ITO, Pondicherry V. M/s. Spatial Info Labs, Pondicherry

ITA 1472/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58102 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-03-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 29-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR YOGESH KAMATH
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO.1472/MDS/2011 (ASSESSMENT YEAR : 2 004-05) THE INCOME TAX OFFICER, WARD-1(2), D.P.THOTTAM, OFF M.G.ROAD, PUDUCHERRY-605 003. VS. M/S. SPATIAL INFO LABS, NO.103 & 105, ESWARAN KOIL STREET, PUDUCHERRY-605 001. PAN:AAYFS5865R (APPELLANT) (RESPONDENT) APPELLANT BY : DR. YOGESH KAMATH, DR RESPONDENT BY : SHRI PH ILIP GEORGE DATE OF HEARING : 13 TH MARCH, 2012 DATE OF PRONOUNCEMENT : 16 TH MARCH, , 2012 O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER: THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE IMPUGNING THE ORDER OF THE CIT(A)-XII, CHENNAI DATE D 26.02.2010 RELEVANT TO THE ASSESSMENT YEAR 2004-05. THE PRESENT APPEAL HAS BEEN FILED WITH THE DELAY OF 468 DAYS. THE APPLICATION FOR CONDONATION OF DELAY, CITING TH E REASONS FOR THE DELAY, IS FILED ALONG WITH THE APPEAL. IN THE INTEREST OF JUSTICE, WE CONDONE THE DELAY FOR THE REASONS MENTI ONED IN THE APPLICATION AND ADMIT THE APPEAL. ITA NO.1472/M DS/2011 2 2. THIS IS A SECOND ROUND OF LITIGATION BETWEE N THE PARTIES. THE ASSESSEE IS A PARTNERSHIP FIRM REGISTE RED AS A SMALL SCALE UNDERTAKING WITH THE DIRECTORATE OF IND USTRIES & COMMERCE, GOVERNMENT OF PUDUCHERRY. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF COMPUTERIZATION OF LAND RECORDS AND DIGITIZATION OF SURVEY MAPS. THE ASSESSEE HAD F ILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2004-05 ON 1.11.2 004 SHOWING NIL INCOME AFTER CLAIMING DEDUCTION UNDER S ECTION 80IB OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFER RED TO AS THE ACT) TO THE EXTENT OF ` 18,69,353/-. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS DISALLO WED THE CLAIM FOR DEDUCTION UNDER SECTION 80IB. THE ASSESSE E FILED AN APPEAL BEFORE THE CIT(A). THE APPEAL OF THE ASSESSE E WAS ALLOWED BY THE LEARNED CIT(A) VIDE ORDER DATED 4.4. 2007. THE DEPARTMENT IMPUGNED THE SAID ORDER BEFORE THE ITAT. THE TRIBUNAL IN ITA NO.1700/MDS/2007 VIDE ORDER DATED 25.07.2008 SET ASIDE THE ASSESSMENT ORDER AND REMAN DED THE MATTER BACK TO THE ASSESSING OFFICER TO EXAMINE THE OPERATIONS OF THE ASSESSEE AND THEN PASS ORDER IN ITA NO.1472/M DS/2011 3 ACCORDANCE WITH LAW. PURSUANT TO THE ORDERS PASSED BY THE TRIBUNAL, THE ASSESSING OFFICER MADE REASSESSMENT V IDE HIS ORDER DATED 24.12.2009 UNDER SECTION 143(3) READ WI TH SECTION 254 AND DISALLOWED THE CLAIM OF DEDUCTION U NDER SECTION 80IB. AGGRIEVED BY THE SAID ORDER OF THE A SSESSING OFFICER, THE ASSESSEE FILED AN APPEAL BEFORE CIT(A) . THE LEARNED CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE V IDE ORDER DATED 26.02.2010. HENCE THE PRESENT APPEAL HAS BEEN FILED BY THE DEPARTMENT IMPUGNING THE ORDER OF THE CIT(A) . 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGA GED IN THE BUSINESS OF COMPUTERIZATION OF FIELD MAPS AND L AND RECORDS. THE ASSESSEE ENTERED INTO AN AGREEMENT WIT H M/S. VISION LABS INSTITUTE, HYDERABAD FOR COMPUTERIZATIO N OF LAND RECORDS AND DIGITIZATION OF MAPS. THE SCOPE OF WORK UNDERTAKEN BY THE ASSESSEE IS AS UNDER:- 1. COMPUTERIZATION OF REVENUE SURVEY FIELDS AND SUB-DIVISIONS FROM THE FIELD MEASUREMENT BOOKS AND SUPPLY OF THE SAME IN SOFT COPY ON CDS AND ALSO A HARD COPY PRINT OUT FOR EACH OF THE REVENUE SURVEY FIELDS WITH SUB DIVISIONS IN A4 SIZE WITH APPROPRIA TE SCALE IN BLACK AND WHITE ON LASER PRINTER. ITA NO.1472/M DS/2011 4 2. COMPUTER GENERATION OF CADASTRAL MAPS OF VILLAGES FORMED BY MOSAICKING REVENUE SURVEY FIELDS . 3. COMPUTERISING THE TRAVERSE DATA OF VILLAGES AND CORRECTION OF THE MOSAICKED VILLAGE MAPS AND SUPPLY OF THESE MAPS IN SOFT COPY ON CDS AND HARD COPY IN 1:10,000 SCALE. 4. IMPART TRAINING TO DEPARTMENTAL STAFF IN THE MAINTENANCE OF CADASTRAL INFORMATION GENERATED DURING THE PROJECT. THE ASSESSEE RETURNED NIL INCOME FOR THE ASSESSMENT YEAR 2004-05 AFTER CLAIMING DEDUCTION UNDER SECTION 80IB . THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER DATED 24. 12.2009 HELD THAT THE MAIN WORK OF THE ASSESSEE IS SCANNING OF DOCUMENTS/LAND RECORDS AND THEREFORE HE WAS OF THE VIEW THAT DIGITAL SOFT COPIES OF CADASTRAL MAPS DATA OF LAND RECORDS ARE MERE SCANNING OF DOCUMENTS AND DOES NOT AMOUNT TO ANY MANUFACTURING ACTIVITY. HE FURTHER HELD THAT THE DI GITAL MAPPING OR LAND PLANNING DOES NOT AMOUNT TO MANUFACTURE OR PRODUCTION OF NEW ARTICLE OR THING OF INDUSTRIAL UN DERTAKING AND THUS REJECTED THE CLAIM UNDER SECTION 80IB. ITA NO.1472/M DS/2011 5 4. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT( A). THE LEARNED CIT(A) AFTER GOING THROUGH THE FACTS OF THE CASE, DOCUMENTS ON RECORD, SUBMISSIONS MADE BY THE PARTIE S AND THE JUDGEMENTS REFERRED TO BY BOTH SIDES CAME TO TH E CONCLUSION THAT THE ASSESSE, IN TERMS OF THE SCOPE OF WORK FOR COMPUTERIZATION OF REVENUE SURVEY FIELD ETC., IS E NTITLED TO DEDUCTION UNDER SECTION 80IB. THE LEARNED CIT(A) H ELD THAT THE WORK UNDERTAKEN BY THE ASSESSEE WITH THE HUMAN EFFORTS AND MACHINES (COMPUTER) HAS RESULTED INTO MANUFACUT URING ACTIVITY. THE LEARNED CIT(A) IN ORDER TO SUPPORT HI S FINDINGS HAS RELIED ON THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. ORACLE SOFTWARE INDIA LTD., REP ORTED AS 210-TMI-35190 : (2010) 320 ITR 546. 5. THE DEPARTMENT HAS COME IN APPEAL IMPUGNING THE ORDER OF THE CIT(A) PRIMARILY ON THE GROUND THAT SO FTWARE DEVELOPMENT AND COMPUTERIZATION OF LAND RECORDS ARE NOT MANUFACTURING ACTIVITY OR PRODUCTION OF ARTICLE OR THING, THEREFORE, THE ASSESSEE IS NOT ENTITLED FOR DEDUCTI ON UNDER SECTION 80IB OF THE ACT. THE LEARNED D.R. SUBMITTE D THAT THE ITA NO.1472/M DS/2011 6 ASSESSEE IS ONLY INVOLVED IN COMPUTERIZATION OF LAN D RECORDS AND DIGITIZATION OF MAPS. THE ASSESSEE IS NOT DEVEL OPING ANY NEW SOFTWARE AND THERE IS NO CHANGE IN FIGURES. NO NEW PRODUCT COMES INTO EXISTENCE. THE ASSESSEE IS ONLY SCANNING THE DOCUMENTS AND MAPS. IN SUPPORT OF HIS CONTENTIO N, THE LEARNED D.R. RELIES ON THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SHROFF CONSULTANT S PVT. LTD., REPORTED AS 238 ITR 1018. 6. ON THE OTHER HAND, SHRI PHILIP GEORGE, LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE SUBMITS THAT IT IS NOT THE SCANNING OF DOCUMENTS ALONE WHICH IS UNDERT AKEN BY THE ASSESSE. THE SCOPE OF WORK UNDERTAKEN BY ASSES SEE INCLUDES COMPUTERIZATION OF REVENUE SURVEY FIELD AN D SUB- DIVISIONS FROM THE FIELD MEASUREMENT BOOKS AND SUPP LY OF THE SAME IN SOFT COPY ON CDS AS WELL AS HARD COPY PRIN T OUT FOR EACH OF REVENUE SURVEY FIELD WITH SUB-DIVISIONS, CO MPUTER GENERATION OF THE CADASTRAL MAPS OF VILLAGES FORMED BY MOSAICING REVENUE SURVEY FIELDS, COMPUTERIZATION OF TRAVERSE DATA OF VILLAGES AND CORRECTION OF MOSAICE D VILLAGE ITA NO.1472/M DS/2011 7 MAPS AND SUPPLY OF THESE VILLAGE MAPS IN SOFT COPY ON CDS AND HARD COPY IN 1:10,000 SCALE AND IMPART TRAINING TO DEPARTMENTAL STAFF IN THE MAINTENANCE OF CADASTRAL INFORMATION GENERATED DURING THE PROJECT. HE SUBMITS THAT SUBS TANTIAL MANPOWER IS USED IN THE PROCESSING OF DATA AND TRA INING OF STAFF AND NEW PRODUCT COMES INTO EXISTENCE AFTER TH E DIGITIZATION OF RECORDS AND MAPS. THE PROCESS OF D IGITIZATION OF MAPS IS HIGHLY TECHNICAL AND ARE NOT MERELY SCAN NED COPIES OF MANUAL MAPS WHICH INCLUDES THE FOLLOWING PROCESS:- DIGITAL MAPS ARE BASED ON VECTOR GRAPHICS WHICH USES GEOMETRICAL PRIMITIVES SUCH AS POINTS, LINES, CURVES AND SHAPES OR POLYGONS, WHICH ARE ALL BASED UPON MATHEMATICAL EQUATIONS, TO REPRESENT IMAGES. VECTOR GRAPHICS FORMATS ARE COMPLEMENTARY TO RASTER GRAPHICS, WHICH IS THE REPRESENTATION OF IMAGES AS AN ARRAY OF PIXELS, AS IT IS TYPICALLY US ED FOR THE REPRESENTATION OF PHOTOGRAPHIC IMAGES. VECTOR GRAPHICS FILES STORE THE LINES, SHAPES AND COLOURS THAT MAKE UP AN IMAGE AS MATHEMATICAL FORMULAE. SINCE THESE FORMULAE CAN PRODUCE AN IMAGE SCALABLE TO ANY SIZE AND DETAIL THE QUALITY OF ITA NO.1472/M DS/2011 8 THE IMAGE IS ONLY DETERMINED BY THE RESOLUTION OF THE DISPLAY. THE IMAGE CAN BE CHANGED BY EDITING SCREEN OBJECTS WHICH ARE THEN SAVED AS MODIFICATIONS TO THE MATHEMATICAL FORMULAE. PROCESS OF GENERATION OF DIGITAL MAPS:- 1. OBTAIN FIELD MEASUREMENT BOOKS FROM GOVERNMENT. 2. FMBS CONTAIN BOUNDARY DATA IN RESPECT OF THE CONCERNED SURVEY, EACH SURVEY CONTAINING A NUMBER OF SUBDIVISIONS. THE BOUNDARIES OF THESE ENTITIES WERE ORIGINALLY SURVEYED BY THE GOVERNMENT. THE SURVEY MEASUREMENTS FOLLOW A SYSTEM OF TRIANGULATION AND BASELINE AND OFFSET METHOD TO EXACTLY REPRESENT THE BOUNDARIES OF THESE ENTITIES. THE DATA IS IN THE FMBS ARE REPRESENTED BY A SYSTEM OF NUMERICAL LADDERS. 3. THE DATA FROM THE FMB IS KEYED THROUGH THE COMPUTER SYSTEM INTO A SOFTWARE PROGRAM, FOR EVERY SURVEY & SUBDIVISION. 4. THE PROGRAM THEN GENERATES THE LAND PARCEL GEOMETRY FOR THE DATA SUPPLIED, BASED ON THE INPUTS KEYED IN. 5. BASED ON THIS LAND PARCEL GEOMETRY GENERATED, PLOTTED LAND PARCELS ARE THEN GENERATED. ITA NO.1472/M DS/2011 9 6. THE OUTPUT GENERATED IS THEN CHECKED FOR ACCURAC Y AND CORRECTNESS BY COMPARING THE SAME WITH THE MEASUREMENTS IN FMBS. 7. THE LAND PARCEL DATA IS THEN MOSAICKED TO FORM VILLAGE MAPS. 8. THE VILLAGE MAPS ARE THEN FITTED INTO TRAVERSE CIRCUITS AND ERRORS, IF ANY ARE CORRECTED. 9. THE FINAL OUTPUT (CADASTRAL MAPS/VILLAGE MAPS) I S THEN PRINTED OUT IN A A4/A3 PAPER SIZE PAPER IN BLACK AND WHITE USING APPROPRIATE SCALES FOR EVERY SURVEY NUMBER/VILLAGE. THE OUTPUT IS ALSO PROVIDED TO THE CUSTOMER IN A CD. THESE ACCURATE DIGITAL MAPS/LAND PLANS MANUFACTURED/PRODUCED ARE NOT THE SAME AS COPIES OF LAND PLANS MADE BY DRAFTSMEN AS THESE ARE ACCURATE GENERATION OF GEOMETRY OF LAND PARCELS THROUGH USE OF NUMERICAL MEASUREMENTS AND DO NOT FOLLOW THE CONVENTIONAL COPYING TECHNIQUES. IN SUPPORT OF HIS CASE, THE LEARNED A.R. RELIES ON THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. ORACLE SOFTWARE INDIA LTD., REPORTED AS 320 ITR 546, WHEREIN THE HONBLE SUPREME COURT HELD THAT THE COURT HAD TO MOVE ALONG WITH THE TIMES WHEN THERE WAS TECHNOL OGICAL ITA NO.1472/M DS/2011 10 ADVANCEMENT AS IN COMPUTER SCIENCE. IN EACH CASE WH EN AN ISSUE OF THIS NATURE AROSE FOR DETERMINATION THE DE PARTMENT HAD TO STUDY THE ACTUAL PROCESS UNDERTAKEN BY THE A SSESSE. IF AN OPERATION/PROCESS RENDERED A COMMODITY FIT FOR U SE FOR WHICH IT WOULD OTHERWISE NOT BE FIT, THE OPERATION/ PROCESS FELL WITHIN THE MEANING OF THE WORD MANUFACTURE. APPLY ING THIS TEST, THE ASSESSEE HAD UNDERTAKEN AN OPERATION WHIC H RENDERED THE BLANK CD FIT FOR USE FOR A PURPOSE FOR WHICH IT WOULD OTHERWISE NOT BE FIT. THE BLANK CD WAS AN INP UT. BY THE DUPLICATING PROCESS UNDERTAKEN BY THE ASSESSE, THE RECORDABLE MEDIA WHICH IS UNFIT FOR ANY SPECIFIC US E GOT CONVERTED INTO THE PROGRAMME WHICH IS EMBEDDED IN T HE MASTER MEDIA AND THUS THE BLANK CD GOT CONVERTED I NTO RECORDED CD BY SUCH AN INTRICATE PROCESS. THE DUPLI CATING PROCESS CHANGED THE BASIC CHARACTER OF A BLANK CD DEDICATING IT TO A SPECIFIC USE. WITHOUT SUCH PROCE SSING, BLANK CDS WOULD BE UNFIT FOR THEIR INTENDED PURPOSE. THER EFORE PROCESSING OF BLANK CDS DEDICATING THEM TO A SPECIF IC USE CONSTITUTED MANUFACTURE IN TERMS OF SECTION 80IA( 12)(B) READ WITH SECTION 33B OF THE ACT. THE MARKETED COPIES OF THE CD ITA NO.1472/M DS/2011 11 WERE GOODS AND THE PROCESS IN WHICH THEY BECAME GOO DS WAS COVERED BY MANUFACTURE OR PROCESSING OF GOODS . 7. TAKING INTO CONSIDERATION OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO THE CASE LAWS RE LIED ON BY BOTH SIDES, WE ARE OF THE CONSIDERED OPINION THAT A FTER THE PROCESSING OF DATA A NEW PRODUCT COMES INTO EXISTEN CE AND THUS THE ACTIVITIES UNDERTAKEN BY THE ASSESSEE CAN BE TERMED AS MANUFACTURE. THE ASSESSEE USES SPECIALIZED METHO DS AND TECHNICAL STAFF FOR COMPUTERIZATION OF LAND RECORDS AND DIGITIZATION OF MAPS. THE PHYSICAL RAW DATA AFTER P ROCESSING TAKES A NEW SHAPE, WHICH CAN BE TRANSPORTED/STORED BY MEANS OF CDS AS WELL AS HARD COPY PRINT OUTS. THE C ASE OF THE ASSESSEE IS SQUARELY COVERED BY THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT OF INDIA IN ORACLE SOFTWARE I NDIA LTD.(SUPRA). THE ACTIVITIES UNDERTAKEN BY THE ASSES SEE FALL WITHIN THE AMBIT OF DEDUCTION ALLOWABLE UNDER THE P ROVISIONS OF SECTION 80IB OF THE ACT. IN VIEW OF OUR ABOVE FI NDINGS, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPE AL FILED BY THE REVENUE. ITA NO.1472/M DS/2011 12 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH, 2012. SD/- SD/- (ABRAHAM P.GEORGE) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 16 TH MARCH, 2012. SOMU COPY TO: (1) APPELLANT ( 4) CIT(A) (2) RESPONDENT (5) D.R. (3) CIT (6) G.F.