CRISIL Limited, CHENNAI V. DCIT, CHENNAI

ITA 1951/CHNY/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2633 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 21-12-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 09-09-2015
• Court: TRIBUNAL
• Department Lawyers: SUNEEL VERMA
• Section: 10B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . . . , . ! , ' # $ [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] S.P.NO.422/MDS/2015 & ./ I.T.A.NO.1951/MDS/2015 / ASSESSMENT YEAR : 2007-08 M/S CRISIL LIMITED 7 TH FLOOR, TVH BELICIAA TOWERS II MRC NAGAR, BLOCK NO.94 CHENNAI 600 028 VS. THE DY. COMMISSIONER OF INCOME-TAX CORPORATE CIRCLE 2(2) CHENNAI [PAN AAACI 1286 J] ( %& / APPELLANT) ( '(%& /RESPONDENT) / APPELLANT BY : SHRI SRIRAM SESHADRI, CA /RESPONDENT BY : SHRI SUNEEL VERMA, CIT / DATE OF HEARING : 21 - 12 - 2015 ! / DATE OF PRONOUNCEMENT : 14 - 01 - 2016 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-6, CHENNAI , DATED 6.5.2015 AND PERTAINS TO ASSESSMENT YEAR 2007-08. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISALLOW ANCE OF CLAIM MADE BY THE ASSESSEE U/S 10A OF THE ACT. S.P NO.422/15 & ITA NO. 1951/2015 :- 2 -: 3. SHRI SRIRAM SESHADRI, LD. REPRESENTATIVE FOR THE A SSESSEE SUBMITTED THAT THE ASSESSEE, IN THE COURSE OF ITS BUSINESS ACTIVITY, COLLECTED MARKET INFORMATION AND DATA IN VARIOUS ST ATISTICAL FORMS AND PROCESSED THE SAME, THEREFORE, THE ACTIVITY OF THE ASSESSEE WOULD AMOUNT TO DEVELOPMENT OF SOFTWARE. REFERRING TO TH E CIRCULAR ISSUED BY THE CBDT IN F.NO.SO 890(E) DATED 26.9.2000, THE LD. COUNSEL SUBMITTED THAT BACK OFFICE OPERATIONS AND DATA PROC ESSING ARE CONSIDERED TO BE IT ENABLED SERVICES BY THE CBDT. REFERRING TO THE JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF CIT VS ML OUTSOURCING SERVICES (P) LTD, 51 TAXMANN.COM 453, THE LD. REPRE SENTATIVE SUBMITTED THAT THE ASSESSEE BEFORE THE DELHI HIGH COURT WAS PROVIDING RECRUITMENT SERVICE BY USING THE INFORMAT ION TECHNOLOGY. THE ASSESSEE BEFORE THE DELHI HIGH COURT, WAS USIN G THE INFORMATION TECHNOLOGY IN SCANNING THE DATA, PROCESSING IT, CON DUCTING ONLINE TESTS FOR SHORT-LISTED CANDIDATES AND ANALYZING THEIR RES ULTS. THE DELHI HIGH COURT, AFTER REFERRING TO THE NOTIFICATION OF THE C BDT DATED 26.9.2000, FOUND THAT THE ASSESSEE WAS NOT PROVIDING ANY RECR UITMENT SERVICE BUT IT WAS USING THE INFORMATION TECHNOLOGY IN SCANNING DATA, PROCESSING IT, CONDUCTING ONLINE TESTS FOR SHORT-LISTED CANDIDATES AND ANALYZING THEIR RESULT. THE DELHI HIGH COURT FOUND THAT THE ASSE SSEE IS ENTITLED FOR THE BENEFIT U/S 10A OF THE ACT. S.P NO.422/15 & ITA NO. 1951/2015 :- 3 -: 4. THE LD. REPRESENTATIVE HAS ALSO PLACED HIS RELIANC E ON THE JUDGMENT OF DELHI HIGH COURT IN THE CASE OF CIT VS MS. KIRAN KAPOOR, 57 TAXMANN.COM 39, AND SUBMITTED THAT WHEN THE ASS ESSEE IS COLLECTING DATA AND PROCESSING THE SAME IN COMPUTER AND EXPORTING IN THE FORM OF COMPUTER SOFTWARE, THE ASSESSEE IS ELI GIBLE FOR EXEMPTION U/S 10B OF THE ACT. PLACING RELIANCE ON THE THIRD MEMBER DECISION OF THIS TRIBUNAL IN ITO VS ACCURUM INDIA (P) LTD, 126 ITD 69, THE LD. REPRESENTATIVE SUBMITTED THAT SOFTWARE IS NOT A MER E KNOWLEDGE BUT IT IS A KNOWLEDGE RECORDED IN A PHYSICAL FORM HAVING A PHYSICAL EXISTENCE, TAKING UP SPACE ON A TAPE, DISC OR HARD DRIVE, MAKI NG PHYSICAL THINGS HAPPEN AND CAN BE PERCEIVED BY SENSES. THE TRIBUNA L FURTHER FOUND THAT THE REQUIREMENT OF SEC. 10A IS THAT THERE SHOU LD BE A CUSTOMIZED ELECTRONIC DATA AND SUCH DATE SHOULD BE EXPORTED OU T OF INDIA. THE DATA WHICH IS CUSTOMIZED MAY BE GATHERED EITHER BY MANUAL EFFORT OR BY ELECTRONIC MEANS. WHATEVER MAY BE THE MEANS OF DATA COLLECTION, ONCE IT IS STORED IN AN ELECTRONIC FORM, IT BECOMES A CUSTOMIZED ELECTRONIC DATA WHICH CAN BE EXPORTED TO QUALIFY FO R DEDUCTION U/S 10A OF THE ACT. THE TRIBUNAL FURTHER FOUND THAT THE PR OCESS OF ACTUALLY COLLECTING THE DATA PHYSICALLY NEED NOT BE IT ENABL ED SERVICE. WHAT ALL IS REQUIRED IS THAT THE DATA COLLECTED SHOULD BE IN AN ELECTRONIC FORM. IN VIEW OF THIS DECISION OF THE THIRD MEMBER, THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 10A OF THE ACT. THE LD. COUNSEL FURTHER SUBMITTED S.P NO.422/15 & ITA NO. 1951/2015 :- 4 -: THAT THE EFFECT OF THE THIRD MEMBER DECISION IS AS GOOD AS A SPECIAL BENCH DECISION, THEREFORE, IT IS BINDING ON THIS BE NCH. FOR THIS PROPOSITION, HE PLACED HIS RELIANCE ON THE JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF P. C. PURI VS CIT, 151 ITR 584 . 5. IN VIEW OF THE ABOVE, THE LD. REPRESENTATIVE SUBMIT TED THAT THE ASSESSEE HAS TO BE TREATED AS RENDERING SERVIC E IN IT ENABLED SERVICE AND HENCE, ELIGIBLE FOR EXEMPTION U/S 10A OF THE ACT. 6. ON THE CONTRARY, SHRI SUNEEL VERMA, LD. DEPARTMENTA L REPRESENTATIVE SUBMITTED THAT THE MAIN ACTIVITY OF THE ASSESSEE IS TO COLLECT MARKET INFORMATION AND DATA. IT IS OTHERW ISE KNOWN AS COLLECTING MARKET INTELLIGENCE. AFTER COLLECTING T HE DATA OR THE MARKET INTELLIGENCE FROM THE MARKET, THE ASSESSEE IS STOR ING THE INFORMATION AND PRESENTING IN A TABLE FORM SO AS TO EXPORT THE SAME TO THE RESPECTIVE CUSTOMERS. THIS ACTIVITY OF THE ASSESS EE AT THE BEST CAN BE CLASSIFIED AS STATISTICAL ANALYSIS AND PRESENTATION OF REPORT WHICH ARE QUITE DIFFERENT FROM DATA PROCESSING. THEREFORE, A CCORDING TO THE LD. DR, COLLECTING MARKET INFORMATION AND PRESENTING TH E SAME BEFORE THE RESPECTIVE CUSTOMERS WOULD NOT CONSTITUTE DATA PROC ESSING SO AS TO CALL AS IT ENABLED SERVICE. PRESENTING THE INFORMATI ON THROUGH ELECTRONIC MEANS TO THE CUSTOMER IS ONLY A MEDIUM OF TRANSMISS ION AND COMMUNICATION, THEREFORE, THE REMUNERATION RECEIVED BY THE ASSESSEE S.P NO.422/15 & ITA NO. 1951/2015 :- 5 -: IS PREDOMINANTLY FOR COLLECTION OF INFORMATION/DATA AND NOT FOR PROCESSING THE SAME. REFERRING TO THE DETAILS OF T HE PERSONS EMPLOYED BY THE ASSESSEE, THE LD. DR SUBMITTED THAT 80% OF THE EMPLOYEES ARE NON-ENGINEERS AND NON-TECHNICAL PERSONS AND THEY CA NNOT PROCESS THE DATA IN THE COMPUTER. THEREFORE, ACCORDING TO THE LD. DR, MERE COLLECTION OF MARKET INFORMATION AND PROCESSING THE SAME TO THE RESPECTIVE CUSTOMERS THROUGH INTERNET CANNOT BE CLA SSIFIED AS DATA PROCESSING. THEREFORE, THE SERVICES RENDERED BY TH E ASSESSEE CANNOT BE CLASSIFIED AS IT ENABLED SERVICE HENCE, THE ASS ESSEE IS NOT ELIGIBLE FOR EXEMPTION U/S 10A OF THE ACT. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. AD MITTEDLY, THE ASSESSEE IS COLLECTING DATA/INFORMATION AND PROCESS ING THE SAME AND THEN TRANSMITTING IT TO THE RESPECTIVE PARTIES. TH E QUESTION ARISES FOR CONSIDERATION IS WHETHER COLLECTION OF DATA AND PRO CESSING THE SAME WOULD AMOUNT TO IT ENABLED SERVICE OR NOT? WE HAVE CAREFULLY GONE THROUGH THE CIRCULAR ISSUED BY THE CDBT DATED 26.9. 2000 CLASSIFYING BACK OFFICE OPERATIONS AND DATA PROCESSING AS IT EN ABLED SERVICES. THE ACTIVITY OF THE ASSESSEE, AS ADMITTED BY THE D EPARTMENT IS AS FOLLOWS: S.P NO.422/15 & ITA NO. 1951/2015 :- 6 -: DATA INFO GATHERING TOOL THIS TOOL IS DEVELOPED BY IN-HOUSE PROGRAMMING EXPERTS OF IREVNA WHO WORK ON VISUAL BASICS SOFTWARE TO DEVELO P A TOOL THAT HELPS IN GATHERING VARIOUS PRE-DETERMINED INFO RMATION FROM VARIOUS WEBSITES AND OTHER ONLINE INTERNET BAS ED SOURCES FOR THE PURPOSES OF COMPILING THE REQUIRED FINANCIAL MODEL OR OTHER REPORTS FOR THE CLIENT. DUE TO THE VOLUMINOUS NATURE OF THE DATA TO BE GATHERED AND THE REAL TIME NATURE OF REPORTING OF SUCH INFORMATION FOR THE PURPOSES OF P ROVIDING DATA TO CLIENTS AS WELL FOR THE USE OF INTERNAL ANA LYTICS, THIS TOOL IS IMPORTANT. 8. THE MAJORITY CUSTOMERS OF THE ASSESSEE ARE INVESTM ENT BANKS. THE INFORMATION/DATA FURNISHED BY THE ASSE SSEE IS BEING USED IN THE BUSINESS ACTIVITY OF THE CUSTOMERS, THEREFOR E, IT IS NOT A MERE COLLECTION OF DATA AS CLAIMED BY THE REVENUE. THE DELHI HIGH COURT IN THE CASE OF ML OUTSOURCING SERVICES (P) LTD. (SUPRA ) EXAMINED THIS ISSUE ELABORATELY AND AFTER REFERRING TO THE CIRCUL AR ISSUED BY THE CBDT DATED 26.9.2000, FOUND THAT USING INFORMATION TECHN OLOGY IN SCANNING DATA, PROCESSING IT, CONDUCTING ONLINE TESTS FOR SH ORT-LISTED CANDIDATES AND ANALYZING THEIR RESULTS WOULD AMOUNT TO DATA PR OCESSING. 9. WE HAVE ALSO GONE THROUGH THE THIRD MEMBER DECISION IN THE CASE OF ACCURUM INDIA (P) LTD. (SUPRA). THIS TRIBU NAL BY MAJORITY OPINION, FOUND THAT THE REQUIREMENT OF SEC. 10A IS THAT THERE SHOULD BE CUSTOMIZED ELECTRONIC DATA AND SUCH DATA SHOULD BE EXPORTED OUTSIDE INDIA. IN THIS CASE ALSO, THE ASSESSEE CUSTOMIZED THE ELECTRONIC DATA S.P NO.422/15 & ITA NO. 1951/2015 :- 7 -: AND IT WAS ADMITTEDLY EXPORTED. THIS TRIBUNAL IS O F THE CONSIDERED OPINION THAT PROCESSING THE DATA BY THE ASSESSEE W OULD AMOUNT TO PROVIDING IT ENABLED SERVICE, THEREFORE, THE ASSES SEE IS ELIGIBLE FOR EXEMPTION U/S 10A OF THE ACT. 10. IN VIEW OF THE ABOVE DISCUSSION, WE ARE UNABLE TO U PHOLD THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY, THE S AME IS SET ASIDE. THE ASSESSING OFFICER IS DIRECTED TO GRANT EXEMPTIO N TO THE ASSESSEE U/S 10A OF THE ACT. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED. CONSEQUENTLY, THE STAY PETITION IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH JANUARY, 2016, AT CHENNAI. SD/- SD/- ( . ! ) (A. MOHAN ALANKAMONY) ' / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 14 TH JANUARY, 2016 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF