE. THUS THE CASE OF THE ASSESSEE DOES NOT FALL WITHIN THIS MEANING. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE AS WELL AS THE DISCUSSION EMERGING OUT FROM THE IMPUGNED ORDERS, THE CASE OF THE ASSESSEE FALLS WITHIN THE AMBIT OF CLAUSE B OF EXPLANATION 2. THE LD. FIRST APPELLAT E AUTHORITY IS OF THE OPINION THAT SUB CLAUSE B IS HAVING TWO PARTS. TH E FIRST PART REPRESENT ANY CUSTOMIZE ELECTRONIC DATA AND SECOND PART ANY P RODUCT OR SERVICE OF ITA NO. 1204/DEL/11 ASSTT. YEAR 2007-08 12 SIMILAR NATURE AS MAY BE NOTIFIED BY THE BOARD. ACC ORDING TO THE LD. CIT(A) THE PRINCIPLE OF EJUSDEM GENERIS IS APPLIC ABLE TO THE SECOND PART OF SUB CLAUSE (B) OF CLAUSE (I) OF EXPLANATION 2. H E OBSERVED THAT THE BOARD HAS NOTIFIED 15 PRODUCTS OR SERVICES IN THIS RESPECT. THE BOARD HAS SPECIFIED THE INFORMATION TECHNOLOGY ENABLED (ITE) PRODUCT OR SERVICES AS THE CASE MAY BE FOR THE PURPOSE OF THE SAID CLAU SE. THEREFORE, ACCORDING TO THE LD. CIT(A) PRODUCTS OF SERVICES R EFERRED TO IN THE NOTIFICATION HAVE TO THE INFORMATION TECHNOLOGY ENA BLED, WHICH IS A PRE CONDITION FOR THE PRODUCT OR SERVICE FOR THE PURPOS E OF SUB CLAUSE B OF EXPLANATION 2. LD. CIT(A) FURTHER EXPLAINED THE M EANING OF HUMAN RESOURCES AND THEREAFTER REJECTED THE CASE OF ASSES SEE BY SUMMARIZING FOLLOWING REASONS :- THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRANSMI TTING DATA BASE FOR RECRUITMENT OF MAN POWER TO A COMPANY IN USA. THE ABOVE ACTIVITY OF THE ASSESSEE DID NOT FALL UND ER THE ITEMS MENTIONED IN SECTION 10A AS NO ARTICLE / THINGS /EXPORTED BY THE ASSESSEE. THE ABOVE BUSINESS ACTIVITY IS NOT A SERVICE OR PRO DUCT SIMILAR TO CUSTOMIZED ELECTRONIC DATA. THE APPELLANTS CLAIM THAT IT WAS EXPORTING COMPUTE R SOFTWARE IS NOT CORRECT FOR THE ABOVE REASONS. THE APPELLANTS CASE IS NOT COVERED BY THE CBDT NOTI FICATION CONTAINING THE WORDS HUMAN RESOURCE SERVICES. THE SAID NOTIFICATION WAS ISSUED BY THE CBDT ONLY F OR THE PURPOSE OF IDENTIFYING CERTAIN AREAS WHERE SERVICES OR PRODUCT S SIMILAR TO CUSTOMIZED ELECTRONIC DATA WOULD BE CONSIDERED FOR DEDUCTION U /S 10A. ITA NO. 1204/DEL/11 ASSTT. YEAR 2007-08 13 THE ITEMS MENTIONED IN THE CBDT NOTIFICATION ARE SU BJECT TO ALL OTHER CONDITIONS STIPULATED IN SECTION 10A WHICH ARE MAND ATORY. THE PRINCIPLE OF EJUSDEM GENERIS IS APPLICABLE TO T HE WORDS PRODUCTS OR SERVICES OF SIMILAR NATURE APPEARING IN EXPLANATIO N 2(I). 12. LD. CIT(A) FURTHER OBSERVED THAT CBDT NOTIFICAT ION IS ALWAYS IN FURTHERANCE TO THE STATUTORY PROVISIONS WHICH EMPOW ER THE NOTIFICATION AND AS SUCH THE NOTIFICATION CANNOT BE IN DEROGATOR Y OF THE STATUTORY PROVISIONS. ACCORDING TO HIM, NOTIFICATION / CIRCUL AR CANNOT DILUTE THE CONDITIONS PROVIDED THE PROVISIONS OF STATUTE BUT O NLY TO CLARIFICATORY IN NATURE. 13. THE LD. THIRD MEMBER IN THE CASE OF ITO VS. ACC URUM INDIA PVT. LTD. HAS CONSIDERED ALL THESE ASPECTS IN HIS ORDER. HE FIRSTLY EXAMINED THE STATUS OF THE CIRCULAR ISSUED BY THE BOARD AND ITS IMPACT UPON THE AUTHORITIES. THEREAFTER, HE EXAMINED THE PRINCIPLE OF EJUSDEM GENERIS AND THEN EXAMINED THE ISSUE WHETHER HUMAN RESOURCE SERVICES ENUMERATED AT S. NO. 8 OF THE NOTIFICATION IS INFOR MATION TECHNOLOGY SERVICE FOR THE PURPOSE OF SECTION 10 A OF THE ACT . LD. THIRD MEMBER HAS MADE LUCID AND ELABORATE DISCUSSION ON ALL THESE TH REE ISSUES WHICH HAVE BEEN AGITATED BY THE PARTIES BEFORE US AND WE CAN NOT DO BETTER THAN TO EXTRACT THE FINDING OF THE LD. THIRD MEMBER IN THE CASE OF ACCURUM INDIA :- ROLE OF BOARDS CIRCULAR ITA NO. 1204/DEL/11 ASSTT. YEAR 2007-08 14 6. THIS IS BEST EXPLAINED BY THE SUPREME COURT IN THE CASE OF UCO BANK V. CIT [1999] 237 ITR 889 1 . AFTER REFERRING TO THE VARIOUS PROVISIONS OF SECT ION 119 OF THE ACT, AT PAGE 896 OF THE REPORT, THE COURT OBSERVED THAT THE BOARD HAS POWER, INTER ALIA, TO TONE DOWN THE RIGOUR OF THE LAW AND ENSURE A FAIR ENFORCEMENT OF ITS PROVISIONS, BY ISSUING CIRCULARS IN EXERCISE OF ITS STATUTORY POWERS UNDER SECTION 119 OF THE ACT, WHICH ARE BINDING ON THE AUTHORITIES IN THE ADMINISTRATION OF THE ACT. IT IS ALSO OBSERVED ON THE SAME PAGE THAT THE POWER IS GI VEN FOR THE PURPOSE OF JUST, PROPER AND EFFICIENT MANAGEMENT OF THE WORK OF ASSE SSMENT AND IN PUBLIC INTEREST. IT IS A BENEFICIAL POWER GIVEN TO THE BOARD FOR PROPER ADMINISTRATION OF FISCAL LAW SO THAT UNDUE HARDSHIP MAY NOT BE CAUSED TO THE ASSESSEE AN D THE FISCAL LAWS MAY BE CORRECTLY APPLIED. AGAIN, AT PAGE 898 OF THE REPORT , IT IS OBSERVED THAT THE TASK OF INTERPRETATION OF THE LAWS IS THE EXCLUSIVE DOMAIN OF THE COURTS. HOWEVER, THE BOARD HAS THE STATUTORY POWER UNDER SECTION 119 TO TONE D OWN THE RIGOUR OF THE LAW FOR THE BENEFIT OF THE ASSESSEE BY ISSUING CIRCULARS TO ENS URE A PROPER ADMINISTRATION OF THE FISCAL STATUTE AND SUCH CIRCULARS WOULD BE BINDING ON THE AUTHORITIES ADMINISTERING THE ACT. 7. LET US CONSIDER THE ABOVE ROLE OF THE CIRCULARS IN THE CONTEXT OF SUB-CLAUSE (B) OF CLAUSE (I) OF EXPLANATION 2 TO SECTION 10A OF THE A CT. THE SAID CLAUSE (I) GIVES THE MEANING OF THE TERM 'COMPUTER SOFTWARE'. ONE OF THE MEANINGS GIVEN IS 'ANY CUSTOMISED ELECTRONIC DATA OR ANY PRODUCT OR SERVIC E OF SIMILAR NATURE, AS MAY BE NOTIFIED BY THE BOARD'. IN OTHER WORDS, IF THE ASSE SSEE IS ENGAGED IN THE EXPORT OF ANY CUSTOMISED ELECTRONIC DATA, THEN, PROFIT EARNED FRO M SUCH EXPORT WOULD QUALIFY FOR DEDUCTION UNDER SECTION 10A OF THE ACT. IT MAY BE N OTED THAT WHEREAS SUB-CLAUSE (A) REFERS TO ANY COMPUTER PROGRAMME, SUB-CLAUSE (B) RE FERS TO ANY CUSTOMISED ELECTRONIC DATA. COMPUTER PROGRAMME REFERRED TO IN SUB-CLAUSE (A) MAY OR MAY NOT BE CUSTOMISED AND MAY BE USEFUL FOR GENERAL APPLICA TION. ON THE OTHER HAND, THE ELECTRONIC DATA REFERRED TO IN SUB-CLAUSE (B) HAS N ECESSARILY TO BE CUSTOMISED. BY THE WORD 'CUSTOMISED' IS MEANT THAT THE DATA IS SUITABL E FOR A SPECIFIC CUSTOMER ONLY. CONSIDERING THE FACT THAT THE EXPRESSION 'CUSTOMISE D ELECTRONIC DATA' IS QUITE GENERAL IN NATURE AND ALSO CONSIDERING THE FACT THAT COMPUT ER APPLICATIONS ARE FAST EXPANDING, ONE CANNOT VISUALISE AS TO WHAT TYPE OF PRODUCTS OR SERVICES WILL COME UP IN FUTURE. CONSIDERING THIS EVER-EXPANDING HORIZON OF SOFTWARE PRODUCTS AND SERVICES, THE BOARD HAS BEEN GIVEN THE POWER TO NOTIFY SUCH P RODUCTS AND SERVICES WHICH IN ITS OPINION SHOULD QUALIFY FOR DEDUCTION UNDER SECTION 10A. IN OTHER WORDS, THIS POWER OF THE BOARD WHEN EXERCISED, IT WILL ENSURE PROPER ADM INISTRATION OF THE FISCAL STATUTE AS OBSERVED BY THE SUPREME COURT IN UCO BANKS CASE (S UPRA). IT IS IN THIS SENSE THE LD. A.M. HAS OBSERVED THAT THE BOARDS CIRCULAR HAS MADE THE JOB OF THE ASSESSING OFFICER QUITE SIMPLE. THUS, IT IS THIS ROLE, AS EXP LAINED BY THE SUPREME COURT, WHICH IS PLAYED BY THE BOARD BY ISSUING THE CIRCULAR, DATED 26-9-2000. EJUSDEM GENERIS 8. THE ABOVE MAXIM SERVES TO RESTRICT THE MEANING OF A GENERAL WORD TO THINGS OR MATTERS OF THE SAME GENUS AS THE PRECEDING PARTICUL AR WORDS. IT IS A WELL-RECOGNISED RULE OF CONSTRUCTION THAT WHEN TWO OR MORE WORDS WH ICH ARE SUSCEPTIBLE OF ANALOGOUS ITA NO. 1204/DEL/11 ASSTT. YEAR 2007-08 15 MEANING ARE COUPLED TOGETHER, THEY ARE UNDERSTOOD T O BE USED IN THEIR COGNATE SENSE. THE TERM IS CHIEFLY USED IN CASES WHERE GENE RAL WORDS HAVE A MEANING ATTRIBUTED TO THEM LESS COMPREHENSIVE THAN THEY WOU LD OTHERWISE BARE, BY REASON OF PARTICULAR WORDS PRECEDING THEM. IN ORDER TO ATTRAC T THE PRINCIPLE OF EJUSDEM GENERIS, IT IS ESSENTIAL THAT A DISTINCT GENUS OR CATEGORY M UST BE DISCERNIBLE IN THE WORDS UNDER EXAMINATION. AS AN ILLUSTRATION, CLAUSE (A) PROVIDE S THAT ANY SUM PAYABLE BY THE ASSESSEE BY WAY OF TAX, DUTY, CESS OR FEE, BY WHATE VER NAME CALLED, UNDER ANY LAW FOR THE TIME BEING IN FORCE, SHALL BE ALLOWED AS DE DUCTION IN THE PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY PAID. HERE, WHILE DETERM INING WHETHER A PARTICULAR PAYMENT FALLS WITHIN THE EXPRESSION 'BY WHATEVER NA ME CALLED', THE PRINCIPLE OF EJUSDEM GENERIS WILL APPLY. SIMILARLY THE SAID PRIN CIPLE WILL APPLY WHILE DETERMINING WHETHER A PARTICULAR RECEIPT IS ANALOGOUS TO BROKER AGE, COMMISSION, INTEREST, RENT, CHARGES MENTIONED IN CLAUSE (BAA) OF THE EXPLANATIO N TO SECTION 80HHC. ON THE OTHER HAND, SO FAR AS CUSTOMISED ELECTRONIC DATA IS CONCERNED, OR A SERVICE OF SIMILAR NATURE IS CONCERNED, DEDUCTION UNDER SECTION 10A IN RESPECT OF PROFITS THEREFROM WILL NOT BE ALLOWED UNLESS THE SERVICE IS NOTIFIED BY TH E BOARD. TO REITERATE, STATUTORY LIABILITIES BY WHATEVER NAME CALLED IN SECTION 43B( A) OR RECEIPTS OF SIMILAR NATURE MENTIONED IN CLAUSE (BAA) OF THE EXPLANATION TO SEC TION 80HHC NEED NOT BE NOTIFIED BY THE BOARD. IN THOSE CASES, THE REVENUE AUTHORITI ES HAVE TO SEE WHETHER THE LIABILITY CLAIMED BY THE ASSESSEE UNDER SECTION 43B IS A STATUTORY LIABILITY OR NOT AND WHETHER IT FITS INTO THE DESCRIPTION OF A TAX, DUTY , CESS, ETC. SIMILARLY, THE RECEIPTS MENTIONED IN CLAUSE (BAA) NEED NOT BE NOTIFIED BY T HE BOARD AND THE REVENUE AUTHORITIES WILL CONSIDER WHETHER THE RECEIPTS ARE OF THE NATURE OF BROKERAGE, RENT, ETC. WHILE DECIDING THESE ISSUES, THE PRINCIPLE OF EJUSD EM GENERIS WILL HAVE TO BE KEPT IN MIND. HOWEVER, SO FAR AS SERVICES WHICH ARE INFORMA TION TECHNOLOGY ENABLED ARE CONCERNED, THE ASSESSEE CAN TAKE THE BENEFIT OF DED UCTION ONLY IF THEY ARE NOTIFIED BY THE BOARD. IF THIS POWER OF NOTIFYING THE SERVICES WAS NOT GIVEN TO THE BOARD, PRINCIPLE OF EJUSDEM GENERIS WOULD HAVE APPLIED. SINCE THE PO WER IS EXERCISED UNDER THE SPECIFIC PROVISION OF SECTION 10A, IT IS PRE-SUPPOS ED THAT THE SERVICES IN RESPECT OF WHICH THE ASSESSEE IS CLAIMING DEDUCTION ARE I.T. E NABLED. OF COURSE, AS A MATTER OF NORMAL PRECAUTION TAKEN WHILE MAKING AN ASSESSMENT, THE ASSESSING OFFICER WILL SATISFY HIMSELF AS TO WHETHER THE CUSTOMISED DATA I S IN ELECTRONIC FORM OR NOT AND WHETHER IT IS ELECTRONICALLY TRANSMITTED OUTSIDE IN DIA OR NOT. IF THE DATA OF RECRUITMENT AND TRAINING COLLECTED BY THE PRESENT ASSESSEE IS I N A MANUAL FORM AND IS SENT TO US BY POST, THE ASSESSEE WILL NOT BE ENTITLED TO DEDUC TION UNDER SECTION 10A. THEREFORE, I FAIL TO UNDERSTAND AS TO WHAT FURTHER CONDITION, THE ASSESSEE NEED TO FULFIL IN THE PRESENT CASE, AS OBSERVED BY THE LD. J.M., WHEN UND ISPUTEDLY THE ENTIRE DATA IS IN ELECTRONIC FORM. HUMAN RESOURCES SERVICES 9. THE LD. JM IS RIGHT IN MENTIONING THAT SOFTWARE IS NOT MERELY KNOWLEDGE BUT, RATHER IS KNOWLEDGE RECORDED IN A PHYSICAL FORM HAVING A P HYSICAL EXISTENCE, TAKING UP SPACE ON A TAPE, DISC OR HARD DRIVE, MAKING PHYSICA L THINGS HAPPEN AND CAN BE PERCEIVED SENSES. HOWEVER, HE MISDIRECTED HIMSELF B Y MISUNDERSTANDING THAT SINCE ITA NO. 1204/DEL/11 ASSTT. YEAR 2007-08 16 THE RECRUITMENT AND TRAINING OF THE PERSONNEL WAS B Y ITSELF NOT I.T. ENABLED, THE PROFIT EARNED BY THE ASSESSED IS NOT ELIGIBLE FOR DEDUCTIO N UNDER SECTION 10A OF THE ACT. THE REQUIREMENT OF THE PROVISION IS THAT THERE SHOU LD BE A CUSTOMIZED ELECTRONIC DATA AND SUCH DATA SHOULD BE EXPORTED OUTSIDE INDIA. THE DATA WHICH A CUSTOMER MAY REQUIRE, MAY BE GATHERED EITHER BY MANUAL EFFORT OR BY ELECTRONIC MEANS, AS FOR EXAMPLE, THROUGH INTERNET. BY WHATEVER MEANS THE DA TA IS COLLECTED, ONCE IT IS STORED IN AN ELECTRONIC FORM, IT BECOMES A CUSTOMIZED ELEC TRONIC DATA WHICH CAN BE EXPORTED TO QUALIFY FOR DEDUCTION UNDER SECTION 10A . THE PROCESS OF ACTUALLY COLLECTING THE DATA NEED NOT BE IT ENABLED. WHAT AL L IS REQUIRED IS THAT THE DATA COLLECTED SHOULD BE IN AN ELECTRONIC FORM. IF ONE W ERE TO GO BY THE UNDERSTANDING OF THE LD. JM, THEN PERHAPS THE PURPOSE OF GIVING IMPE TUS TO SOFTWARE INDUSTRY OR TO THE COMPUTERIZATION AS A WHOLE, WOULD BE DEFEATED. AS A N ILLUSTRATION, IF A PERSON WANTS TO OPEN A GARMENT SHOP IN A PARTICULAR LOCALITY, IT MAY APPROACH A CONSULTING FIRM TO EXPLORE THE MARKET POTENTIALITY OF THAT AREA. IN TH AT CASE, THE CONSULTING FIRM WILL HAVE TO INITIALLY WORK MANUALLY TO COLLECT DATA LIKE, NU MBER OF GARMENT SHOPS IN THE LOCALITY, THE ECONOMIC STRATA TO WHICH THE POPULATION RESIDIN G IN THAT LOCALITY BELONGS, THE SPENDING HABITS OF THE PEOPLE RESIDING IN THE LOCAL ITY, ETC. ALL THESE ACTIVITIES WILL HAVE TO BE CARRIED OUT MANUALLY AND ONCE THE DATA IS COL LECTED, IT MAY BE COLLATED AND ANALYZED AND MAY BE STORED IN AN ELECTRONIC DEVICE. THIS BECOMES THE IT ENABLED CUSTOMIZED ELECTRONIC DATA. IF THIS DATA IS EXPORTE D OUTSIDE INDIA, THE CONSULTING FIRM WILL BE ELIGIBLE FOR DEDUCTION UNDER SECTION 10A. S IMILAR IS THE SITUATION IN THE PRESENT CASE. THE ASSESSEE INVITED APPLICATIONS FOR RECRUIT MENT THROUGH NEWSPAPERS, CARRIED OUT INTERVIEWS, SELECTED THEM AND TRAINED THEM. IT IS WORTHNOTING THAT THIS EXERCISE WAS CARRIED OUT NOT FOR NAMESAKE BUT IT WAS A SERIO US AND SINCERE EFFORT WHICH IS REFLECTED BY THE MAGNITUDE ON WHICH THE ASSESSEE WO RKED. MORE THAN 7,000 APPLICATIONS WERE RECEIVED WHICH WERE VETTED AND TH EN THE PROCESS OF RECRUITMENT WAS UNDERTAKEN. ALL THESE DATA WERE STORED IN AN EL ECTRONIC DEVICE AND TRANSMITTED TO US FOR THE USE OF THE PARENT COMPANY. RECRUITMEN T CAN BE DONE ONLINE ALSO, BUT PERHAPS THE SCALE OF OPERATION MAY NOT BE AS HUGE A S IT WAS IN THE PRESENT CASE. TRAINING CAN ALSO BE CARRIED OUT ONLINE BUT IT CANN OT BE AS EFFECTIVE AS A CLASSROOM TRAINING. IF THE INTENTION OF THE LEGISLATURE WAS T HAT IN ORDER TO QUALIFY FOR DEDUCTION UNDER SECTION 10A, EVERY ACTIVITY SHOULD BE CARRIED OUT THROUGH ELECTRONIC MEANS, THEN THE PURPOSE OF ENACTING SECTION 10A WOULD HAVE BEEN TOTALLY DEFEATED. THE EXACT LANGUAGE OF SUB-CLAUSE (B) OF CLAUSE (1) OF E XPLANATION 2 IS 'ANY CUSTOMIZED ELECTRONIC DATA'. THUS, IF THE RESULT OF THE ENTIRE EXERCISE OF RECRUITMENT AND TRAINING IS STORED IN AN ELECTRONIC DEVICE, IT IS NOT POSSIBLE TO SAY THAT IT IS NOT A CUSTOMIZED ELECTRONIC DATA. IF THE DATA IS IN A FORM OTHER THA N ELECTRONIC, THEN THE EXPORT THEREOF WILL NOT QUALIFY FOR THE DEDUCTION. THIS ASPECT, AS MENTIONED EARLIER, HAS TO BE EXAMINED BY THE ASSESSING OFFICER IN THE COURSE OF THE ASSESSMENT AND WHICH IN THIS CASE, THERE IS NO DISPUTE THAT THE DATA WAS IN THE ELECTRONIC FORM. 10. ANOTHER OBJECTION OF THE LD. JM IS THAT THERE WAS ONLY AN EXCHANGE OF CORRESPONDENCE THROUGH E-MAILS BETWEEN THE ASSESSEE AND THE PARENT COMPANY. WELL, WHEN THE PARENT COMPANY RECEIVED THE DATA, NA TURALLY, THERE WOULD BE EXCHANGE OF VIEWS OVER THE CANDIDATES. IN THIS CONN ECTION, THE LD. AM HAS GIVEN THE ITA NO. 1204/DEL/11 ASSTT. YEAR 2007-08 17 APT EXAMPLE OF A CALL CENTRE. IN THE ILLUSTRATION G IVEN BY HIM, A COMPANY IS SITUATED IN USA AND ITS CUSTOMER IN UK ASKS A QUESTION WHICH IS ANSWERED BY A CALL CENTRE IN BANGALORE. TO REPLY TO THE QUESTION OF THE CUSTOMER , THE PERSON SITTING IN THE CALL CENTRE, DEPENDING ON THE NATURE OF QUESTION, MAY OR MAY NOT REQUIRE THE HELP OF A COMPUTER. WHERE THE HELP OF COMPUTER IS NOT REQUIRE D, THE PERSON AT THE CALL CENTRE WILL SIMPLY ANSWER THE QUESTION. NOW, IN THIS CASE, AS A MATTER OF FACT, THERE IS NO USE OF ANY COMPUTER HARDWARE OF SOFTWARE AND YET, BY VI RTUE OF IT BEING A CALL CENTRE, IT WILL BE ELIGIBLE FOR DEDUCTION UNDER SECTION 10A. H ERE ALSO THERE WAS MERELY A COMMUNICATION BETWEEN THE PARTIES OVER A TELEPHONE AND NOTHING BEYOND THAT. ONE MAY RAISE A QUESTION THAT IF THERE IS NO USE OF COM PUTER THEN WHY SHOULD IT BE INCLUDED IN THE LIST OF IT ENABLED SERVICES. IT NEE DS TO BE APPRECIATED THAT IN MAJORITY OF THE CASES, THE USE OF COMPUTER WOULD BE THERE. I F A PERSON IN US HAS INVESTED MONIES IN INDIA THROUGH A FINANCIAL CONSULTANT IN I NDIA, AND IF THE US INVESTOR WANTS SOME INFORMATION ABOUT HIS INVESTMENTS, THE INFORMA TION SO SUPPLIED THROUGH THE CALL CENTRE WILL BE AN EXPORT OF CUSTO-MIZED ELECTRONIC DATA. THE INFORMATION MAY HAVE BEEN GIVEN EITHER ON TELEPHONE OR THROUGH E-MAIL. T HUS, HOW THE INFORMATION IS TRANSMITTED IS NOT MATERIAL, WHAT IS MATERIAL IS TH AT SOME CUSTOMIZED ELECTRONIC DATA IS TRANSMITTED. THEREFORE, THE EXERCISE CARRIED OUT BY THE ASSESSEE CANNOT BE OVER SIMPLIFIED BY STATING THAT IT WAS MERELY AN EXCHANG E OF CORRESPONDENCE THROUGH E- MAILS. THE LD. JM HAS MENTIONED THAT THIS IS NOT A CASE WHERE THE ASSESSEE HAS COLLECTED ANY DATA OR CONDUCTED ANY SURVEY FOR GATH ERING INFORMATION REGARDING THE AVAILABILITY OF TALENT IN A SPECIFIC FIELD. I SIMPL Y FAIL TO COMPREHEND, CONSIDERING THE VOLUMINOUS MATERIAL PLACED ON RECORD AS TO HOW CAN IT BE SAID THAT THE ASSESSEE HAS NOT COLLECTED ANY DATA. THIS OBSERVATION IS CONTRAR Y TO THE FACTS ON RECORD. FINALLY, THE OBJECTION OF THE ASSESSING OFFICER THAT ALL THE CAN DIDATES SELECTED WERE NOT ABSORBED BY THE PARENT COMPANY IS OF NO AVAIL. THE OBLIGATIO N OF THE ASSESSEE UNDER THE CONTRACT WAS ONLY TO RECRUIT AND TRAIN THE CANDIDAT ES. THE PARENT COMPANY WAS UNDER NO OBLIGATION TO ABSORB ALL THE SELECTED CANDIDATES . IT IS ALSO NOT A PRE-CONDITION FOR THE ASSESSEE FOR CLAIMING DEDUCTION UNDER SECTION 1 0A OF THE ACT. THE ONLY CONDITION IS THAT WHETHER IT HAS EXPORTED ANY CUSTOMIZED ELEC TRONIC DATA RELATING TO ANY OF THE SERVICES SPECIFIED BY THE BOARD OR NOT. WE HAVE ALR EADY OBSERVED THAT THE ASSESSEE HAS FULFILLED THIS CONDITION. FOR WHATEVER REASON, THE PARENT COMPANY MAY NOT HAVE BEEN ABLE TO ABSORB ALL THE SELECTED CANDIDATES, BU T THAT IS NEITHER THE CONCERN OF THE ASSESSEE NOR THE REQUIREMENT UNDER THE ITEM 'HUMAN RESOURCES SERVICES'. THEREFORE, THIS OBJECTION OF THE ASSESSING OFFICER HAS NO FORCE. 11. SUMMARIZING THE ABOVE DISCUSSION, I AM OF THE VIEW THAT THE PRINCIPLE OF EJUSDEM GENERIS IS NOT APPLICABLE WHEN THE BOARD HAS SPECIF ICALLY NOTIFIED THE IT ENABLED PRODUCTS AND SERVICES. WHAT IS THE ROLE AND PURPORT OF THE CIRCULAR OF THE BOARD IS ALREADY DISCUSSED EARLIER. THE LD. JM HAS MENTIONED THAT THE CBDT NOTIFICATION IS ALWAYS IN FURTHERANCE OF THE STATUTORY PROVISION, T HAT IT CANNOT BE IN DEROGATION OF THE ITA NO. 1204/DEL/11 ASSTT. YEAR 2007-08 18 STATUTORY PROVISION AND THAT IT CANNOT DILUTE THE C ONDITIONS PROVIDED UNDER THE PROVISIONS OF THE STATUTE BUT ONLY BE CLARIFICATORY IN NATURE. IN THIS CONNECTION, I HAVE ALREADY QUOTED FROM THE JUDGMENT IN THE CASE UCO BA NK ( SUPRA) THAT THE BOARD HAS THE STATUTORY POWER TO TONE DOWN THE RIGOUR OF THE LAW FOR THE BENEFIT OF THE ASSESSEE. IN FACT, AT PAGE 898 (OF 237 ITR), IT IS OBSERVED B Y THE SUPREME COURT THAT THE BINDING CHARACTER ATTACHES TO THE CIRCULARS EVEN IF THEY BE FOUND NOT IN ACCORDANCE WITH THE CORRECT INTERPRETATIONS OF THE SECTIONS AN D THEY DEPART OR DEVIATE FROM SUCH CONSTRUCTION. ACCORDINGLY, IN THE LIGHT OF THIS DIS CUSSION, I AGREE WITH THE VIEW TAKEN BY THE LD. AM THAT THE ASSESSEE IS ENTITLED TO DEDU CTION UNDER SECTION 10A OF THE ACT. 14. WITH THE ASSISTANCE OF LD. REPRESENTATIVE, WE H AVE GONE THROUGH THE ORDER OF THE LD. THIRD MEMBER EXTRACTED SUPRA A T THE TIME OF HEARING. THE ONLY DISPARITY OF FACTS BETWEEN BOTH THESE CASE S IS THAT IN THE CASE OF ACCURUM INDIA, ASSESSEE WAS GIVING TRAINING ALSO TO THE ELIGIBLE CANDIDATES. IN THE PRESENT CASE, ASSESSEE HAS NOT G IVEN ANY TRAINING. FOR GRANT OF DEDUCTION U/S 10A, TRAINING IS AN IMMA TERIAL PART. DEDUCTION IS ADMISSIBLE TO THE ASSESSEE BECAUSE IT HAS PREPAR ED THE CUSTOMIZED DATA OF ELIGIBLE CANDIDATES FOR EMPLOYMENT IN IT IN DUSTRY. IT IS TRANSMITTING THE DATA OF THOSE ELIGIBLE CANDIDATES FOR EMPLOYMENT IN SOFTWARE INDUSTRY. THIS EXPORT OF CUSTOMIZED ELECTR ONIC DATA WOULD MAKE THE ASSESSEE ELIGIBLE TO CLAIM DEDUCTION U/S 10A. A S FAR AS THIS PART OF ITA NO. 1204/DEL/11 ASSTT. YEAR 2007-08 19 SERVICE IS CONCERNED, THERE IS NO DISPARITY ON FACT S BETWEEN THESE CASES. 15. THE OTHER OBJECTIONS POINTED OUT BY THE LD. AO IS THAT ASSESSEE HAS GOT APPROVAL FROM STP AUTHORITY FOR THE BANGALO RE OFFICE ON THE LAST DATE OF THE ACCOUNTING YEAR. HE WAS OF THE OPINION THAT ASSESSEE HAS MADE THE PAYMENT OF CERTAIN FEES IN THE MONTH OF MA Y, 2007 AND THEREFORE IN EFFECT IT BE CONSTRUED THAT APPROVAL W AS AVAILABLE TO THE ASSESSEE FOR ASSTT. YEAR 2008-09 I.E. THE NEXT FINA NCIAL YEAR. HE ALSO EXPRESSED HIS DOUBT ABOUT POTENTIALITY OF ASSESSEE TO RAISE THE INVOICE ON THE LAST DATE OF THE ACCOUNTING YEAR FOR A CONSI DERATION OF RS. 1,47,28,800/-. THE CASE OF THE ASSESSEE ON THE OTHE R HAND IS THAT IT WAS OPERATING AT GURGAON WHEN IT WAS BECOME UNVIABLE TH EN IT WENT TO BANGALORE AND APPLIED FOR REGISTRATION WITH STPI AU THORITY ON 23 RD JANUARY, 2007. THE REGISTRATION WAS GRANTED W.E.F 31 ST MARCH, 2007. THE ASSESSEE HAS STARTED COMMERCIAL PRODUCTION ON T HIS DATE. ACCORDING TO THE ASSESSEE IN FACT, IT WAS CARRYING OUT ALL THE ACTIVITIES PRIOR TO REGISTRATION GRANTED BY STPI AUTHORITIES. THE ASSESSEE HAS PLACED ON RECORD COPY OF THE LEASE AGREEMENT, LIST OF ITS EMPLOYEES, DETAILS OF SALARY PAID, COPY OF THE APPLICATION MAD E FOR GRANT OF REGISTRATION. IT WAS ALREADY OPERATING AT GURGAON. THUS ON THE STRENGTH OF ALL THESE DETAILS, IT HAS DEMONSTRATED THAT IT W AS IN COMMERCIAL ITA NO. 1204/DEL/11 ASSTT. YEAR 2007-08 20 PRODUCTION. IT HAS APPLIED FOR THE REGISTRATION. SU CH REGISTRATION WAS GRANTED TO IT ON THE LAST DATE AND IT HAS RAISED TH E INVOICES ACCORDINGLY. ULTIMATELY, IT HAS RECEIVED THE PAYMENT ALSO. AS FA R AS THE OTHER OBJECTION POINTED OUT BY THE AO ABOUT THE SHARE HOL DING OF FAMILY MEMBERS, WE ARE OF THE VIEW THAT AO HAS JUST DISCUS SED THE SHARE HOLDING PATTERNS OF TWO COMPANIES I.E. USA AND OF I NDIAN COMPANY. HOWEVER, HE DID NOT DISPUTE THEIR STATUS IN THE EY ES OF LAW. HE HAS NOT RECORDED THE STATEMENT OF ANY DIRECTORS AND COME O UT WITH AN ARGUMENT THAT NO SUCH ACTIVITY HAS BEEN CARRIED OUT BY THE A SSESSEE. THE ASSESSEE HAS PRODUCED BEFORE THE AO EMAILS ETC. FOR DEMONSTRATING ITS CASE. ON DUE CONSIDERATION OF ALL THE FACTS AND CIR CUMSTANCES, WE ARE OF THE OPINION THAT CASE OF THE ASSESSEE IS DULY COVER ED BY THE DECISION OF THE ITAT, CHENNAI AND IT IS ENTITLED FOR DEDUCTION U/S 10A OF THE INCOME TAX ACT. WE ALLOW THE APPEAL OF ASSESSEE AND DIRECT THE AO TO GRANT THE DEDUCTION. ORDER PRONOUNCED IN THE OPEN COURT ON 27.5.201 1. SD/- SD/- [SHAMIM YAHYA] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27.5.2011 VEENA ITA NO. 1204/DEL/11 ASSTT. YEAR 2007-08 21 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT
