IMSI (India) Pvt. Ltd., Dehradun V. JCIT, Dehradun

ITA 53/DEL/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6742 (ITAT-DEHRADUN)
• Duration Of Justice: 4 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 03-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N C UPADHYAY
• Keywords: Set aside
• Section: 234B; 10B; 251; 80IC; 80IC; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , DEHRADUN BENCH, (THROUGH VIDEO CONFERENCING] BEFORE SHRI N.K. BILLAIYA , ACCOUNTANT MEMBER, AND MS. SUCHITRA KAMBLE , JUDICIAL MEMBER ITA NO. 5 3 /DEL/201 7 [A.Y 20 1 1 - 1 2 ] ITA NO. 1025 /DEL/201 7 [A.Y 2012 - 13] ITA NO. 1026/ DEL/201 7 [A.Y 2013 - 14] M/S IMSI [ INDIA ] PVT LTD VS. THE J. C.I.T 2410, DOON EXPRESS RANGE - 2 BUSINESS PARK, DEHRADUN DEHRADUN UTTARAKHAND PAN : AABCI 1797 A [APPELLANT] [RESPONDENT] DATE OF HEARING : 2 6 . 0 8 .20 2 1 DATE OF PRONOUNCEMENT : 2 6 .0 8 .20 2 1 ASSESSEE BY : SHRI ASHWANI KUMAR , A DV SHRI ADITYA KUMAR, CA REVENUE BY : SHRI N.C. UPADHYAY, CIT - DR ORDER PER N.K. BILLAIYA , ACCOUNTANT MEMBER: - TH ESE THREE SEPARATE APPEAL S BY THE ASSESSEE ARE PREFERRED AGAINST TH RE E SEPARATE ORDER S OF THE LD. CIT(A), MUZAFFARNAGAR D ATED 06 .0 9 .201 6 PERTAINING TO A.YS 2011 - 12, 2012 - 13 AND 2013 - 14. 2 2. SINCE COMMON GRIEVANCES ARE INVOLVED IN ALL THESE APPEALS, THESE WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 3. THE COMMON GRIEVANCES RAISED BY THE ASSESSEE READ AS UNDER; 1) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) MUZAFFRNAGAR ('LD. CIT (A)') HAS ERRED ON FACTS & IN LAW IN DISALLOWING THE CLAIM OF THE APPELLANT FOR DEDUCTION U/S 80 - IC OF THE INCOME TAX ACT, 1961 ('THE ACT') AND CONFIRMING THE ADDITION OF INCOME OF INR 1,84,28,269/ - ON ACCOUNT OF DEDUCTION CLAIMED UNDER SECTION 80IC AS MADE BY THE LEARNED JOINT COMMISSIONER OF INCOME TAX RANGE - 2, DEHRADUN, ('LD. AO') . 2) THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT THE APPELLANT IS NOT RENDERING SERVICES IN THE FIELD OF INFORMATION AND COMMUNICATION TECHNOLOGY ('ICT') INDUSTRY REQUIRED FOR CLAIMING DEDUCTION U/S 80 - IC OF THE ACT. 3) THE LD. CIT (A) HAS ER RED ON FACTS IS NOT APPRECIATING THE BUSINESS MODEL OF THE APPELLANT AND HOLDING THE APPELLANT IS ENGAGED IN THE BUSINESS OF MANPOWER RECRUITMENT AND SUPPLY TO ENTITIES ENGAGED IN ICT INDUSTRY AND THE ENTIRE BUSINESS MODEL OF THE APPELLANT IS MERE AN ARRAN GEMENT SO THAT THE ENTITIES TO WHOM THE APPELLANT IS PROVIDING ITS SERVICES COULD BE FREE FROM STATUTORY OBLIGATION ATTACHED WITH AN EMPLOYER AND COULD FOCUS ON THEIR CORE COMPETENCIES. 3 4) THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT BUSINES S OF THE APPELLANT IS NOT CARRIED OUT WITHIN THE STATE OF UTTARAKHAND AS REQUIRED FOR CLAIMING DEDUCTION U/S 80 - IC OF THE ACT. 5) THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE APPELLANT HAS MERELY UNDERTAKEN A RECONSTRUCTION OF ITS EXISTI NG BUSINESS AND IS THEREFORE, NOT ALLOWED TO CLAIM DEDUCTION U/S 80 - IC. 6. THE LD. CIT (A)/LD. AO HAVE ERRED IN LAW AND ON FACTS IN L EVYING INTEREST U/S 234B OF THE ACT. 7. THE ABOVE GROUNDS OF APPEALS ARE INDEPENDENT AND WITHOUT PREJUDICE TO ONE ANOTHER. 8. THE APPELLANT CRAVES LEAVE TO ADD/ WITHDRAW OR AMEND ANY GROUND HEARING. 4. THE BONE OF CONTENTION LIES IN THE OBSERVATIONS OF THE ASSESSING OFFICER WHEREIN HE STATED THAT DEDUCTION U/S 80IC OF THE INCOME TAX ACT, 1961 [HEREINAFTER REFERRED T O AS 'THE ACT' FOR SHORT] CANNOT BE ALLOWED DURING THE YEARS UNDER CONSIDERATION WHEN ITS CLAIM OF DEDUCTION U/S 80IC OF THE ACT WAS DISALLOWED FOR INITIAL A.Y ITSELF. 4 5. DRAWING SUPPORT FROM THE FINDINGS OF THE A.Y 2007 - 08, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEDUCTION U/S 80IC OF THE ACT. 6. WE FIND THAT THE CLAIM OF DEDUCTION U/S 80IC OF THE ACT WAS ALLOWED BY THIS TRIBUNAL IN A.YS 2007 - 08 TO 2010 - 11 IN ITA N OS. 5856/DEL/2011, 4279/DEL/2012, 5744/DEL/2012 AND 2506/DEL/2013. THE RELEV ANT FINDINGS OF THE CO - ORDINATE BENCH READ AS UNDER: 27. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE ASSESSEE WAS ENGAGED IN SUPPLYING PERSONNEL POSSESSING COMPUTER SKILLS TO ITS CLIENTS. THE ASSESSEE CLAIMED THE DEDUCTION U/S 80IC OF THE ACT. THE PROVISIONS CONTAINED IN THE SAID SECTION READ AS UNDER: '80 - IC. (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB - SECTION (2), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUC TION FROM SUCH PROFITS AND GAINS, AS SPECIFIED IN SUB - SECTION (3). (2) THIS SECTION APPLIES TO ANY UNDERTAKING OR ENTERPRISE, -- (A) WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OR PRODUCE ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE 5 TH IRTEENTH SCHEDULE, OR WHICH MANUFACTURES OR PRODUCES ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE THIRTEENTH SCHEDULE AND UNDERTAKES SUBSTANTIAL EXPANSION DURING THE PERIOD BEGINNING (I) ON THE 23RD DAY OF DECEMBER, 2002 AND ENDI NG BEFORE THE 1ST DAY OF APRIL, [2007], IN ANY EXPORT PROCESSING ZONE OR INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR INDUSTRIAL ESTATE OR INDUSTRIAL PARK OR SOFTWARE TECHNOLOGY PARK OR INDUSTRIAL AREA OR THEME PARK, AS NOTIF IED BY THE BOARD IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS REGARD, IN THE STATE OF SIKKIM; OR (II) ON THE 7TH DAY OF JANUARY, 2003 AND ENDING BEFORE THE 1ST DAY OF APRIL, 2012, IN ANY EXPORT PROCESSING ZONE OR INTE GRATED INFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR INDUSTRIAL ESTATE OR INDUSTRIAL PARK OR SOFTWARE TECHNOLOGY PARK OR INDUSTRIAL AREA OR THEME PARK, AS NOTIFIED BY THE BOARD IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CEN TRAL GOVERNMENT IN THIS REGARD, IN THE STATE OF HIMACHAL PRADESH OR THE STATE OF UTTARANCHAL; OR (III) ON THE 24TH DAY OF DECEMBER, 1997 AND ENDING BEFORE THE 1ST DAY OF APRIL, 2007, IN ANY EXPORT PROCESSING ZONE OR INTEGRATED INFRASTRUCTURE DEVELOPMENT CE NTRE OR INDUSTRIAL GROWTH CENTRE OR INDUSTRIAL ESTATE OR INDUSTRIAL PARK OR 6 SOFTWARE TECHNOLOGY PARK OR INDUSTRIAL AREA OR THEME PARK, AS NOTIFIED BY THE BOARD IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS REGARD, IN A NY OF THE NORTH - EASTERN STATES; (B) WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OR PRODUCE ANY ARTICLE OR THING, SPECIFIED IN THE FOURTEENTH SCHEDULE OR COMMENCES ANY OPERATION SPECIFIED IN THAT SCHEDULE, OR WHICH MANUFACTURES OR PRODUCES ANY ARTICLE OR THING , SPECIFIED IN THE FOURTEENTH SCHEDULE OR COMMENCES ANY OPERATION SPECIFIED IN THAT SCHEDULE AND UNDERTAKES SUBSTANTIAL EXPANSION DURING THE PERIOD BEGINNING -- (I) ON THE 23 RD DAY OF DECEMBER, 2002 AND ENDING BEFORE THE 1 ST DAY OF APRIL, 2012, IN THE STA TE OF HIMACHAL PRADESH OR THE STATE OF UTTARANCHAL; OR (II) ON THE 7 TH DAY OF JANUARY, 2003 AND ENDING BEFORE THE 1 ST DAY OF APRIL, 2012, IN THE STATE OF HIMACHAL PRADESH OR THE STATE OF UTTARANCHAL; OR (III) ON THE 24 TH DAY OF DECEMBER, 1997 AND ENDING BEFORE THE 1 ST DAY OF APRIL, 2007, IN ANY OF THE NORTH - EASTERN STATES. (3) THE DEDUCTION REFERRED TO IN SUB - SECTION (1) SHALL BE -- (I) IN THE CASE OF ANY UNDERTAKING OR ENTERPRISE REFERRED TO IN SUB - CLAUSES (I) AND (III) OF CLAUSE (A) OR SUB - CLAUSES (I) AND (III) OF CLAUSE (B), OF SUB - SECTION (2), ONE HUNDRED PER CENT OF SUCH 7 PROFITS AND GAINS FOR TEN ASSESSMENT YEARS COMMENCING WITH THE INITIAL ASSESSMENT YEAR; (II) IN THE CASE OF ANY UNDERTAKING OR ENTERPRISE REFERRED TO IN SUB - CLAUSE (II) OF CLAUSE (A ) OR SUB - CLAUSE (II) OF CLAUSE (B), OF SUB - SECTION (2), ONE HUNDRED PER CENT OF SUCH PROFITS AND GAINS FOR FIVE ASSESSMENT YEARS COMMENCING WITH THE INITIAL ASSESSMENT YEAR AND THEREAFTER, TWENTY - FIVE PER CENT (OR THIRTY PER CENT WHERE THE ASSESSEE IS A C OMPANY) OF THE PROFITS AND GAINS. (4) THIS SECTION APPLIES TO ANY UNDERTAKING OR ENTERPRISE WHICH FULFILS ALL THE FOLLOWING CONDITIONS, NAMELY: -- (I) IT IS NOT FORMED BY SPLITTING UP, OR THE RECONSTRUCTION, OF A BUSINESS ALREADY IN EXISTENCE : PROVIDED THA T THIS CONDITION SHALL NOT APPLY IN RESPECT OF AN UNDERTAKING WHICH IS FORMED AS A RESULT OF THE RE - ESTABLISHMENT, RECONSTRUCTION OR REVIVAL BY THE ASSESSEE OF THE BUSINESS OF ANY SUCH UNDERTAKING AS IS REFERRED TO IN SECTION 33B , IN THE CIRCUMSTANCES AND WITHIN THE PERIOD SPECIFIED IN THAT SECTION; (II) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUSINESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. EXPLANATION. -- THE PROVISIONS OF EXPLANATIONS 1 AND 2 TO SUB - SECTION (3) OF SECTION 80 - IA SHALL APPLY FOR THE PURPOSES OF 8 CLAUSE (II) OF THIS SUB - SECTION AS THEY APPLY FOR THE PURPOSES OF CLAUSE (II) OF THAT SUB - SECTION. (5) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, NO DEDUCTION SHALL BE ALLOWED UNDER ANY OTHER SECTION CONTAINED IN CHAPTER VIA OR IN SECTION 10A OR SECTION 10B , IN RELATION TO THE PROFITS AND GAINS OF THE UNDERTAKING OR ENTERPRISE. (6) NOTWITHSTANDING ANYTHING CONTAINED IN THIS ACT, NO DEDUCTION SHALL BE ALLOWED TO ANY UNDERTAKING OR ENTERPRISE UNDER THIS SECTION, WHERE THE TOTAL PERIOD OF DEDUCTION INCLUSIVE OF THE PERIOD OF DEDUCTION UNDER THIS SECTION, OR UNDER THE SECOND PROVISO TO SUB - SECTION (4) OF SECTION 80 - IB OR UNDER SECTIO N 10C , AS THE CASE MAY BE, EXCEEDS TEN ASSESSMENT YEARS. (7) THE PROVISIONS CONTAINED IN SUB - SECTION (5) AND SUB - SECTIONS (7) TO (12) OF SECTION 80 - IA SHALL, SO FAR AS MAY BE, APPLY TO THE ELIGIBLE UNDER TAKING OR ENTERPRISE UNDER THIS SECTION.' 28. FROM THE ABOVE PROVISIONS, IT IS CLEAR THAT THE DEDUCTION U/S 80IC OF THE ACT IS AVAILABLE WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE F ROM ANY BUSINESS OF MANUFACTURING OR PRODUCTION OF ANY ARTICLE OR THING NOT BEING ARTICLE OR THING SPECIFIED IN THIRTEENTH SCHEDULE OR COMMENCED ANY OPERATION SPECIFIED IN FOURTEENTH SCHEDULE AND UNDERTAKES SUBSTANTIAL EXPANSION DURING THE PERIOD BEGINNING ON THE 7 TH DAY OF JANUARY, 2003 AND ENDING BEFORE 1 ST DAY OF APRIL, 2012 IN THE STATE OF HIMACHAL PRADESH OR 9 STATE OF UTTARANCHAL. THE CLAIM OF THE ASSESSEE IS THAT IT WAS ESTABLISHED DURING THE PERIOD SPECIFIED IN SUB - CLAUSE (II) OF CLAUSE (A) OF SUB - S ECTION (2) TO SECTION 80IC OF THE ACT AND IT IS PROVIDING THE SERVICES SPECIFIED IN FOURTEENTH SCHEDULE, THEREFORE, IT IS ELIGIBLE FOR DEDUCTION U/S 80IC OF THE ACT. NOW THE CONTROVERSY TO BE RESOLVE BEF ORE US AS TO WHETHER THE ASSESSEE WAS ESTABLISHED IN THE STATE MENTIONED IN SECTION 80IC(2)(A)(II) AND STARTED THE BUSINESS IN THE SPECIFIED PERIOD I.E. FROM 7 T H DAY OF JANUARY, 2003 TO APRIL 2012 AND PERFORM THE FUNCTIONS AS ARE MENTIONED IN SCHEDULE THIRTEENTH OR SCHEDULE FOURTEENTH. THE FUNCTION/OPERATION PROVIDED IN SCHEDULE THIRTEENTH RELATES TO THE MANUFACTURING OR PRODUCTION OF ANY ARTICLE OR THING SPECIFIED IN THAT SCHEDULE BUT THE ASSESSEE IS N OT ENGAGED IN SUCH ACTIVITIES, SO THE OPERATION UNDERTAKEN BY THE ASSESSEE DOES NOT FALL IN SCHEDULE THIRTEENTH. NOW WE HAVE TO EXAMINE AS TO WHETHER THE ASSESSEE FALLS IN THE DEFINITION OF INDUSTRY OR IT IS DOING THE OPERATION SPECIFIED IN SCHEDULE FOURTE ENTH. THE TERM 'INDUSTRY' IS NOT DEFINED IN THE INCOME TAX ACT , HOWEVER, THE HON'BLE SUPREME COURT IN THE CASE OF NATIONAL UNION OF COMMERCIAL EMPLOYEES VS M. R. MEHER, INDUSTRIAL TRIBUNAL, BOMBAY (SUPRA ) HELD THAT THE CONCEPT OF INDUSTRY COVERS THE PRODUCTION OF GOODS AS WELL AS RENDERING OF SERVICES, IN THE SAID CASE, IT HAS BEEN HELD AS UNDER: 'IT WOULD BE REALISED THAT THE CONCEPT OF INDUSTRY POSTULATES PARTNERSHIP BETWEEN CAPITAL AND LABOUR OR BETWEE N THE EMPLOYER AND HIS EMPLOYEES. IT IS UNDER THIS PARTNERSHIP THAT THE EMPLOYER CONTRIBUTES HIS CAPITAL AND THE EMPLOYEES THEIR 10 LABOUR AND THE JOINT CONTRIBUTION OF CAPITAL AND LABOUR LEADS DIRECTLY TO THE PRODUCTION WHICH THE INDUSTRY HAS IN VIEW. IN OTH ER WORDS, THE COOPERATION BETWEEN CAPITAL AND LABOUR OR BETWEEN THE EMPLOYER AND HIS EMPLOYEES WHICH IS TREATED AS A WORKING TEST IN DETERMINING WHETHER ANY ACTIVITY AMOUNTS TO AN INDUSTRY, IS THE CO - OPERATION WHICH IS DIRECTLY INVOLVED IN THE PRODUCTION O F GOODS OR IN THE RENDERING OF SERVICE. IT CANNOT BE SUGGESTED THAT EVERY FORM OR ASPECT OF HUMAN ACTIVITY IN WHICH CAPITAL AND LABOUR CO - OPERATE OR EMPLOYER AND EMPLOYEES ASSIST EACH OTHER IS AN INDUSTRY. THE DISTINGUISHING FEATURE OF AN INDUSTRY IS THAT FOR THE PRODUCTION OF GOODS OR FOR THE RENDERING OF SERVICE, CO - OPERATION BETWEEN CAPITAL AND LABOUR OR BETWEEN THE EMPLOYER AND HIS EMPLOYEES MUST BE DIRECT AND MUST BE ESSENTIAL.' [EMPHASIS SUPPLIED]. 29. SIMILARLY, THE HON'BLE APEX COURT IN THE CASE OF BANGLORE WATER SUPPLY & SEWERAGE BOARD VS A. RAJAPPA (SUPRA) HELD AS UNDER: ....THE WORD 'INDUSTRY' HAS A WIDE IMPORT AND IT IS (I) SYSTEMATIC ACTIVITY, (II) ORGANISED BY CO - OPERATION BETWEEN EMPLOYER AND EMPLOYEE (THE DIRECT AND SUBSTANTIAL ELEMENT IS CHI MERICAL), (III) FOR THE PRODUCTION AND/OR DISTRIBUTION OF GOODS AND SERVICES CALCULATED TO SATISFY HUMAN WANTS AND WISHES (NOT SPIRITUAL OR RELIGIOUS BUT INCLUSIVE OF MATERIAL THINGS OR SERVICES GEARED TO CELESTIAL BLISS, E.G., MAKING ON A LARGE SCALE, PRA SAD OR FOOD), PRIMA FACIE THERE IS AN INDUSTRY' IN THAT ENTERPRISE. IT WAS 11 FURTHER OBSERVED THAT THE TRUE FOCUS IS FUNCTIONAL AND THE DECISIVE TEST IS THE NATURE OF THE ACTIVITY WITH SPECIAL EMPHASIS ON THE EMPLOYER - EMPLOYEE RELATIONS.' FROM THE RATIO LAID DOWN BY THE HON'BLE APEX COURT IN THE AFORESAID REFERRED TO CASES, IT CAN SAFELY BE HELD THAT THE WORD ' INDUSTRY' HAS A WIDE IMPORT AND IT IS A SYSTEMATIC ACTIVITY ORGANIZED BY CO - OPERATION BETWEEN EMPLOYER AND EMPLOYEE FOR PRODUCTION AND/OR DISTRIBUTION OF GOODS AND SERVICES CALCULATED TO SATISFY HUMAN WANTS AND WISHES. 29. IN THE PRESENT CASE, THE ASSESSEE IS A COMPANY INCORPORATED AT DEHRADUN, IT IS ENGAGED IN PROVIDING SUPPORT SERVICES TO IT COMPANIES LIKE IBM, NOKIA, WIPRO INFOTECH, TECH MAHINDRA ET C. THE SERVICES PROVIDED ARE THROUGH VARIOUS MODES ON - LINE, ON - SITE OR OFF - SITE DEPENDING ON THE NATURE OF THE CLIENTS. THE VARIOUS SERVICES PROVIDED BY THE ASSESSEE TO ITS CLIENTS ARE APPLICATION DEVELOPMENT & SUPPORT, CUSTOMER CARE SERVICES, ASSET MANAGE MENT & MAINTENANCE, TELECOM SOFTWARE & HARDWARE INSTALLATION, FACILITY MANAGEMENT SERVICES, TECHNICAL HELP DESK SUPPORT, DOMINO SERVERS SUPPORT AND ON CALL SUPPORT SERVICES ETC. FOR PROVIDING THE ABOVE SAID SERVICES, THE ASSESSEE ENTERED INTO CONTRACT WITH THE VARIOUS CLIENTS AND THE SPECIFIC WORK WAS REQUIRED TO BE DONE AT THE SITES OF THE CLIENTS AS PER THEIR REQUIREMENTS FOR EFFICIENCY AND MAINTAINING CONFIDENTIALITY. THE WORK PERFORMED AT THE SITES OF THE CLIENTS WAS THROUGH THE STAFF OF THE ASSESSEE AN D NOT BY THE CLIENTS OR THEIR STAFF. ALL THE 12 PERSONNELS WHO WORKED AT THE SITES OF THE CLIENTS WERE THE EMPLOYEES OF THE ASSESSEE, THOSE WERE ACCOUNTABLE TO THE ASSESSEE AND NOT TO THE CLIENTS AND THE ASSESSEE WAS RESPONSIBLE/ACCOUNTABLE FOR THE WORK DONE BY ITS EMPLOYEES AT THE SITE OF THE CLIENTS WHO ENTERED INTO AGREEMENTS FOR PROVIDING THE SERVICES WITH THE ASSESSEE AND NOT WITH THE PERSONNEL DEPUTED BY THE ASSESSEE. THE COPY OF THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH M/S TECH MAHINDRA IS PLACED AT PAGE NOS. 251 TO 257 OF THE ASSESSEE'S PAPER BOOK, IN THE SAID AGREEMENT, IT IS CLEARLY MENTIONED AT PAGE NO. 252 & 253THAT THE ASSESSEE WILL PROVIDE THE SERVICES OF TECHNICALLY QUALIFIED AND EXPERIENCED PERSONNEL TO TECH MAHINDRA LTD. FOR WORKING AND ASSIGNING AS MAY BE DESIRED BY TECH MAHINDRA LTD. ON TIME AND MATERIAL BASIS ON OFFSHORE AS WELL AS ONSITE ASSIGNMENTS AND THAT THE ASSESSEE SHALL ENSURE THAT PERSONNEL ENGAGED UNDER THIS AGREEMENT MUST HAVE APPROPRIATE QUALIFICATIONS & COMPETENCE AND IN A LL RESPECTS ACCEPTABLE TO TECH MAHINDRA LTD. AND THAT THE ASSESSEE COMPANY SHALL BE RESPONSIBLE FOR MAKING APPROPRIATE DEDUCTION IN RESPECT OF INCOME TAX AND OTHER STATUTORY DEDUCTIONS UNDER LAWS IN WHICH THE SERVICES ARE PROVIDED, MEANING THEREBY ALL THE PAYMENTS OF SALARIES, RELATED TAXES AND OTHER STATUTORY OBLIGATION TOWARDS EMPLOYEES WERE THE RESPONSIBILITY OF THE ASSESSEE AND NOT THAT OF THE CLIENTS. SIMILAR, AGREEMENT WAS ENTERED WITH M/S NOKIA INDIA PVT. LTD. (COPY OF WHICH IS PLACED AT PAGE NOS. 25 8 TO 263 OF THE ASSESSEE'S PAPER BOOK). IN THE SAID AGREEMENT ALSO, THE SIMILAR CONDITIONS WERE THERE. SIMILARLY, THERE WAS AN AGREEMENT WITH IBM LTD. AND SCOPE OF WORK WAS ALSO DEFINED WHICH IS EVIDENT FROM PAGE NO. 266 OF THE 13 ASSESSEE'S PAPER BOOK WHEREI N THE SCOPE OF WORK (SOW) WAS AS HAS BEEN DEFINED AS UNDER: 'UNDER THIS SOW, SUPPLIER WILL PROVIDE SOFTWARE SUPPORT DEVELOPMENT ACTIVITIES, INCLUDING BUT NOT LIMITED TO, SOFTWARE DEVELOPMENT, SOFTWARE RESTING, PUBLICATION DEVELOPMENT, PROGRAM MAINTENANCE, SOFTWARE DEVELOPMENT SUPPORT AND/OR SUCH OTHER ACTIVITIES AS MAY BE DEFINED BY THE BUYER TO THE SUPPLIER IN THE RELEVANT WA. SUPPLIER WILL ALSO PROVIDE TO BUYER THE DELIVERABLES AND SERVICES DESCRIBED IN SECTION 3.0 OF THIS SOW.' FROM THE AFORESAID AGREEME NTS ENTERED BETWEEN THE ASSESSEE AND ITS CLIENTS, IT IS CLEAR THAT ASSIGNED WORK WAS TO BE DONE BY THE EMPLOYEES OF THE ASSESSEE AT THE SITES OF THE CLIENTS AND THERE WAS NO DIRECT CONTRACT BETWEEN THE CLIENTS AND EMPLOYEES. ALL THE PAYMENTS IN LIEU OF THE WORK DONE WAS THE RESPONSIBILITY OF THE ASSESSEE AND NOT OF THE CLIENTS. 30. IN THE PRESENT CASE, IT IS NOT IN DISPUTE THAT PART (C) OF THE SCHEDULE FOURTEENTH OF THE ACT RELATES TO STATE OF HIMACHAL PRADESH AND THE STATE OF UTTARANCHAL. THE VARIOUS ACTIV ITY OR ARTICLE OR THING OR OPERATIONS ARE DEFINED IN THE SAID SCHEDULE WHICH READ AS UNDER: 14 PART C FOR THE STATE OF HIMACHAL PRADESH AND THE STATE OF UTTARANCHAL S. ACTIVITY OR ARTICLE 4/6 DIGIT SUB - CLASS ITC(HS) OR THING OR EXCISE UNDER NIC CLASSIFCATION OPERATION CLASSIFICATION CLASSIFICATION 4 /6 DIGIT ON 1998 1. FLORICULTURE - - 0603 OR 060120 OR 06029020 OR 06024000 2. MEDICINAL HERBS AND AROMATIC HERBS, ETC., PROCESSING 3. HONEY 0409004 4. HORTICULTURE AND AGRO - BASED INDUSTRIES SUCH AS (A) SAUCES, KETCHUP, ETC 21.03 15135 TO 15137 AND 5139 (B) FRUIT JUICES AND FRUIT PULP 2202.40 (C) JAMS, JELLIES, VEGETABLE JUICES, 20.01 PUREE, PICKLES, ETC. (D) PRESERVED FRUITS AND VEGETABLES (E) PROCESSING O F FRESH FRUITS VEGETABLES INCLUDING PACKAGING (F) PROCESSING, PRESERVATION, PACKAGING OF MUSHROOMS 15 5. FOOD PROCESSING INDUSTRY 19.01 TO EXCLUDING THOSE INCLUDED IN THE 19.04 THIRTEENTH SCHEDULE 6. SUGAR AND ITS BY - PRODUCTS 17019100 7. SILK AND SILK PRODUCTS 50.04 50.05 17116 8. WOOL AND WOOL PRODUCTS 51.01 TO 51.12 17117 9. WOVEN FABRICS (EXCISAB LE GARMENTS) 6101 TO 611710 10. SPORTS GOODS AND ARTICLES AND EQUIPMENT FOR GENERAL PHYSICAL EXERCISE AND EQUIPMENT FOR ADVENTURE SPORTS/ACTIVITIES, TOURISM (TO BE SPECIFIED, BY NOTIFICATION, BY THE CENTRAL GOVERNMENT) 9506.00 11. PAPER AND PAPER PRODUCTS EXCLUDING THOSE IN THE THIRTEENTH SCHEDULE (AS PER EXCISE CLASSIFICATION) 12. PHARMA PRODUCTS 30.03 TO 30.05 13. INFORMATION AND COMMUNICATION TECHNOLOGY INDUSTRY, COMPUTER HARDWARE, CALL CENTRES 84.7 130006/7 14. BOTTLING OF MINERAL WATER 2201 16 15. ECO - TOURISM INCLUDING HOTELS, RESORTS, SPA, ENTERTAINMENT/AMUSEMENT PARKS 55101 AND ROPEWAYS 16. INDUSTRIAL GASES (BASED ON ATMOSPHERIC FRACTION) 17. HANDICRAFTS 18. NON - TIMBER FOREST PRODUCT - BASED INDUSTRIES.] 31. FROM THE AFORESAID PART (C) OF SCHEDULE FOURTEENTH, IT IS CL EAR THAT THE INFORMATION AND COMMUNICATION TECHNOLOGY INDUSTRY, COMPUTER HARDWARE, CALL CENTERS ARE PLACED AT NO. 13. THE ASSESSEE IS ALSO ENGAGED IN THE SIMILAR TYPE OF ACTIVITIES BECAUSE IT PROVIDES SOFTWARE SUPPORT DEVELOPMENT ACTIVITIES, PROGRAMME MAIN TENANCE SERVICES, SOFTWARE DEVELOPMENT SUPPORT AND SOFTWARE TESTING. THEREFORE, THE ACTIVITIES UNDERTAKEN BY THE ASSESSEE FALLS IN CATEGORY NO. 13 OF PART C OF SCHEDULE FOURTEENTH OF THE INCOME TAX ACT. IN THE PRESENT CASE, THE AO WHILE DISALLOWING THE CLA IM OF THE ASSESSEE RILED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF MSCO PVT. LTD. VS UNION OF INDIA AIR 1985 SC 76. HOWEVER, IN THE SAID DECISION, THE HON'BLE SUPREME COURT OBSERVED THAT THE WORD 'INDUSTRY' HAS MANY MEANING AND THAT IT IS HAZARDOUS TO INTERPRET A WORD IN ACCORDANCE WITH ITS DEFINITION IN ANOTHER STATUTE OR STATUTORY INSTRUMENT AND MORE SO WHEN THE WORD TO BE CONSTRUED IS TO BE USED IN A TAXING STATUTE OR A NOTIFICATION ISSUED THEREUNDER, IT SHOULD BE UNDERSTOOD IN ITS 17 CO MMERCIAL SENSE. FROM THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE SAID CASE, IT IS CLEAR THAT THE PRINCIPLES LAID DOWN THEREIN ARE THAT THE TERM 'INDUSTRY' HAS MANY MEANINGS AND THE MEANING MUST BE GIVEN WHICH IT RECEIVES IN ORDINARY PARLANCE OR UNDERS TOOD IN THE SENSE IN WHICH PEOPLE CONVERSANT WITH THE SUBJECT MATTER OF THE STATUTE OR STATUTORY INSTRUMENT UNDERSTAND IT. IN THE AFORESAID REFERRED TO CASE, THE HON'BLE SUPREME COURT HELD AS UNDER: 'THE EXPRESSION 'INDUSTRY' HAS MANY MEANINGS. IT MEANS 'SKILL', 'INGENUITY', 'DEXTERITY', 'DILIGENCE', 'SYSTEMATIC WORK OR LABOUR', 'HABITUAL EMPLOYMENT IN THE PRODUCTIVE ARTS', 'MANUFACTURING ESTABLISHMENT' ETC. BUT WHILE CONSTRUING A WORD WHICH OCCURS IN A STATUTE OR A STATUTORY INSTRUMENT IN THE ABSEN CE OF ANY DEFINITION IN THAT VERY DOCUMENT IT MUST BE GIVEN THE SAME MEANINGS WHICH IT RECEIVES IN ORDINARY PARLANCE OR UNDERSTOOD IN THE SENSE IN WHICH PEOPLE CONVERSANT WITH THE SUBJECT MATTER OF THE STATUTE OR STATUTORY INSTRUMENT UNDERSTAND IT. IT IS H AZARDOUS TO INTERPRET A WORD IN ACCORDANCE WITH ITS DEFINITION IN ANOTHER STATUTE OR STATUTORY INSTRUMENT AND MORE SO WHEN SUCH STATUTE OR STATUTORY INSTRUMENT IS NOT DEALING WITH ANY COGNATE SUBJECT.' 32. THE HON'BLE APEX COURT IN THE CASE OF BANGALORE WA TER SUPPLY & SEWERAGE BOARD VS A. RAJAPPA (SUPRA) CLEARLY HELD THAT THE WORD 'INDUSTRY' ALSO INCLUDES THE DISTRIBUTION OF GOODS AND SERVICES. THEREFORE, IT CAN SAFELY BE HELD THAT THE ACTIVITIES UNDERTAKEN BY THE ASSESSEE FALLS IN THE DEFINITION OF THE IND USTRY TO WHICH THE PROVISIONS CONTAINED IN SECTION 80IC OF THE ACT APPLIES. IN THE 18 PRESENT CASE, NOTHING IS BROUGHT ON RECORD TO SUBSTANTIATE THAT THE SERVICES PROVIDED TO THE CLIENTS BY THE ASSESSEE COMPANY WERE NOT THROUGH ITS EMPLOYEES AND THAT THE REMUNERATION OR OTHER BENEFITS WERE NOT PROVIDED BY THE ASSESSEE OR THERE WAS ANY DIRECT LINK BETWEEN THE CLIENTS AND THE EMPLOYEES OF THE ASSESSEE. IT, THEREFORE, CAN BE SAFELY BE HELD THAT THE ASSESSEE PROVIDED THE SERVICES TO ITS CLIENTS AND THE OPERATIONS UNDERTAKEN BY THE ASSESSEE FALLS IN THE CATEGORY OF INFORMATION AND COMMUNICATION TECHNOLOGY INDUSTRY WHICH IS INCLUDED IN 'CLAUSE NO. 13' OF PART C OF THE 'SCHEDULE FOURTEENTH' TO THE INCOME TAX ACT , 1961. THE ASSESSEE IS SITUATED AT DEHRADUN WHICH IS THE PART OF THE STATE OF UTTARANCHAL TO WHICH PART C OF 'SCHEDULE FOURTEENTH' APPLIES. THE SDE TELEPHONES, DEHRADUN ALSO ISSUED A CERTIFICAT E COPY OF WHICH IS PLACED AT PAGE NO. 216 OF THE ASSESSEE'S PAPER BOOK WHICH STATES THAT THE ASSESSEE HAD BEEN PROVIDED DATACOM LINKS BY THEM WHICH WAS BEING USED FOR TRANSMISSION OF DATA FOR DEVELOPMENT OF SOFTWARE FOR EXPORT PURPOSES SINCE 17 TH JANUARY 2006. THE SAID CERTIFICATE IS PLACED AT PAGE NO. 216 OF THE ASSESSEE'S PAPER BOOK AND READ AS UNDER: 'CERTIFICATE BY DATACOM SERVICE PROVIDER CERTIFIED THAT M/S IMSI (INDIA) PVT. LTD. HAVE BEEN PROVIDED DATACOM LINKS BY US REFERRED IN PARA '4' OF BACK - UP F ORM. THE LINK IS BEING USED BY THEM FOR TRANSMISSION OF DATA FOR DEVELOPMENT OF SOFTWARE FOR EXPORT PURPOSES SINCE 17 JAN. 2006.' SD/ - SD/ - J.T.O. TELEPHONES S.D.E TELEPHONES CLEMENT TOWN CLEMENT TOWN DEHRADUN DEHRADUN 19 33. THE ASSESSEE SITUATED AT DEHRADUN IS ALSO HAVING ELECTRICITY METER IN ITS NAME WHICH IS EVIDENT FROM PAGE NOS. 214 & 215 OF THE ASSESSEE'S PAPER BOOK WHICH IS THE COPY OF THE ELECTRICITY BILL FOR THE P ERIOD 28 TH JANUARY 2006 TO 10 TH MARCH 2006 AN D DUE DATE OF PAYMENT WAS 31 ST MARCH 2006. IN THE PRESENT CASE, IT IS ALSO RELEVANT TO POINT OUT THAT NOTHING IS BROUGHT ON RECORD TO SUBSTANTIATE THAT THE ASSESSEE WAS NOT SITUATED AT DEHRADUN AND HAVING ITS REGISTERED OFFICE THERE, COPY OF THE INCOME TAX RETURN OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION IS PLACED AT PAGE NOS. 55 TO 95 OF THE ASSESSEE'S PAPER BOOK, IN THE SAID RETURN THE ADDRESS MENTIONED IS '.... EXPRESS BUSINESS PARK SUBHASH ROAD, DEHRADUN, UTTARANCHAL'. THEREFORE, IT IS CLEAR THAT ASSESSEE IS SITUATED AT DEHRADUN IN STATE OF UTTARANCHAL. 34. THE CBDT ISSUED A CIRCULAR NO. 694 DATED 23.11.199 4 (COPY OF WHICH IS PLACED AT PAGE NO. 451 OF THE ASSESSEE'S PAPER BOOK) VIDE WHICH A CLARIFICATION HAS BEEN ISSUED REGARDING TAX HOLIDAY UNDER SECTIONS 10A AND 10B OF THE ACT FOR THE UNITS PRODUCING COMPUTER SOFTWARE IN EXPORT PROCESSING ZONES OR SOFTWARE TECHNOLOGY PARKS. THE SAID CIRCULAR READS AS UNDER: 'SINCE COMPUTER PROGRAMMES ARE NOT PHYSICAL GOODS BUT ARE DEVELOPED AS A RESULT OF AN INTELLECTU AL ANALYSIS OF THE SYSTEMS AND METHODS FOLLOWED BY THE PURCHASER OF THE PROGRAMME, IT IS OFTEN PREPARED ON - SITE, WITH THE SOFTWARE PERSONNEL GOING TO THE CLIENT'S PREMISES. DOUBTS HAVE BEEN RAISED WHETHER UNITS TAKING UP SUCH PRODUCTION OF SOFTWARE AT THE CLIENT'S PREMISES WOULD BE ELIGIBLE FOR THE TAX HOLIDAY. 20 THE GOVERNMENT'S POLICY ON TAX INCENTIVE TO SOFTWARE EXPORTS IS REFLECTED IN THE PROVISIONS OF SECTION 80HHE INTRODUCED IN 1991. UNDER THIS PROVIS ION, TECHNICAL SERVICES PROVIDED OUTSIDE INDIA, FOR THE DEVELOPMENT OR PRODUCTION OF COMPUTER SOFTWARE, ARE INCLUDED FOR THE PURPOSE OF THE TAX INCENTIVE. SIMILARLY, FOR THE PURPOSE OF SECTION 10A OR 10 B, AS LONG AS A UNIT IN THE EPZ/EOU/STP ITSELF PRODUCES COMPUTER PROGRAMMES AND EXPORTS THEM, IT SHOULD NOT MATTER WHETHER THE PROGRAMME IS ACTUALLY WRITTEN WITHIN THE PREMISES OF THE UNIT. IT IS, ACCORDINGLY, CLARIFIED THAT, WHERE A UNIT IN THE EPZ/EOU/ST P DEVELOPS SOFTWARE SUR PLACE, THAT IS, AT THE CLIENT'S SITE ABROAD, SUCH UNIT SHOULD NOT BE DENIED THE TAX HOLIDAY UNDER SECTION 10A OR 10B ON THE GROUND THAT IT WAS PREPARED ON - SITE, AS LONG AS THE SO FTWARE IS A PRODUCT OF THE UNIT, I.E., IT IS PRODUCED BY THE UNIT.' 35. IF AN ANALOGY IS DRAWN WITH REFERENCE TO THE SAID CIRCULAR THEN THERE IS NO TERRITORIAL LIMITATION TO PROVIDE OR RENDER SERVICES FOR GETTING THE BENEFIT U/S 80IC OF THE ACT. PARTICULAR LY WHEN, THE ASSESSEE IS SITUATED AND BASED IN DEHRADUN WITHIN THE STATE OF UTTARANCHAL WHICH IS ESTABLISHED FROM THE FOLLOWING DOCUMENTS FURNISHED BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW: I) COPY OF ELECTRICITY METER SEALING CERTIFICATE AND ELECTRICI TY BILL; II) CERTIFICATE FROM BSNL CERTIFYING THE DATE OF CONNECTION OF BROADBAND; 21 III) REGISTRATION WITH STPI, DEHRADUN (THE STPI SCHEME IS ADMINISTERED BY THE DEPARTMENT OF ELECTRONICS, GOVT. OF INDIA THROUGH SOFTWARE TECHNOLOGY PARKS OF INDIA); IV) REGI STRATION WITH THE OFFICE OF THE COMMISSIONER OF PROVIDENT FUND, DEHRADUN.' 36. IN THIS PRESENT CASE, THE ASSESSEE CONTROLLED AND PROVIDED ALL THE FACILITIES TO ITS CLIENTS FROM DEHRADUN AND THE ACTIVITIES UNDERTAKEN BY THE ASSESSEE FALLS IN ITEM NO. 13 OF PART C OF SCHEDULE FOURTEENTH TO THE INCOME TAX ACT , 1961. THE ASSESSEE HAS ITS OPERATIONAL UNIT AT DEHRADUN, PAYING TAXES IN UTTARANCHAL, CREATING JOBS IN THE SAID STATE, BRINGING NEW IT CALL CENTRES AN D BPO COMPANIES TO DEHRADUN TO DELIVER IT SERVICES. THEREFORE, IT FULFILLS THE CONDITIONS TO CLAIM THE DEDUCTION U/S 80IC OF THE ACT. WE, THEREFORE, BY CONSIDERING THE TOTALITY OF THE FACTS AS DISCUSSED HEREINABOVE, ARE OF THE VIEW THAT THE ASSESSEE RIGHTL Y CLAIMED THE DEDUCTION U/S 80IC OF THE ACT AND THE AO WAS NOT JUSTIFIED IN DENYING THE SAID CLAIM. IN THAT VIEW OF THE MATTER, WE SET ASIDE THE IMPUGNED ORDER AND DIRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSEE. 37. IDENTICAL ISSUE IS INVOLVED IN ITA NOS . 4277 & 5744/DEL/2012 AND ITA NO. 2506/DEL/2013 FOR THE ASSESSMENT YEARS 2008 - 09, 2009 - 10 & 2010 - 11 RESPECTIVELY. THEREFORE, OUR FINDINGS GIVEN IN THE FORMER PART OF THIS ORDER IN ITA NO. 5856/DEL/2011 FOR THE ASSESSMENT YEAR 2007 - 08 SHALL APPLY MUTATIS M UTANDIS FOR THE REMAINING ASSESSMENT YEARS ALSO. 22 7. RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO - ORDINATE BENCH [SUPRA], WE DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF DEDUCTION U/S 80IC OF THE ACT. 8 . I N THE RESULT, ALL THE THREE APPEAL S FILED BY THE ASSESSEE IN ITA NO S . 5 3 /DEL/201 7, 1025/DEL/2017 AND 1026/DEL/2017 ARE ALLOWED . THE ORDER IS PRON OUNCED IN THE OPEN COURT ON 2 6 .0 8 .20 2 1 IN THE PR ESENCE OF BOTH THE RIVAL REPRESENTATIVES . SD/ - SD/ - [ SUCHITRA KAMBLE ] [ N.K. BILLAIYA ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 6 TH AUGUST , 2021 VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI 23 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER