M/s. M L Outsourcing Services Pvt. Ltd., New Delhi V. Addl.CIT, New Delhi

ITA 6724/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3493 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 11-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIVRAJ SINGH
• Keywords: Business income; Depreciation; Double taxation relief; Question of law
• Section: 37(1); 10B; 37; 10

Judgement Text

1 ITA NOS. 6724 & 6682/DEL/2014 IN THE INCOME TAX APPELLA TE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI N. K. SAINI, ACCOUNTANT ME MBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A .NO. 6724/DEL/2 014 (A.Y 2011-12) M L OUTSOURCING SERVICES PVT. LTD. B-137/1, EAST OF KAILASH NEW DELHI AADCM9508K (APPELLANT) VS ADDL. CIT RANGE-6 NEW DELHI (RESPONDENT) I.T.A .NO. 6682/DEL/2 014 (A.Y 2011-12) DCIT CIRCLE-6 (1) NEW DELHI (APPELLANT) VS M L OUTSOURCING SERVICES PVT. LTD. B-137/1, EAST OF KAILASH NEW DELHI AADCM9508K (RESPONDENT) APPELLANT BY SH. ADITI GUPTA, CA RESPONDENT BY SH. SHIV RAJ SINGH, SR. DR ORDER PER SUCHITRA KAMBLE, JM THESE TWO APPEALS ARE FILED BY THE REVENUE AND THE ASSESSEE FOR ASSESSMENT YEAR 2011-12 AGAINST THE ORDER DATED 17/ 1/2014 PASSED BY CIT(A)-IX- NEW DELHI. DATE OF HEARING 21.11.2017 DATE OF PRONOUNCEMENT 13.02.2018 2 ITA NOS. 6724 & 6682/DEL/2014 2. THE GROUNDS OF APPEAL ARE AS UNDER:- ITA NO.6724/DEL/2014 1. (A) THE LEARNED CIT(A) HAS ERRED IN SUSTAINING T HE DISALLOWANCE OF RS. 2,58,84,605/- MADE BY THE LEARNED ASSESSING OFF ICER UNDER SECTION 10B OF THE ACT, ON THE ALLEGED CONTENTION THAT THE APPROVAL GIVEN BY THE DIRECTOR STPI HAS NOT BEEN RATIFIED BY THE BOARD OF APPROVAL. (B) THAT IN THIS CONNECTION, THE LEARNED CIT(A) HA S FAILED TO GIVE CREDENCE TO THE FACT THAT THE POWERS OF THE BOARD OF APPROVAL H AVE BEEN DELEGATED TO THE DIRECTOR STPI VIDE PRESS NOTE NO. 5 AND THEREFO RE, THERE WAS NO REQUIREMENT FOR THE BOARD OF APPROVAL TO RATIFY THE APPROVAL GIVEN BY THE DIRECTOR STPI. ITA NO. 6682/DEL/2014 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING THE PART OF TURNOVER OF RS. 5 ,56,70,752/- ON ACCOUNT OF PROVIDING INTERNATIONAL RECRUITMENT SERVICES TO M/S MINDLANCE INC. FOR CALCULATION OF DEDUCTION U/S 10B OF THE ACT, IGNORING THE FACT THAT SERVICES PROVIDED BY ASSESSEE DOES NOT FALL UNDER THE HUMAN RESOURCE SER VICES? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 24,40,633/- M ADE BY THE AO U/S 40A(IA) ON ACCOUNT OF NON DEDUCTION OF TAX ON PURCHASE OF SOFT WARE. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 52,866/- ON A CCOUNT OF LOSS ON ACCOUNT OF EXCHANGE IGNORING THE FACT THAT LOSS ON ACCOUNT OF FLUCTUATION IS ALLOWED ON SALE NOT ON ADVANCE? 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT (A)HAS ERRED IN DELETING THE ADDITION OF RS. 8,83,6 00/- U/S 10B ON ACCOUNT OF MISCELLANEOUS INCOME BEING CONSIDERED FOR THE PURPO SE OF CALCULATION OF DEDUCTION U/S 10B OF THE I.T. ACT,1961 IGNORING THE FACT THAT MISCELLANEOUS INCOME MUST DIRECTLY RESULT FROM ELIGIBLE BUSINESS I.E. 100% EXPORT ORIENTED BUSINESS? 5. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE & IN LAW, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS. 45,90 5/- ON ACCOUNT OF DEPRECIATION CLAIMED IGNORING THE FACT THAT DEPRECIATION ON INTA NGIBLE ASSET IS ALLOWABLE @ 25%? 3 ITA NOS. 6724 & 6682/DEL/2014 6. THAT THE ORDER OF THE LD. CIT(A) IS ERRONEOUS A ND IS NOT TENABLE ON FACTS AND IN LAW. 7. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUDIC E TO EACH OTHER. 3. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF DEVELOPMENT AND MAINTENANCE OF COMPUTER SOFTWARE AND EXPORT OF IT E NABLED SERVICES (HUMAN RESOURCE SERVICES). THE ASSESSEE CLAIMED CERTAIN AM OUNT U/S 10B OF THE ACT AS DEDUCTION FROM THE TOTAL INCOME. THE RETURN OF INCO ME FOR THE A.Y. 2011-12 WAS ELECTRONICALLY FILED ON 29.09.2011 DECLARING AN INC OME OF RS.97,94,001/- AFTER CLAIMING DEDUCTION U/S 10B FOR AN AMOUNT OF RS.2,58 ,84,605/-. THIS RETURN WAS PROCESSED INITIALLY U/S 143(1) AND SUBSEQUENTLY SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED ON 19.12.2013 U/S 143( 3) OF THE ACT AT AN INCOME OF RS.3,88,75,087/- WITH FOLLOWING ADDITIONS AND DISALLOWANCE. I. DEDUCTION U/S 10B AMOUNTING TO RS.2,58,84,605/- II. DEDUCTION U/S 10B IN RESPECT OF INTERNATIONAL RECR UITMENT AMOUNTING TO RS. 1,03,95,900/- III. DISALLOWANCE OF RS.24,40,633/- FOR NON-DEDUCTION O F TDS ON PURCHASE OF SOFTWARE IV. ADHOC DISALLOWANCE OF 5% OUT OF VARIOUS EXPENDITU RES AMOUNTING TO RS. 6,57,072/- V. DISALLOWANCE OF EXCHANGE FLUCTUATION AMOUNTING TO RS.52,866/- VI. NOT INCLUDING CERTAIN RECEIPTS FOR THE PURPOSE OF COMPUTATION U/S 10B. VII. RESTRICTING CLAIM OF DEPRECIATION TO 25% AS AGAINST 60% CLAIMED BY THE APPELLANT. IN ADDITION TO THE ABOVE DISALLOWANCES, THE AO INIT IATED PENALTY PROCEEDINGS U/S 271 BA OF THE ACT AND DENIED THE CARRY FORWARD OF CREDIT U/S 115JAA(4) OF THE ACT. 4. AGGRIEVED BY THE DISALLOWANCES, THE ASSESSEE FIL ED APPEAL BEFORE CIT(A). THE CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSE E. 4 ITA NOS. 6724 & 6682/DEL/2014 5. THE LD. AR SUBMITTED THAT GROUND NO. 1 OF THE AS SESSEES APPEAL AND THE DEPARTMENTS APPEAL IS COVERED IN FAVOUR OF THE ASS ESSEE FOR ASSESSMENT YEAR 2007-08 BY THE HONBLE DELHI HIGH COURTS DECISION IN CASE OF THE ASSESSEES OWN APPEAL. AS RELATES TO GROUND NO. 2, THE LD. AR RELIED UPON THE JUDGMENT OF INFRA SOFT LTD. 2014 TO 20 TAXMAN 273 OF THE HON BLE DELHI HIGH COURT WHICH COVERS THE ISSUE IN FAVOUR OF THE ASSESSEE. AS REL ATED TO GROUND NO. 3, THE LD. AR RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN CASE OF CIT VS. WOODWARD GOVERNOR INDIA PVT. LTD. 2009 312 ITR 254 WHICH IS COVERED IN FAVOUR OF THE ASSESSEE. GROUND NO. 4 IS RELATED TO BUSINESS INCOME. THE LD. AR SUBMITTED THAT THERE WERE THREE TYPES OF MISCELLANE OUS INCOME THAT ARE UNSERVED NOTICE PAYABLE INTEREST, INCOME AND MISCEL LANEOUS INCOME INCLUDING SUNDRY BALANCE WRITTEN BACK STATE CHEQUES AND OTHER MISCELLANEOUS INCOME. THE LD. AR SUBMITTED THAT INCOME FROM UNSERVED NOTI CE PAY ARISES WHEN SALARY OF THE EMPLOYEES ARE REVERSED DUE TO THE REASON THA T THEY DO NOT SERVE THE NOTICE PERIOD. IF SALARY IS ALLOWABLE BUSINESS EXPE NDITURE THEN ON SIMILAR ANALOGY INCOME ARISING DUE TO THE REASON OF SUCH SA LARY HAD TO BE REVERSED BECAUSE OF THE NOTICE BORROWED REMAINING UNSERVED S HOULD ALSO BE THE PART OF BUSINESS INCOME. AS RELATES TO INTEREST INCOME IT I S GENERATED FROM INCIDENTAL ACTIVITY AND THE SAME IS BUSINESS INCOME. THUS, TH ESE ADDITIONS ARE NOT PROPER BECAUSE THE MISCELLANEOUS INCOME U/S 10B IS IN-FACT A BUSINESS INCOME. THE LD. AR AS RELATED TO GROUND RELATING TO DEPRECIATIO N ON SOFTWARE SUBMITTED THAT COMPUTER INCLUDES COMPUTER SOFTWARE AND HENCE AMPLE FOR DEPRECIATION AT 60%. 6. THE LD. DR RELIED UPON THE ORDER OF THE ASSESSIN G OFFICER AND CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. AS RELATES TO GROUND NO. 1 OF THE REVENUE S APPEAL AND THE ASSESSEES APPEAL, THE SAME IS RELATING TO TURNOVER OF RS.5,56 ,70,752/- ON ACCOUNT OF PROVIDING INTERNATIONAL RECRUITMENT SERVICES. WE S HOULD HAVE NOT BEEN 5 ITA NOS. 6724 & 6682/DEL/2014 CONSIDERED FOR CALCULATION OF DEDUCTION U/S 10B OF THE INCOME TAX ACT, AS PR THE REVENUE WHILE THE ASSESSEE IN ITS APPEAL TAKEN A GROUND THAT DISALLOWANCE OF DEDUCTION U/S 10B AMOUNTING TO RS.2,58,84,605/- IS NOT CORRECT ON THE PART OF CIT(A) AS THE VIDE PRESS NOTE NO 5 (1997 SERIES) ISSUED BY EXEMPT OF INDUSTRY POWERS HAVE BEEN DELEGATED TO DIRECTOR STPR FOR GRA NTING APPROVAL. THE SAID PRESS NOTE NO. 5 DOES NOT REFER TO SECTION 10A OR S ECTION 10B OF THE ACT, AND THEREFORE, IT IS APPLICABLE FOR CLAIMING EXEMPTION U/S 10B OF THE ACT AS WELL. IN ASSESSEES CASE FILED BY THE REVENUE BEFORE THE HON BLE HIGH COURT, DELHI, THE HONBLE HIGH COURT HELD THAT PARA 18 PAGE NO. 205 U P TILL 209. 18. IT IS CLEAR FROM THE AFORESAID DISCUSSION, THA T THE RESPONDENT-ASSESSEE WAS NOT PROVIDING RECRUITMENT SERVICES, AS ARE NORM ALLY AND GENERALLY UNDERTAKEN BY THE HIRING AGENTS. IN THE INSTANT CAS E, THE RESPONDENTASSESSEE WAS USING INFORMATION TECHNOLOGY IN SCANNING THE DATA, PROCESSING IT, CONDUCTING ONLINE TESTS FOR SH ORTLISTED CANDIDATES, AND ANALYSING THEIR RESULTS. THE ASSESSEE WOULD THEN FU RTHER PROCESS THE LIST, AFTER REFERRING TO THE ACTIVITIES BY TRACKING PROSP ECTIVE CANDIDATES FROM THE DATA SOURCING TILL THE DATE OF HIRING. THE CATS DAT ABASE GOT REGULARLY UPDATED AND REVISED IN THE PROCESS. IN THE LAST STA GE, THERE WAS AN OUTFLOW OF THE LIST OF SELECTED CANDIDATES. THE EXPRESSION, HUMAN RESOURCE SERVICES WAS USED IN THE NOTIFICATION AND WITH REFERENCE TO THE WORDS, INFORMATION TECHNOLOGY BASED PRODUCTS OR SERVICES , THE BOARD WAS CONSCIOUS AND AWARE THAT HUMAN RESOURCE SERVICES CA N BE RENDERED IN INDIA TO THIRD PARTY COMPANIES, WHICH ARE STATIONED ABROAD. THE WORD, HUMAN MEANS, A MAN OR A WOMAN AND THE WORD RESOURCE, IN NORMAL PARLANCE, REFERS TO SUPPLY OF GOODS, RAW MATERIAL, ETC, WHICH A PERSON CAN USE. WHEN READ TOGETHER, THE WORD, HUMAN RESOURCE WOULD INCLUDE A LARGE NUMBER OF SERVICES AND ACTIVITIES INVOLVING H UMANS RENDERING THEIR SERVICES IN ANY BUSINESS, TRADE OR A PROFESSION. IT WOULD BE INCORRECT AND/OR ILLOGICAL TO HOLD THAT THE PROCESS OF ACQUIR ING AND RECRUITING EMPLOYEES WOULD NOT BE INCLUDED IN THE EXPRESSION, HUMAN RESOURCE. 6 ITA NOS. 6724 & 6682/DEL/2014 NASCOM LITERATURE INCLUDES RECRUITMENT, STAFFING, E DUCATION AND TRAINING, PAY ROLLS SERVICES AND RECORD MANAGEMENT UNDER THE HEAD, HUMAN RESOURCE SERVICES. GARY DESSER IN HIS WORK, HUMAN RESOURCE MANAGEMENT HAS EXPLAINED THE SAID TERM AS THE PROCESS OF ACQU IRING TRAINING, APPRAISING AND COMPENSATING EMPLOYEES, AN D ATTENDING TO THEIR LABOUR RELATIONS, HEALTH AND SAFETY AND FAIRNESS CO NCERNS. PROCESS OF ACQUIRING IS AN INTEGRAL PART OF HUMAN RESOURCE MAN AGEMENT AND ITA NO. 1255/2011 PAGE 16 OF 19 NOT ALIEN OR EXCLUDED. CAMB RIDGE ONLINE DICTIONARY DEFINES, HUMAN RESOURCE AS, PEOPLE, W HEN CONSIDERED AS AN ASSET THAT IS OR CAN BE EMPLOYED AND THAT IS USEFUL TO A COMPANY, ORGANIZATION, ETC. THE OXFORD DICTIONARY OF ENGLISH DEFINES THE EXPRE SSION, HUMAN RESOURCE AS, THE PERSONNEL OF A BUSINESS O R ORGANISATION REGARDED AS A SIGNIFICANT ASSET IN TERMS OF SKILLS AND ABILITIES . THOUGH ETHOLOGICALLY WE HAVE OBJECTION IN HOLDING A PERSON NEL AS AN ASSET, BUT THE DICTIONARY MEANINGS DEFINE AN ASSET AS, A USEFUL OR VALUABLE THING OR PERSON . IT MAY BE ACCEPTABLE, IF IT EMPHASISES AND REPRES ENTS PARAMOUNTCY AND EMINENCE ATTACHED TO PERSONNEL. HUM ANISING THE WORD IN THE PRESENT CONTEXT, THE TERM, HUMAN RESOURCE WOULD MEAN, PERSONNEL OF A BUSINESS ORGANISATION AND THE EXPRESSION, SERVICE WILL MEAN AND INCLUDE ANYTHING ASSOCIATED WITH THE PERSO NNEL OF A BUSINESS ORGANISATION, INCLUDING THEIR SELECTION OR RECRUITM ENT. 19. IN VIEW OF THE AFORESAID POSITION, WE DO NOT FI ND MERIT IN THE SUBMISSIONS MADE BY THE APPELLANT-REVENUE THAT THE ACTIVITIES IN QUESTION WERE NOT COVERED UNDER THE NOTIFICATION S.O. 890(E) , I.E. HUMAN RESOURCE SERVICE AND, THEREFORE, THE RESPONDENT-ASSESSEE WAS NOT ENTITLED TO BENEFIT UNDER SECTION 10A OF THE ACT. 20. DURING THE COURSE OF HEARING BEFORE US, LEARNED COUNSEL FOR THE APPELLANT-REVENUE HAD SUBMITTED THAT REVENUE HAS AL SO RAISED THE QUESTION OF PERVERSITY. IT WAS POINTED OUT THAT IN RESPECT OF THE BANGALORE 7 ITA NOS. 6724 & 6682/DEL/2014 UNIT, THE ASSESSING OFFICER HAD OBSERVED THAT THE I NVOICES WERE RAISED BY THE RESPONDENT-ASSESSEE ON 31ST MARCH, 2007, I.E. O N THE LAST DATE OF THE FINANCIAL YEAR AND ON THE SAID DATE ITSELF REGISTRA TION LETTER HAD BEEN ISSUED BY STPI, BANGALORE. FURTHER, THE ASSESSING O FFICER HAD OBSERVED THAT THE ITA NO. 1255/2011 PAGE 17 OF 19 RESPONDENT -ASSESSEE HAD NOT COMPLIED WITH THE CONDITIONS MENTIONED IN THE CERTI FICATE ISSUED BY STPI (SEE PARAGRAPHS 3.4, 3.11 AND 3.12 OF THE GROUNDS O F APPEAL). THE AFORESAID FINDINGS ARE FACTUAL IN NATURE. THE RESPO NDENT ASSESSEE HAD SET UP AN UNDERTAKING AT GURGAON, HARYANA ON OR ABOUT 2 7TH JULY, 2004, WHICH CONTINUED TO OPERATE TILL 30TH SEPTEMBER, 200 6. THEREAFTER, THE UNDERTAKING WAS SHIFTED TO BANGALORE. THE RETURN FI LED FOR THE ASSESSMENT YEAR 2007-08 INCLUDED INCOME FROM BOTH THE GURGAON AND BANGALORE OPERATIONS, AND IT WAS CLAIMED THAT THEY WERE EXEMP T UNDER SECTION 10A OF THE ACT, AS THE UNDERTAKING SHIFTED. WE ONLY REC ORD THAT THE ISSUE AND QUESTION WHETHER THE SHIFTING ITSELF WOULD DISQUALI FY AND NEGATE THE CLAIM HAS NOT BEEN SPECIFICALLY RAISED IN THE GROUNDS OF APPEAL FILED BY THE REVENUE OR IN ITA NO. 1255/2011 PAGE 18 OF 19 RELAT E TO THE GRANT OF APPROVAL. STPI WAS ALSO AWARE THAT AS PER THE APPLI CATION FORM, THE UNIT WAS ALREADY UNDERTAKING WORK. THE ASSESSING OFFICER HAS RECORDED AND MENTIONED THAT THE NUMBER OF EMPLOYEES IN BANGALORE UNIT HAD INCREASED SUBSTANTIALLY FROM 11 IN THE MONTH OF AUGUST, 2006 TO 22 TILL THE MONTH OF MARCH, 2007. THE RESPONDENT-ASSESSEE HAD INCURRED S UBSTANTIAL EXPENDITURE ON SALARY AND HAD ALSO INSTALLED NEW CO MPUTERS WORTH RS.24,50,000/-. THERE WAS A SUBSTANTIAL INCREASE IN THE TURNOVER. FURTHER, WE NOTICE THAT NO BENEFIT OR ADVANTAGE WAS ACCRUING TO THE RESPONDENT- ASSESSEE BY PROCURING INVOICES OF RS.1.47 CRORES ON 31ST MARCH, 2007. IF THESE INVOICES HAD BEEN ISSUED IN THE NEXT YEAR, BE NEFIT UNDER SECTION 10A WOULD STILL HAVE BEEN AVAILABLE. THE TRIBUNAL, IN T HE IMPUGNED ORDER, HAS REFERRED AND MENTIONED THAT THE RESPONDENT-ASSESSEE HAD PLACED ON RECORD A LIST OF EMPLOYEES, DETAILS OF SALARY PAID, A COPY OF THE APPLICATION 8 ITA NOS. 6724 & 6682/DEL/2014 MADE FOR REGISTRATION AND ON THE BASIS OF THE DETAI LS, WAS SATISFIED THAT THE RESPONDENT-ASSESSEE ON FACTUAL BASIS HAD UNDERTAKEN THE SAID ACTIVITIES. IT WAS ALSO NOTICED THAT THE REVENUE HAD NOT STATED THAT NO SUCH OR ACTUALLY NO ACTIVITIES WERE PERFORMED OR CARRIED OU T BY THE RESPONDENT- ASSESSEE AT BANGALORE. IT IS NOTICEABLE THAT THE TO TAL BUSINESS INCOME AS DECLARED, OF RS.82,22,953/-, WAS ACCEPTED AS THE BU SINESS RECEIPTS OF THE RESPONDENT-ASSESSEE. THIS INCLUDED THE AMOUNT OF RS .1.47 CRORES FOR INVOICES RAISED BY BANGALORE UNITS AND RS.62.92 LAC S BY THE GURGAON UNIT. IF WE EXCLUDE INVOICES ISSUED BY THE BANGALORE UNIT OF RS.1.47 CRORES, THEN THIS FIGURE CANNOT BE ADDED OR INCLUDED AS THE INCO ME OR RECEIPTS. THE RESULT COULD BE A LOSS. 21. IT IS CLEAR TO US THAT THE QUESTION OF PERVERSI TY WAS NOT FRAMED IN THE ORDER DATED 11TH APRIL, 2012 BY FRAMING THE SUBSTAN TIAL QUESTION OF LAW AND ITA NO. 1255/2011 PAGE 19 OF 19 WE DO NOT THINK THE ORDER PASSED BY THE TRIBUNAL IN THE PRESENT CASE CAN BE TREATED AND REGARDED AS PERVERSE. 22. IN VIEW OF THE AFORESAID DISCUSSION, THE QUESTI ON OF LAW MENTIONED ABOVE IS ANSWERED IN FAVOUR OF THE RESPONDENT-ASSES SEE AND AGAINST THE APPELLANT-REVENUE. THE APPEAL IS DISMISSED. IN THE FACTS OF THE CASE, THERE WILL BE NO ORDER AS TO COSTS. THE ASSESSEES CASE IS COVERED BY THIS DECISION OF THE JURISDICTIONAL HIGH COURT. THE ASSESSEE IS ENGAGED IN THE ENTIRE RECRU ITMENT PROCESS. THE RECRUITMENT PROCESS COMMENCES FROM USE OF COMPUTER AND IT ENABLED TOOLS AND ENDS WITH THE USAGE OF IT ENABLES TOOLS ONLY. MOREOVER, THE APPELLANT CANNOT PERFORM A SINGLE STEP OF THE RECRUITMENT PRO CESS THAT THE USE OF IT ENABLES TOOLS. THE ASSESSEE EXPORTS CUSTOMIZE ELEC TRONIC DATA OR PRODUCT REGARDING THE CANDIDATES THAT HAVE BEEN SOURCED BY THE ASSESSEE. THIS POSITION HAS BEEN ACCEPTED BY THE REVENUE AUTHORITI ES IN EARLIER YEARS I.E. ASSESSMENT YEAR 2010-11, WHERE IN THE HONBLE ITAT HELD THAT AS UNDER:- 9 ITA NOS. 6724 & 6682/DEL/2014 8. ON APPEAL, THE LD. CIT (A) OBSERVED THAT FOR TH E ASSESSMENT YEAR 2007- 08, THE TRIBUNAL HAD ALLOWED THE CLAIM OF THE ASSES SEE U/S 10B IN FULL AND INCLUDED IN THE EXPORT TURNOVER, THE RECEIPT FROM I NTERNATIONAL RECRUITMENT SERVICE. THE LD. CIT (A) ALSO NOTICED THAT THE TRIB UNAL OBSERVED, AS PER SECTION 10A EXPLANATION 2 CLAUSE (B), ANY CUSTOMIZE ELECTRONIC DATA IS QUALIFIED FOR TREATMENT AS A COMPUTER SOFTWARE ON W HOSE EXPORT DEDUCTION WOULD BE ADMISSIBLE TO AN ASSESSEE AND THIS SUB-CLA USE FURTHER CLASSIFY THAT ANY OTHER SERVICE IF NOTIFIED BY THE BOARD THE N THOSE SERVICES WOULD ALSO QUALIFY FOR TREATMENT AS COMPUTER SOFTWARE. TH E LD. CIT (A) ALSO OBSERVED THAT HIS PREDECESSOR IN ASSESSEE'S OWN CAS E FOR ASSESSMENT YEAR 2009-10 HAD ALLOWED THE CLAIM U/S 10B OF THE ACT FO LLOWING THE TRIBUNAL ORDER FOR ASSESSMENT YEAR 2007-08. THE LD. CIT (A), FOLLOWING THE AFORESAID DECISION IN ASSESSEE'S OWN CASE, ALLOWED THE GROUND OF THE ASSESSEE AND DIRECTED THE AO TO RE- COMPUTE THE DEDUCTION U/S 10 B. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON . AFTER GOING THROUGH THE ORDER OF THE CIT (A), WE FI ND THAT THIS ISSUE IS ALREADY DECIDED IN FAVOUR OF THE ASSESSEE BY THE TR IBUNAL IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007-08 AND THE SAME W AS FOLLOWED BY THE CIT (A) IN ASSESSMENT YEAR 2009-10 AND IN THIS RELE VANT ASSESSMENT YEAR. IN THIS VIEW OF THE MATTER, WE ITA NO.6292/DEL/2011 3 DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT (A) AND WE UPHOLD THE SAME. IT IS ORDERED ACCORDINGLY. GROUND NO.1 IS REJECTED. THUS, THE ASSESSEES CASE IS SQUARELY COVERED BY T HE DECISIONS OF THE HONBLE HIGH COURT AND THE ITAT. THEREFORE, GROUND NO. 1 OF THE REVENUES APPEAL IS DISMISSED AND GROUND NO. 1OF THE ASSESSEE S APPEAL IS ALLOWED. 8. AS RELATES TO GROUND NO. 2 OF THE REVENUES APPE AL, THE DECISION OF THE HONBLE DELHI HIGH COURT IN CASE OF INFRA SOFT LTD WAS RELIED BY THE LD. AR. THE SOFTWARE WAS PURCHASED IN THE FINANCIAL YEAR 2010-1 1, WHICH IS PRIOR TO AMENDMENT AND IT WAS A SHRINKED WRAPPED SOFTWARE WH ICH IS CONSIDERED AS 10 ITA NOS. 6724 & 6682/DEL/2014 PURCHASE OF COPY RIGHTED ARTICLE AND NOT RIGHT TO U SED COPYRIGHT. COPYRIGHTED ARTICLE IS DIFFERENT FROM COPYRIGHT AND WHAT WAS PU RCHASED DURING FINANCIAL YEAR 2010-11 WAS A COPYRIGHTED ARTICLE. SOFTWARE P URCHASE WAS GOLD COMPETENCY WELCOME KIT SOFTWARE, END POINT SECURITY & DATA PROTECTION, SECURITY E-DELIVERY PAK. THE DECISION OF THE INFRA SOFT HAS HELD THAT AMOUNT RECEIVED BY THE ASSESSEE UNDER LICENSES AGREEMENT F OR ALLOWING USE OF SOFTWARE WAS NOT ROYALTY EITHER UNDER THE ACT OR UNDER DTAA. THEREFORE, THERE IS NO NEED TO EXEMPTION EFFECT OF SUBSEQUENT AMENDMENT TO SECTION 9(1) (VI) AND ALSO WHETHER AMOUNT RECEIVED FOR USE OF SOFTWARE WOULD B E ROYALTY IN TERMS THEREOF. THE RELIANCE OF THE LD. AR ON THE DECISION OF THE I NFRA SOFT CLEARLY MAKES OUT IN THE CASE FOR THE ASSESSEE. THEREFORE, GROUND NO. 2 OF THE REVENUES APPEAL IS DISMISSED. 9. AS RELATES TO GROUND NO. 3, THE ASSESSEE RELIED UPON THE DECISION OF THE WOODWARD GOVERNOR INDIA PVT. LTD. WHEREIN IT WAS HE LD THAT THE EXPRESSION EXPENDITURE AS USED IN SECTION 37 OF THE ACT COVERS AN AMOUNT WHICH IS REALLY LOSS EVEN THOUGH THE SAID AMOUNT HAS NOT GONE OUT F ROM THE BACK OF THE ASSESSEE. ANY DIFFERENCE ARISING ON CONVERSION OF OUTSTANDING LIABILITY AT CLOSING RATE SHOULD BE RECOGNIZED IN THE PROFIT AND LOSS ACCOUNT OR THE REPORTING PERIOD. THE HONBLE APEX COURT IN CASE OF ONGC VS. CIT(A) 2010 189 TAXMAN.COM 292 HELD THAT LOSS SUFFERED BY THE ASSES SEE ON ACCOUNT OF FLUCTUATION IN RATE OF FOREIGN EXCHANGE AS ON DATE OF BALANCE-SHEET COULD BE ALLOWED AS AN EXPENDITURE U/S 37(1) OF THE ACT EVEN IF THE LIABILITY IS NOT ACTUAL DISCHARGE IN THE YEAR IN WHICH FLUCTUATION IN RATE OF FOREIGN EXCHANGE HAD OCCURRED. THESE TWO DECISIONS OF THE APEX COURT SQ UARELY COVERS THE CASE OF THE ASSESSEE. THEREFORE, THE GROUND NO. 3 OF THE R EVENUES APPEAL IS DISMISSED. 10. AS RELATED TO GROUND NO. 4, THE SAME IS UNDER T HE CATEGORY OF BUSINESS INCOME AND HENCE DEDUCTION SHOULD HAVE BEEN ALLOWED BY THE ASSESSING OFFICER. THE FIXED DEPOSITS MADE BY THE ASSESSEE WERE IN THE COURSE OF 11 ITA NOS. 6724 & 6682/DEL/2014 BUSINESS AND THEREFORE, THE INCOME WAS ACCESSIBLE A S BUSINESS INCOME. AS REGARDS MISCELLANEOUS INCOME WHICH COMPRISE OF SUND RY BALANCES WRITTEN BACK STALE CHEQUES AND PROFIT ON SALE OF FIXED ASSETS. THESE ARE THE RECEIPTS IN NATURE OF BUSINESS INCOME FROM UNSERVED NOTICE PAY IS ALSO A PART OF THE BUSINESS INCOME. IF THE SALARY IS ALLOWABLE AS BUS INESS EXPENDITURE THEN ON SIMILAR ANALOGY INCOME ARISING DUE TO THE REASON OF SUCH SALARY HAD TO BE REVERSED BECAUSE OF THE NOTICE PERIOD REMAINING UNS ERVED SHOULD ALSO BE A PART OF BUSINESS INCOME. THE CLAIM U/S 10B OF THE ACT O N MISCELLANEOUS INCOME, INTEREST INCOME AND INTEREST FROM UNSERVED NOTICE P AY WAS RIGHTLY ALLOWED BY THE CIT(A). GROUND NO. 4 OF THE REVENUES APPEAL I S DISMISSED. 11. AS RELATES TO GROUND NO. 5, THE LD. ARS CONTEN TION THAT THE COMPUTER INCLUDES COMPUTER SOFTWARE AND, THEREFORE, ELIGIBLE FOR DEPRECIATION OF 60%. THERE IS A SEPARATE ENTRY IN INCOME TAX RULES FOR D EPRECIATION ON SOFTWARE AT 60%. THE CIT(A) HAS RIGHTLY HELD THAT THERE IS NO AMBIGUITY IN THIS CASE THAT COMPUTER SOFTWARE PURCHASED WOULD NOT BE ELIGIBLE F OR DEPRECIATION AT 60%. GROUND NO. 5 OF THE REVENUES APPEAL IS DISMISSED. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED AND THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH FEBRUARY, 2018 . SD/- SD/- (N. K. SAINI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 13/02/2018 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 12 ITA NOS. 6724 & 6682/DEL/2014 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 21/11/2017 PS 2. DRAFT PLACED BEFORE AUTHOR 27/11/2017 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2017 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS .02.2018 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK .02.2018 PS 8. DATE ON WHICH FILE GOES TO THE AR 13 ITA NOS. 6724 & 6682/DEL/2014 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.