IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 1115/CHD/2008 ASSESSMENT YEAR: 2005-06 M/S BEBO TECHNOLOGIES PVT LTD., VS. THE JCIT, RANGE -V, MOHALI CHANDIGARH PAN NO. AABCB9492R ITA NO. 116/CHD/2009 ASSESSMENT YEAR: 2005-06 THE DCIT, CIRCLE 6(1), VS. M/S BEBO TECHNOLOGIES PVT LTD., MOHALI MOHALI PAN NO. AABCB9492R & C.O.NO. 22/CHD/2009 (IN ITA NO. 116/CHD/2010) ASSESSMENT YEAR: 2005-06 M/S BEBO TECHNOLOGIES PVT LTD., VS. THE DCIT, CIRCL E 6(1), MOHALI MOHALI PAN NO. AABCB9492R ITA NO. 1066/CHD/2009 ASSESSMENT YEAR: 2006-07 M/S BEBO TECHNOLOGIES PVT LTD., VS. THE DCIT, CIRCL E 6(1), MOHALI MOHALI PAN NO. AABCB9492R ITA NO. 294/CHD/2010 ASSESSMENT YEAR: 2007-08 M/S BEBO TECHNOLOGIES PVT LTD., VS. THE DCIT, CIRCL E 6(1), MOHALI MOHALI PAN NO. AABCB9492R (APPELLANT) (RESPONDENT) 2 APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT BY: SHRI S.S.KHEMWAL ORDER PER SUSHMA CHOWLA, JM OUT OF THESE FOUR APPEALS, THREE APPEALS FILED BY T HE SAME ASSESSEE ARE AGAINST THE DIFFERENT ORDERS OF CIT(A), CHANDIG ARH DATED 28.11.2008, 25.9.2009 AND 26.2.2010 RELATING TO ASSESSMENT YEAR S 2005-06 TO 2007-08 RESPECTIVELY AGAINST THE ORDERS PASSED UNDER SECTIO N 143(3)OF THE I.T. ACT, 1961. THE REVENUE HAS ALSO FILED AN APPEAL IN ITA NO.116/CHD/2010 RELATING TO ASSESSMENT YEAR 2005-06 AGAINST WHICH T HE ASSESSEE HAS FILED CROSS OBJECTION BEING C.O. NO. 22/CHD/2010. 2. ALL THE APPEALS / CROSS OBJECTION RELATING TO TH E SAME ASSESSEE AND APPEAL OF THE REVENUE HAVING SIMILAR GROUNDS WERE H EARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR TH E SAKE OF CONVENIENCE. 3. THE ASSESSEE IN ITA NO.1115/CHD/2008 RELATING TO ASSESSMENT YEAR 2005-06 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THAT THE LD. CIT(A) HAS FURTHER ERRED IN HOLDING TH AT THE ASSESSEES REASONABLE PROFIT FOR THE PERIOD 1.10.2004 TO 31.1.2005 IS THE COST + @ 17% AS AGAINST THE PROFIT SHOWN AT 49% MERELY ON THE SUSPICIOUS PREMISE HOLDING IT TO BE MODE OF COMPUTATION OF EXCESSIVE PROFIT WHICH IS ARBITRARY AND UNJUSTIFIED. 2. THAT THE LD. CIT(A) HAS FURTHER ERRED IN HOLDING TH AT THE ASSESSEE WOULD NOT BE ELIGIBLE FOR DEDUCTION UN DER SECTION 10B ON THE DIFFERENCE OF PROFIT SHOWN BY TH E ASSESSEE AND THE PROFIT TAKEN COST + @ 17% HOLDING IT TO BE TAXABLE WHICH OTHERWISE IS EXEMPT UNDER SECTI ON 10B OF THE ACT AND AS SUCH IS ARBITRARY AND UNJUSTI FIED. 3 3. THAT THE LD. CIT(A) HAS FURTHER ERRED IN UPHOLDING THE DISALLOWANCE OF RS. 5,54,752/- INVOKING THE PROVISI ONS OF SECTION 14A OF THE ACT WHICH IS ARBITRARY AND UNJUSTIFIED. 4. THE REVENUE IN ITA NO. 116/CHD/2009 RELATING TO ASSESSMENT YEAR 2005-06 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN ALLOWING APPEAL OF THE ASSE SSEE WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ALLOWING EXEMPTION US/ 10B OF THE INCOME TAX ACT. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXPENDITURE INCURRE D BY THE ASSESSEE TO THE TUNE OF RS. 48,22,679/- U/S 69C R/W WITH SECTION 10B(7) AND DISALLOWANCE OF AN EXPENDIT URE OF RS. 5,54,752/- INCURRED BY THE ASSESSEE COMPANY U/S 14A OF THE INCOME TAX ACT, 1961. 5. THE FOLLOWING GROUNDS HAVE BEEN RAISED BY ASSESS EE IN THE CROSS OBJECTIONS IN C.O. 22/CHD/2000 RELATING TO ASSESSME NT YEAR 2005-06.- 1. THAT THE EXEMPTION UNDER SECTION 10B OF THE INCOME TAX ACT IS ALLOWABLE TO THE ASSESSEE WHICH HAS ALSO BEE N ALLOWED BY THE ASSESSING OFFICER HIMSELF IN THE SUBSEQUENT ASSESSMENT YEAR I.E. 2006-07 AND NOW TO SAY THAT THE LD. CIT(A) HAS ERRED IN ALLOWING EXEMPTION UNDER SECTION10B OF THE ACT IS WHOLLY WARRANTED. 2. THAT THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDI TION OF RS. 48,22,679/- MADE UNDER SECTION 69C R.W.S. 10B( 7) OF THE ACT MADE BY THE LD. ASSESSING OFFICER ALLEGEDLY ON ACCOUNT OF EXPENDITURE INCURRED BY THE APPELLANT OU TSIDE THE BOOKS OF ACCOUNT. 3. THAT THE LD. CIT(A) HAS WRONGLY UPHELD THE DISALLOWANCE OF AN EXPENDITURE OF RS. 5,54,752/- UN DER SECTION 14A OF THE ACT WHILE THE ASSESSEE DID NOT C LAIM ANY SUCH DEDUCTION BY WAY OF EXPENDITURE. AS A MAT TER OF FACT NO SUCH RELIEF HAS BEEN ALLOWED BY THE LD. CIT(A) AND THE GROUND OF APPEAL OF THE DEPARTMENT IS UNTENABLE . 4 6. THE ASSESSEE IN ITA NO 1066/CHD/2010 RELATING T O ASSESSMENT YEAR 2006-07 AND IN ITA NO.294/CHD/2010 RELATING TO ASSE SSMENT YEAR 2007-08 HAS RAISED THE FOLLOWING COMMON GROUNDS OF APPEAL:- 4. THAT THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEES REASONABLE PROFIT DURING THE YEAR IS THE COST + @ 22% AS AGAINST THE PROFIT SHOWN AT RS. 54.14% (ASSESSMENT YEAR 2006-07) AND 52.70% (ASSESSMENT YEAR 2007-08) MERELY ON THE SUSPICIOUS PREMISE HOLDING IT TO BE MODE OF COMPUTATION OF EXCESSIVE PROFIT WHICH IS ARBITRARY AND UNJUSTIFIED. 5. THAT THE LD. CIT(A) HAS FURTHER ERRED IN HOLDING TH AT THE ASSESSEE WOULD NOT BE ELIGIBLE FOR DEDUCTION UN DER SECTION 10B ON THE DIFFERENCE OF PROFIT SHOWN BY TH E ASSESSEE AND THE PROFIT TAKEN COST + @ 22% HOLDING IT TO BE TAXABLE WHICH OTHERWISE IS EXEMPT UNDER SECTI ON 10B OF THE ACT AND AS SUCH IS ARBITRARY AND UNJUSTI FIED. 7. THE GROUND NO.1 RAISED BY THE REVENUE IN ITA NO. 116/CHD/2009 BEING GENERAL IS DISMISSED. 8. THE ISSUE IN GROUND NO.2 RAISED BY THE REVENUE I S IN CONNECTION WITH THE EXEMPTION CLAIMED 10B OF THE INCOME TAX AC T. THE ASSESSEE VIDE GROUND NOS. 1 & 2 IN ITA NO. 115/CHD/2008 IS A GGRIEVED BY ESTIMATION OF PROFITS OF THE BUSINESS WHICH IN TURN ARE ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT. 9. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD CLAIMED ITS INCOME F ROM BUSINESS AS EXEMPT U/S 10B OF THE ACT. THE ASSESSEE WAS ENGAGED IN PROVIDING VARIETIES OF SERVICES OF SOFTWARE DEVELOPMENT, QUAL ITY ASSURANCE AND TESTING SERVICES, SUPPORT SERVICES. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, ON THE PERUSAL OF THE INVOICES ISSUED BY THE ASSESSEE, THE ASSESSING OFFICER NOTED THAT THE SAID INVOICES WERE ISSUED FOR PROVIDING 5 QUALITY ASSURANCE SERVICES AND CODE TESTING. THE AS SESSING OFFICER FURTHER NOTED THE PROVISIONS OF SECTION 10B OF THE INCOME T AX ACT ALLOWING DEDUCTION TO 100% EXPORT ORIENTED UNDERTAKING AND A LSO TOOK NOTE OF THE NOTIFICATION DATED 26.9.2000, UNDER WHICH INFORMATI ON TECHNOLOGY ENABLED PRODUCTS OR SERVICES FOR THE PURPOSE OF EXPLANATION 2(I)(B) OF SECTION 10B WERE NOTIFIED. THE ASSESSING OFFICER WAS OF THE VI EW THAT THE QUALITY ASSURANCE SERVICES AND CODE TESTING SERVICES PROVID ED BY THE ASSESSEE WERE NOT COVERED WITHIN THE PURVIEW OF THE SAID NOT IFICATION; HENCE, THE EXEMPTION CLAIMED U/S 10B OF THE ACT WAS FOUND TO B E NOT JUSTIFIED. THE SECOND ASPECT WAS WHETHER THE SERVICES OF THE ASSES SEE WERE PRODUCTION. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE VIDE LETTER DATED 26.12.2007 STATED THAT IT WAS ENGAGED IN THE FIELD OF SOFTWARE DEVELOPMENT AND OTHER RELATED ACTIVITIES AND HENCE NOT MAINTAINING PRODUCTION RECORDS. THE ASSESSING OFFICER WAS OF T HE VIEW THAT IN THE ABSENCE OF THE PRODUCTION RECORDS, IT WAS NOT POSSI BLE TO CONCLUDE WHETHER THE ASSESSEE COMPANY WAS ACTUALLY ENGAGED IN THE PR ODUCTION OR MANUFACTURE OF THE COMPUTER SOFTWARE OR NOT. IT WA S OBSERVED BY THE ASSESSING OFFICER THAT CLAIM OF EXEMPTION U/S 10B O F THE ACT WAS NOT JUSTIFIED ON THIS GROUND. THE NEXT ASPECT NOTICED BY THE ASSESSING OFFICER WAS THAT THE ASSESSEE HAD STARTED ITS BUSINESS ACTI VITIES FROM ITS INITIAL LOCATION AT 491, PHASE IV, SECTOR 59, MOHALI AND HA D OPENED UNIT AT SPIC CENTRE, SECTOR 12, CHANDIGARH VIDE LEASE AGREEMENT DATED 4.3.2003. ANOTHER UNIT OF THE ASSESSEE WAS STARTED AT SCO 156 -157, 4 TH FLOOR, SECTOR 34, CHANDIGARH ON 24.9.2004, AS PER THE INFORMATION OBTAINED FORM CUSTOMS AND EXCISE DEPARTMENT. THE ASSESSING OFFIC ER NOTED THE ASSESSEE NOT TO HAVE PURCHASED ANY NEW COMPUTERS DU RING THE YEAR BUT HAD INCURRED EXPENDITURE ON ADDITIONS TO THE EXISTING A SSETS, BEING, HARD DISK FOR LAPTOP, CABLE ROPES, MISC. NETWORKING ITEMS, MO DEM AND FRACTIONAL 6 CONVERTERS, UPS, ETC. THE ASSESSING OFFICER FOUND THE ASSESSEE NOT TO HAVE PURCHASED ANY COMPUTER AFTER 24.9.2004 AND AS SUCH HELD THAT IT HAD NOT STARTED ANY NEW UNIT AT SECTOR 34, CHANDIGARH, BUT THE SAME WAS FORMED BY RESTRUCTURING OF THE OLD UNIT OF THE ASSE SSEE COMPANY. THUS, THE ASSESSING OFFICER HELD THAT BY VIRTUE OF SECTIO N 10B (2)(II) OF THE ACT WHICH PROVIDES THAT AN UNDERTAKING IN ORDER TO BE E LIGIBLE FOR EXEMPTION SHOULD NOT BE FORMED BY SPLITTING OR RECONSTRUCTIO N OF BUSINESS ALREADY IN EXISTENCE, DISABLED THE ASSESSEE TO THE EXEMPTION CLAIMED U/S 10B OF THE ACT. THE NEXT OBJECTION OF THE ASSESSING OFFICER W AS THAT AS PER SECTION 10B OF THE ACT, THE PROFITS AND GAINS OF 100% EXPOR T ORIENTED UNDERTAKING ARE EXEMPT I.E. AN UNDERTAKING WHICH HAS BEEN APPRO VED AS 100% EXPORT ORIENTED UNDERTAKING BY THE BOARD, APPOINTED IN THI S BEHALF BY THE CENTRAL GOVERNMENT, IN EXERCISE OF POWERS CONFERRED VIDE SE CTION 14 OF THE INDUSTRIES (DEVELOPMENT & REGULATION) ACT, 1951 AND RULES THERE UNDER. IN RESPONSE TO THE ABOVESAID QUERY, THE ASSESSEE EX PLAINED THAT IT WAS NOT REGISTERED WITH THE AUTHORITY OF INDUSTRIES (DEVELO PMENT & REGULATION) ACT, 1951 BUT WAS REGISTERED UNDER THE PUNJAB SHOPS AND COMMERCIAL ESTABLISHMENT ACT, 1958. THE ASSESSING OFFICER H ELD THAT THE APPROVAL BY THE SOFTWARE TECHNOLOGY PARK OF INDIA (STPI IN S HORT) CANNOT BE SAID TO HAVE FULFILLED THE CONDITIONS OF SECTION 10B OF THE ACT, DISENTITLING THE ASSESSEE TO THE EXEMPTION U/S 10B OF THE ACT. RELI ANCE WAS PLACED ON INFOTECH ENTERPRISES LTD VS. JCIT [85 ITD 325 (HYD) ]. THE ASSESSING OFFICER HELD THE ASSESSEE NOT ENTITLED TO CLAIM TH E EXEMPTION U/S 10B OF THE INCOME TAX ACT, BECAUSE OF NON FULFILLMENT OF T HE UNDER MENTIONED CONDITIONS:- 1. THE SERVICES RENDERED BY THE ASSESSEE COMPANY I.E. QUALITY ASSURANCE AND CODE TESTING IS NOT COVERED I N THE DEFINITION OF COMPUTER SOFTWARE AS DEFINED IN EXPLA NATION 7 2(I) OF SECTION 10-B AND THE NOTIFICATION NO. 11521 DATED 26 TH SEPT, 2000 ISSUED BY CBDT IN THIS REGARD; 2. NON AVAILABILITY OF PRODUCTION DATA; 3. RESTRUCTURING OF BUSINESS ALREADY IN EXISTENCE; 4. NO APPROVAL FROM THE BOARD APPOINTED BY THE CENTRA L GOVERNMENT IN EXERCISE OF POWERS CONFERRED BY SECTI ON 14 OF THE INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 1961 AND RULES MADE UNDER THAT ACT; 5. THE ASSESSEE COMPANY HAS FILED REPORT IN FORM 56G O NLY FOR UNIT LOCATED AT MOHALI WHEREAS NO BUSINESS IS C ARRIED FROM THIS UNIT AND NO PRESCRIBED REPORT FOR UNIT AT SPIC CENTRE, SECTOR 12, CHANDIGARH AND SCO 156-157, 4 TH FLOOR, SECTOR 34, CHANDIGARH HAD BEEN FILED; 6. THE ASSESSEE COMPANY HAD NOT MENTIONED THE LOCATION FROM WHERE THE INVOICES HAD BEEN ISSUED I.E. THE IN VOICES DO NOT BEAR THE ADDRESS OF THE UNIT FROM WHICH SUCH INVOICES HAD BEEN ISSUED; 7. AS PER INVOICES SUBMITTED THE PAYMENTS TERM IS 30 D AYS (NET) FROM THE DATE OF INVOICE / AUTHORIZATION BUT FROM THE DETAILS FILED AND FOREIGN INWARD REMITTANCES CERTIF ICATION IT IS EVIDENT THAT THE ASSESSEE COMPANY HAD RECEIVE D PAYMENT IN ADVANCE. IT CLEARLY SHOWS THAT THERE IS CONTRADICTION IN THE INVOICE AND THE PAYMENT RECEIV ED. THUS AFFAIRS DECLARED BY THE ASSESSEE ARE NOT VERIF IABLE; AND 8. AS PER THE CONSULTING AGREEMENT, THE ASSESSEE CO MPANY IS ELIGIBLE FOR REMUNERATION @ 13.5% OF THE ACTUAL EXP ENSES INCURRED. ON PERUSAL OF INVOICES IT IS CLEAR THAT THE ASSESSEE HAS CHARGED REMUNERATION @ 13.5% OF THE EXPENSES INCURRED BUT THE EXPENSES SHOWN IN THE BOO KS OF 8 ACCOUNT ARE NOT IN LINE WITH THE REMUNERATION RECEI VED BY THE ASSESSEE COMPANY. 10. BEFORE THE CIT(A) THE LD. AR FOR THE ASSESSEE P OINT WISE MET THE OBJECTIONS OF THE ASSESSING OFFICER. I) THE FIRST PLEA OF THE LD. AR WAS THAT THE BUSIN ESS OF THE ASSESSEE COMPANY DOES NOT FALL UNDER EXPLANATION (2)(I)(B) OF SECTION 10B OF THE ACT BUT FALLS UNDER THE EXPLANATION 2 (I)(A) OF THE ACT. THE ASSESSEE WAS E NGAGED IN THE DEVELOPMENT OF SOFTWARE WHICH QUALIFIES FOR EXEMPTION UNDER EXPLANATION 2(I)(A) OF SECTION 10B OF THE ACT. REFERENCE WAS MADE TO SEVERAL DOCUMENTS INCLUDING APPROVED INVOICES, AGREEMENTS WITH CLIENT S, PROCESS, LIST OF MANPOWER AND THEIR QUALIFICATION, SOFTWARE DEVELOPED AND OTHER DETAILS / INFORMATION FILED BEFORE THE ASSESSING OFFICER IN SUPPORT OF THE CONT ENTION THAT ASSESSEE WAS ENGAGED IN THE BUSINESS OF DEVELO PMENT OF SOFTWARE. IT WAS THUS PLEADED THAT THE CONCLUSI ON OF THE ASSESSING OFFICER THAT THE BUSINESS OF THE ASSE SSEE DID NOT FALL UNDER EXPLANATION 2(I)(B) OF SECTION 1 0B OF THE OF THE ACT WAS IRRELEVANT. II) THE SECOND CONTENTION OF THE LD. AR FOR THE ASSESSE E WAS THAT THE DEVELOPMENT OF SOFTWARE FALLS UNDER SERVIC E SECTOR CATEGORY FOR WHICH NO PRODUCTION RECORDS AS SUCH ARE MAINTAINED. HOWEVER, NECESSARY INFORMATION HAS TO BE FILED WITH STPI INCLUDING ANNUAL AS WELL MONTHLY PROFITS REPORT, ALL INVOICES SHOWING SERVICES PROVI DED, NAME OF FOREIGN PARTY, TOTAL AMOUNT RECEIVED AND AL SO DECLARATION BEING SOFTWARE EXPORT DECLARATION (SOFT AX) FORM WITH STPI, DECLARATION OF EXPORT OF EACH MONTH , DETAILS OF MANPOWER ENGAGED, TIME SHEETS, INTERNET USAGE, ETC. 9 III) THE CLAIM OF THE ASSESSEE WAS THAT THE PROJECT UNDERTAKEN BY IT WAS IN THE NATURE OF PRODUCTION FO R WHICH APPROVALS WERE GRANTED BY STPI UNDER THE DELEGATED POWERS OF RBI UNDER FEMA. IT WAS CLAIMED THAT THE REQUIREMENTS WERE GIVEN TO THE ASSESSEE BY THE CLIENT AND THE SOFTWARE DEVELOPMENT WAS DONE ACCORD ING TO THE SPECIFICATION PROVIDED BY THE CUSTOMER BY DEVELOPING THE PRODUCT, REGULAR MEETING WERE CONDUC TED, STATUS REPORTS WERE SENT ON PERIODICAL BASIS AND WO RKING SOFTWARE WAS DELIVERED AT A PREDETERMINED SCHEDULE. THE ASSESSEE COMPANY CLAIMED THAT THE WORK AS PER THE REQUIREMENTS OF FOREIGN BUYER COMPANY WAS DONE AND ALSO PROGRESS MADE ON THE SOFTWARE WAS SENT THROUGH INTERNET AGAINST WHICH INVOICES WERE RAISED AND FOR EIGN INWARD REMITTANCE WAS RECEIVED. IV) IN RESPECT OF THE RESTRUCTURING OF BUSINESS ALREAD Y IN EXISTENCE, IT WAS EXPLAINED THAT VIDE NOTE 6 OF ACC OUNTS, IT WAS DECLARED BY THE ASSESSEE COMPANY THAT LOANED EQUIPMENT WORTH RS. 19.69 LAKHS ON LOAN BASIS WERE RECEIVED FROM THE PRINCIPAL AS PER THE AGREEMENT BE TWEEN THE COMPANIES. WITH REGARD TO THE LOCATION OF BUS INESS IT WAS EXPLAINED THAT THERE IS NO MERIT IN THE CONT ENTION OF THE ASSESSING OFFICER THAT THE BUSINESS ACTIVITI ES WERE INITIALLY STARTED FROM THE MOHALI ADDRESS, WHICH WA S ONLY THE REGISTERED OFFICE OF THE ASSESSEE COMPANY AND N O PRODUCTION WAS EVER CARRIED OUT FROM THE SAID LOCAT ION. THE LD. AR PROVIDED DETAILS OF ALL THE LOCATIONS OF THE ASSESSEE COMPANY AS INCORPORATED UNDER PARA 24 AT P AGES 12 & 13 OF THE APPELLATE ORDER AND ALSO TABULATED T HE DETAILS OF THE UNITS UNDER PARA 25 AT PAGE 14 OF TH E APPELLATE ORDER. IN SUMMARY, IT WAS EXPLAINED THAT THERE WAS NO PRODUCTION / SERVICES PROVIDED ANY TIME FROM THE MOHALI ADDRESS. AFTER GRANTING OF SPACE AT SPIC CE NTRE, CHANDIGARH, AND VARIOUS PERMISSIONS, ASSESSEE COMMENCED ITS STPI UNIT FROM THERE AND ON 28.3.2003 AND CAPITAL GOODS WERE IMPORTED FOR THE SAID PREMIS ES. 10 FURTHER, EXPANSION WAS DONE AT SCO 156-157, SECTOR 34, CHANDIGARH ON 27 TH JULY 2004, FOR WHICH CAPITAL GOODS WERE ALSO IMPORTED AFTER GRANT OF REQUISITE PERMISS IONS. THE DENIAL OF EXEMPTION U/S 10B OF THE ACT ON ACCOU NT OF RE-STRUCTURING OF BUSINESS AND NO COMPUTER(S) BEING PURCHASED WAS THUS CLAIMED TO BE WITHOUT ANY BASIS. IT WAS ALSO ALLEGED THAT THE ASSESSING OFFICER FAILED TO GIVE ANY OPPORTUNITY TO REBUT THE SAID ALLEGATIONS. V) IN RESPECT OF NO APPROVAL FROM THE BOARD, IT WAS PO INTED OUT THAT THOUGH SUCH APPROVAL IS NECESSARY FROM THE BOARD BUT 100% EOU SHOULD BE REGISTERED WITH THE BO ARD IS NOWHERE MENTIONED. FURTHER, IT WAS ARGUED THAT THE ASSESSING OFFICER HAD FAILED TO ASK WHETHER APPROVA L WAS TAKEN FROM THE BOARD. THE RELIANCE BY THE ASSESSIN G OFFICER ON INFOTECH ENTERPRISES LTD VS. JCIT (SUPRA ), WAS CLAIMED TO BE MISPLACED BY THE LD. AR FOR THE ASSES SEE, IN THE PRESENT CASE, AS ASSESSEE WAS CLAIMING EXEMP TION UNDER THE NEW STP SCHEME WHICH CAME INTO EXISTENCE FROM 1.4.1994 VIDE AMENDMENT BY THE FINANCE ACT, 19 93, WHEREAS IN THE FACTS OF M/S INFOTECH ENTERPRISES LT D, THE EXEMPTION WAS CLAIMED IN RESPECT OF UNIT COMING INT O EXISTENCE ON 26.9.1991. VI) THE OTHER TWO OBJECTIONS OF THE ASSESSING OFFICER W ERE IN RESPECT OF THE NON MENTIONING OF LOCATION IN THE IN VOICES ISSUED. IT WAS EXPLAINED BY THE LD. AR THAT THE ASSESSEE COMPANY IS ONE UNIT AND OTHER UNITS ARE ME RE EXPANSION OF THE EXISTING UNIT AND ALL THE INVOICES WERE AT THE REGISTERED OFFICE ADDRESSE OF THE ASSESSEE COMP ANY. FURTHER, IT WAS CONTENDED THAT ALL THE INVOICES ISS UED BY THE ASSESSEE COMPANY WERE APPROVED BY STPI. VII) THE NEXT CONTENTION OF THE ASSESSING OFFICER WAS THAT AS PER THE INVOICES, PAYMENT TERM WAS 30 DAYS FROM THE DATE OF INVOICE / AUTHORIZATION BUT FROM THE DETAILS FIL ED AND FOREIGN INVESTMENT REMITTANCE CERTIFICATE IT WAS EV IDENT 11 THAT THE PAYMENT WERE RECEIVED IN ADVANCE. AS PER THE ASSESSING OFFICER THE AFFAIRS DECLARED BY THE ASSES SEE THUS WERE NOT VERIFIABLE. IN REPLY, IT WAS EXPLAIN ED BY THE LD. AR THAT THERE WAS NO RELATION BETWEEN THE INVOICES RAISED AND AMOUNT RECEIVED FOR THE PURPOSE OF EXEMPTION AND FURTHER IT WAS CLAIMED THAT THERE WAS NO LAW AGAINST TAKING ADVANCES FROM THE CLIENT. VIII) THE ASSESSING OFFICER AT PAGE 9 STATES THAT AS PER THE CONSULTING AGREEMENT, THE ASSESSEE WAS ELIGIBLE FOR REMUNERATION @ 13.5% OF THE ACTUAL EXPENSES INCURRE D. THE ASSESSING OFFICER FURTHER NOTED FROM THE PERUSA L OF INVOICES THAT THE ASSESSEE HAD CHARGED REMUNERATION @ 13.5% OF THE EXPENSES INCURRED BUT THE EXPENSES SHO WN IN THE BOOKS OF ACCOUNT WERE NOT IN LINE WITH THE REMUNERATION RECEIVED BY THE ASSESSEE COMPANY. IN R EPLY, BEFORE THE CIT(A), THE LD. AR CONTENDS THAT THE REMUNERATION STATED WERE MINIMUM REMUNERATION AGREE D UPON AT THE TIME OF CONTRACT WHICH WERE INCREASED O N 1.4.2004. 11. THE REPLY OF THE ASSESSEE WAS CONFRONTED TO THE ASSESSING OFFICER WHO VIDE OFFICE LETTER NO. 169 DATED 17.3.2008 FURN ISHED ITS REPORT WHICH IN TURN WAS CONFRONTED TO THE ASSESSEE TO WHICH ANO THER REPLY WAS FILED BY THE ASSESSEE. THE TABULATED VERSION OF CONTENTION OF THE ASSESSING OFFICER AND THE REPLY OF THE ASSESSEE ARE INCORPORATED AT P AGES 21 TO 23 OF THE APPELLATE ORDER. THE CONTENTION OF THE ASSESSING OFFICER IN THE REMAND REPORT WAS THAT THE ASSESSEE HAD NOT ABLE TO PROVE WHICH SOFTWARE WAS PRODUCED AND ON WHICH MEDIA IT WAS TOLD AND HOW IT IS QUOTED. THE REPLY OF THE ASSESSEE WAS THAT ALL THE WORK DONE IN RELAT ION TO THE DEVELOPMENT OF SOFTWARE WAS STORED ON THE HARD DISK OF THE COMP UTER AND WAS EXPORTED THROUGH SATELLITE LINK. THE NEXT LIMB OF THE OBJE CTION OF THE ASSESSING OFFICER WAS THAT THE ASSESSEE WAS CARRYING OUT JOB WORK FOR THE PARENT 12 COMPANY AND THAT TOO ON THE COMPUTER OF THE PARENT COMPANY. IN REPLY, IT WAS EXPLAINED THAT THE ASSESSEE WAS NOT DOING JOB W ORK FOR THE ASSOCIATE ENTERPRISE BUT WAS ENGAGED INTO PROGRAMMING TO REND ER QUALITY AND TESTING ASSURANCE SERVICES, WHICH ARE THE PROGRAMS WHICH EN ABLES THE COMPUTER TO FIND OUT ERRORS AND BUGS. 12. THE CIT(A) ON PERUSAL OF THE RIVAL CONTENTIONS OBSERVED THAT THE ASSESSEE WAS NOT ENGAGED IN ANY NEW PRODUCTION OF T HE SOFTWARE AND IT WAS ONLY THE PARENT COMPANY, WHICH DEVELOPED THE SOFTW ARE. THE CIT(A) HELD THE ASSESSEE TO HAVE DONE JOB WORK FOR THE VARIOUS COMPANIES. THE QUANTUM OF SALARIES PAID TO THE KEY PERSONS BY THE ASSESSEE COMPANY, AS PER CIT(A), INDICATED THAT ASSESSEE WAS NOT INVOLV ED IN THE DEVELOPMENT OF SOFTWARE AND THE SAME INDICATES THAT THE ASSESSE E WAS ONLY DOING JOB WORK. THE CIT(A) FURTHER HELD THAT THE CASE OF THE ASSESSEE WAS COVERED BY THE NOTIFICATION NO. SO-890(E) DATED 26.9.2000. THE CIT(A) OBSERVED THAT THE ASSESSEE WAS DOING BACK UP OFFICE OPERATIO NS FOR THE PARENT COMPANY AND HENCE WAS ENTITLED TO THE CLAIM OF DEDU CTION U/S 10B OF THE ACT. IN RESPECT OF THE UNITS OPERATED BY THE ASSES SEE COMPANY, THE CIT(A) OBSERVED THAT THE ADDRESS OF MOHALI WAS ONLY A REGI STERED OFFICE ADDRESS AND NO ACTIVITY WAS CARRIED OUT AT MOHALI. THE OTHE R TWO UNITS WERE THE PLACES FROM WHERE THE ASSESSEE WAS FOUND TO BE OPER ATING. IT WAS FURTHER HELD THAT THERE WAS NO SPECIFIC PROVISION THAT THE EQUIPMENT SHOULD BE OWNED BY THE ASSESSEE AND JOB WORK CAN BE DONE EVEN ON LOANED EQUIPMENT. THE CIT(A) HELD THE ASSESSEE TO HAVE GI VEN SUFFICIENT EVIDENCE THAT THE EQUIPMENT WAS IMPORTED AND LOANED TO IT. IN RESPECT OF THE APPROVAL FROM THE BOARD, THE CIT(A) VIDE OFFICE LETTER DATED 13.10.2008 ASKED THE ASSESSEE TO FURNISH THE NECESS ARY EVIDENCE OF THE APPROVAL GIVEN BY THE BOARD AS PER THE REQUIREMENTS U/S 10B OF THE ACT. 13 THE LD. COUNSEL FURNISHED REPLY DATED 5.11.2008 BEF ORE THE CIT(A) WHICH IS INCORPORATED IN PARA 44AT PAGE 22 OF THE APPELL ATE ORDER, UNDER WHICH IT WAS EXPLAINED THAT THE MINISTRY OF INDUSTRY (DEPART MENT OF INDUSTRIAL DEVELOPMENT ) HAD DELEGATED THE POWERS TO STPI TO A PPROVE 100% EOU. IT WAS FURTHER CLAIMED BY THE ASSESSEE THAT THE COP Y OF THE APPROVAL LETTER FROM STPI OF 100% EOU STATUS GIVEN TO THE ASSESSEE COMPANY WAS ALREADY PLACED ON RECORD. THE CIT(A) OBSERVED THAT THE REL EVANT NOTIFICATION UNDER THE LEGISLATION, WHICH WOULD BE CONSIDERED AS THE APPROVAL GIVEN BY THE BOARD, WAS FILED BY THE ASSESSEE. 13. THE NEXT ISSUE ADDRESSED BY THE CIT(A) WAS THE INVOKING OF SECTION 10B(7) AND ESTIMATION OF THE PROFITS OF THE ASSESSE E COMPANY WHICH WILL BE ADDRESSED BY US IN PARAS HEREINAFTER. THE EXEMP TION U/S 10B OF THE INCOME TAX ACT WAS THUS ALLOWED TO THE ASSESSEE. THE REVENUE IS IN APPEAL AGAINST THE AFORESAID ORDER OF THE CIT(A). 14. THE LD. DR FOR THE REVENUE PLACED RELIANCE ON T HE ORDER OF THE ASSESSING OFFICER. THE AR FOR THE ASSESSEE POINTE D OUT THAT THE EXEMPTION U/S 10B OF THE ACT WAS DISALLOWED BY THE ASSESSING OFFICER IN THE YEAR UNDER APPEAL. HOWEVER, IN SUCCEEDING YEA RS SIMILAR DEDUCTION CLAIMED U/S 10B OF THE ACT WAS ALLOWED TO THE ASSES SEE. 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ASSESSEE COMPANY, A PRIVATE LIMITED COMPANY WAS INC ORPORATED ON 22.8.2002 UNDER THE COMPANIES ACT, 1956. THE COPY OF REGISTRATION CERTIFICATE ALONG WITH THE COPY OF THE MEMORANDUM & ARTICLES OF ASSOCIATION ARE ENCLOSED AT PAGES 85 TO 104 OF THE PAPER BOOK. THE ASSESSEE COMPANY WAS REGISTERED UNDER THE SOFTWARE TECHNOLOGY PARK 14 SCHEME OF GOVERNMENT OF INDIA VIDE APPROVAL NO. STPIM/PCMG/PSE/02/199-7492 DATED 17.2.2003 AS 100% EXPORT ORIENTED UNIT. THE COPY OF THE SAME IS ENCLOSED AT PAGES 105 TO 109 OF THE PAPER BOOK. THE ASSESSEE COMPANY ENTERED INTO AN AGREEME NT WITH STPI ON 17.2.2003, COPY OF THE SAID AGREEMENT IS ATTACHED A T 111 TO 113 OF PAPER BOOK. ON 4.3.2003, THE COMPANY ENTERED INTO AN AGR EEMENT WITH CHANDIGARH ADMINISTRATION FOR ALLOTMENT OF SPACE, O N LEASE, AT FIRST FLOOR, SPIC CENTER, PEC CAMPUS, SECTOR 12, CHANDIGARH. TH E COPY OF ALLOTMENT LETTER IS ENCLOSED AT PAGE 114 OF THE PAPER BOOK. THE ASSESSEE COMPANY GOT CERTIFICATION OF BONDING OF OPERATIONAL AREA FR OM STPI ON 17.3.2003, COPY OF WHICH IS PLACED AT PAGES 129 OF THE PAPER B OOK. THE ASSESSEE FURTHER RECEIVED THE GREEN CARD AND RCMC FROM STPI , VIDE LETTER DATED 20.3.2003 PLACED AT PAGE 125 OF THE PAPER BOOK. TH E ASSESSEE FURTHER CLAIMS TO HAVE RECEIVED IMPORTER EXPORTER CODE FROM DIRECTOR GENERAL OF FOREIGN TRADE ON 20.3.2003 AND ALSO APPROVAL FOR IM PORT OF CAPITAL GOODS FROM STPI ON 17.3.2003. AFTER COMPLETING ALL THE L EGAL FORMALITIES AND HAVING ALL NECESSARY APPROVALS AND PERMISSIONS, THE ASSESSEE COMPANY COMMENCED ITS COMMERCIAL OPERATION FROM IST JULY 20 03 AND INTIMATION LETTER WAS SUBMITTED TO THE STPI REGARDING COMMENCE MENT OF THE COMMERCIAL OPERATIONS. THE ASSESSEE STARTED ANOTHE R UNIT AT SCO 156- 157, 4 TH FLOOR, SECTOR 34, CHANDIGARH ON 27.7.2004. 16. AS PER THE ASSESSEE BEBO STANDS FOR BE EXTENSI ON, BE OFFSHORE. PRESENTLY, THE ASSESSEE COMPANY IS RUNNING ITS STPI UNIT AND PROVIDES SOFTWARE DEVELOPMENT SERVICE AND QUALITY ASSURANCE SERVICES. THE ASSESSEE FURTHER POINTED OUT THAT IT WAS A MICROSOF T CERTIFIED COMPANY AND BEAR MICROSOFT CERTIFIED PARTNER LOGO. THE ASSESS EE COMPANY WORKED ON VARIOUS DOMAINS LIKE MICROSOFT, LINUX, UNIX AND SOL ARIS. 15 17. THE ASSESSEE COMPANY ENTERED INTO A CONSULTING AGREEMENT WITH M/S RAICO INC. DBA QASOURCE, USA ON 1.2.2003 FOR PROVID ING CONSULTING SERVICES AND THE SAME IS FILED WITH THE SOFTWARE TE CHNOLOGY PARK OF INDIA. THE ASSESSEE COMPANY IS EXPORTING ENTIRE SER VICES TO M/S RAICO INC. DBA QASOURCE, USA, IN PURSUANCE OF THE SAID AG REEMENT. THE COPY OF CONSULTING AGREEMENT IS ENCLOSED AT PAGES 355 TO 360 OF THE PAPER BOOK. 18. AS PER THE CONSULTING AGREEMENT, THE RECITALS B ETWEEN M/S RAICO INC. DBA QASOURCE, USA (HEREINAFTER REFERRED TO AS THE COMPANY) AND THE ASSESSEE (REFERRED TO AS CONSULTANT) ARE AS UNDER:- I) THE CONSULTANT HAVING EXPERTISE IN THE AREA OF THE COMPANYS BUSINESS, WAS WILLING TO PROVIDE CONSULTI NG SERVICES TO THE COMPANY, IN TURN TO THE EMPLOYEES O R TO OTHER AFFILIATED COMPANIES. II) THE COMPANY HAD DEVELOPED CERTAIN PROPRIETARY INFORMATION, WHICH IT CONSIDERED VITAL TO ITS BUSIN ESS AND GOODWILL. FURTHER, CERTAIN SERVICES TO BE PROVIDED BY THE CONSULTANT FOR THE COMPANY WOULD BE SERVICES PROVID ED TO A PARTY / CLIENT, FOR WHOM THE COMPANY WAS PROVIDING SERVICES. UNDER THE AGREEMENT, THE PROPRIETARY INFORMATION WA S TO BE COMMUNICATED TO THE CONSULTANT IN THE COURSE OF PRO VIDING CONSULTING SERVICES TO THE COMPANY. FURTHER, THE PARTIES AGREED TO THE UNDER MENTIONED CONDITIONS:- A) THE COMPANY HAS ENGAGED THE CONSULTANT TO RENDER AS AN INDEPENDENT CONTRACTOR FOR PROVIDING CONSULTING SER VICES AND ANY SUCH OTHER PROJECT ASSIGNMENTS AS MAY BE AGREED IN WRITING BETWEEN THE TWO FROM TIME TO TIME. 16 B) THAT THE COMPANY WILL PROVIDE CERTAIN PROPRIETARY INFORMATION WHICH THE COMPANY HAD DEVELOPED AND CON SIDERS IT VITAL TO ITS BUSINESS AND GOODWILL. THE PROPRIETA RY AND CONFIDENTIAL INFORMATION SHALL INCLUDE BUT BE NOT L IMITED TO : I) FORMULAS, RESEARCH AND DEVELOPMENT TECHNIQUES, PROCESSES, TRADE SECRETS, COMPUTER PROGRAMS, SOFTWARE, ELECTRONIC CODES, MAST WORKS, INVENTIONS, INNOVATIONS, PATENTS, PATENT APPLICATIONS, DISCOVERIES, IMPROVEMENTS, DATE KNOW HOW, FORMATS, TEST RESULTS AND RESEARCH PROJECTS; II) INFORMATION ABOUT COSTS, PROFITS, MARKETS, SALES, CONTRACTS AND LIST OF CUSTOMERS, AND DISTRIBUTORS. III) BUSINESS, MARKETING AND STRATEGIC PLANS IV) FORECASTS, UNPUBLISHED FINANCIAL INFORMATION, BUDGETS, PROJECTIONS AND CUSTOMER IDENTITIES, CHARACTERISTICS AND AGREEMENTS AND V) EMPLOYEE PERSONAL FILES AND COMPENSATION INFORMATION C) THAT THE PROPRIETARY INFORMATION WILL NECESSARY BE COMMUNICATED TO OR ACQUIRED BY CONSULTANT AND ITS A GENTS IN THE COURSE OF PROVIDING CONSULTING SERVICES TO THE COMPANY AND THE COMPANY DESIRES TO OBTAIN THE SERVICES OF C ONSULTANT ONLY, IF IN DOING SO, IT CAN PROTECT THE PROPRIETAR Y INFORMATION AND GOODWILL. 19. FURTHER, IT WAS AGREED UPON BETWEEN THE PARTIES :- THAT THE COMPANY HAS PROVIDED THE ABOVE PROPRIETARY INFORMATION, EQUIPMENTS, ETC SO THAT THE SERVICES T O BE PROVIDED BY THE CONSULTANT ARE AS PER ITS SPECIFICA TIONS AND 17 PROJECT PLANS AND ALSO TO ENSURE QUALITY AND TIMELY DELIVERY, CONFIDENTIALITY AND TO PROTECT ITS GOODWILL AND INT EREST. THESE FACILITIES HAVE BEEN PROVIDED TO ASSIST THE CONSULT ANT SO THAT THERE ARE NO VARIATIONS IN THE FINAL OUTCOME OF THE SERVICES. 20. THAT AS AGREED BETWEEN THE PARTIES THE REMUNERA TION FOR THE SERVICES PROVIDED BY THE ASSESSEE WERE AGREED TO BE AN AMOU NT EQUAL TO 10% OF THE ACTUAL EXPENSES DESCRIBED IN THE PRECEDING SENT ENCE. THE SAID TOTAL COST WAS TO INCLUDE ALL TAXES, DUTIES, CESS LEVIED BY THE TAX AUTHORITIES OR ANY OTHER AUTHORITY IN INDIA EXCEPT FOR INCOME TAX / WEALTH TAX. THE CONDITIONS OF PAYMENT WERE SUBJECT TO ISSUE OF INVO ICES WITHIN 45 DAYS AFTER COMPLETION OF THE MONTHLY OR OTHER APPLICABLE BILLING DATE/S. IT WAS FURTHER PROVIDED THAT THE INVOICES WERE PAYABLE 30 DAYS AFTER THE END OF THE MONTH IN WHICH THE SAME WERE ISSUED. 21. THE PARTIES EXECUTED AN ADDENDUM TO THE CONSULT ING AGREEMENT UNDER WHICH W.E.F. IST APRIL, 2004 THE REMUNERATION WAS FIXED AT 13.5% OF THE ACTUAL EXPENSES AS AGAINST 10% OF THE ACTUAL EX PENSES, PROVIDED IN THE AGREEMENT DATED 1.2.2003. IN THE SAID ADDENDUM, IT WAS FURTHER PROVIDED THAT W.E.F. IST OCTOBER 2004, THE WHOLE OF THE REMU NERATION CLAUSE IN PARA 2 (I), (II) AND (III) SHALL BE SUBSTITUTED BY NEW C LAUSE AS UNDER:- REMUNERATION:- SERVICES ARE PLACED ON THE BASIS OF A FIXED HOURLY RATE, DETERMINED BY THE COMPANY IN AGREEMENT WITH THE CONSULTANT, FOR EACH CATEGORY OF ENGINEER EMPLOYED / HIRED BY THE CONSULTANT AND WORKING ON THE ASSIGNMENTS GIVEN BY THE COMPANY TO THE CONSULTANT. THE RATE PER HOUR FOR THE DIFFERENT CATEGORIES OF ENGINEERS SHALL BE AS FOLLOWS: LEVEL 1 USD 7 PER HOUR 18 LEVEL 2 USD 9 PER HOUR THE SCOPE OF WORK AND OTHER TERMS AND CONDITIONS AS ALREADY SPECIFIED IN THE SAID CONSULTING AGREEMENT SHALL REMAIN IN FORCE SUBJECT TO ANY CHANGES, MODIFICATION AND AMENDMENTS AS AND WHEN REQUIRED AND AS AGREED TO BETWEEN RAICO INC. DBA QASOURCE AND BEBO TECHNOLOGIES PRIVATE LIMITED FROM TIME TO TIME. THIS ADDENDUM MAY PLEASE BE KEPT ATTACHED TO THE CONSULTING AGREEMENT DATED IST FEBRUARY 2003. 22. THE ASSESSEE HAD CLAIMED DEDUCTION U/S 10B OF T HE INCOME TAX ACT ON THE PROFITS OF BUSINESS CARRIED ON BY THE ASSESS EE. THE ISSUE ARISING IN THE GROUND OF APPEAL RAISED BY THE REVENUE IS AGAIN ST THE ORDER OF CIT(A) HOLDING THE ASSESSEE ELIGIBLE FOR THE EXEMPTION U/S 10B OF THE INCOME TAX ACT. 23. SECTION 10 B PROVIDES AS UNDER:- SPECIAL PROVISIONS IN RESPECT OF NEWLY ESTABLISHED HUNDRED PER CENT EXPORT- ORIENTED UNDERTAKINGS . 10B. (1) SUBJECT TO THE PROVISIONS OF THIS SECTION, A DEDUCTION OF SUCH PROFITS AND GAINS AS ARE DERIVED BY A HUNDRED PER C ENT EXPORT-ORIENTED UNDERTAKING FROM THE EXPORT OF ARTICLES OR THINGS O R COMPUTER SOFTWARE FOR A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS BEGINNIN G WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAK ING BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR COMPUTER SOFTWARE, AS THE CASE MAY BE, SHALL BE ALLOWED FROM THE TOTAL INCOME OF THE ASSESSEE : PROVIDED THAT WHERE IN COMPUTING THE TOTAL INCOME OF THE UN DERTAKING FOR ANY ASSESSMENT YEAR, ITS PROFITS AND GAINS HAD NOT BEEN INCLUDED BY APPLICATION OF THE PROVISIONS OF THIS SECTION AS IT STOOD IMMEDIAT ELY BEFORE ITS SUBSTITUTION BY THE FINANCE ACT, 2000, THE UNDERTAKING SHALL BE ENT ITLED TO THE DEDUCTION REFERRED TO IN THIS SUB-SECTION ONLY FOR THE UNEXPI RED PERIOD OF AFORESAID TEN CONSECUTIVE ASSESSMENT YEARS : [ PROVIDED [ FURTHER ] THAT FOR THE ASSESSMENT YEAR BEGINNING ON THE 1ST DAY OF APRIL, 2003, THE DEDUCTION UNDER THIS SUB-SECTION S HALL BE NINETY PER CENT OF THE PROFITS AND GAINS DERIVED BY AN UNDERTAKING FROM TH E EXPORT OF SUCH ARTICLES OR THINGS OR COMPUTER SOFTWARE:] PROVIDED ALSO THAT NO DEDUCTION UNDER THIS SECTION SHALL BE ALLO WED TO ANY UNDERTAKING FOR THE ASSESSMENT YEAR BEGINNING ON TH E 1ST DAY OF APRIL, [ 2012 ] AND SUBSEQUENT YEARS : 19 [ PROVIDED ALSO THAT NO DEDUCTION UNDER THIS SECTION SHALL BE ALLO WED TO AN ASSESSEE WHO DOES NOT FURNISH A RETURN OF HIS INCOM E ON OR BEFORE THE DUE DATE SPECIFIED UNDER SUB-SECTION (1) OF SECTION 139 .] (2) THIS SECTION APPLIES TO ANY UNDERTAKING WHICH F ULFILS ALL THE FOLLOWING CONDITIONS, NAMELY : (I) IT MANUFACTURES OR PRODUCES ANY ARTICLES OR TH INGS OR COMPUTER SOFTWARE; (II) IT IS NOT FORMED BY THE SPLITTING UP, OR THE RECONS TRUCTION, OF A BUSINESS ALREADY IN EXISTENCE : PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN RESPECT OF ANY UNDERTAKING WHICH IS FORMED AS A RESULT OF THE RE-E STABLISHMENT, RECONSTRUCTION OR REVIVAL BY THE ASSESSEE OF THE BU SINESS OF ANY SUCH UNDERTAKING AS IS REFERRED TO IN SECTION 33B , IN THE CIRCUMSTANCES AND WITHIN THE PERIOD SPECIFIED IN THAT SECTION ; (III) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUS INESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. 24. SUB SECTION (7) OF SECTION 10B PROVIDES AS UNDE R:- THE PROVISIONS OF SUB-SECTION (8) AND SUB-SECTION (10) OF SECTION 80-IA SHALL, SO FAR AS MAY BE, APPLY IN RELATION TO THE UNDERTAKING REFERRED TO IN THIS SEC TION AS THEY APPLY FOR THE PURPOSES OF THE UNDERTAKING REFERRED TO IN SECTION 80-IA. 25. EXPLANATION 2 OF SECTION 10B DEFINES COMPUTER S OFTWARE AS UNDER:- EXPLANATION 2 UNDER SECTION 10B (8), CLAUSE (I) DEF INES COMPUTER SOFTWARE AS UNDER:- ( I ) COMPUTER SOFTWARE MEANS (A) ANY COMPUTER PROGRAMME RECORDED ON ANY DISC, T APE, PERFORATED MEDIA OR OTHER INFORMATION STORAGE DEVICE; OR (B) ANY CUSTOMIZED ELECTRONIC DATA OR ANY PRODUCT OR SE RVICE OF SIMILAR NATURE AS MAY BE NOTIFIED 21 BY THE BOARD, WHICH IS TRANSMITTED OR EXPORTED FROM INDIA TO AN Y PLACE OUTSIDE INDIA BY ANY MEANS; 20 26. UNDER THE PROVISIONS OF SECTION 10B OF THE INCO ME TAX ACT, A PERSON DERIVING INCOME FROM A 100% EXPORT ORIENTED UNDERTAKING SHALL BE EXEMPT FROM TAX FOR A PERIOD OF 10 CONSEQUENT ASSES SMENT YEARS STARTING FROM THE PREVIOUS YEAR IN WHICH THE UNDERTAKING BEG INS TO MANUFACTURE OR PRODUCE ARTICLES OF THINGS OR COMPUTER SOFTWARE, AS THE CASE MAY BE, ON THE FULFILLMENT OF THE FOLLOWING CONDITIONS:- A) THE UNIT IS ENGAGED IN THE EXPORT OF ARTICLE OF TH INGS OR COMPUTER SOFTWARE; B) THAT THE UNIT HAS NOT BEEN FORMED BY SPLITTING UP O R RECONSTRUCTION OF AN EXISTING BUSINESS; AND C) THAT IT HAS NOT BEEN FORMED BY THE TRANSFER TO A NE W BUSINESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. 27. IT IS FURTHER PROVIDED THAT DEDUCTION U/S 10B O F THE ACT SHALL BE TO THE EXTENT OF 90% OF THE PROFITS AND GAINS DERIVED BY AN UNDERTAKING FROM THE EXPORT OF SUCH ARTICLES OR THINGS OR COMPUTER S OFTWARE. THE PROVISO UNDER THE SECTION FURTHER STIPULATES THAT THE ELIGI BLE ASSESSEE WOULD BE ENTITLED TO DEDUCTION UNDER THIS SECTION ONLY ON FU RNISHING OF THE RETURN OF INCOME ON OR BEFORE THE DUE DATES SPECIFIED U/S 139 (1) OF THE ACT. UNDER SUB SECTION (3) TO SECTION 10B OF THE ACT, IT IS PR OVIDED THAT THE SALE PROCEEDS ARE TO BE RECEIVED OR BROUGHT INTO INDIA I N FOREIGN CONVERTIBLE EXCHANGE WITHIN THE PERIOD OF 6 MONTHS FROM THE END OF THE SPECIFIED YEAR OR WITHIN SUCH EXTENDED PERIOD AS THE COMPETENT AUT HORITY MAY ALLOW IN THIS REGARD. THE CREDIT OF THE SALE PROCEEDS IN TH E SEPARATE ACCOUNT OUTSIDE INDIA WITH THE APPROVAL OF THE RBI IS HELD TO BE IN COMPLIANCE WITH THE PROVISIONS OF THE ACT. THE DEDUCTION U/S 10B(1) IS NOT ADMISSIBLE TO THE ASSESSEE UNLESS THE ASSESSEE FURN ISHES THE REPORT OF AN ACCOUNTANT IN THE PRESCRIBED FORM ALONGWITH RETURN OF INCOME. UNDER SUB SECTION (7) TO SECTION 10B OF THE ACT, IT IS PROVID ED THAT THE PROVISIONS OF 21 SUB SECTIONS (8) & (10) TO SECTION 80IA OF THE ACT ARE APPLICABLE IN RELATION TO AN UNDERTAKING, WHILE COMPUTING THE PRO FIT OF BUSINESS U/S 10B OF THE ACT. AN OPTION IS GIVEN TO THE ASSESSEE NOT TO CLAIM THE DEDUCTION U/S 10B OF THE ACT FOR ANY OF THE RELEVANT ASSESSME NT YEAR/S WITHIN THE BLOCK OF TEN CONSECUTIVE ASSESSMENT YEARS, BY FURNI SHING A DECLARATION IN WRITING TO THE ASSESSING OFFICER BEFORE THE DUE DA TE OF FURNISHING OF RETURN OF INCOME U/S 139(1) OF THE ACT, IN THIS REG ARD AS PER THE SECTION 10B(8) OF THE ACT. THE DEFINITIONS OF TERMS RELEVA NT TO THE SECTION ARE DEFINED AS PER EXPLANATION 2 U/S 10B OF THE ACT AND COMPUTER SOFTWARE IS DEFINED UNDER EXPLANATION (2)(I) OF THE ACT. A S PER EXPLANATION (2)(I)(A) OF SECTION 10B OF THE ACT, COMPUTER SOFTW ARE MEANS A COMPUTER PROGRAM RECORDED ON NEW DISC, TAPE, PERFORATED MEDI A OR OTHER INFORMATION STORAGE DEVICE AND AS PER EXPLANATION 2 (I)(B) ANY CUSTOMIZED ELECTRONIC OR DATA OR ANY PRODUCT / SERVICES OF SI MILAR NATURE AS MAY BE NOTIFIED BY THE BOARD, BOTH OF WHICH ARE TRANSMITT ED / EXPORTED FROM INDIA TO ANY PLACE OUTSIDE INDIA BY ANY MEANS. THE CBDT AS PER NOTIFICATION NO. 890E DATED 26.9.2000 HAD NOTIFIED THE LIST OF SERVICES ELIGIBLE UNDER THE CATEGORY OF COMPUTER SOFTWARE WH ICH IN TURN IS ELIGIBLE FOR DEDUCTION US/ 10B OF THE ACT. THE NOTIFICATIO N ISSUED BY CBDT PROVIDES AS UNDER:- IN EXERCISE OF POWERS CONFERRED BY EXPLANATION 2(I )(B) OF SECTION 10B, CENTRAL BOARD OF DIRECT TAXES VIDE NOTIFICATIO N NO. 11521 DATED 26TH SEPT. 2000 HAS NOTIFIED THE INFORMATION TECHNOLOGY ENABLED PRODUCTS OR SERVICES FOR THE PURPOSE OF SAI D CLAUSE AS UNDER:- I) BACK OFFICE OPERATIONS II) CALL CENTRES III) CONTENT DEVELOPMENT OR ANIMATION IV) DATA PROCESSING 22 V) ENGINEERING AND DESIGN VI) GEOGRAPHIC INFORMATION SYSTEM SERVICES VII) HUMAN RESOURCE SERVICES VIII) INSURANCE CLAIM PROCESSING IX) LEGAL DATABASES X) MEDICAL TRANSCRIPTION XI) PAYROLL XII) REMOTE MAINTENANCE XIII) REVENUE ACCOUNTING XIV) SUPPORT CENTERS ; AND XV) WEBSITE SERVICES (NOTIFICATION NO. 11521/F.NO. 142/49/2000-TPL) THE COPY OF THE NOTIFICATION IS PLACED AT PAGE 17 O F THE PAPER BOOK-II. 28. IN THE FACTS OF THE PRESENT CASE AND ON PERUSAL OF THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH ITS PRINCIPAL, IT IS EVIDENT THAT THE ASSESSEE IS PROVIDING SERVICES TO THE CLIENT AND TH E PROJECT UNDERTAKEN WAS IN THE NATURE OF PRODUCTION FOR WHICH APPROVALS WER E GRANTED BY STPI. THE DEVELOPMENT OF THE PROJECT UNDERTAKEN IS ACCORD ING TO THE SPECIFICATIONS PROVIDED BY THE CLIENT OR THE CUSTOM ERS. THE ASSESSEE COMPANY IS ENGAGED IN THE PROGRAMMING TO RENDER QUA LITY AND TESTING ASSURANCE SERVICES AS PER THE REQUIREMENTS OF ITS C LIENTS AND ALL THE PROGRESS MADE IS ON A SOFTWARE DEVELOPED BY THE CLI ENTS AND THE SAME IS TRANSMITTED TO THE CLIENTS THROUGH INTERNET. SUCH SERVICES CARRIED ON BY THE ASSESSEE ARE IN THE NATURE OF BACK OFFICE OPERA TIONS AND ARE COVERED BY THE NOTIFICATION ISSUED BY THE CBDT VIDE NO. 890E D ATED 26.9.2000 WHICH HAS NOTIFIED THE INFORMATION TECHNOLOGY ENABLED PRO DUCTS OR SERVICES TO BE CONSIDERED UNDER EXPLANATION 2 TO SECTION 10B OF TH E ACT. WE UPHOLD THE ORDER OF CIT(A) IN THIS REGARD. 23 29. WE FIND THAT THE ASSESSEE HAD MADE SIMILAR CLAI M OF EXEMPTION U/S 10B OF THE ACT IN THE SUCCEEDING YEARS I.E. ASSESSM ENT YEARS 2006-07 AND 2007-08. DURING THE ASSESSMENT PROCEEDINGS, THE SU BMISSION OF THE ASSESSEE IN SUPPORT OF THEIR CLAIM WERE AS UNDER:- A) THE SOFTWARE CODE OF OUR CUSTOMERS IS SENT TO US EI THER VIA INTERNET OR VIA COMPACT DISCS. THE DATA SO RECEIVE D IS STORED ON A HARD DISK OR A NETWORK DISK. B) BEBO ENGINEERS WORK ON CUSTOMIZED SOFTWARE CODE LOC ALLY ON THEIR COMPUTERS WHICH IS SENT TO OUR OFFICE VIA INTERNET OR CD AND ONCE WORK IS COMPLETED THEN CODE IS TRANSMITTED TO THE CLIENT VIA INTERNET. C) ALL OF THE APPLICATIONS WE ENGINEER ARE EITHER WEB BASED AND OR DESKTOP BASED, HOWEVER, THE COMMON ELEMENT I N ALL OF THE WORK WE DO IS THAT IT IS WORKING ON SAME TYP E OF SOFTWARE CODE WRITTEN IN VARIOUS LANGUAGES SUCH AS JAVA, C++, RUBY ON RAILS, NET ETC. D) IN A TYPICAL SCENARIO, CLIENT WOULD SEND US THE WEB ADDRESS AND ASK THE TEAM IN INDIA TO EXECUTE THEIR SOFTWARE ENGINEERING TASKS TO WORK ON THE DEVELOPME NT OF THE APPLICATION. OUR TEAMS PERFORM ENGINEERING TA SKS ON THE SOFTWARE AND POST THE RESULTS IN THE SOURCE COD E REPOSITORY SYSTEM AT THE CLIENT SITE ON RECORD THE RESULTS IN THE DATABASE AT CLIENT SITE OR EMAIL THE WORK PR ODUCT TO THE CLIENT. IN ALL EVENTS, THE CODE IS TRANSMITTED EITHER VIA THE INTERNET OR VIA CDS TO OUR OFFICE, INITIALLY ST ORED ON LOCAL DRIVES AND AT THE END OF EACH DAY COMPLETED S OURCE CODE IS ELECTRONICALLY TRANSMITTED TO THE CLIENT SI TE TO BE MERGED AND STORE ON THEIR REPOSITORY SYSTEMS AND ELECTRONIC MEDIA SUCH AS HARD DRIVES. 30. THE ASSESSING OFFICER VIDE ASSESSMENT ORDER DAT ED 12.11.2009 RELATING TO ASSESSMENT YEAR 2006-07 HAD HELD THE AS SESSEE ELIGIBLE TO THE EXEMPTION CLAIMED U/S 10B OF THE ACT BY HOLDING AS UNDER:- 19. ON THE BASIS OF WRITTEN SUBMISSION AND INFORMA TION FURNISHED BY THE ASSESSEE, I AM OF THE CONSIDERED O PINION THAT THOUGH THE ASSESSEE IS NOT ENGAGED FULLY IN THE DEV ELOPMENT OF COMPUTER SOFTWARE AS THERE IS NO NEW PRODUCTION OF THE SOFTWARE. YET, THE ASSESSEES CASE IS SQUARELY COVE RED AS PER THE NOTIFICATION NO. SO 890 (E) DATED 26.9.2000 WHI CH HAS NOTIFIED THAT A NUMBER OF IT ENABLED SERVICES SUCH AS BACK OFFICE OPERATIONS, CALL CENTERS, CONTENT DEVELOPMEN T AND ANIMATION, DATA PROCESS, REVENUE ACCOUNTING, ENGINE ERING 24 AND DESIGN, GEOGRAPHY INFORMATION SERVICES, HUMAN & RESOURCE SERVICES, INSURANCE CLAIM, PROCESSING PAYR OLL, MEDICAL TRANSCRIPTION, REMOTE MAINTENANCE, SUPPORT CENTRES, WEB SITE SERVICES AS INFORMATION ENABLED PRODUCTS O R SERVICES ETC. THAT WOULD QUALIFY AS COMPUTER SOFTWARE FOR TH E PURPOSES OF SECTION 10-A/10-B OF THE INCOME TAX ACT. THE AS SESSEE IS DOING THE BACK UP OFFICE OPERATIONS FOR M/S RAICO I NC. DBA QA SOURCE, USA AND THEREFORE IS ELIGIBLE FOR DEDUCT ION U/S 10-B OF THE INCOME TAX ACT. 31. IN ASSESSMENT YEAR 2007-08, THE ASSESSING OFFIC ER WHILE PASSING THE ORDER U/S 143(3) OF THE ACT DATED 12.11.2009 GRANTE D THE EXEMPTION U/S 10B OF THE ACT TO THE ASSESSEE AND THE FOLLOWING OF FICE NOTE WAS ANNEXED TO THE ASSESSMENT ORDER, WHICH IS AVAILABLE IN THE PAPER BOOK FILED BY THE REVENUE RELATING TO ASSESSMENT YEAR 2007-08 AT PAGE S 21 TO 32 OF THE PAPER BOOK. THE OFFICE NOTE READS AS UNDER:- 1. THE ASSESSEE COMPANY IS IN THE BUSINESS OF PROVIDIN G SOFTWARE DEVELOPMENT AND IS ELIGIBLE EXEMPTION U/S 10B OF THE INCOME TAX ACT, 1961 IN RESPECT OF PROFIT EA RNED FROM SUCH ACTIVITY. THE ASSESSEE, BESIDES THE EXEM PT INCOME, HAS OTHER INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES, CAPITAL GAINS AND DIVIDEND INCOME EXEMPT U/S 10. 2. THE ASSESSEES CASE IS COVERED AS PER NOTIFICATI ON NO. 50890 (E) DATED 26.9.2000 WHICH HAS NOTIFIED THAT A NUMBER OF I.T. ENABLED SOURCES SUCH AS BACK OFFICE OPERATIONS, CALL CENTERS, DATA PROCESS ETC. WOULD Q UALIFY AS COMPUTER SOFTWARE FOR THE PURPOSES OF SECTION 10A/10B OF INCOME TAX ACT, 1961. THE ASSESSEE IS DOING BACK OFFICE OPERATION FOR M/S RAICO INC. DBA QA SOURCE, USA & IS THEREFORE ELIGIBLE FOR DEDUCTIO N U/S 10B OF INCOME TAX ACT, 1961. 32. IN THE TOTALITY OF FACTS AND CIRCUMSTANCES, WE HOLD THAT THE ASSESSEE IS DOING BACK OFFICE OPERATIONS FOR ITS CLIENTS AND HENCE IS ELIGIBLE FOR EXEMPTION CLAIMED U/S 10B OF THE INCOME TAX ACT. TH E NEXT OBJECTION OF THE ASSESSING OFFICER IN DENYING THE EXEMPTION U /S 10B OF THE ACT TO THE ASSESSEE WAS THE NON AVAILABILITY OF PRODUCTION DATA WHICH HAS NO MERIT IN VIEW OF THE ASSESSEE CARRYING OUT BACK OFF ICE OPERATIONS FOR IT 25 CLIENTS, WHICH IS PROJECT OF SERVICE INDUSTRY FOR W HICH PRODUCTION DATA IS NOT MAINTAINABLE. 33. THE ASSESSING OFFICER HAD DENIED THE DEDUCTION U/S 10B OF THE ACT BY OBSERVING THAT THERE WAS RESTRUCTURING OF BUSINE SS ALREADY IN EXISTENCE AS THE ASSESSEE WAS FOUND TO BE OPERATING FROM THRE E DIFFERENT PLACES AND NO NEW COMPUTERS WERE PURCHASED BY THE ASSESSEE FOR CARRYING ON ITS BUSINESS OF COMPUTER SOFTWARE. THE ASSESSEE HAD SHO WN THE INITIAL LOCATION OF ITS COMPANY AT 491, PHASE IV, MOHALI WH ICH WAS THE REGISTERED OFFICE OF THE ASSESSEE COMPANY. THE PLEA OF THE ASS ESSEE IN THIS REGARD IS THAT THE SAID ADDRESS IS THE RESIDENCE OF ONE OF TH E DIRECTORS OF THE ASSESSEE COMPANY AND THE SAME WAS UTILIZED FOR THE REGISTRATION OF THE COMPANY. IT IS CLAIMED BY THE ASSESSEE THAT NO PRO DUCTION / SERVICES WERE EVER PROVIDED FROM THE SAID PREMISES. THE ASSESSEE COMPANY STARTED ITS BUSINESS OF COMPUTER SOFTWARE FROM SPIC CENTRE, PEC CAMPUS, SECTOR 12, CHANDIGARH WHICH WAS ALLOTTED TO THE ASSESSEE ON LE ASE BY CHANDIGARH ADMINISTRATION ON 4.3.2003. THE ASSESSEE OBTAINED THE GREEN CARD AND RCMC FROM STPI ON THE AFORESAID ADDRESS ON 17.3.200 3 AND ALSO GOT THE APPROVAL FROM STPI FOR IMPORTING CAPITAL GOODS ON T HE SAID ADDRESS ON 17.3.2003. THE LICENSE FOR PRIVATE BONDED WAREHOUSE DATED 27.3.2003 IS ISSUED FOR THE ABOVE SAID ADDRESS AND THE ASSESSEE COMMENCED ITS OPERATION AS AN STPI UNIT FROM 28.3.2003 FROM THE S AID ADDRESS. FURTHER, THE ASSESSEE IN ORDER TO EXPAND ITS BUSINESS TOOK A NOTHER SPACE ON LEASE BEING 4 TH FLOOR AT SCO 156-57, 4 TH FLOOR, SECTOR 34-A, CHANDIGARH ON 27.7.2004. THE APPROVAL FROM THE STPI FOR IMPORTIN G CAPITAL GOODS WAS RECEIVED ON 22.2.2005 AND THE ASSESSEE COMPANY EXPO RTED ITS ENTIRE SOFTWARE DEVELOPMENT FROM THE ABOVE SAID ADDRESS. 26 34. THE SECOND ASPECT OF THE ISSUE IS NON PURCHASE OF CAPITAL GOODS BY THE ASSESSEE IN UNIT I AT SPIC CENTRE, CHANDIGARH A ND UNIT II AT SECTOR 34-A, CHANDIGARH. THE ALLEGATION OF THE ASSESSING O FFICER WERE THAT NO CAPITAL GOODS WERE PURCHASED BY THE ASSESSEE AND HE NCE IT IS PRESUMED THAT THE BUSINESS AT UNIT I & UNIT II WAS CARRIED O N AFTER RESTRUCTURING OF THE EXISTING UNIT AT MOHALI, WHICH IS NOT PERMISSIB LE IN VIEW OF THE PROVISIONS OF SECTION 10B(2) OF THE ACT . THE ASSE SSEE VIDE ITS WRITTEN SUBMISSIONS FURNISHED BEFORE THE CIT(A) HAD TABULAT ED THE DETAILS OF THE UNITS OF THE ASSESSEE COMPANY WHICH ARE REPRODUCED UNDER PARA 25 AT PAGE 14 OF THE APPELLATE ORDER. THE UNIT I AT SPIC CENT RE, CHANDIGARH RECEIVED ITS STPI APPROVAL ON 12.3.2003 WHEREAS THE UNIT II AT SECTOR 34-C, CHANDIGARH RECEIVED ITS STPI APPROVAL ON 5.8.2004. THE CLAIM OF THE ASSESSEE IS THAT THE EQUIPMENTS WERE LOANED FROM IT S PRINCIPAL WHICH WERE PRE LOADED WITH THE INFORMATION ON WHICH THE ASSESS EE HAD TO CARRY ON ITS PROGRESS REPORTS IN CONNECTION WITH THE CUSTOMERS A ND EXPORT OF SAID SERVICES TO M/S RAICO INC. DBA QASOURCE, USA. THE ASSESSEE HAD IMPORTED THE CAPITAL GOODS FOR UNIT-I AT THE VALUE OF RS. 8,37,479/- DURING THE PERIOD 22.4.2003 ON 11.11.2003 AND FOR THE UNIT II FOR RS. 19.69 LACS FROM 20.10.2004 TO 5.3.2005. THE INFORMATION IN RE SPECT OF THE LOANED EQUIPMENT RECEIVED FROM PRINCIPAL AS PER THE AGREEM ENT BETWEEN THE ASSESSEE COMPANY AND ITS PRINCIPAL WAS DECLARED BY WAY OF NOTE NO.6 TO THE NOTES OF ACCOUNTS ANNEXED TO THE BALANCE SHEET FOR THE RESPECTIVE YEARS. THE SAID NOTE 6 IS REPRODUCED UNDER PARA 22 AT PAGES 11 & 12 OF THE APPELLATE ORDER UNDER WHICH IT HAS BEEN DECLARE D THAT THE AFORESAID EQUIPMENT INCLUDES COMPUTER SOFTWARE, COMPUTER CODE , SOURCES CODE, REQUISITE KNOW-HOW IN THE FORM OF DESIGN AND OTHER FACILITIES ACCORDING TO THE REQUIREMENT OF THE PROJECTS. FURTHER, IT WAS D ECLARED THAT THE EQUIPMENT WOULD BE RETURNED AFTER THE COMPLETION OF THE PROJECT / TERM OF 27 AGREEMENT. FROM THE PERUSAL OF THE TERMS OF THE AG REEMENT WHICH ARE REFERRED TO BY US IN THE PARAS HEREINABOVE, WE HAVE NOTED THAT IT WAS AGREED BETWEEN PARTIES THAT COMPANY WOULD PROVIDE THE PROPRIETARY INFORMATION, EQUIPMENT ETC SO THAT THE SERVICES BE PROVIDED BY THE CONSULTANT (I.E. THE ASSESSEE) AS PER THE SPECIFICA TIONS AND PROJECTED PLANS OF THE COMPANY, TO ENSURE QUALITY AND TIMELY DELIVE RY AND CONFIDENTIALITY. IT IS PERTINENT TO MENTION HERE THAT EQUIPMENTS WHI CH HAD BEEN PROVIDED BY THE COMPANY TO THE CONSULTANT WERE PRELOADED WIT H CERTAIN PROPRIETARY INFORMATION WHICH WAS DEVELOPED BY THE COMPANY. TH E HIGHLY SOPHISTICATED, ADVANCED AND PROPRIETARY SOFTWARE WH ICH WERE BUNDLED IN THE EQUIPMENTS WERE GIVEN BY THE COMPANY TO THE CON SULTANT AND THE CONSULTANT I.E. THE ASSESSEE HAD TO PROVIDE THE CU STOMIZED SERVICES ON THE SAID FACILITIES. THE SAID FACILITIES WERE PROVID ED TO THE ASSESSEE COMPANY SO THAT THERE WAS NO VARIATION IN THE FINAL OUTCOME OF THE SERVICES PROVIDED TO THE VARIOUS CUSTOMERS OF THE C OMPANY. 35. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES, WE UPHOLD THE ORDER OF CIT(A) IN THIS REGARD THAT THE ASSESSEE WAS CARRYIN G ON ITS BUSINESS FROM UNIT I AT SPIC CENTRE, CHANDIGARH AND UNIT II AT SE CTOR 34-A, CHANDIGARH. THE ADDRESS OF MOHALI WAS ONLY A REGISTERED OFFICE OF THE ASSESSEE COMPANY FROM WHICH NO ACTIVITY WAS CARRIED OUT BY T HE ASSESSEE COMPANY. THERE IS NO RESTRUCTURING OF BUSINESS OF THE ASSESS EE. FURTHER, THE ASSESSEE HAVING CARRIED OUT ITS WORK ON THE LOANED EQUIPMENTS AND EVIDENCE IN RESPECT OF WHICH WAS CONSIDERED BY THE CIT(A), THE ASSESSEE IS ENTITLED TO THE CLAIM OF DEDUCTION U/S 10B OF TH E ACT. FURTHER, THERE IS NO MERIT IN THE OBSERVATION OF THE ASSESSING OFFICE R THAT THE NON MENTIONING OF THE LOCATION FROM WHERE THE INVOICES WERE ISSUED, DISENTITLES THE ASSESSEE TO THE CLAIM OF DEDUCTION U/S 10B OF THE ACT. THE 28 ASSESSEE WITH ITS REGISTERED OFFICE AT MOHALI AND I TS UNIT I AND UNIT II AT CHANDIGARH WAS OPERATING AS A COMPOSITE UNIT AND TH ERE IS NO REQUIREMENT TO FURNISH THE ADDRESSES OF THE INDIVIDUAL PLACES F ROM WHICH SERVICES WERE RENDERED AS AGAINST THE MENTIONING OF REGISTERED OF FICE ON THE INVOICES ISSUED BY THE ASSESSEE 36. THE NEXT OBJECTION OF THE ASSESSING OFFICER WAS THAT THERE WAS NO APPROVAL FROM THE BOARD APPOINTED BY THE CENTRAL G OVERNMENT FOR 100% EOU STATUS. THE CIT(A) VIDE LETTER DATED 13.10.2008 REQUISITIONED THE ASSESSEE TO FURNISH THE NECESSARY EVIDENCE OF APPRO VAL GIVEN AS PER THE REQUIREMENTS OF SECTION 10B OF THE ACT TO WHICH THE ASSESSEE FURNISHED A REPLY DATED 5.11.2008. THE EXPLANATION OF THE ASSE SSEE WAS THAT THE MINISTRY OF INDUSTRIES (DEPARTMENT OF INDUSTRIAL DE VELOPMENT) HAD DELEGATED THE POWERS TO STPI TO APPROVE AND REGISTE R THE 100% EOU, A COPY OF THE DELEGATION OF POWERS IN THIS REGARD IS REFERRED TO PARA 44 OF THE APPELLATE ORDER AND FURTHER THE COPY OF THE APP ROVAL LETTER FROM STPI ALREADY FILED ON RECORD WAS REFERRED TO BY THE ASSE SSEE BEFORE THE CIT(A). 37. THE OBSERVATIONS OF CIT(A) ARE AS UNDER:- 44. THE ASSESSING OFFICER HAS ALSO DENIED DEDUCTIO N U/S 10B TAKING THE VIEW THAT THERE IS NO APPROVAL FROM THE BOARD APPOINTED BY THE CENTRAL GOVERNMENT FOR 100% EOU ST ATUS. VIDE THIS OFFICE LETTER DATED 13/10/08, THE ASSESSE E WAS ASKED TO FURNISH NECESSARY EVIDENCE OF THE APPROVAL GIVEN BY THE BOARD AS PER REQUIREMENTS U/S 10B. THE COUNSEL FUR NISHED REPLY DATED 5/11/08 AND SUBMITTED AS UNDER:- IN THIS REGARD IT IS SUBMITTED THAT THE MINISTRY O F INDUSTRY (DEPARTMENT OF INDUSTRIAL DEVELOPMENT) HAS DELEGATED THE POWERS TO STPI TO APPROVE & REGISTER THE 100% EOU. THE COPY OF POWERS DELEGATED TO STPI UNDER SECTION 14 OF INDUSTRIAL (DEVELOPMENT & REGULATION ) ACT 1951 (55 OF 1951) READ WITH SUB RU LE (2) OF RULE 10 OF THE REGISTRATION & LICENSING OF 29 INDUSTRIAL RULES 1952 BY MINISTRY OF INDUSTRY DEPARTMENT OF INDUSTRIAL DEVELOPMENT VIDE NOTIFICATION NO. SO-117(E) DATED 22.2.93 IS ENCLOSE D FOR YOUR PERUSAL. THE COPY OF SAID APPROVAL LETTER FROM STPI AS 100% EOU STATUS GIVEN TO BEBO TECHNOLOGIES PVT LTD. HAS ALREADY BEEN PLACED ON RECORD. 38. THE CIT(A) HELD THE STATUS OF 100% EOU TO BE GR ANTED TO THE ASSESSEE. 39. THE LD. DR FOR THE REVENUE BEFORE US HAS FAILED TO POINT OUT ANY CONTRARY EVIDENCE TO THE SAME. THE LD. COUNSEL FO R THE ASSESSEE DREW OUR ATTENTION TO THE GAZETTED NOTIFICATION IN THIS REGA RD PLACED AT PAGE 16 OF THE PAPER BOOK-II UNDER WHICH THE POWERS HAD BEEN G IVEN TO CONSIDER THE APPLICATION FOR SETTING UP OF UNITS UNDER STP SCHEM E OPERATED VIDE CUSTOM NOTIFICATION NO. 138 & 140 DATED 22.10.1991. THE SAID COMMITTEE WAS ALSO EMPOWERED TO CONSIDER THE PROPOSALS FOR IN DUSTRIAL LICENSE, FOREIGN TECHNICAL COLLABORATION AGREEMENT AND IMPOR T OF CAPITAL GOODS. THE ASSESSEE HAS FURNISHED THE REGISTRATION UNDER THE SOFTWARE TECHNOLOGY PARK SCHEME OF INDIA VIDE APPROVAL NO. STPIM/PCMG/PSE/02/199-7492 DATED 17.2.2003 REGISTER ING THE ASSESSEE AS AN 100% EOU. THE COPY OF THE SAID CERTIFICATE IS ENCLOSED AT PAGES 105 TO 109 OF THE PAPER BOOK ALONGWITH THE COPY OF THE AGREEMENT ENTERED INTO BY THE ASSESSEE COMPANY WITH STPI ON17.2.2003, A COPY OF WHICH IS ENCLOSED AT PAGES 111 TO 113 OF THE PAPER BOOK. IN VIEW OF THE ABOVE SAID EVIDENCE, UPHOLDING THE ORDER OF CIT(A), WE HOLD TH AT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 10B OF THE ACT AS A 100% EOU ON BEING REGISTERED WITH STPI. . IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE AND IN VIEW OF OUR OBSERVATION IN PARAS HEREIN ABOVE, WE UPHOLD THE ORDER OF CIT(A) IN HOLDING THAT THE ASSESSEE IS ELI GIBLE TO THE EXEMPTION 30 CLAIMED U/S 10B OF THE ACT. ACCORDINGLY, GROUND NO .2 RAISED BY THE REVENUE IS THUS DISMISSED. 40. THE SECOND ASPECT OF THE DISALLOWANCE U/S 10B OF TH E ACT WAS THE COMPUTATION OF INCOME IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF THE SERVICES PROVIDED BY THE ASSESSEE TO ITS CLIENT IN USA. THE ASSESSING OFFICER IN THE ASSESSMENT ORDER RELATING TO ASSESSM ENT YEAR 2005-06 HAD OBSERVED FROM FORM 3CEB ATTACHED WITH THE RETURN OF INCOME THAT M/S RAICO INC. DBA QASOURCE, USA WAS AN ASSOCIATED ENTE RPRISES OF THE ASSESSEE COMPANY AS PER THE PROVISIONS OF SECTION 9 2A(2) OF THE INCOME TAX ACT BY WAY OF EQUITY CONTRIBUTION. THE ASSESSIN G OFFICER WAS OF THE VIEW THAT ACCORDING TO SECTION 10B (7) OF THE ACT, THE PROVISIONS OF SECTION 80IA(10), IN CASE WHERE ASSESSEE HAD SHOWN EXCESSIVE PROFITS, WERE APPLICABLE ACCORDING TO WHICH THE ASSESSING OF FICER HAD THE POWER TO DETERMINE THE INCOME OF THE ASSESSEE COMPANY WHI CH WOULD HAVE BEEN RECEIVABLE / DERIVED BY IT FROM THE ELIGIBLE BUSINE SS. THE ASSESSING OFFICER RECOMPUTED THE PROFITS OF BUSINESS ON MATCH ING RECEIPTS AND THE EXPENDITURE SHOWN BY THE ASSESSEE AND WAS OF THE VI EW THAT THE ASSESSEE HAD UNDER STATED THE EXPENDITURE INCURRED BY IT TO THE EXTENT OF RS. 48,22,679/- AFTER OBSERVING THAT THE PROFITS DERIVE D BY THE ASSESSEE AT 49.03% OF THE RECEIPTS FOR THE PERIOD STARTING FROM OCTOBER 2004 WERE EXCESSIVE AS COMPARED TO THE AGREEMENT BETWEEN THE PARTIES THAT W.E.F. 1.4.2004, THE ASSESSEE SHALL BE PAID REMUNERATION W ITH MARK UP OF 13.5% AS PER THE ADDENDUM TO THE AGREEMENT WAS UNREASONAB LE FOR THE PERIOD STARTING FROM OCTOBER 2004. THE ASSESSING OFFICER THUS HELD THAT THE ASSESSEE HAD INCURRED EXPENDITURE OUT OF BOOKS OF A CCOUNT. ACCORDINGLY THE ADDITION U/S 69C OF THE ACT AMOUNTING TO RS. 48 ,22,679/- WAS MADE BY THE ASSESSING OFFICER. 31 41. THE ASSESSING OFFICER IN THE PROCEEDINGS RELATI NG TO ASSESSMENT YEAR 2006-07 HELD THE ASSESSEE TO BE ELIGIBLE FOR D EDUCTION U/S 10B OF THE INCOME TAX ACT, BUT FURTHER HAD INVOKED THE PROVISI ONS OF SECTION 10B(7) OF THE ACT AND HAD OBSERVED THAT THE PROVISIONS OF SECTION 80IA (10) OF THE ACT WERE SQUARELY APPLICABLE TO THE ASSESSEES CASE. THE ASSESSEE IN ASSESSMENT YEAR 2006-07 HAD SHOWN GROSS RECEIPTS OF RS. 4.03 CRORES FROM ASSOCIATE ENTERPRISES AGAINST WHICH TOTAL EXPENSES TO THE TUNE OF RS. 1.8 CRORES WERE CLAIMED. THE PROFITS DERIVED BY THE AS SESSEE FROM PROVIDING SERVICES ASSURED AT 54.14% OF THE RECEIPTS WERE FOU ND TO BE HIGHLY DISPROPORTIONATE TO THE EXPENSES CLAIMED. THE EXPLA NATION OF THE ASSESSEE THAT THE PARENT COMPANY WAS PAYING REMUNERATION ON WITH MARK UP @ 13.5% FROM APRIL, 2004 BUT W.E.F. OCTOBER 2004, THE INVOICES WERE RAISED ON MAN HOUR BASIS, ON THE BASIS OF THE ADDENDUM TO THE ORIGINAL COUNSELING AGREEMENT AND THE REVISION OF THE SALAR Y OF KEY PERSONS IN 2004, WAS BRUSHED ASIDE BY THE ASSESSING OFFICER. T HE EXPLANATION OF THE ASSESSEE IS INCORPORATED AT PAGES 6 OF THE ASSESSME NT ORDER. FURTHER, INSTANCES OF COMPARABLE CASE WERE GIVEN BY THE ASSE SSEE. HOWEVER, THE EXPLANATION OF THE ASSESSEE FOR THE REVISION OF ITS REMUNERATION FROM COST PLUS RATES OF THE BUSINESS, TO PAYMENT ON THE BASI S OF MAN HOUR BASIS WAS FOUND BY THE ASSESSING OFFICER NOT JUSTIFIED VIS-A- VIS THE PROFITS SHOWN BY THE ASSESSEE @ 54.14%. THE SAME WAS HELD BY THE AS SESSING OFFICER TO BE EXCESSIVE AND ASSESSING OFFICER WAS OF THE VIEW THAT PROFITS UP TO 22% WAS REASONABLE AND WAS ELIGIBLE FOR DEDUCTION U /S 10B OF THE ACT. THE DIFFERENCE OF PROFITS SHOWN BY THE ASSESSEE OVE R AND ABOVE 22% WAS TREATED AS INCOME FROM UNDISCLOSED SOURCES RESULTIN G IN AN ADDITION OF RS. 1,30,21,367/-. 32 42. THE ASSESSING OFFICER WHILE COMPLETING THE ASSE SSMENT RELATING TO ASSESSMENT YEAR 2007-08, HELD THE ASSESSEE TO HAVE SHOWN EXCESSIVE PROFITS FROM THE BUSINESS. A COMPARISON WAS MADE T O THE RESULTS DECLARED BY M/S QUARK SYSTEMS PVT AND M/S QUARK MEDIA PVT LT D, WHO HAD SHOWN THE NET PROFIT & SALES RATIO AT 12.3% AND 20.85% RE SPECTIVELY, SCALE DOWN THE PROFITS OF THE ASSESSEE COMPANY TO 22% AND ADDI TION OF RS. 1,82,50,265/-WAS MADE BEING EXCESSIVE PROFITS CLAI MED BEING NOT ELIGIBLE TO THE DEDUCTION U/S 10B OF THE INCOME TAX ACT. 43. THE CIT(A) IN ASSESSMENT YEAR 2005-06 WAS OF TH E VIEW THAT FOR THE PERIOD STARTING FROM OCTOBER 2004, A REASONABLE PRO FIT SHOULD BE ADOPTED AT COST PLUS @ 17% AS AGAINST THE PROFITS SHOWN BY THE ASSESSEE COMPANY. FURTHER, IN ASSESSMENT YEAR 2006-07 AND 2007-08, TH E CIT(A) HELD THAT THE REASONABLE PROFITS DURING THE RESPECTIVE YEARS SHOU LD BE ADOPTED AT COST PLUS 22% AS AGAINST THE PROFITS SHOWN BY THE ASSESS EE AND THE EXCESSIVE PROFITS DECLARED BY THE ASSESSEE WERE HELD TO BE NO T ELIGIBLE FOR THE DEDUCTION U/S 10B OF THE ACT. THE ASSESSEE IS IN A PPEAL AGAINST THE AFORESAID ORDERS OF THE CIT(A) RELATING TO ASSESSME NT YEARS 2005-06 TO 2007-08 AND HAS RAISED THE AFORESAID ISSUES VIDE GR OUND NOS 1 & 2 IN THE CAPTIONED YEARS. THE REVENUE VIDE GROUND NO.3 IS AG GRIEVED BY THE ORDER OF CIT(A) RELATING TO ASSESSMENT YEAR 2005-06 IN DE LETING THE ADDITION MADE BY THE ASSESSING OFFICER U/S 69C READ WITH SEC TION 10B(7) OF THE INCOME TAX ACT. THE SECOND PART OF THE GROUND OF AP PEAL RAISED BY THE REVENUE IS IN CONNECTION WITH THE RELIEF GRANTED BY THE CIT(A) U/S 14A OF THE ACT, WHICH SHALL BE DEALT BY US ALONG WITH GROU ND NO.3 RAISED BY THE ASSESSEE IN THIS CONNECTION. 33 44. THE PROFITS DECLARED BY THE ASSESSEE WERE FOUND BY THE AUTHORIT IES BELOW TO BE EXCESSIVE SPECIALLY IN THE FACTS OF THE PRESENT CASE WHERE THE ASSESSEE WAS EXPORTING ITS COMPUTER SOFTWARE TO AN ASSOCIATE CONCERN. ADMITTEDLY, THE ASSESSEE COMPANY IS CARRYING ON THE COMPUTER SOFTWARE OPERATIONS IN CONSULTATION WITH ONE OF ITS ASSOCIAT E CONCERN AND U/S 10B(7) OF THE INCOME TAX ACT THE ASSESSING OFFICER IS EMPOWERED TO LOOK INTO THE MAGNITUDE OF PROFIT SHOWN BY THE ASSESSEE WHERE IT IS OF THE VIEW THAT PROVISIONS OF SECTION 80IA(8) AND (10) OF THE INCOME TAX ACT ARE ATTRACTED. 45. THE SECTION 80IA(8) & (10) OF THE ACT READS AS UNDER:- 80IA (8 & 10) OF THE ACT. [DEDUCTIONS IN RESPECT OF PROFITS AND GAINS FROM IN DUSTRIAL UNDERTAKINGS OR ENTERPRISES ENGAGED IN INFRASTRUCTURE DEVELOPMENT, ETC. (8) WHERE ANY GOODS [OR SERVICES] HELD FOR THE PURPOSES OF THE ELIGIBLE BUSINESS ARE TRANSFERRED TO ANY OTHER BUSINESS CARR IED ON BY THE ASSESSEE, OR WHERE ANY GOODS [OR SERVICES] HELD FOR THE PURPOSES OF ANY OTHER BUSINESS CARRIED ON BY THE ASSESSEE ARE TRANSFERRED TO THE E LIGIBLE BUSINESS AND, IN EITHER CASE, THE CONSIDERATION, IF ANY, FOR SUCH TR ANSFER AS RECORDED IN THE ACCOUNTS OF THE ELIGIBLE BUSINESS DOES NOT CORRESPO ND TO THE MARKET VALUE OF SUCH GOODS [OR SERVICES] AS ON THE DATE OF THE TRAN SFER, THEN, FOR THE PURPOSES OF THE DEDUCTION UNDER THIS SECTION, THE P ROFITS AND GAINS OF SUCH ELIGIBLE BUSINESS SHALL BE COMPUTED AS IF THE TRANS FER, IN EITHER CASE, HAD BEEN MADE AT THE MARKET VALUE OF SUCH GOODS [OR SER VICES] AS ON THAT DATE : PROVIDED THAT WHERE, IN THE OPINION OF THE ASSESSING OFFICER , THE COMPUTATION OF THE PROFITS AND GAINS OF THE ELIGIBL E BUSINESS IN THE MANNER HEREINBEFORE SPECIFIED PRESENTS EXCEPTIONAL DIFFICU LTIES, THE ASSESSING OFFICER MAY COMPUTE SUCH PROFITS AND GAINS ON SUCH REASONABLE BASIS AS HE MAY DEEM FIT. [EXPLANATION.FOR THE PURPOSES OF THIS SUB-SECTION , MARKET VALUE, IN RELATION TO ANY GOODS OR SERVICES, MEANS THE PRICE THAT SUCH GOODS OR SERVICES WOULD ORDINARILY FETCH IN THE OPEN MARKET. ] (10) WHERE IT APPEARS TO THE ASSESSING OFFICER THA T, OWING TO THE CLOSE CONNECTION BETWEEN THE ASSESSEE CARRYING ON THE ELI GIBLE BUSINESS TO WHICH THIS SECTION APPLIES AND ANY OTHER PERSON, OR FOR A NY OTHER REASON, THE COURSE OF BUSINESS BETWEEN THEM IS SO ARRANGED THAT THE BUSINESS TRANSACTED 34 BETWEEN THEM PRODUCES TO THE ASSESSEE MORE THAN THE ORDINARY PROFITS WHICH MIGHT BE EXPECTED TO ARISE IN SUCH ELIGIBLE BUSINES S, THE ASSESSING OFFICER SHALL, IN COMPUTING THE PROFITS AND GAINS OF SUCH E LIGIBLE BUSINESS FOR THE PURPOSES OF THE DEDUCTION UNDER THIS SECTION, TAKE THE AMOUNT OF PROFITS AS MAY BE REASONABLY DEEMED TO HAVE BEEN DERIVED THERE FROM. 46. UNDER SECTION 80IA(10) OF THE ACT, WHERE IT IS APPARENT TO THE ASSESSING OFFICER THAT THE ARRANGEMENTS BETWEEN THE ASSESSEE CARRYING ON THE ELIGIBLE BUSINESS AND ANY OTHER ASSOCIATE PERSO N WITH WHOM IT IS CARRYING ON THE BUSINESS TRANSACTIONS, IS SO ARRANG ED, THAT IT RESULTS IN MORE THAN ORDINARY PROFITS TO THE ASSESSEE, WHICH M IGHT BE EXPECTED TO ARISE IN SUCH CARRYING ON OF THE BUSINESS, THE ASSE SSING OFFICER IS EMPOWERED TO ADOPT A REASONABLE AMOUNT OF PROFITS D EEMED TO HAVE BEEN DERIVED FROM CARRYING ON OF SUCH ELIGIBLE BUSINESS. THE PRE CONDITION FOR INVOKING OF THE PROVISIONS TO THE SECTION 80IA (10) OF THE ACT IS THE ASSESSEE HAVING DECLARED MORE THAN ORDINARY PROFITS WHICH MIGHT BE EXPECTED TO ARISE IN THE LINE OF ELIGIBLE BUSINESS CARRIED ON BY THE ASSESSEE. THUS THE QUESTION TO BE ADDRESSED IN THE PRESENT SET OF FACTS AND CIRCUMSTANCES IS WHETHER THE ASSESSEE HAS DECLARED MORE THAN ITS SHARE OF PROFITS FROM THE ELIGIBLE BUSINESS. 47. THE ASSESSEE HAS ENTERED INTO A CONSULTING AGRE EMENT WITH M/S RAICO INC. DBA QASOURCE, USA AND AS PER THE TERMS O F THE SAID AGREEMENT, THE ASSESSEE WAS ENTITLED TO REMUNERATIO N EQUIVALENT TO 10% OF ACTUAL EXPENSES DESCRIBED IN THE PRECEDING SENTENCE OF THE AGREEMENT. THE TOTAL COST WAS ALSO REFERRED TO IN THE SAID AGREE MENT. THE PARTIES EXECUTED AN ADDENDUM TO THE CONSULTING AGREEMENT UN DER WHICH IT WAS PROVIDED THAT W.E.F. 1.4.2004, THE REMUNERATION IS FIXED AT 13.5% OF ACTUAL EXPENSES IS TO BE PAID AS AGAINST 10% OF THE ACTUAL EXPENSES, PROVIDED IN THE CONSULTING AGREEMENT DATED 1.2.2003. IT WAS FUR THER PROVIDED IN THE 35 SAID ADDENDUM THAT W.E.F. 1.10.2004 THE WHOLE OF T HE REMUNERATION CLAUSE SHALL BE SUBSTITUTED BY A NEW CLAUSE UNDER W HICH THE ASSESSEE WAS ENTITLED TO REMUNERATION ON MAN HOUR BASIS. THE ASS ESSEE HAS PLACED THE COPY OF THE ADDENDUM TO THE CONSULTING AGREEMENT AT PAGES 361 TO 363 OF THE PAPER BOOK. THE CLAUSE IN RESPECT OF REMUNERAT ION AS PER THE ADDENDUM IS REPRODUCED BY US IN THE PARAS HEREIN AB OVE. THE TERMS OF THE AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND ITS CLIENTS ARE TO BE CONSIDERED BY THE STPI AND THE ASSESSEE IN THIS REG ARD HAD FURNISHED AS COPY OF THE SERVICE AGREEMENT TO THE ADDITIONAL DIR ECTOR, STPI, MOHALI FOR REGISTRATION OF SERVICES AGREEMENT VIDE ITS LET TER DATED 30.6.2003 PLACED AT PAGE 364 OF THE PAPER BOOK. THE ADDENDUM TO THE CONSULTANT AGREEMENT WAS ALSO FORWARDED TO THE ADDITIONAL DIRE CTOR, STPI, MOHALI ON 30.11.2004. THE SAID COMMUNICATION IS PLACED AT PAGE 365 OF THE PAPER BOOK. FURTHER, WE FIND THAT DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FURNISHED LETTER DATED 2 6.12.2007, IN WHICH IT WAS EXPLAINED AS UNDER:- THE ASSESSEE COMPANY IS ENGAGED IN THE FILED OF SOF TWARE DEVELOPMENT AND OTHER RELATED ACTIVITIES AND HENCE NOT MAINTAINING ANY PRODUCTION RECORDS. HOWEVER, COPIE S OF THE FOLLOWING DOCUMENTS ARE ENCLOSED HEREWITH :- A) EXPORT INVOICES APPROVED BY THE STPI UNDER THE PROVISIONS OF FF B) MONTHLY RETURNS SUBMITTED WITH THE STPI SHOWING THE EXPORT AND C) ANNUAL RETURN SUBMITTED THE STPI D) STATUS REPORT OF SOFTWARE DEVELOPMENT ACTIVITIES. E) PROOF OF COMPUTER PURCHASED F) PROOF OF INTERNET CONNECTION. 36 THE DETAILS OF THE EMPLOYEES OF THE ASSESSEE COMPAN Y ALONG WITH THEIR QUALIFICATIONS AND FORM NO.16 ARE ENCLOSED HE REWITH . THE SAID LETTER IS ENCLOSED AT PAGES 63 TO 65 OF TH E PAPER BOOK FILED BY THE DEPARTMENT RELATING TO ASSESSMENT YEAR 2005-06. 48. THE ASSESSEE HAS FURNISHED BEFORE US THE COPIE S OF THE BILLS RAISED BY IT FOR THE SERVICES PROVIDED TO ITS CLIENTS. THE INITIAL PAYMENTS UP TO 31.3.2004 WERE RAISED WITH A MARK UP @ 10%. THE CO PIES OF THE SAID BILLS ARE PLACED AT PAGES 58 & 59 OF THE PAPER BOOK . THE BILLS STARTING FROM APRIL 2004 TO 30.9.2004 WERE RAISED WITH MARK UP @ 13.5% AND ARE PLACED AT PAGES 60 & 65 OF THE PAPER BOOK. THE REAFTER, WITH EFFECT FROM OCTOBER 2004 THE BILLS WERE RAISED ON THE BASI S OF MAN HOUR BASIS AND AS PER THE RATES FIXED BETWEEN THE PARTIES ON ACCOUNT OF LEVEL-I AND LEVEL II OF EMPLOYEES. THE COPIES OF THE SAID BILL ARE PLACED AT PAGES 66 TO 67 OF THE PAPER BOOK. AS PER THE REQUIREMENTS OF I TS REGISTRATION WITH STPI, THE ASSESSEE HAS TO FURNISH THE INFORMATION I N RESPECT OF THE EXPORT INVOICES RAISED BY IT DURING EACH MONTH AND ALSO TH E FOREIGN EXCHANGE RECEIPT BY IT DURING THE SAID PERIOD ALONGWITH DETA ILS OF EXPENSES INCURRED FOR THE AFORESAID MONTH IN SOFTEX FORM/S. THE ASSE SSEE HAS PLACED ON RECORD THE SOFTEX FORM FURNISHED FOR THE MONTH OF A PRIL 2004 AT PAGES 131 TO 135 OF THE PAPER BOOK UNDER WHICH IT HAD ENCLOS ED THE COPIES OF THE EXPORT INVOICES ISSUED IN THE MONTH OF APRIL 2004 A LONGWITH DETAILS OF EXPENSES IN THE MONTH OF APRIL 2004 AND COPY OF FIR C RECEIVED IN THE MONTH OF APRIL 2004. SIMILAR INFORMATION HAS BEEN F URNISHED BY THE ASSESSEE FOR THE PERIOD MAY 2004 TO MARCH 2005 AT A PGES 136 TO 189 OF THE PAPER BOOK. FURTHER, THE ASSESSEE HAD FURNISHE D THE ANNUAL PROGRESS 37 REPORT FOR THE FINANCIAL YEAR 2004-05 TO THE STPI A ND THE COPIES OF SAME ARE PAGES 192 TO 193 OF THE PAPER BOOK. 49. WE FIND THAT THE ASSESSEE COMPANY HAD RAISED TH E BILLS FOR THE SERVICES RENDERED BY IT IN CONSONANCE WITH THE TERM S OF AGREEMENT SETTLED BETWEEN IT AND ITS CLIENTS. THE FIRST BILLS WERE RAISED AS PER THE REMUNERATION CLAUSE AGREED UPON BETWEEN THE ASSESSE E AND ITS CLIENTS AS PER THE CONSULTING AGREEMENT DATED 1.1.2003. HOWEV ER, THE TERMS OF REMUNERATION WERE AMENDED AS PER THE ADDENDUM TO TH E CONSULTING AGREEMENT BETWEEN THE PARTIES WITH AMENDMENT TAKING EFFECT FROM 1.4.2004. AS PER THE SAID ADDENDUM TO THE CONSULTI NG AGREEMENT W.E.F. APRIL 2004, REMUNERATION WAS FIXED WITH MARK UP @ 1 3.5% AND W.E.F. OCTOBER 2004, THE ASSESSEE WAS ENTITLED TO RECEIVE THE PAYMENTS ON MAN HOUR BASIS AS AGAINST THE INITITAL AGREEMENT BETWEE N PARTIES TO RECEIVE THE PAYMENTS FOR THE SERVICES RENDERED ON A MARK UP ON THE EXPENSES INCURRED BY IT. 50. FROM THE PERUSAL OF THE AFORESAID DETAILS IT IS APPARENT THAT THE ASSESSEE COMPANY RAISES MONTHLY INVOICES, FOR THE S ERVICES RENDERED AND COPIES OF THE SAME ARE SUBMITTED TO THE STPI FOR TH EIR PERUSAL. THE COPIES OF THE EXPORT DECLARATION SUBMITTED IN THE FORM OF SOFTEX FORMS FOR THE YEAR UNDER CONSIDERATION ARE ENCLOSED IN THE PAPER BOOK FILED BY ASSESSEE. THE COPY OF THE ANNUAL RETURN FILED FOR THE RELEVAN T FINANCIAL YEAR IS ALSO ENCLOSED AT PAGES 192 & 193 OF THE PAPER BOOK. TH E INFORMATION IN RESPECT OF REMUNERATION CHARGED BY THE ASSESSEE ON MONTH WISE BASIS WAS FURNISHED BEFORE THE STPI ON A REGULAR BASIS WHICH IS NOT DISPUTED TO BY THE REVENUE AUTHORITIES. THE COPIES OF THE SUBMISS IONS MADE BY THE 38 ASSESSEE BEFORE THE ASSESSING OFFICER ARE ENCLOSED IN THE PAPER BOOK FILED BY THE REVENUE IN THIS REGARD, A REFERENCE TO WHICH HAS BEEN MADE BY US IN PARAS HEREINABOVE. 51. IN THE TOTALITY OF FACTS AND CIRCUMSTANCES, WE FIND THAT THE TOTAL REMUNERATION DECLARED BY THE ASSESSEE IS BACKED BY THE BILLS RAISED BY THE ASSESSEE AS PER THE TERMS OF AGREEMENT BETWEEN THE PARTIES, WHICH IN TURN ARE OPEN FOR SCRUTINY BEFORE THE STPI AUTHORITIES, WHICH HAD RECOGNIZED THE STATUS OF THE ASSESSEE TO BE 100% EOU. IN THE G AMIT OF EVIDENCE AVAILABLE ON RECORD, WE FIND NO MERIT IN THE REJECT ION OF THE BOOK RESULTS SHOWN BY THE ASSESSEE FROM YEAR TO YEAR. THE ASSES SING OFFICER IN ANY CASE HAD FAILED TO BRING ON RECORD ANY DISCREPANCY IN THE SAID BILLS OF REMUNERATION MAINTAINED BY THE ASSESSEE EXCEPT FOR ITS CONTENTION THAT THE PROFITS SHOWN BY THE ASSESSEE WERE RELATIVELY ON A HIGHER SIDE FOR PERIOD STARTING OCTOBER 2004, WHICH IN ANY CASE WERE ON AC COUNT OF CHANGE IN THE REMUNERATION CLAUSE. IN THE ABSENCE OF ANY SPECIFIC INSTANCES BEING REFERRED TO BY THE ASSESSING OFFICER WE FIND NO MER IT IN THE ORDER OF THE ASSESSING OFFICER IN INVOKING THE PROVISIONS OF SEC TION 92 OF THE ACT ON THE SURMISE THAT THE PROFITS SHOWN BY THE ASSESSEE ON ACCOUNT OF TRANSACTION WITH A RELATIVE CONCERN WERE ON A HIGHE R SIDE. FURTHER, THE ASSESSING OFFICER HAS FAILED TO POINT OUT THE BASIS FOR ESTIMATING THE GP RATE IN THE HANDS OF THE ASSESSEE. 52. WE FURTHER FIND THAT THE ASSESSEE HAD FURNISHED ON RECORD A CERTIFICATE FROM STPI DATED 9.7.2009 DURING THE PRO CEEDINGS RELATING TO ASSESSMENT YEAR 2006-07, WHICH READS AS UNDER:- 39 STPI REF NO. STPIM/PCMG/PSE/02/199-759/2009 DATED 9 .7.2009 TO WHOM IT MAY CONCERN THIS IS TO CERTIFY THAT M/S BEBO TECHNOLOGIES PVT L TD IS REGISTERED WITH STPI VIDE APPROVAL NO. STPIM/PCMG/PSE/02/199-8210 DATED 12.3.2003 AND RENE WED LEVY OF PENALTY VIDE STPM/PCMG/PSE/02/199-2093 DATE D 19.3.2008 FOR MANUFACTURE AND EXPORT OF COMPUTER SO FTWARE/IT ENABLED SERVICES. THE UNIT HAS COMMENCED THEIR OPERATION ON 28.3.2003 . SINCE OCTOBERS 2004 & TILL DATE THE UNIT IS PROVIDING SER VICES TO THEIR OVERSEAS CLIENT AND CHARGED THEM ON MAN HOUR BASIS BETWEEN US$ 7 TO US$ 10 DEPENDING UPON THE LEVEL OF ENGINEERS. THE RATES CHARGED BY THEM ARE COMPARABL E WITH OTHER UNITS PROVIDING SUCH SERVICES. 53. AS PER THE ABOVE SAID CERTIFICATE, THE RATES CH ARGED BY THE ASSESSEE WERE FOUND TO BE COMPARABLE WITH OTHER UNITS PROVID ING SUCH SERVICES. IN VIEW OF THE SAME, THERE IS NO MERIT IN THE ALLEGATI ON THAT PROFITS SHOWN BY ASSESSEE ARE ON THE HIGHER SIDE. FURTHER, THE BASI S FOR MAKING THE ADDITION IN ASSESSMENT YEAR 2007-08 WAS THE RESULTS SHOWN BY A CONCERN M/S QUARK SYSTEMS PVT AND M/S QUARK MEDIA PVT LTD. IT IS AN ESTABLISHED PRINCIPLE OF NATURAL JUSTICE THAT NO BODY IS TO BE CONDEMNED UNHEARD AND THE CASE OF THE ASSESSEE IS THAT THE RATES SHOWN BY THE SAID CO NCERNS COULD NOT BE APPLIED TO DETERMINE ITS PROFITS AS THE SAID INFORM ATION WAS NOT CONFRONTED TO IT AND FURTHER THE BUSINESS ACTIVITY CARRIED ON BY THE TWO CONCERNS WERE NOT IDENTICAL. WE FIND SIMILAR ISSUE OF ESTIMATION OF PROFITS AROSE BEFORE THE MUMBAI BENCH OF THE TRIBUNAL IN FABULA TRADING COMPANY (P) LT V ITO [(2009) 21 DTR (MUMBAI)(TRIB) 210] WHEREIN ON S IMILAR ISSUE IT HAS BEEN HELD AS UNDER:- 16.IT IS AN ESTABLISHED PRINCIPLE THAT THERE IS NO MERIT IN ESTIMATING THE TRADING RESULTS OF A PARTICULAR YEAR BASED ON THE TRADING RESULTS SHOWN IN PRECEDING OR SUCCEEDING YEAR. SIMILARLY, THERE IS NO MERIT IN COMPRISING THE TRADING RESULTS OF A CONCER N 40 WITH THE TRADING RESULTS OF ANOTHER CONCERN CARRYIN G ON SIMILAR OR SAME BUSINESS. IN THE FACTS AND CIRCUMSTANCES OF THE CASE BEFORE US, WE FIND NO MER IT IN THE GROSS PROFIT RATE SHOWN BY THE ASSESSEE AND DEL ETE THE ADDITION MADE ON BASIS FOR INVOKING THE PROVIS IONS OF S.92 OF THE ACT, HENCE THE ADDITION MADE BY THE ASSESSING OFFICER IS DIRECTED TO BE DELETED. THUS, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWE D. 54. IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT C ASE BEFORE US, WE FIND NO MERIT IN THE ORDERS OF THE AUTHORITIES BELOW IN REWORKING THE PROFITS OF THE ASSESSEE COMPANY WHICH IN TURN ARE ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT. THERE IS NO MERIT IN APPLYING THE PROVISI ONS OF SECTION 80IA(10) TO THE PROFITS DECLARED BY THE ASSESSEE TO REWORK T HE PROFITS OF ELIGIBLE BUSINESS, WHICH IN TURN ARE ENTITLED TO THE BENEFIT OF EXEMPTION U/S 10B OF THE ACT. ACCORDINGLY, WE DIRECT THE ASSESSING O FFICER TO ACCEPT THE RESULTS SHOWN BY THE ASSESSEE IN THE CAPTIONED YEAR S I.E. ASSESSMENT YEARS 2005-06 TO 2007-08 AS THE PROFITS OF THE ELIGIBLE B USINESS, WHICH IN TURN ARE ENTITLED TO THE BENEFIT OF EXEMPTION U/S 10B OF THE ACT. ACCORDINGLY, GROUND NOS. 1 & 2 RAISED BY THE ASSESSEE IN ALL THE YEARS UNDER CONSIDERATION ARE ALLOWED. 55. THE ASSESSING OFFICER WHILE COMPUTING THE INCOM E IN ASSESSMENT YEAR 2005-06 AFTER HOLDING THE ASSESSEE TO HAVE SHO WN HIGHER PROFITS OF ELIGIBLE BUSINESS HAD MADE A DISALLOWANCE U/S 69C O F THE ACT ON ACCOUNT OF EXPENDITURE RELATABLE TO THE EARNING OF THE HIGH ER RECEIPTS VIS-A-VIS THE EXPENDITURE SHOWN FOR THE YEAR UNDER CONSIDERATION. IN VIEW OF OUR OBSERVATION IN THE PARAS HEREINABOVE, WE UPHOLD THE ORDER OF CIT(A) IN DELETING THE ADDITION MADE U/S 69C OF THE ACT, WHI CH IN ANY CASE IS ATTRACTED IN SUCH CASES, WHERE IN ANY FINANCIAL YE AR THE ASSESSEE IS FOUND TO HAVE INCURRED ANY EXPENDITURE, IN RESPECT OF WHI CH, HE OFFERS NO 41 EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE OR PART THEREOF OR THE EXPLANATION OFFERED BY HIM, IN THE OPINION OF THE A SSESSING OFFICER IS NOT SATISFACTORY, SUCH AN EXPENDITURE IS DEEMED TO BE I NCOME OF THE ASSESSEE FOR THE FINANCIAL YEAR. THE PROVISIONS OF SECTION 6 9C ARE NOT ATTRACTED IN THE PRESENT CASE AS THERE IS NO FINDING OF THE ASSE SSING OFFICER OF THE ASSESSEE HAVING INCURRED SUCH EXPENDITURE FOR EARN ING OF THE RECEIPTS OF THE ELIGIBLE BUSINESS. THE ADDITION WAS MADE ON THE PRESUMPTION THAT IN ORDER TO EARN SUCH HIGHER REVENUES, THE ASSESSEE IS DEEMED TO HAVE INCURRED SUCH AN EXPENDITURE. UPHOLDING THE ORDER OF THE CIT(A) IN THIS REGARD, WE DISMISS THE GROUND NO.3 RAISED BY THE RE VENUE IN THIS CONNECTION. 56 ANOTHER ISSUE HAS BEEN RAISED BY THE ASSESSEE IN ASSESSMENT YEAR 2005-06 WITH REGARD TO THE DISALLOWANCE MADE BY INV OKING THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT. THE REVENUE IS ALSO IN APPEAL IN THIS REGARD BY WAY OF GROUND NO.3 (2 ND PART). FROM THE PERUSAL OF THE APPELLATE ORDER, WE FIND THAT THE ASSESSING OFFICER HAD DETERMINED THE EXPENSES RELATABLE TO EARNING OF DIVIDEND INCOME @ 10% AND MADE A DISALLOWANCE OF RS. 5,54,752/-. THE CIT(A) UPHOLD ING THE ORDER OF THE ASSESSING OFFICER IN INVOKING THE PROVISIONS OF SEC TION 14A UPHELD ADDITION OF RS. 5,54,752/- AND ALSO HELD THAT THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT AS PER PARA 55 OF THE APPELLATE ORDER. IN VIEW THEREOF, WHERE THE ADDITION HAS BEEN UPHELD BY THE CIT(A), THE GROUND OF APPEAL RAISED BY THE REVENUE IN THIS REGA RD IS MISCONCEIVED AND HENCE THE SAME IS DISMISSED. 57. NOW COMING TO THE ISSUE OF EXPENSES TO BE DISAL LOWED IN RELATION TO THE EXEMPT INCOME EARNED BY THE UNDERTAKING AND THE APPLICATION OF THE 42 PROVISIONS OF SECTION 14A OF THE ACT, WE FIND THAT THE ISSUE STANDS COVERED BY THE RATIO LAID DOWN BY THE HON'BLE BOMBAY HIGH C OURT IN GODREJ & BOYCE MFG.CO.LTD. V DCIT & ANR, [234 CTR 1 (BOM)] W HEREIN THE CONSTITUTIONAL VALIDITY OF SECTION 14A(2)&(3) OF I. T.ACT AND RULE 8D OF THE INCOME TAX RULES WAS CHALLENGED. THE COURT HEL D THAT THE PROVISIONS OF RULE 8D WERE NOT ULTRA VIRUS THE PROV ISIONS OF SECTION 14A AND IT WAS ALSO HELD THAT THE SAME DO NOT OFFEN D ARTICLE 14 OF THE CONSTITUTION. IT WAS FURTHER HELD THAT THE PROVISI ON OF RULE 8D WAS TO BE APPLIED PROSPECTIVELY W.E.F. 01.04.2007 I.E. IN RELATION TO ASSESSMENT YEAR 2008-09 AND SUBSEQUENT YEARS AS THE MEMORANDUM EXPLAINING THE PROVISIONS OF THE FINANCE BILL 2006 STATES THAT THI S AMENDMENT WOULD TAKE EFFECT FROM 01.04.2007. THE COURTS FURTHER HE LD THAT EVEN IN THE ABSENCE OF SUB-SECTION (2) AND (3) OF SECTION 14A A ND RULE 8D, THE ASSESSING OFFICER WAS NOT PRECLUDED FROM MAKING APP ORTIONMENT ON ACCOUNT OF ADMINISTRATIVE EXPENDITURE RELATABLE TO EARNING OF EXEMPT INCOME. FOLLOWING THE RATIO LAID DOWN BY THE HON'B LE BOMBAY HIGH COURT IN GODREJ & BOYCE MFG.CO.LTD. (SUPRA), WE ARE OF THE VIEW THAT ADMINISTRATIVE EXPENDITURE ATTRIBUTABLE TO SUCH EXE MPT INCOME MERITS TO BE DISALLOWED. 58. WE HOLD THAT CERTAIN PORTION OF THE EXPENDITURE RELATABLE TO EARNING OF DIVIDEND INCOME MERITS TO BE DISALLOWED. THE A SSESSEE DURING THE YEAR UNDER CONSIDERATION HAD DECLARED DIVIDEND INCOME OF RS. 10,54,254/-. THE ASSESSING OFFICER DISALLOWED 10% OF PERSONAL AN D ADMINISTRATIVE EXPENSES INCURRED BY THE ASSESSEE AS BEING RELATABL E TO THE EARNING SAID DIVIDEND INCOME. WE FIND THAT THE SAID DISALLOWANCE IS ON A HIGHER SIDE AND RESTRICT THE DISALLOWANCE TO RS. 2 LACS, KEEPI NG IN VIEW THE QUANTUM 43 OF DIVIDEND INCOME EARNED BY THE ASSESSEE. ACCORDI NGLY, GROUND NO.3 RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 59. THE ASSESSEE HAS ALSO FILED CROSS OBJECTIONS IN ASSESSMENT YEAR 2005-06. THE GROUND NOS. 1 & 2 RAISED BY THE ASSES SEE IN ITS CROSS OBJECTIONS ARE IN SUPPORT OF THE ORDER OF CIT(A) IN ALLOWING EXEMPTION U/S 10B OF THE ACT AND IN DELETING THE ADDITION U/S 69C OF THE ACT. IN VIEW OF OUR ORDER IN DISMISSING THE GROUNDS OF APPEAL RA ISED BY THE REVENUE IN THIS REGARD, THE GROUND NOS 1 & 2 RAISED IN THE CRO SS OBJECTION BECOME INFRUCTUOUS. THE GROUND NO.3 IS AGAINST THE DISALLO WANCE OF EXPENSES IN VIEW OF THE PROVISIONS OF SECTION 14A OF THE ACT WH ICH ALSO BECOMES INFRUCTUOUS ON ACCOUNT OF OUR PARTLY ALLOWING THE C LAIM OF THE ASSESSEE IN CONNECTION WITH GROUND NO.3 RAISED BY ASSESSEE IN THIS BEHALF. THE CROSS OBJECTIONS ARE THUS DISMISSED. 60. IN THE RESULT, APPEAL OF THE ASSESSEE IN ASS ESSMENT YEAR 2005-06 IS PARTLY ALLOWED AND FOR ASSESSMENT YEARS 2006-07 AN D 2007-08 ARE ALLOWED. THE APPEAL OF THE REVENUE AND CROSS OBJE CTIONS FILED BY THE ASSESSEE IN ASSESSMENT YEAR 2005-06 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF APRIL, 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 29 TH APRIL, 2011 RKK COPY TO: 44 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH