M/s Informatics (India) Limited, Bangalore V. DCIT, Bangalore

ITA 1504/BANG/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6095 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 06-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P YADAV CITI
• Assessee Lawyers: V CHANDRASHEKAR
• Keywords: Opportunity of being heard; Additional evidence; Competent authority
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.1504/BANG/2013 ASSESSMENT YEAR : 2009-10 M/S. INFORMATICS (INDIA) LTD., NO.194, R.V. ROAD, BASAVANGUDI, BANGALORE 560 004. PAN : AAACI 3561K VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11(4), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI V. CHANDRASHEKAR, ADVOCATE RESPONDENT BY : SHRI O.P. YADAV, CIT-I (DR) DATE OF HEARING : 09.04.2014 DATE OF PRONOUNCEMENT : 16.04.2014 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 30.08.2013 OF THE CIT(APPEALS)-I, BANGALORE RELATIN G TO ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF DISTRIBUTION OF JOURNALS, CD ROM, DATA BASES AND ELECTRONIC DATA . THE ASSESSEE ALSO SET UP A STP UNIT FOR EXPORT OF CONTENT DEVELOPMENT SERVICES. THE ASSESSEE HAS AN APPROVAL FOR SETTING UP OF STP UNIT AND THAT APPROVAL WAS ITA NO.1504/BANG/2013 PAGE 2 OF 18 ORIGINALLY GRANTED ON 24.3.2000 AND EXTENDED FOR A PERIOD OF 5 YEARS FROM 4.10.2005 AND FURTHER EXTENDED FOR A PERIOD OF 5 YE ARS FROM 10.4.2010. 3. FOR THE A.Y. 2009-10, THE ASSESSEE FILED A RETUR N OF INCOME IN WHICH THE ASSESSEE CLAIMED DEDUCTION U/S. 10B OF THE ACT OF A SUM OF RS.1,10,71,914 IN RESPECT OF EXPORT OF COMPUTER SOF TWARE IN ITS STP UNIT SET UP AND APPROVED BY THE STPI AUTHORITIES. THE REQU IRED REPORT OF AN AUDITOR AS REQUIRED UNDER FORM. 56F R.W. RULE 16E OF THE RU LES WAS FILED BY THE ASSESSEE. A COPY OF THE REPORT IS AT PAGES 38 TO 4 0 OF THE ASSESSEES PAPERBOOK (PB). THOUGH AT PAGE 38, THE REPORT IS S AID TO BE ONE U/S. 10B OF THE ACT, ANNEXURE-A OF THE REPORT IN COL. 16 REF ERS TO SECTION 10A OF THE ACT. IN COL. 5 OF ANNEXURE-A, THE NATURE OF BUSINE SS OF UNDERTAKING IS STATED TO BE 100% EOU/IT ENABLED SERVICES. THERE I S NO DIFFERENCE BETWEEN DEDUCTION U/S. 10A AND 10B OF THE ACT AS IN BOTH THE SECTIONS, THE CONDITION IS THAT THE PROFITS & GAINS SHOULD BE DER IVED FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE. THE DIFFERENCE IS THAT SECTION 10B APPLIES TO 100% EOU WHILE SECTION 10A IS APPLICABLE TO UNIT S REGISTERED WITH STPI. 4. THE ASSESSING OFFICER CALLED UPON THE ASSESSEE T O EXPLAIN THE NATURE OF SERVICES RENDERED BY THE ASSESSEE SO AS T O EXAMINE THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S. 10B OF THE ACT. TH E ASSESSEE SUBMITTED THAT IT WAS A STPI IS REGISTERED IN THE YEAR, 2000 AND HAS BEEN CLAIMING DEDUCTION U/S. 10A FOR THE PAST SEVERAL YEARS. THA T THE ASSESSEE UNDERTAKES VARIOUS ACTIVITIES IN THE STPI AS PER TH E DETAILED NOTE ENCLOSED ITA NO.1504/BANG/2013 PAGE 3 OF 18 HEREWITH. THAT THE ACTIVITY INVOLVES DATA PROCESS ING, CONTENT DEVELOPMENT ETC. AS PER NOTIFICATION NO. S.O.890(E), DT. 26.9.2 000 ISSUED U/S.10A OF THE ACT, NOTIFYING VARIOUS ACTIVITIES BEING THE INFORMA TION TECHNOLOGY ENABLED SERVICES/PRODUCTS FOR THE PURPOSE OF SECTION 10A OF THE INCOME TAX ACT, 1961. AS COULD BE SEEN FROM THE SAID NOTIFICATION N OTIFIED ACTIVITIES INCLUDE CONTENT DEVELOPMENT, DATA PROCESSING, GEOGRAPHICAL INFORMATION SYSTEMS, LEGAL DATABASES, BACK OFFICE OPERATIONS ETC. THE A SSESSEE ALSO POINTED OUT THAT APART FROM SOFTWARE DEVELOPMENT, EVEN INFORMAT ION TECHNOLOGY ENABLED SERVICES HAVE BEEN INCLUDED WITHIN THE NOTI FIED ACTIVITIES FOR THE PURPOSE OF SECTION 10A. THE ASSESSEE ALSO POINTE D OUT THAT THE SERVICES WERE TO FOREIGN CLIENTS AND THE CONSIDERATION HAS B EEN RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE. THE CLAIM FOR DEDUCT ION U/S.10A OF THE ACT HAS BEEN EXAMINED IN THE PAST AND ALLOWED BY THE AO AFTER DETAILED SCRUTINY FOR ASSESSMENT YEARS 2001-02 TO 2008-09. THAT THERE HAS BEEN NO CHANGE IN THE NATURE OF ACTIVITIES FOR THE PAST SEV ERAL YEARS AND HENCE IN THE PRESENT A.Y. IT WAS NOT OPEN TO THE AO TO REVIE W ASSESSEES ELIGIBILITY AS NEITHER THERE IS ANY CHANGE IN THE LAW NOR IN TH E FACTS. THE ASSESSEE ALSO ENCLOSED A COPY OF THE NOTIFICATION OF CBDT, S .O. NO.890(E) DATED 26.9.2000. 5. THE AO EXAMINED THE NATURE OF SERVICES AS GIVEN BY THE ASSESSEE IN ITS REPLY TO THE SHOW CAUSE NOTICE AND FOUND THE DESCRIPTION OF THE SERVICES RENDERED BY THE ASSESSEE TO BE AS FOLLOWS: - ITA NO.1504/BANG/2013 PAGE 4 OF 18 1) ABSTRACTING AND INDEXING SERVICES 2) DIRECTORY COMPILATION & UPDATING SERVICES 3) METADATA COMPILATION AND UPDATING SERVICES 4) DATA CONVERSION SERVICES. 1. ABSTRACTING AND INDEXING SERVICES : THE ASSESSEE HAS EXPERTS IN VARIOUS SUBJECTS WORKIN G UNDER IT. THESE EXPERTS SUMMARIZE/ABSTRACT/INDEX FROM SCHOLARLY JOU RNALS, MAGAZINES AND NEWSPAPERS IN THE AREA OF BIOCHEMISTRY, BIOTECH NOLOGY, CHEMICAL ENGINEERING AND INDIA BUSINESS, AS PER THE REQUIREM ENTS OF THE OVERSEAS CLIENT AND TRANSMIT THE SAME TO THE OVERSEAS CLIENT . ACCORDING TO THE AO, IN THE NOTES ON ACCOUNTS THE R EVENUE RECOGNITION WAS MENTIONED AS FOLLOWS: REVENUE FROM SALE OF PRINTED E-JOURNALS SUBSCRIPTI ONS, SALE OF CD DATA BASE, E- DATA BASE, LIBRARY AUTOMATION AND NETWORKING PRODUCTS AND AGENCY COMMISSION IS RECOGNIZED IN THE YEAR IN WHICH PROCESSING. ACCORDING TO THE AO, THE ABOVE NOTES IT WAS CLEAR T HAT ASSESSEE WAS NOT IN THE BUSINESS OF SOFTWARE DEVELOPMENT NOR I T ENA BLED SERVICE AND WAS IN THE BUSINESS OF E-TRADING AND IN THE BUSINESS OF PROVIDING TECHNICAL SERVICES. THE ABOVE SERVICE PROVIDED BY THE ASSESSE E COMPANY WAS THEREFORE HELD TO BE NOT ELIGIBLE FOR EXEMPTION U/S 10B OF I.T.ACT. II. DIRECTORY COMPILATION & UPDATING SERVICES: THE ASSESSEE HELPS FOREIGN PUBLISHERS IN COMPILING, EDITING AND UPDATING DIRECTORIES AND REFERENCE WORKS BY EMPLOYI NG PEOPLE TRAINED IN THE TASK OF WEB BASED RESEARCH, SURVEYS, TELEPHONIC INTERVIEWS, ETC. TO COMPILE AND VERIFY DATA ABOUT COMPANIES, PRODUCTS, PEOPLE AND SUCH OTHER INFORMATION PUBLISHED OR IN PUBLIC DOMAIN. T HE SERVICES ARE PERFORMED BY THE TECHNICAL EXPERTS OF THE ASSESSEE BY HELPING FOREIGN CLIENTS/PUBLISHERS IN COMPILING AND UPLOADING DIREC TORIES AND REFERENCE WORKS. THE CLIENTS OF THE ASSESSEE WILL SEND RAW D ATA TO ASSESSEE TO DO THE COMPILATION AND UPLOADING SERVICES. AFTER RECEI VING THE DATA FROM THE CLIENTS, ASSESSEE WILL ASSIGN THE ABOVE WORK TO TECHNICAL EXPERTS, IN ITA NO.1504/BANG/2013 PAGE 5 OF 18 TURN THESE TECHNICAL EXPERTS DO THE INTERNET RESEAR CH. AFTER COMPILATION CLEANED DATA WILL BE UPLOADED TO THE CLIENT. THE AO HOWEVER HELD THAT THE SERVICES RENDERED WERE CLIENT SPECIFIC AND WAS CLEARLY PROVIDING TECHNICAL SERVICES TO C1IENTS AND WAS NOT ELIGIBLE FOR EXEMPTION U/S 10B OF I.T.ACT. III. DATA CONVERSION SERVICES : THE ASSESSEE EXPLAINED THAT PUBLISHERS SEND TO THE ASSESSEE THEIR PRINTED MATERIAL (BOOKS, JOURNALS) ETC. FOR CONVERT ING THE SAME TO DIGITAL MEDIA, WHICH IS CALLED DATA CONVERSION SERVICE. THE ASSESSEE SCANS THE PAGES USING SCANNERS, CONVERT THE SCANNED CONTENT T O SEARCHABLE TEXT USING OCR SOFTWARE, PROOF-READ AND EDIT FOR ENSURIN G ACCURACY OF CONVERTED DATA, ORGANIZE AND FORMAT THE CONVERTED C ONTENT TO VARIOUS SEARCH AND DELIVERY FORMATS FOR DELIVERING THROUGH INTERNET, COMPUTER, MOBILE DEVICES ETC. THIS PROCESS IS CALLED DATA CO NVERSION SERVICES. THE AO HOWEVER HELD THAT THE SERVICE WAS NOTHING BU T PROVIDING TECHNICAL SERVICE AND WAS ELIGIBLE FOR EXEMPTION U/ S. 10B OF INCOME TAX ACT. IV. METADATA COMPILATION AND UPDATING SERVICES : PUBLISHING COMPANIES CREATING INFORMATION PRODUCTS REQUIRE METADATA CREATION. METADATA IS A TECHNICAL NAME FOR DATA ABO UT DATA WHICH IS SIMILAR TO ADDRESS OF PEOPLE IN A DIRECTORY OR LIST ING OF BOOKS IN A PARTICULAR WAY IN THE CATALOG OF BOOKS ETC. THE ASS ESSEE SPECIALIZED IN CREATING METADATA FOR ARTICLES PUBLISHED IN ACADEMI C AND TECHNICAL JOURNALS. THE METADATA COMPONENTS OF AN ARTICLE ARE CALLED BIBLIOGRAPHIC DATA SUCH AS: AUTHORS NAME, TITLE OF THE ARTICLE, NAME OF THE JOURNAL IN WHICH IT IS PUBLISHED WITH YEAR AND PAGE NUMBERS, ETC. ABSTRACT OF THE ARTICLE IF AVAILABLE IN THE ARTIC LE. THE ASSESSEE SUBMITTED THAT IT PROVIDES TO ONE OF T HE MAJOR US CLIENTS CHEMICAL ABSTRACTS SERVICE (CAS). THE SAID CLIENT P ROVIDES THE ASSESSEE LIST OF JOURNALS FROM WHICH THE ASSESSEE H AS TO IDENTITY ARTICLES, ITA NO.1504/BANG/2013 PAGE 6 OF 18 EXTRACT THE METADATA OF THE TYPE MENTIONED ABOVE FR OM THOSE ARTICLES AND FORMAT THE METADATA IN A FORMAT SPECIFIED BY CAS. T HE ASSESSEE ATTACHED TWO DOCUMENTS AS ILLUSTRATION OF THIS SERV ICE. DOCUMENT-1, WHICH GIVES FIRST PAGE OF THE ARTICLE FROM WHICH TH E ASSESSEE EXTRACTS PART OF THE METADATA. DOCUMENT-2 A COMPILATION OF M ETADATA RECORD THE ASSESSEE DELIVERED TO CAS. THE AO HOWEVER HELD THAT METADATA WAS NOTHING BUT A TECHNICAL NAME FOR DATA ABOUT DATA WHICH IS SIMILAR TO ADDRESSES O F PEOPLE IN THE DIRECTORY, OR LISTING OF BOOKS IN A PARTICULAR WAY IN THE CATALOGUE OF BOOKS. THE ASSESSEE WAS EXPERT /SPECIALIZED IN CRE ATING METADATA. BUT THE ACTIVITY OF CREATING METADATA IS NOTHING BUT PR OVIDING TECHNICAL SERVICE TO CLIENTS. 6. FOR THE REASONS GIVEN ABOVE, THE AO CONCLUDED TH AT THE ASSESSEE WAS IN THE BUSINESS PROVIDING ONLY TECHNICAL SERVIC ES TO THE CLIENTS AND EARNING INCOME. HE HELD THAT THE CLAIM FOR EXEMPTI ON U/S. 10B OF THE ACT IS ALLOWED FOR COMPANY OR UNDERTAKING IN THE BUSINESS OF MANUFACTURE OR PRODUCE ARTICLE OR THINGS OR IN THE BUSINESS OF SOF TWARE DEVELOPMENT. THE AO ALSO MADE A REFERENCE TO THE MASTER SERVICE AGRE EMENT WITH CHEMICAL ABSTRACT SERVICES (CAS) DIVISION OF AMERICAN CHEMIC AL SOCIETY AND OBSERVED THAT THE SERVICES RENDERED TO THE SAID CLI ENT BY THE ASSESSEE AS PER THE AGREEMENT WAS A) MONITORING THE WEB (JOURNALS WEB SITES) B) SELECT APPROPRIATE ARTICLE PROCESSING. C) ASSIGN AND APPROPRIATE SECTION NUMBER. D) KEY BIBLIOGRAPHIC ABSTRACT DATAS. E) ACQUIRE DELIVERY THE TEXT IMAGES IN TIFF FORMAT. F) FINALLY PROVIDE A CLEANED DATA TO THE CLIENT. ITA NO.1504/BANG/2013 PAGE 7 OF 18 THE AO ALSO REFERRED TO THE DELIVERABLES UNDER THE AGREEMENT TO CONTAIN THE FOLLOWING: IMAGES SEND BY THE ASSESSEE COMPANY SHOULD BE MINIM UM 300- PIXELS WIDE, MAXIMUM 3MB IN SIZE. IMAGES ARE TO IN JPEG OR GIF FORMAT. IMAGES MUST COPYRIGHT-FREE, PUBLIC DOMAIN, OR OTHER WISE AVAILABLE FREE FOR COMMERCIAL USE BY ENCYCLOPEDIA.COM. IMAGES MUST APPROPRIATE ILLUSTRATE THE TOPIC TERM T HEY ARE UPLOADED FOR AND ARE SUBJECT TO REVIEW BY THE CUSTOMER. MAPS AND GRAPHICS ARE ACCEPTABLE IF APPROPRIATE IN ILLUSTRATING THE TOPIC TERM, MPS WILL BE TREATED THE SAME AS OTHER I MAGES AND ARE BE UPLOADED WITH ALL OF THE SOURCE INFORMATION. COPYRIGHT-FREE IMAGES CAN HE FOUND AT THE SOURCES L ISTED AND LINKED TO FROM HIGHBEAMS TOOL. WIKIMEDIA COMMONS, THE LIB RARY OF CONGRESS. OPEN PHOTO, CREATIVE COMMONS (FLICKR) AND THE PERRY- CASTANEDA LIBRARY COLLECTION. THIS LIST IS NOT EXCL USIVE NOR DOES IT GUARANTEE THAT AN IMAGE FOUND USING THESE SOURCES I S COPYRIGHT-FREE, ALL IMAGES MUST BE CHECKED. FLICKR IS A SPECIAL EASE IN THAT IT HOSTS SOME IMAG ES THAT ARE OK TO USE AND OTHER THAT ARE NOT. MAKE SURE THAT ALL IMAGES F ROM FLICKR ARE AVAILABLE TO BE USED FOR COMMERCIAL PURPOSES. YOU C AN LIMIT YOU SEARCH ON FICKR TO THOSE IMAGES AND EACH IMAGE. COPYRIGHT-FREE IMAGES CAN ALSO BE FOUND AT OTHER SO URCES. AS LONG AS THE COPYRIGHT STATUS IS STATED CLEARLY FOR AN IMAGE , OTHER SOURCES CAN BE USED. ADDITIONAL SOURCES MAY BE ADDED TO THE TOO L AS DISCOVERED AND THE CONSULTANT RELATIONSHIP MANAGER WILL BE INF ORMED. 7. THE AO WAS OF THE VIEW THAT THE ABOVE SERVICES A RE IN THE NATURE OF PROVIDING TECHNICAL SERVICES TO CLIENTS NOT ELIGIBL E FOR EXEMPTION U/S 10(B) OF THE IT ACT. ITA NO.1504/BANG/2013 PAGE 8 OF 18 8. BASED ON THE ABOVE, THE AO CAME TO THE CONCLUSIO N THAT THE ASSESSEE WAS NOT ENGAGED IN THE BUSINESS OF MANUFAC TURE OR PRODUCTION OF ARTICLE OR THINGS OR COMPUTER SOFTWARE. HE ACCORDI NGLY REJECTED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S. 10B OF THE ACT. 9. BEFORE THE CIT(APPEALS), THE ASSESSEE REITERATED THE SUBMISSIONS M MADE BEFORE THE AO AND CLAIMED THAT THE CONCLUSIONS OF THE AO ARE NOT CORRECT. IN PARTICULAR, THE ASSESSEE RAISED AN ADD ITIONAL GROUND OF APPEAL BEFORE THE CIT(A) IN WHICH THE ASSESSEE SUBMITTED T HAT IN THE EVENT OF CLAIM OF THE ASSESSEE NOT BEING CONSIDERED U/S. 10B OF THE ACT, THEN THE CLAIM MAY BE CONSIDERED U/S. 10A OF THE ACT. THE C IT(A), HOWEVER, CONFIRMED THE FINDINGS OF THE AO. THE CIT(A) ALSO HELD THAT FOR CLAIM OF DEDUCTION U/S. 10B OF THE ACT, THE EOU SHOULD BE AP PROVED BY THE COMPETENT AUTHORITY. HIS OBSERVATIONS IN THIS REGA RD WERE AS FOLLOWS:- 3.9 AS ALREADY DISCUSSED EARLIER VIDE LETTER DATE D 16.03.2000, THE APPELLANT HAS BEEN GRANTED PERMISSION AS 100% E OU UNIT AND SINCE THEN THE APPELLANT COMPANY CLAIMING EXEMPTION U/S 10B OF THE ACT. EXPLANATION 2(IV) MAKES IT ABUNDANTLY CLEAR THAT A 100 PER CENT EXPORT ORIENTED UNDERTAKING REFERRED TO UNDER SUBSE CTION (I) MEANS AN UNDERTAKING WHICH HAS BEEN APPROVED BY THE COMPETENT AUTHORITY. THUS, THE APPROVAL OF THE UNDERTAKING BY COMPETENT AUTHORITY AS 100 PER CENT EOU IS PRIMARY CONDITION AND AFTER THAT SUCH UNDERTAKING SHOULD BE ENGAGED IN MANUFACTURING OR PRODUCTION OF ANY ARTICLE OR THING OR COMPUTERS SOF TWARE. THUS, THE MERE RECOGNITION AS 100 PER CENT EOU BY A COMPE TENT ITA NO.1504/BANG/2013 PAGE 9 OF 18 AUTHORITY DOES NOT ENABLE THE APPELLANT TO CLAIM EX EMPTION U/S 10B UNLESS IT SATISFIES OTHER CONDITION, SUCH AS IT MANUFACTURES OR PRODUCE ANY ARTICLES OR THINGS OR COMPUTER SOFTWARE . FOR THE PURPOSE OF SECTION 10B OF THE ACT 100 PER CENT EOU IS ONLY THAT WHICH IS SO APPROVED BY THE BOARD APPOINTED BY THE CENTRAL GOVERNMENT IN EXERCISE OF POWERS CONFERRED U/S 14 O F THE IDAR ACT 1951. A 100 PER CENT EOU UNDER THE STP SCHEME C OULD NOT BY EQUATED WITH 100 PER CENT EOU APPROVED BY THE BO ARD APPOINTED BY THE CONFERRED U/S 14 OF THE ACT. THE C ONDITIONALITIES THAT GOVERN UNITS SETUP UNDER STP SCHEME ARE DIFFER ENT FROM THOSE THAT GOVERN THE UNIT SETUP AS 100 PER CENT EO U AND SO APPROVED BY THE BOARD. SOME OF THE CONDITIONALITIES ARE COMMON AND OVER LAPPING BUT OTHER CONDITIONALITIES LIKE TH E SATISFACTION OF EMPLOYMENT CRITERIA, FOREIGN EXCHANGE ETC. ARE APPA RENT BY DIFFERENT. THE HONBLE ITAT, HYDERABAD IN THE CASE OF INFOTECH ENTERPRISES LTD VS. JCIT (2003) 85 ITD 325 (HYD) DI SCUSSED THIS ISSUE IN DETAIL AND DECIDED IN FAVOUR OF THE R EVENUE. THE HONBLE HIGH COURT OF DELHI DECIDED THE ISSUE IN CO NFORMITY WITH THE DECISION OF HONBLE ITAT, HYDERABAD IN THE CASE OF CIT VS. REGENCY CREATION LTD. (2012) 353 ITR 326 (DELHI ) AND THE ASSESSING OFFICER HEAVILY RELIED UPON THE SAME. 10. WITH REGARD TO THE ALTERNATIVE CLAIM OF THE ASS ESSEE FOR DEDUCTION U/S. 10A OF THE ACT, THE ASSESSEE HAD FILED BEFORE THE CIT(A) A REPORT OF THE AUDITOR IN FORM 56F R.W. RULE 16D OF THE I.T. RULES , 1962, IN WHICH THE CLAIM FOR DEDUCTION U/S. 10A WAS MADE. ON THE ABOV E CLAIM OF THE ASSESSEE, THE CIT(A) HELD THAT DEDUCTION U/S. 10A O F THE ACT CAN BE ALLOWED ONLY WHEN THE REPORT IN THE PRESCRIBED FROM IS FILED ALONG WITH THE RETURN OF INCOME. HE HELD THAT THE SAID FORM WAS N OT FILED ALONG WITH THE RETURN OF INCOME OR BEFORE THE COMPLETION OF THE AS SESSMENT, HENCE THE SAME CANNOT BE ENTERTAINED. THE CIT(A) FURTHER HEL D THAT IT IS NOT POSSIBLE ITA NO.1504/BANG/2013 PAGE 10 OF 18 TO SHIFT THE CLAIM OF DEDUCTION FROM 10B TO 10A OF THE ACT AND IN THIS REGARD OBSERVED AS FOLLOWS:- UNDER SUB-SECTION (1) OF SECTION 10B OF THE ACT PR OVIDED THAT SUBJECT TO THE PROVISIONS OF THIS SECTION, A D EDUCTION OF SUCH PROFITS AND GAINS ARE DERIVED BY A HUNDRED PERCENT EXPORT ORIENTED UNDERTAKING FROM THE EXPORT OF ARTICLES OR THINGS O R COMPUTER SOFTWARE FOR A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING BEGINS TO MANUFACTURING OR PRODUCE ARTICLES OR THINGS OR COMPUTER SOFTWARE, AS THE CAS E MAY BE SHALL BE ALLOWED FROM THE TOTAL INCOME OF THE ASSESSEE. T HIS IMPLIED THAT IF EXEMPTION U/S 10B IS CLAIMED, IN PREVIOUS Y EAR RELEVANT TO ASSESSMENT YEAR IN WHICH THE UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE ARTICLES ELIGIBLE EXEMPTION FOR TEN CONS EQUENT ASSESSMENT YEARS ON THAT SECTION ONLY. THERE IS NO PROVISION UNDER THE SECTION EXEMPTION TO BE SHIFTED FROM 10B TO 10A IF NOT SATISFIED THE CONDITIONS ON WHICH CLAIMED EXEMPTION . THE CONDITION FOR ALLOWANCE OF DEDUCTION U/S 10A AND 10 B ARE STOOD ON DIFFERENT FOOTING AS HELD BY THE HONBLE ITAT, H YDERABAD IN THE CASE OF VNS MAKRO TECHNOLOGIES PVT. LTD VS DCIT (ITA NO 577/HYD/2012). THUS THERE IS NO MERIT IN THE APP ELLANTS CONTENTION, HENCE REJECTED ON THIS ISSUE. 11. AGGRIEVED BY THE AFORESAID ORDER OF THE CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS. SEC.10A O F THE ACT AND EXPLN.-2 THERETO READS THUS: SECTION 10A: SPECIAL PROVISION IN RESPECT OF NEWLY ESTABLISHED UNDERTAKINGS IN FREE TRADE ZONE, ETC. SUBJECT TO THE PROVISIONS OF THIS SECTION, A DEDUCT ION OF SUCH PROFITS AND GAINS AS ARE DERIVED BY AN UNDERTAKING FROM THE EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE FOR A PERIO D OF TEN CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE ASS ESSMENT YEAR ITA NO.1504/BANG/2013 PAGE 11 OF 18 RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAK ING BEGINS TO MANUFACTURE OR PRODUCE SUCH ARTICLES OR THINGS OR C OMPUTER SOFTWARE, AS THE CASE MAY BE, SHALL BE ALLOWED FROM THE TOTAL INCOME OF THE ASSESSEE . EXPLANATION 2 : FOR THE PURPOSES OF THIS SECTION, (I) '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 PRODUCT O R SERVICE OF SIMILAR NATURE, AS MAY BE NOTIFIED BY THE BOARD, WH ICH IS TRANSMITTED OR EXPORTED FROM INDIA TO ANY PLACE OUTSIDE INDIA B Y ANY MEANS; AS CAN BE SEEN FROM EXPLN.-2 (B) TO SEC.10A OF THE ACT EVEN CUSTOMIZATION OF ELECTRONIC DATA OR ANY PRODUCT OR SERVICE OF SIM ILAR NATURE WHICH ARE NOTIFIED BY THE CBDT ARE ALSO CONSIDERED AS DEVELOP MENT OF COMPUTER SOFTWARE. THE CBDT HAS SPECIFIED AN EXHAUSTIVE LIS T OF CERTAIN INFORMATION TECHNOLOGY ENABLED (IT ENABLED) SERVICES [VIDE NO TIFICATION NO SO 890(E), DATED 26 SEPTEMBER 2000], WHICH ARE AS UNDE R: BACK-OFFICE OPERATIONS CALL CENTRES CONTENT DEVELOPMENT AND ANIMATION DATA PROCESSING ENGINEERING AND DESIGN GEOGRAPHIC INFORMATION SYSTEM SERVICES HUMAN RESOURCE SERVICES INSURANCE CLAIM PROCESSING LEGAL DATABASES ITA NO.1504/BANG/2013 PAGE 12 OF 18 MEDICAL TRANSCRIPTION PAYROLL REMOTE MAINTENANCE REVENUE ACCOUNTING SUPPORT CENTRES WEB-SITE SERVICES 13. IT IS NOT IN DISPUTE THAT IN THE PAST THE ASSES SEE HAS BEEN CLAIMING DEDUCTION U/S.10A OF THE ACT AND HAD BEEN ALLOWED T HE BENEFIT OF SUCH DEDUCTION. THE REVENUE IN THOSE YEARS DID NOT QUES TION THE NATURE OF SERVICES RENDERED BY THE ASSESSEE AS NOT AMOUNTING TO MANUFACTURE OF COMPUTER SOFTWARE. IN ASSESSEES OWN CASE FOR THE A.Y. 2005-06, THIS TRIBUNAL IN ITA NO.982/BANG/2009 HAD CONSIDERED THE QUESTION OF COMPUTATION OF DEDUCTION U/S. 10A OF THE ACT. IN T HAT ASSESSMENT YEAR, THE ASSESSEE HAD CLAIMED DEDUCTION U/S. 10A OF THE ACT. IT WAS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT DEDUCTION WAS WRONGLY CLAIMED U/S. 10B INSTEAD OF SECTION 10A OF THE ACT. ACCORDING T O HIM, SUCH A MISTAKE OUGHT TO HAVE BEEN POINTED OUT OR RECTIFIED AT THE STAGE OF ASSESSMENT OR AT THE FIRST APPELLATE STAGE, BUT HAD NOT BEEN DONE SO . IT WAS HIS SUBMISSION THAT IN THE PAST THE CLAIM OF THE ASSESSEE WAS MADE AND ALLOWED U/S. 10A OF THE ACT AND ACCORDINGLY FOR THE PRESENT ASSESSME NT YEAR, THE REVENUE SHOULD NOT BE ALLOWED TO TAKE A DIFFERENT STAND. 14. RELIANCE WAS PLACED ON THE DECISION OF ITAT BAN GALORE DECISION IN THE CASE OF ANSR SOURCE INDIA PVT. LTD. V. ITO, ITA ITA NO.1504/BANG/2013 PAGE 13 OF 18 NO.562/BANG/2013 . IN THE AFORESAID DECISION, ONE OF THE ISSUES THAT AROSE FOR CONSIDERATION WAS, WHETHER THE ASSESSEE C OULD BE PERMITTED TO CHANGE ITS CLAIM FOR DEDUCTION FROM SECTION 10B TO SECTION 10A OF THE ACT. IN THAT CASE, THE ASSESSEE MADE A CLAIM FOR DEDUCTI ON U/S. 10A OF THE ACT BEFORE THE FIRST APPELLATE AUTHORITY AND DEDUCTION U/S. 10B OF THE ACT WAS REJECTED ON THE GROUND THAT 100% EOU OF THE ASSESSE E WAS NOT APPROVED BY THE DEVELOPMENT COMMISSIONER AS RATIFIED BY THE BOARD OF APPROVAL FOR EOU SCHEME. SINCE THE ASSESSEE COULD NOT FILE THE APPROVAL REQUIRED U/S. 10B OF THE ACT AND SINCE THE ASSESSEE WAS REGISTERE D AS 100% EOU UNDER STP SCHEME, AN ALTERNATIVE CLAIM FOR DEDUCTION U/S. 10A OF THE ACT, (AS WAS MADE BY THE ASSESSEE IN THE PRESENT APPEAL) WAS MAD E BEFORE THE CIT(APPEALS). THE TRIBUNAL EXAMINED THE ABOVE CLAI M AND FOUND THAT THE ITAT CHENNAI BENCH IN THE CASE OF ITO V. HEARTLAND K.G. INFORMATION LTD., (2010) 131 TTJ 216 (CHENNAI) HAD DEALT WITH AN IDENTICAL CLAIM OF THE ASSESSEE, WHEREIN IT WAS HELD THAT REVENUE W AS BOUND TO EXAMINE THE AVAILABILITY OF DEDUCTION UNDER ANY OF THE PROV ISIONS OF LAW. THEREAFTER, THE BENCH HELD THAT IF THE CLAIM U/S. 10A IS OTHERW ISE ALLOWABLE, THE SAME SHOULD BE CONSIDERED. THE TRIBUNAL CONCLUDED AS FO LLOWS:- 4.3.2. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE ISSUE AS DELIBERATED UPON IN THE FORE-GOING PARAGRAPHS, WE A RE OF THE OPINION THAT THE ASSESSING OFFICER FOR HAVING FAILE D TO PROPERLY APPRAISE THE ASSESSEE OF ITS LEGITIMATE CLAIM [BOAR DS CIRCULAR NO.14 (XL 35) DATED 11.4.1955] AND ALSO IT HAS BEEN DENIED AN OPPORTUNITY BY THE FIRST APPELLATE AUTHORITY TO FUR NISH CORRECT FORM FOR CLAIMING DEDUCTION U/S 10A [WHICH IT HAD A DMITTEDLY ITA NO.1504/BANG/2013 PAGE 14 OF 18 FAILED TO DO SO AT THE TIME OF ASSESSMENT PROCEEDIN GS, THE ENTIRE ISSUE REQUIRES TO BE LOOKED INTO AFRESH AT THE ASSE SSING OFFICERS LEVEL. TO FACILITATE THE AO TO IMPLEMENT THE ABOVE DIRECTION AND TO TAKE APPROPRIATE ACTION IN ACCORDANCE WITH THE P ROVISIONS OF THE ACT, THE ISSUE IS RESTORED ON THE FILE OF THE A O. IN THE MEANWHILE, THE ASSESSEE THROUGH ITS AR IS ADVISED T O FURNISH ALL THE RELEVANT DOCUMENTS/PROOF AT ITS POSSESSION BEFO RE THE AO SO AS TO ENABLE HIM TO CARRY OUT THE ABOVE DIRECTION E XPEDITIOUSLY. IT IS ORDERED ACCORDINGLY. 15. THE LD. COUNSEL FOR THE ASSESSEE ALSO FURTHER R EITERATED THE SUBMISSIONS AS WERE MADE BEFORE THE CIT(APPEALS) AS TO HOW THE NATURE OF SERVICES RENDERED BY THE ASSESSEE WOULD FALL WIT HIN THE MEANING OF DATA PROCESSING AND CONTENT DEVELOPMENT, AS ENVISAGED IN THE NOTIFICATION ISSUED U/S. 10A OF THE ACT VIZ., NOTIFICATION S.O. NO.890(E) DATED 26.9.2000. 16. THE LD. DR, HOWEVER, RELIED UPON THE ORDER OF T HE ASSESSING OFFICER. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PE RUSAL OF THE ORDER OF ASSESSMENT SHOWS THAT THE QUESTION WHETHER THE NATU RE OF SERVICES RENDERED BY THE ASSESSEE CAN BE SAID TO BE DATA PR OCESSING AND CONTENT DEVELOPMENT FALLING WITHIN THE NOTIFICATION ISSUED U/S. 10A OF THE ACT, HAS NOT BEEN EXAMINED BY THE AO IN THE PROPER PERSPECTI VE. ON THE ABSTRACTING AND INDEXING SERVICES, THE AO HAS RELIE D ON THE REVENUE RECOGNITION AS EXPLAINED IN THE NOTES TO ACCOUNTS O F THE ASSESSEE WHEREIN THERE IS A REFERENCE TO SALE OF PRINTED E-JOURNALS SUBSCRIPTIONS. FROM THE SAME, HE HAS CONCLUDED THAT THE ASSESSEE WAS IN THE BUSINESS OF E- ITA NO.1504/BANG/2013 PAGE 15 OF 18 TRADING. WE FAIL TO SEE AS TO HOW THE REVENUE RECOG NITION BY AN ASSESSEE WITH REFERENCE TO SALE OF PRINTED E-JOURNALS SUBSC RIPTION WILL HAVE ANY BEARING ON THE NATURE OF SERVICES RENDERED BY THE A SSESSEE. AS WE HAVE ALREADY SEEN THE ASSESSEE WAS IN THE BUSINESS OF DI STRIBUTION OF JOURNALS, CD ROM, DATA BASES AND ELECTRONIC DATA. THE ASSESS EE ALSO SET UP A STP UNIT FOR EXPORT OF CONTENT DEVELOPMENT 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 & I NDEXING SERVICES WERE NOT IN THE NATURE OF DATA PROCESSING OR CONTEND DEV ELOPMENT. WE ARE OF THE VIEW THAT THE EXPRESSION DATA PROCESSING WILL HAVE TO RECEIVE A BROAD MEANING, KEEPING IN VIEW THE PURPOSE BEHIND THE PRO VISIONS OF SEC.10A/10B OF THE ACT WHICH IS TO AUGMENT FOREIGN EXCHANGE EARNINGS. 18. WITH REGARD TO THE DIRECTORY COMPILATION AND U PDATING 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 THE VERY NATURE OF SERVICE WILL BE DATA PROCESSING. THE DATA RECEI VED IN ONE FORM IS CONVERTED INTO ANOTHER FORM AND DELIVERED ABROAD. THERE IS CERTAINLY VALUE ADDITION TO THE DATA RE-TRANSMITTED ABROAD. IT IS FOR THIS VALUE ADDITION AND GETTING BACK THE DATA IN A DIFFERENT FORM THAT THE ASSESSEE RECEIVES REMUNERATION. CLEARLY THE SAME WILL BE IN THE NATU RE OF DATA PROCESSING. 19. WITH REGARD TO DATA CONVERSION SERVICES, THE AO HAS MERELY OBSERVED THAT CONVERTING SCANNED CONTENT TO READABL E TEXT WOULD BE ONLY ITA NO.1504/BANG/2013 PAGE 16 OF 18 RENDERING OF TECHNICAL SERVICES. WE ARE OF THE VIE W THAT THE SAID SERVICE WOULD BE IN THE NATURE OF CONTENT DEVELOPMENT AS ENVISAGED IN THE CBDT CIRCULAR REFERRED TO IN THE EARLIER PART OF TH IS ORDER. 20. WITH REGARD TO METADATA COMPILATION AND UPDATI NG SERVICES, HE HAS MERELY OBSERVED THAT THE ASSESSEE WAS ONLY PROVIDIN G 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 E ARLIER PART OF THIS ORDER. 21. IT IS CLEAR THAT THE AO HAS NOT EXAMINED THE CB DT CIRCULAR DATED 26.9.2000. IN OUR VIEW, THE TERM DATA PROCESSING WOULD BE WIDE ENOUGH TO COVER THE SERVICES RENDERED BY THE ASSESSEE. THE C IT(APPEALS) HAS ONLY APPROVED THE FINDINGS OF THE AO AND HAS NOT GIVEN H IS INDEPENDENT VIEW ON THE ISSUE. WE THEREFORE HOLD THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS MANUFACTURE OF COMPUTER SOFTWARE AS ENVISA GED IN SEC.10A/10B OF THE ACT. 22. ADMITTEDLY THE ASSESSEE DID NOT HAVE THE REQUIR ED APPROVAL AS ENVISAGED U/S.10B OF THE ACT. THE ASSESSEE HOWEVER CLAIMS IT HAS THE REQUIRED APPROVAL FOR ALLOWING DEDUCTION U/S.10A OF THE ACT. WITH REGARD TO THE QUESTION AS TO WHETHER THE ASSESSEE CAN BE ALLO WED TO SHIFT THE CLAIM FOR DEDUCTION FROM SECTION 10B TO SECTION 10A OF TH E ACT, WE HAVE ALREADY SEEN THAT IN THE PAST THE ASSESSEE HAD BEEN CLAIMIN G DEDUCTION U/S. 10A OF THE ACT. IN OUR VIEW, THE DECISION RENDERED BY THE ITAT BANGALORE BENCH IN ITA NO.1504/BANG/2013 PAGE 17 OF 18 THE CASE OF ANSR SOURCE INDIA PVT. LTD. (SUPRA) , SQUARELY COVERS THE ISSUE AND THE CLAIM OF THE ASSESSEE SHOULD BE DIREC TED TO BE EXAMINED IN THE LIGHT OF THE PROVISIONS OF SECTION 10A OF THE A CT AND FOR THIS PURPOSE THE REPORT OF THE AUDITOR IN FORM 56F OF THE ACT FILED BEFORE THE CIT(A) IS ADMITTED AS ADDITIONAL EVIDENCE. WE ARE OF THE VIE W 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 ASSESS ING OFFICER FOR FRESH CONSIDERATION CLAIM OF THE ASSESSEE FOR DEDUCTION U /S.10A OF THE ACT. THE ASSESSING OFFICER WILL DECIDE THE ISSUE AFRESH AFTE R AFFORDING THE ASSESSEE OPPORTUNITY OF BEING HEARD. 23. FOR STATISTICAL PURPOSES, THE APPEAL IS TREATED AS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF APRIL , 2014 . SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 16 TH APRIL , 2014 . /D S/ ITA NO.1504/BANG/2013 PAGE 18 OF 18 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.