Appeal details
Counselvise Citation
[2016] 131 COUNSELVISE.COM (IT) 2867 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
5 year(s) 9 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
05-10-2016
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
E
Next Hearing Date
03-08-2015
Assessment Year
2001-2002
Appeal Filed On
20-12-2010
Judgement Text
E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI C. N. PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.8864 /MUM/2010 ( / ASSESSMENT YEAR : 2001-02) MRS. SUPERNA R. MOTWANE, GNYANGHAR, 14 TH ROAD, KHAR (WEST), MUMBAI -400 052. / V. DY. COMMISSIONER OF INCOME TAX, CIRCLE 19(1), 3 RD FLOOR, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI. ./ PAN : AABPK5356 G ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SHRI SHEKHAR GUPTA REVENUE BY : SHRI SANJEEV KASHYAP,DR / DATE OF HEARING : 01-08-2016 / DATE OF PRONOUNCEMENT : 05-10-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE, BEING ITA NO. 8864/MUM/2010, IS DIRECTED AGAINST THE APPELLATE ORDER DATED 22 ND OCTOBER, 2010 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 30, M UMBAI (HEREINAFTER CALLED THE CIT(A)), FOR THE ASSESSMENT YEAR 2001- 02, THE APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ARISING FROM THE ASSESSMENT ORDER DATED 30 TH DECEMBER, 2009 PASSED BY THE LEARNED ASSESSING OF FICER (HEREINAFTER CALLED THE AO) U/S 143(3) R.W.S. 254 OF THE INCOME TAX ACT,1961 (HEREINAFTER CALLED THE ACT). THIS IS THE SECOND ROUND OF LITIGATION. ITA 8864/MUM/2010 2 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE INCOME TAX APPELLATE TRIBUNAL, MUMBA I (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- 1. THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN SUSTAINING THE DISALLOWANCE OF CONSULTANCY FEES PAID OF RS. 18,00,000/-. 2. THE LEARNED (APPEALS) HAS ERRED IN LAW AND ON TH E FACTS OF THE CASE IN SUSTAINING THE DISALLOWANCE OF DEDUCTION U/S 80 HHE OF THE INCOME TAX ACT, 1961. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL DERIVING INCOME FROM SALARY, INCOME FROM PROFESSION, CAPITAL GAIN AND OTHER SOURCES. THE RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 3 1-10-2001 WHICH WAS SUPPORTED BY THE TAX AUDIT REPORT. THE ASSESSMENT WAS ORIGINALLY FRAMED U/S 143(3) OF THE ACT ON 24 TH OCTOBER, 2003 ON A TOTAL INCOME OF RS. 33,08,658/- AGAINST THE RETURNED INCOME OF RS. 12,60,610/- WHER EBY THE FOLLOWING ADDITIONS WERE MADE BY THE REVENUE WHILE FRAMING OR IGINAL ASSESSMENT VIDE ORDERS DATED 24.10.2003:- 1. CONSULTANCY FEES PAID TO HUSBAND RS. 18,00,000 /- 2. BUSINESS PROMOTION EXPENSES RS. 75,000/- 3. TRAVELLING EXPENSES RS. 1,01,138/- RS. 19,76,138/- ============ THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A) IN THE FIRST ROUND OF LITIGATION AND THE LD. CIT(A) , INTER-ALIA, UPHELD THE ORDER OF THE A.O. IN RESPECT OF CONSULTANCY CHARGES OF RS. 18 LAKHS PAID BY THE ASS ESSEE TO HER HUSBAND WHEREBY DISALLOWANCE WAS CONFIRMED BY LEARNED CIT(A ). DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) IN THE FIRST ROUND OF LITIGATION, THE LD. CIT(A) ADMITTED THE NEW CLAIM RAISED BY THE ASSESSEE U/S 80HHE OF THE ACT WHICH WAS NOT RAISED BY THE ASSESSEE IN THE RETURN OF INCOME FILED ITA 8864/MUM/2010 3 WITH THE REVENUE AND ALSO THE SAME WAS NOT RAISED D URING THE COURSE OF THE ASSESSMENT PROCEEDINGS BEFORE THE AO IN THE ORIGINA L ASSESSMENT PROCEEDINGS. THE A.O., HOWEVER, OBJECTED THE ADMIS SION OF THE NEW CLAIM IN THE REMAND REPORT PROCEEDINGS BUT THE LD. CIT(A) OV ERRULED THE OBJECTION OF THE A.O. AND ALLOWED THE CLAIM IN FAVOUR OF THE ASS ESSEE. THE MATTER WENT BEFORE THE TRIBUNAL VIA SECOND APPEAL IN THE FIRST ROUND OF LITIGATION WHEREBY THE ASSESSEE AND THE REVENUE FILED CROSS APPEAL AGA INST THE APPELLATE ORDER PASSED BY THE LD. CIT(A) IN THE FIRST ROUND OF LITI GATION. THE TRIBUNAL SET ASIDE THE ISSUE BACK TO THE FILE OF THE A.O. IN ITA NO. 1 470/M/2005 AND ITA NO. 1731/M/2005 DATED 26.05.2008 AND DIRECTED THE AO TO DECIDE THE FOLLOWING ISSUES AFRESH:- 1. THE HON'BLE ITAT RESTORED THE MATTER OF PAYMENT OF SOFTWARE CONSULTANCY CHARGES OF RS.18 LAKHS TO SHRI GAURAV MOTWANE TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE CLAIM OF THE ASSESSEE WITH REFERENCE TO THE AMOUNT PAID / PAYABLE TO SHRI GAURAV MOTWANE. 2. THE HON'BLE ITAT ALSO RESTORED THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH REFERENCE TO THE CLAIM OF DE DUCTION U/S.80HHE. 3. THE HON'BLE ITAT ALSO RESTORED THE ISSUE REGARDI NG FOREIGN TRAVEL TO THE FILE OF THE ASSESSING OFFICER TO CONS IDER AFRESH THE NATURE OF FOREIGN TRAVEL AND TO ALLOW THE CLAIM AS PER LAW. 4. DURING THE RELEVANT PREVIOUS YEAR , THE ASSESSEE IS STATED TO BE ENGAGED AS CONSULTANT FOR MAZAA MEDIA, INC., NEW YORK. THE ASSESSEE IN SECOND ROUND OF LITIGATION SUBMITTED BEFORE THE AO THAT CO NSULTANCY FEES WAS PAID BY THE ASSESSEE TO HUSBAND SHRI GAURAV MOTWANE , PROPR IETOR OF M/S PIXEL MULTIMEDIA FOR DEVELOPING COMPLETE WEB STRATEGY. I T WAS SUBMITTED THAT THE MR. GAURAV MOTWANE IS AN MBA GRADUATE FROM USA WHO HAD HELPED THE ASSESSEE IN DEVELOPING BRAND STRATEGY AND DEVELOPME NT SERVICES ON VARIOUS ITA 8864/MUM/2010 4 COMMUNICATION TOOLS. IT WAS SUBMITTED THAT M/S PIX EL MULTIMEDIA WAS IN THE SAID BUSINESS FOR 5 YEARS AND HAD ALSO RENDERED SER VICES TO VARIOUS CLIENTS. IT WAS SUBMITTED THAT M/S PIXEL MULTIMEDIA I.E. PROPRI ETARY CONCERN OF THE HUSBAND OF THE ASSESSEE, MR GAURAV MOTWANE HAS ALSO SHOWN AN INCOME OF RS. 15 LAKHS BEING RECEIVED FROM THE ASSESSEE DURIN G THE ASSESSMENT YEAR 2002-03 ON RECEIPT BASIS IN THE RETURN OF INCOME FI LED WITH THE REVENUE AS HE WAS FOLLOWING CASH SYSTEM OF ACCOUNTING AND IT WAS SUBMITTED THAT THE PAYMENTS HAVE BEEN MADE BY THE ASSESSEE FOR THE PUR POSES OF BUSINESS. THE ASSESSEE ALSO SUBMITTED A LETTER DATED 24.12.2009 S IGNED BY MR. GAURAV MOTWANE STATING THAT THE AMOUNT HAS BEEN DULY RECEI VED BY HIM AND THE SAME HAS BEEN REFLECTED IN HIS RETURN OF INCOME FIL ED WITH THE REVENUE. THE A.O. OBSERVED THAT THE ADDITIONS HAVE BEEN MADE AFTER A DETAILED AND COMPREHENSIVE LETTER WAS ISSUED TO MR. GAURAV MOTWA NE SO AS TO EXAMINE THE NATURE AND EXTENT OF SERVICES RENDERED BY HIM. THE A.O. HELD THAT THE DISALLOWANCE WAS MADE AFTER INVESTIGATION OF THE MA TTER AND ALSO AFTER IT WAS ADMITTED BY SHRI GAURAV MOTWANE THAT THERE WAS NO A GREEMENT BETWEEN HIM AND THE ASSESSEE AND ALSO THAT THERE WAS NO CORRESP ONDENCE WITH THE ASSESSEE WITH PARTICULAR REFERENCE TO THE SERVICES RENDERED. NO RECORDS WERE PRODUCED DURING THE ASSESSMENT PROCEEDINGS AND ALSO IN THE APPELLANT PROCEEDINGS OR EVEN DURING THE SET ASIDE PROCEEDING S. IT WAS OBSERVED BY THE AO THAT THE ASSESSEE HAS ALSO VIDE LETTER DATED 22 ND OCTOBER, 2003 WITHDRAWN THE CLAIM OF EXPENSE AND AGREED TO THE ADDITION IN THE FIRST ROUND OF LITIGATION. THE A.O. REFERRED TO THE DECISION OF THE HONBLE BO MBAY HIGH COURT REPORTED IN RAMESHCHANDRA & CO. V. CIT (1987) 168 ITR 375(B OM.HC) , AND OBSERVED THAT THE ASSESSEE CANNOT BE AN AGGRIEVED PARTY, WHE N SHE HERSELF HAS AGREED TO THE ADDITIONS. DURING THE SET ASIDE PROCEEDINGS NO FURTHER DETAILS WERE FILED BY THE ASSESSEE TO SHOW THAT THE WITHDRAWAL OF CONS ULTANCY FEES PAID TO MR. GAURAV MOTWANE WAS ERRONEOUS. THE ASSESSEE FILED ON LY A LETTER FROM MR. GAURAV MOTWANE STATING THAT THE AMOUNT HAS BEEN REC EIVED AND TO THIS EFFECT ITA 8864/MUM/2010 5 NO AFFIDAVIT OR ANY OTHER EVIDENCE HAS BEEN FILED B Y THE ASSESSEE TO STATE THAT THE WITHDRAWAL OF THE CONSULTANCY CHARGES PAYMENT T O HER HUSBAND WAS ERRONEOUS. THE ASSESSMENT ORDER FRAMED ON THE BASI S OF REVISED COMPUTATION OF INCOME FILED BY THE ASSESSEE, WHEREIN IT WAS OBS ERVED BY THE AO THERE IS NO SCOPE FOR ALLOWING THE SAID EXPENSES. IT WAS FURTHE R OBSERVED BY THE AO THAT THE ASSESSEE DOES NOT HAVE ANY DIRECT CLIENT AND HA D DONE WORK FOR VARIOUS CUSTOMERS ON BEHALF OF MAZZA MEDIA INC. , USA . IN THE SET ASIDE PROCEEDINGS IN SECOND ROUND OF LITIGATION , IT WAS OBSERVED BY THE AO THAT THE ASSESSEE DID NOT FILED COPY OF BILLS RAISED, COPY O F AGREEMENT, COPY OF CORRESPONDENCE OR DETAILS OF ANY TERMS AND CONDITIO NS FOR THE SAID PAYMENT. UNDER THESE CIRCUMSTANCES AS THE CLAIM OF THE ASSES SEE WAS NOT SUPPORTED BY ANY NEW EVIDENCE IN SECOND ROUND OF LITIGATION, RS. 18 LACS PAID TO MR. GAURAV MOTWANE AS CONSULTANCY CHARGES WAS DISALLOWED BY TH E A.O. VIDE ASSESSMENT ORDER DATED 30.12.2009 PASSED BY THE AO U/S. 143(3) READ WITH SECTION 254 OF THE ACT. 5. WITH RESPECT TO THE CLAIM OF THE ASSESSEE U/S 80 HHE OF THE ACT, THE A.O. OBSERVED THAT THE ASSESSEE HAS NEVER MADE THE CLAIM IN THE RETURN OF INCOME NOR IN THE REVISED COMPUTATION OF INCOME FIL ED DURING ORIGINAL ASSESSMENT PROCEEDINGS. THE CLAIM WAS FIRST MADE BE FORE THE LD. CIT(A) IN THE FIRST ROUND OF LITIGATION AND THE LD. CIT(A) ACCORD INGLY CALLED FOR THE REMAND REPORT OF THE A.O. WITH RESPECT TO THE CLAIM U/S 80 HHE OF THE ACT. THE AO VIDE REMAND REPORT CONCLUDED THAT THE ASSESSEE WAS NOT E NTITLED FOR CLAIM U/S.80HHE OF THE ACT. DURING SET ASIDE PROCEEDINGS, THE ASSESSEE WAS ISSUED SHOW CAUSE NOTICE AND THE RELEVANT PORTION OF THE R EPLY OF THE ASSESSEE IS AS UNDER:- THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH M/ S. MAZZA MEDIA INC., USA FOR CONCEPTUALIZATION AND DESIGNING OF THE CONTENT FOR THEIR WEBSITE, PLANNING FEATURES AND NE WS EVENTS ON THE WEBSITES AND DEVELOPMENT OF CONTENT FOR OTHER M EDIA. ITA 8864/MUM/2010 6 PURSUANT TO THE SAME, THE ASSESSEE DEVELOPED THE CO NTENTS OF THE WEBSITE AND FOR WHICH THE REMUNERATION HAD BEEN PAI D IN FOREIGN EXCHANGE. WE ARE ATTACHING CERTIFICATES OF FOREIGN INWARD REMITTANCES ALONG WITH AUDIT REPORT, IN FORM 10CCAF AS REQUIRED U/S. 80HHE(4) OF THE INCOME TAX ACT. SINCE THE ASSE SSEE HAS COMPLIED WITH THE REQUIREMENTS OF SECTION 80HHE, WE SHALL REQUEST YOU KINDLY TO ALLOW DEDUCTION IN RESPECT OF THE SAME. FROM THE REPLY, THE A.O. OBSERVED THAT THE ASSESSEE HAS NOT FILED ANY FRESH EVIDENCE IN SUPPORT OF HER CLAIM U/S. 80HHE OF THE ACT, HENCE THE AO REJECTED THE SAME IN SECOND ROUND OF LITIGATION. TH E A.O. OBSERVED THAT THE APPOINTMENT OF THE ASSESSEE BY MAZZA MEDIA INC.,USA SPECIFICALLY MENTIONS THAT THE ASSESSEE IS ONLY A CONSULTANT IN INDIA AND APPOINTMENT LETTER DATED 24 TH NOVEMBER, 2003 IS A DOCUMENT WHICH WAS PRODUCED AF TER THE COMPLETION OF ASSESSMENT ON 24 TH OCTOBER , 2003. THE SAID LETTER DOES NOT MENTION E XPORT OF SOFTWARE DONE BY THE ASSESSEE. THE ASSESSEE DID NOT FILE ANY APPOINTMENT LETTER OR OTHER DOCUMENT SHOWING ANY TRANSACTION SH OWING EXPORT OF SOFTWARE NEITHER DURING ASSESSMENT PROCEEDINGS NOR DURING SE T ASIDE PROCEEDINGS. THE ASSESSEE WAS ONLY APPOINTED AS EDITOR-IN-CHIEF AND CREATIVE HEAD OF MAZZA MEDIA AND THE VARIOUS ACTIVITIES CARRIED OUT BY HER WERE ON BEHALF OF MAZZA MEDIA INC.,USA . IT WAS OBSERVED BY THE AO THAT THE ASSESSEE WORK PROFILE WITH MAZZA MEDIA INC. INVOLVE RECRUITING STRONG AND CREATIVE TEAM ON BEHALF OF THE SAID COMPANY, AND THE ASSESSEE RENDERED ONLY SERVICES IN INDIA AND WEB DESIGNING AND PRODUCTION WAS ONE OF THE SERVICE S WHICH WERE UNDER CONTROL OF THE ASSESSEE. THE ASSESSEE HAS RECEIVED INCOME AS EDITOR-IN-CHIEF IN INDIA FOR CREATIVE ACTIVITIES BUT THERE WAS NO E XPORT OF SOFTWARE INVOLVED. NO CLAIM OF DEDUCTION U/S 80HHE OF THE ACT WAS FIL ED BY THE ASSESSEE WHILE FILING THE RETURN OF INCOME. FORM NO. 10CCAF WAS N OT FILED ALONG WITH THE RETURN OF INCOME AS REQUIRED UNDER SECTION 80HHE(4) OF THE ACT WHICH IS FILED IN SET ASIDE PROCEEDINGS. THE CLAIM WAS MADE FOR T HE FIRST TIME BEFORE THE LEARNED CIT(A) IN FIRST ROUND OF LITIGATION. THE A SSESSEE HAS NOT FILED THE DETAILS OF CERTIFICATES OF FOREIGN INWARD REMITTANC ES ALONG WITH AUDIT REPORT IN ITA 8864/MUM/2010 7 FORM NO. 10CCAF AS REQUIRED U/S 80HHE(4) OF THE ACT WHICH ARE FILED DURING THE SET ASIDE PROCEEDINGS IN SECOND ROUND OF LITIGA TION. THE CERTIFICATE IS DATED 16 TH DECEMBER, 2003 WHEREAS THE ASSESSMENT PROCEEDINGS HAVE BEEN COMPLETED ON 24 TH OCTOBER, 2003 IN THE FIRST ROUND OF LITIGATION AND THUS THE FORM NO. 10CCAF CLAIM UNDER AN AUDIT REPORT WHICH W AS DATED AFTER THE FINALIZATION OF ASSESSMENT U/S 143(3) OF THE ACT WA S NOT ADMISSIBLE AS WAS OBSERVED BY THE AO. EVEN DURING THE COURSE OF SET ASIDE PROCEEDINGS, THE ASSESSEE HAS NOT FILED THE REQUIRED CERTIFICATE OF FOREIGN INWARD REMITTANCES ON THE PLEA THAT SINCE THE ISSUE IS OLD , THE CERTIFIC ATE WERE NOT AVAILABLE. THUS THE A.O. OBSERVED THAT THE CLAIM OF THE ASSESSEE U/ S 80HHE OF THE ACT IS NOT SUPPORTED BY ANY EVIDENCE. THE A.O. ACCORDINGLY CO NCLUDED THAT THE CLAIM U/S 80HHE OF THE ACT FOR ONLY ASSESSMENT YEAR 2001- 02 IS AN ATTEMPT TO AVOID TAX, AS NO SUCH CLAIM HAS BEEN MADE IN THE SU BSEQUENT YEAR . THE A.O. ALSO HELD THAT IN THE REMAND PROCEEDINGS IN THE FIR ST ROUND OF LITIGATION, THE A.O OBJECTED TO THE ADMISSION OF ADDITIONAL GROUND STATING THAT THE ASSESSEE HAS NOT CLAIMED THE SAID RELIEF IN THE RETURN OF IN COME AND, THEREFORE, THE CONDITIONS LAID DOWN U/S 80HHE OF THE ACT WERE NOT FULFILLED FOR CLAIMING THE RELIEF U/S 80HHE OF THE ACT. HOWEVER, THE LD. CIT(A ) DID NOT ACCEPT THE OBJECTION OF THE A.O. AND DIRECTED THE A.O. TO EXAM INE THE ISSUE AFRESH AND WORK OUT THE DEDUCTION U/S 80HHE OF THE ACT AFTER E XAMINING THE CLAIM OF DEDUCTION IN FORM 10CCAF. THUS THE A.O. OBSERVED TH AT THE CLAIM IS NOT ALLOWABLE SINCE THE RETURNED INCOME TENDS TO BE LOW ER THAN THE ASSESSED INCOME. THE ASSESSEE OUGHT TO HAVE MADE THE CLAIM I N THE ORIGINAL RETURN OR IN A REVISED RETURN BUT THE ASSESSEE HAS NOT DONE T HE SAME. THE AO OBSERVED THAT THIS VIEW IS SUPPORTED BY THE DECISION IN THE CASE OF GOETZE (INDIA) LTD. V. CIT, (2006) 284 ITR 323(SC) WHEREIN IT HAS BEEN HEL D THAT ANY CHANGE IN STAND BY THE ASSESSEE SHOULD HAVE BEEN TAKEN THROUG H FILING A REVISED RETURN OF INCOME. THE A.O. ACCORDINGLY DISALLOWED THE CLAI M U/S 80HHE OF THE ACT AND INCOME WAS ASSESSED IGNORING THE CLAIM U/S. 80H HE OF THE ACT AS THE CLAIM IS NOT LEGALLY ALLOWABLE AS HELD BY THE AO VI DE ASSESSMENT ORDER DATED ITA 8864/MUM/2010 8 30-12-2009 PASSED U/S. 143(3) READ WITH SECTION 254 OF THE ACT IN THE SECOND ROUND OF LITIGATION. 6.AGGRIEVED BY THE ASSESSMENT ORDER DATED 30-12-200 9 PASSED BY THE A.O. U/S. 143(3) READ WITH SECTION 254 OF THE ACT IN SEC OND ROUND OF LITIGATION, THE ASSESSEE FILED FIRST APPEAL BEFORE THE LD. CIT(A) I N SECOND ROUND OF LITIGATION. 7. BEFORE THE LD. CIT(A), THE ASSESSEE REITERATED THE SUBMISSIONS WHAT WERE MADE BEFORE THE A.O. THE ASSESSEE SUBMITTED T HAT THE ASSESSEE HAS ALREADY SUBMITTED LETTER DATED 15TH MARCH, 2004, 16 TH DECEMBER, 2009 AND 24 TH DECEMBER, 2009 DULY SIGNED BY MR. GAURAV MOTWANE C ONFIRMING THE WORK DONE BY HIM FOR THE ASSESSEE AND THE PAYMENTS RECEIVED BY HIM FROM THE ASSESSEE. IT WAS SUBMITTED THAT THE LETTER DATE D 15TH MARCH, 2004 ALSO EXPLAINS WHY THERE WAS NO WRITTEN AGREEMENT BETWEEN THE ASSESSEE AND MR. GAURAV MOTWANE. IT WAS SUBMITTED THAT AN AGREEMENT CAN BE ORAL AND NEED NOT BE IN WRITING. THE COPY OF THE INVOICE DATED 11 TH APRIL, 2002 OF PIXEL MULTIMEDIA , PROPRIETOR MR. GAURAV MOTWANE WAS SUBM ITTED AT THE TIME OF THE ORIGINAL ASSESSMENT. IT WAS SUBMITTED THAT MR. GAUR AV MOTWANE HAS SHOWN INCOME OF RS. 15 LAKHS AND ALSO PAID TAX ON THE SAI D INCOME AND AS SUCH THE DISALLOWANCE OF RS. 18 LAKHS WILL AMOUNTS TO DOUBLE TAXATION. IT WAS SUBMITTED BY THE ASSESSEE THAT SINCE ALL THE EVIDEN CES HAVE BEEN SUBMITTED BEFORE THE A.O. AND THE DISALLOWANCE MADE BY THE A. O IS PURELY ON CONJECTURES AND SURMISES HENCE THE DISALLOWANCE SHO ULD BE DELETED. THE LD. CIT (A) AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE OBSERVED THAT THE IMPUGNED DISALLOWANCE HAD BEEN MADE AFTER A DETAILED AND COMPREHENSIVE LETTER WAS ISSUED TO MR.GAURAV MOTWAN E SO AS TO EXAMINE THE NATURE AND EXTENT OF SERVICES RENDERED BY HIM. THE LD. CIT(A) OBSERVED THAT THE DISALLOWANCE WAS MADE AFTER INVESTIGATION OF TH E MATTER AND ALSO AFTER IT WAS ADMITTED BY MR. GAURAV MOTWANE THAT THERE WERE NO AGREEMENT BETWEEN ITA 8864/MUM/2010 9 HIM AND THE ASSESSEE AND ALSO THAT THERE WAS NO COR RESPONDENCE WITH THE ASSESSEE WITH PARTICULAR REFERENCE TO THE SERVICES RENDERED. THE LEARNED CIT(A) OBSERVED THAT THE ASSESSEE ALSO COULD NOT PRODUCE ANY RECORDS MAINTAINED BY HER NEITHER DURING ASSESSMENT PROCEEDINGS NOR DURIN G THE APPELLATE PROCEEDINGS OR DURING THE SET ASIDE PROCEEDINGS. FU RTHER IT WAS OBSERVED BY LEARNED CIT(A) THAT THE ASSESSEE HAS ALSO WITHDRAW N THE CLAIM VIDE LETTER DATED 22 ND OCTOBER, 2003. IT WAS OBSERVED BY LEARNED CIT(A) T HAT IN VIEW OF DECISION OF HONBLE BOMBAY HIGH COURT REPORTED IN R AMESHCHANDRA & CO. V. CIT (1987) 168 ITR 375(BOM.HC) , THE ASSESSEE CANN OT BE AN AGGRIEVED PARTY, WHEN SHE HERSELF HAS AGREED TO THE ADDITIONS . IT WAS FURTHER OBSERVED BY LEARNED CIT(A) THAT DURING THE SET ASIDE PROCEED INGS NO FURTHER DETAILS WERE FILED BY THE ASSESSEE TO SHOW THAT THE WITHDRA WAL OF CONSULTANCY FEES PAID TO MR. GAURAV MOTWANE WAS ERRONEOUS OR WAS TA KEN BACK BY HER . IT WAS OBSERVED BY LEARNED CIT(A) THAT THE ASSESSEE HA S DONE WORK FOR VARIOUS CUSTOMERS ON BEHALF OF MAZZA MEDIA INC AS THE ASSES SEE DOES NOT HAVE DIRECT CLIENTS. THE ASSESSEE HAS NOT UTILIZED THE SERVICE S OF MR. GAURAV MOTWANE ON THE GROUND THAT HE HAS NOT RAISED ANY BILL DURING T HE YEAR OR IN THE SUBSEQUENT FINANCIAL YEAR WAS THE OBSERVATION OF LE ARNED CIT(A). THE ASSESSEE HAS NOT MADE ANY PAYMENT DURING THE YEAR T O MR. GAURAV MOTWANE BUT HAD MERELY MADE PROVISION FOR CONSULTANCY FEE O F RS. 18 LAKHS WHICH WAS REFLECTED AS A LIABILITY IN THE BALANCE SHEET. MR. GAURAV MOTWANE HAS NOT DECLARED ANY RECEIPT FROM THE ASSESSEE IN RESPECT O F CONSULTANCY CHARGES. AS PER THE ASSESSEE, THE ASSESSEE WAS FOLLOWING MERCAN TILE SYSTEM OF ACCOUNTING WHEREAS MR. GAURAV MOTWANE HAD FOLLOWED CASH SYSTEM OF ACCOUNTING AND HAD ACCOUNTED RS. 15 LAKHS DURING THE ASSESSMENT YE AR 2002-03 WHEN THE PAYMENTS WERE MADE TO MR GAURAV MOTWANE AND THE BAL ANCE SUM OF RS. 3 LAKHS WAS NOT RECEIVED BY MR. GAURAV MOTWANE AND HE NCE NOT SHOWN AS HIS INCOME. THE LEARNED CIT(A) OBSERVED THAT THE A.O. R EJECTED THE CONTENTION OF THE ASSESSEE ON THE GROUND THAT MR. GAURAV MOTWANE ALSO FOLLOWED THE MERCANTILE SYSTEM OF ACCOUNTING. THE A.O. CAME TO T HIS CONCLUSION ON THE ITA 8864/MUM/2010 10 GROUND THAT MR. GAURAV MOTWANE'S BALANCE SHEET FOR THE ASSESSMENT YEAR 2001-02 DISCLOSED CURRENT LIABILITY OF RS. 44,065/- AND THE BALANCE SHEET FOR THE ASSESSMENT YEAR 2002-03 REFLECTED CURRENT LIABI LITY IN RESPECT OF OUTSTANDING EXPENSES OF RS. 93,857/-. IN THE ORIGIN AL APPELLATE PROCEEDINGS THE LD. CIT(A) HELD THAT THE ASSERTION THAT MR. GAU RAV MOTWANE HAD THE TECHNICAL COMPETENCE AND THE EXPERTISE FOR THE DEVE LOPMENT OF SOFTWARE PROGRAM WHICH HAS RESULTED IN THE CREATION OF THE W EBSITE CANNOT BE ACCEPTED IN THE ABSENCE OF ANY POSITIVE EVIDENCE PRODUCED DU RING THE ASSESSMENT PROCEEDINGS. THE LEARNED CIT(A) OBSERVED THAT THE S TATEMENT GIVEN BY THE ASSESSEE AGREEING TO THE ADDITION WAS NOT VOLUNTARY AND THAT SHE WAS ADVISED BY THE A.O TO GIVE SUCH A STATEMENT BUT NO EVIDENCE HAS BEEN FURNISHED BY THE ASSESSEE IN THIS REGARD TO SUGGEST THAT THE ASS ESSEE WAS EITHER COERCED OR UNDULY INFLUENCED TO AGREE TO THE ADDITION. THE ASS ESSEE IS A WELL EDUCATED AND THUS AWARE OF HER RIGHTS AND OBLIGATIONS. IT WA S OBSERVED BY LEARNED CIT(A) THAT IT CANNOT THEREFORE BE ASSUMED THAT SHE WAS INTIMIDATED OR COERCED BY THE A.O TO AGREE TO AN ADDITION OF THIS NATURE. THUS, THE LD. CIT(A) CONFIRMED THE ADDITION OF RS. 18 LAKHS MADE BY THE A.O. IN SECOND ROUND OF LITIGATION VIDE APPELLATE ORDER DATED 22.10.2010. WITH REGARD TO THE DENIAL OF THE CLAIM OF DEDUCTION U/S 80HHE OF THE ACT, THE ASSESSEE SUBMITTED BEFORE LEARNED CIT(A) THAT THE A .O HAS REJECTED THE CLAIM OF THE ASSESSEE SINCE THE ASSESSEE HAS NOT MADE THE CLAIM IN THE ORIGINAL RETURN OF INCOME OR IN THE REVISED RETURN OF INCOM E. IN SUPPORT, THE A.O. HAS RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZE INDIA LTD. V. CIT (2006) 284 ITR 323(SC). THE ASSES SEE SUBMITTED THAT THE ACTION OF THE A.O. WAS NOT PROPER. THE ITAT IN THE CASE OF CHICAGO PNEUMATIC INDIA LTD. (2007) 15 SOT 252 (MUM) WHEREIN THE TRIB UNAL RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F GOETZE INDIA LTD. (SUPRA) AND HELD IN THE SAID ORDER THAT THE LEARNED CIT(A) HAS POWERS COTERMINOUS WITH THE POWERS OF THE A.O AND THE APPELLATE PROCEE DINGS ARE CONTINUATION OF ITA 8864/MUM/2010 11 THE ORIGINAL PROCEEDINGS AND THE LEARNED CIT(A) HAV E ENTERTAINED THE CLAIM OF THE ASSESSEE AND ALLOWED IT IF OTHER PROVISIONS OF LAW ARE SATISFIED. THE TRIBUNAL HAS ENTERTAINED THE CLAIM AND HAD DIRECTED THE A.O TO EXAMINE THE CLAIM OF THE ASSESSEE AND HENCE THE ISSUE IS STALE , WAS THE CONTENTION OF THE ASSESSEE BEFORE THE LEARNED CIT(A). IT WAS SUBMITTE D THAT DURING THE COURSE OF THE REASSESSMENT SET ASIDE PROCEEDINGS, THE ASSESSE E HAD FILED FOREIGN INWARD REMITTANCE CERTIFICATE TO THE EXTENT OF RS. 18,43,9 37/-, HENCE, THE A.O. WAS WRONG THAT THE FOREIGN INWARD REMITTANCE CERTIFICAT ES WERE NOT FILED DURING THE COURSE OF REASSESSMENT. IT WAS SUBMITTED THAT AS PE R THE A.O. THE ASSESSEE HAD RENDERED SERVICES IN INDIA AND THE ASSESSEE HAD NOT EXPORTED SOFTWARE SO AS TO QUALIFY FOR DEDUCTION U/S 80 HHE OF THE ACT. IN THIS REGARD THE ASSESSEE REFERRED TO THE LD. CIT(A)S ORDER WHEREIN THE ASSE SSEE HAD SUBMITTED HER EXHAUSTIVE OBJECTIONS TO THE A.O AND THE CIT(A) , A ND AFTER GOING THROUGH THE SAME , THE LD. CIT(A) HAD CONSIDERED THE SAME AND D IRECTED THAT DEDUCTION U/S 80HHE OF THE ACT WAS ALLOWABLE IN PRINCIPLE IN THE FIRST ROUND OF LITIGATION. THE ASSESSEE CONTENDED THAT THE A.O. HA S NOT BROUGHT ON RECORD ANYTHING FRESH SO AS TO DISALLOW THE CLAIM U/S 80HH E OF THE ACT. THE LD. CIT(A) IN THE SECOND ROUND OF LITIGATION AF TER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, REJECTED THE SAME ON T HE GROUND THAT THE ASSESSEE SHOULD HAVE MADE THE CLAIM IN THE RETURN O F INCOME OR IN THE REVISED RETURN BUT THE ASSESSEE DID NOT DO THE SAME. THE L D. CIT(A) OBSERVED THAT EVEN DURING THE SET ASIDE PROCEEDINGS, THE ASSESSEE HAS NOT FILED ANY SUPPORTING CERTIFICATES OF FOREIGN INWARD REMITTANC ES AND SIMPLY STATED THAT SINCE THE ISSUE IS OLD, THE CERTIFICATES WERE NOT A VAILABLE, HENCE, THE CLAIM OF THE ASSESSEE U/S 80HHE OF THE ACT IS NOT SUPPORTED BY EVIDENCE. THE ASSESSEE IS ONLY CONSULTANT IN INDIA. THE APPOINTME NT LETTER DATED 24 TH NOVEMBER, 2003 IS A DOCUMENT WHICH IS PRODUCED AFTE R THE COMPLETION OF ASSESSMENT ON 24 TH OCTOBER, 2003. THERE IS NO MENTION OF EXPORT OF C OMPUTER SOFTWARE. THE ASSESSEE HAS NOT FILED ANY APPOINTMEN T LETTER OR OTHER ITA 8864/MUM/2010 12 DOCUMENT SHOWING ANY TRANSACTION OF EXPORT OF COMPU TER SOFTWARE DURING ASSESSMENT PROCEEDINGS OR DURING SET ASIDE PROCEEDI NGS. THERE WAS NOT ANY EVIDENCE TO SHOW THAT THE ASSESSEE HAD EXPORTED COM PUTER SOFTWARE OUT OF INDIA, HENCE, THE LEARNED CIT(A) HELD THAT THE ASSE SSEE IS NOT ENTITLED FOR DEDUCTION U/S 80HHE OF THE ACT VIDE APPELLATE ORDER S DATED 22.10.2010. 8.AGGRIEVED BY THE APPELLATE ORDER DATED 22.10.2010 PASSED BY THE LD. CIT(A), THE ASSESSEE CARRIED THE MATTER BEFORE THE TRIBUNAL IN SECOND ROUND OF LITIGATION. 9. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE REVENUE HAS DISALLOWED THE CONSULTANCY EXPENSES OF RS. 18 LAKHS AND ALSO DENIED THE DEDUCTION U/S 80HHE OF THE ACT. THE LD. COUNSEL SU BMITTED THAT THIS IS THE SECOND ROUND OF LITIGATION AND THE LD. CIT(A) DISMI SSED THE APPEAL OF THE ASSESSEE ON BOTH THE GROUNDS. IN THE FIRST ROUND, THE TRIBUNAL HAS SET ASIDE THE MATTER TO THE FILE OF THE A.O. IN ITA NO. 1470/ MUM/2005 AND ITA NO. 1731/MUM/2005 VIDE ORDERS DATED 26 TH MAY, 2008. IT WAS SUBMITTED THAT THE ASSESSEE GOT THE CONTRACT FROM MAZZA MEDIA INC. , USA FOR CONCEPTUALIZATION AND DESIGNING FOR THEIR WEBSITE, PLANNING FEATURES AND NEWS EVENTS ON THE WEBSITE AND DEVELOPMENT OF CONTENT FO R OTHER MEDIA FOR MAZZA MEDIA INC., USA. IT WAS SUBMITTED THAT OUT OF THE TOTAL RECEIPT FROM MAZZA MEDIA INC., USA, THE ASSESSEE HAD INCURRED EXPENDIT URE OF RS. 18 LACS FOR THE SERVICES RENDERED BY MR. GAURAV MOTWANE. PROVISION FOR CONSULTANCY EXPENSES WERE MADE FOR RS. 18 LACS DURING RELEVANT ASSESSMENT YEAR WITH RESPECT TO CONSULTANCY SERVICES RENDERED BY MR. GAU RAV MOTWANE FOR WHICH PAYMENT OF RS. 15 LACS WAS MADE TO MR. GAURAV MOTWA NE IN THE IMMEDIATELY SUBSEQUENT YEAR I.E. ASSESSMENT YEAR 2002-03 WHICH HAS BEEN OFFERED TO TAX BY SAID MR. GAURAV MOTWANE BY DECLARING THE SAID IN COME OF RS.15 LACS RECEIVED IN THE PREVIOUS YEAR RELEVANT TO THE ASSES SMENT YEAR 2002-03 AS INCOME OF THE ASSESSMENT YEAR 2002-03 AND PAID TH E DUE TAXES ON THESE ITA 8864/MUM/2010 13 INCOME TO REVENUE. IT WAS SUBMITTED BY LEARNED COU NSEL FOR THE ASSESSEE THAT THE ASSESSEE AGREED FOR THE ADDITIONS BEFORE THE AO IN THE FIRST ROUND OF LITIGATION UNDER INSISTENCE FROM THE AO. THE LD. C OUNSEL RELIED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT REPORTED IN RAMESHCHANDRA & CO. V. CIT (1987) 168 ITR 375(BOM.HC) AND SUBMITTED TH AT RETRACTION WAS FILED BY WAY OF AFFIDAVIT BEFORE THE LEARNED CIT(A) AS TH E A.O. INSISTED THE ASSESSEE TO SURRENDER THE AMOUNT. MR. GAURAV MOTWANE HAD GI VEN LETTER TO THE A.O. DATED 24 TH DECEMBER, 2009 STATING THAT HE HAS RENDERED THE SE RVICES AND THE SAID AMOUNT WAS OFFERED TO TAX IN THE RETURN OF INC OME FILED BY SAID MR GAURAV MOTWANE WITH THE REVENUE IN THE ASSESSMENT YEAR 2002-03. MR. GAURAV MOTWANE HAS DULY PAID THE TAXES ON THE SAID AMOUNT OF RS. 15 LACS RECEIVED BY HIM DURING ASSESSMENT YEAR 2002-03 AND HENCE THERE IS NO EVASION OF TAXES. IT WAS SUBMITTED THAT THE A.O. C OULD HAVE SUMMONED MR. GAURAV MOTWANE U/S 131 OF THE ACT IN SET ASIDE PROC EEDINGS AND CROSS EXAMINED HIM. THE LD. COUNSEL ALSO RELIED ON THE F OLLOWING CASE LAWS AND CONTENDED THAT WHERE THERE IS NO TAX EVASION AND HE NCE NO DISALLOWANCE IS CALLED FOR :- 1. ASHISH PLASTIC INDUSTRIES V. ACIT, (2015)373 ITR 45 (SC) 2. CIT V. INDO SAUDI SERVICES (TRAVEL) P. LTD., 310 ITR 306 (BOM) 3. ACIT V. MALHAR INFORMATION SERVICES, 307 ITR (AT ) 29 (MUMBAI IT WAS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASS ESSEE THAT IF THERE IS NO TAX EVASION , SECTION 40A(2) OF THE ACT CANNOT BE INVOK ED. WITH RESPECT TO THE DENIAL OF DEDUCTION U/S 80 HHE OF THE ACT BY THE A.O. ON THE GROUND THAT THE ASSESSEE HAS NOT CLAIMED THE SA ME IN THE ORIGINAL RETURN OF INCOME NOR FILED A REVISED RETURN OF INCOME. THE CLAIM IS FILED WITH THE LD. CIT(A) FOR THE FIRST TIME IN THE ORIGINAL PROCEEDIN GS. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE IS COMPUTER SOFTWARE EXPORT THROUGH INTERNET. ITA 8864/MUM/2010 14 THE MONEY HAS COME IN THE FORM OF CONVERTIBLE FOREI GN EXCHANGE. THE AUDITORS CERTIFICATE WAS ALSO GIVEN IN FORM NO 10CC AF. THE ASSESSEE RELIED ON THE FOLLOWING DECISIONS:- 1. NIRMALA L. MEHTA V. CIT 269 ITR 1 (BOMBAY HC) 2. RACHANA S. TALREJA V. DCIT 16 ITR (TRIB) 53 (MUM BAI) ON BEING ASKED BY THE BENCH, THE ASSESSEE SUBMITTED THAT THE ASSESSEE DID NOT FILED ANY SOFTEX FORM WITH GOVERNMENT AUTHORITI ES AS MANDATED UNDER LAW FOR EXPORTING COMPUTER SOFTWARE. THE ASSESSEE SUBMI TTED THAT THE ASSESSEE WAS ASSIGNED THE JOB OF DESIGNING WEBSITE BY MAAZA MEDIA INC, USA AND THE ASSESSEE WAS EDITOR-IN-CHIEF OF MAAZA ENTERTAINMENT INDIA PRIVATE LIMITED , A COMPANY PROMOTED BY MAAZA MEDIA INC., USA IN INDIA AND THEY ARE TWO DIFFERENT ASSIGNMENTS. 10. THE LD. D.R. SUBMITTED THAT THERE IS NO DOCUMEN TARY EVIDENCE SUBMITTED BY THE ASSESSEE WITH RESPECT TO THE CONSU LTANCY EXPENSES OF RS. 18 LACS PAID BY HER TO HER HUSBAND MR. GAURAV MOTWANE. NO COPY OF AGREEMENT WAS SUBMITTED BY THE ASSESSEE. NO DOCUMENT HAS BEE N FURNISHED TO PROVE THAT THE HUSBAND OF THE ASSESSEE MR. GAURAV MOTWANE HAS RENDERED SERVICES TO THE ASSESSEE. IT IS ALSO NOT BROUGHT ON RECORD THAT SH. GAURAV MOTWANE IS COMPUTER SOFTWARE PROFESSIONAL. THERE IS NO PROOF T HAT HER HUSBAND MR GAURAV MOTWANE HAS PAID THE TAXES ON RS. 15 LACS RE CEIVED BY HIM FROM THE ASSESSEE IN THE IMMEDIATELY SUCCEEDING ASSESSMENT Y EAR WHICH IS NOT EMANATING FROM THE RECORD. THE LEARNED DR DREW OUR ATTENTION TO PARA 3.1 OF THE APPELLATE ORDERS OF THE LEARNED CIT(A) DATED 22 .10.2010. THE LD. D.R. DREW OUR ATTENTION TO PAPER BOOK PAGE 20 & 21 WHERE BY BALANCE SHEET OF THE ASSESSEE IS PLACED AND ALSO DREW OUR ATTENTION TO T HE P&L ACCOUNT VIDE PAPER BOOK PAGE 29 TO 39 OF MR. GAURAV MOTWANE IS PLACED. WITH RESPECT TO THE SECOND ISSUE OF CLAIM UNDER SECTION 80HHE OF THE AC T, THE LD. D.R ALSO DREW ITA 8864/MUM/2010 15 OUR ATTENTION TO PAPER BOOK PAGE 51 TO 56 WHEREBY T HE PURPOSE OF REMITTANCE RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE AS MENTION ED IN FIRC IS CONSULTANCY FEES AND NOT EXPORT OF COMPUTER SOFTWARE. IT WAS SU BMITTED THAT NO CLAIM FOR DEDUCTIONS U/S. 80HHE OF THE ACT WAS MADE BY THE A SSESSEE IN THE ORIGINAL RETURN OF INCOME AND HENCE THE ASSESSEE IS NOW NOT ENTITLED TO DEDUCTION U/S. 80HHE OF THE ACT AS NO REVISED RETURN OF INCOME HAS BEEN FILED BY RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F GOETZE INDIA LIMITED(SUPRA). FURTHER NO SUCH CLAIM FOR DEDUCTION U/S 80HHE OF THE ACT WAS MADE IN SUBSEQUENT YEARS BY THE ASSESSSEE. IT I S SUBMITTED BY THE LEARNED DR BEFORE THE TRIBUNAL THAT THIS IS THE SEC OND ROUND OF LITIGATION AND EVEN IN THE SET ASIDE PROCEEDINGS , NO EVIDENCES WE RE FILED BY THE ASSESSEE TO PROVE HER CLAIM OF DEDUCTION U/S 80HHE OF THE ACT. THE ASSESSEE DID NOT SUBMITTED FIRC EVEN IN SECOND ROUND OF LITIGATIONS AND NOW COPIES OF FIRC ARE FILED BEFORE THE TRIBUNAL AND GENUINENESS AND A UTHENTICITY OF FIRC CANNOT BE DETERMINED. 11. IN THE REJOINDER, THE LD. COUNSEL FOR THE ASSES SEE SUBMITTED THAT THE DECISION IN THE CASE OF GOETZE INDIA LIMITED(SUPRA) DOES NOT APPLY IN THIS CASE AS THE CLAIM CAN ALWAYS BE LODGED WITH THE APPELLAT E AUTHORITIES. IT WAS SUBMITTED THAT THE TRIBUNAL HAS POWER TO CONSIDER NEW CLAIM DURING APPELLATE PROCEEDINGS AND IN ANY CASE IN FIRST ROUN D OF LITIGATION THE TRIBUNAL SET ASIDE THE ISSUE AND DIRECTED AO TO VERIFY THE C LAIM OF THE ASSESSEE WHICH ITSELF INDICATE THAT THE CLAIM WITH RESPECT TO ALLO WABILITY OF DEDUCTION U/S. 80HHE OF THE ACT WAS ADMITTED BY THE TRIBUNAL IN TH E FIRST ROUND OF LITIGATION ITSELF. IN NUTSHELL THE LD. COUNSEL SUBMITTED THAT THE CLAIM OF THE ASSESSEE MAY BE ACCEPTED. 12. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND AL SO PERUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING CASE LAWS RELIED UPON BY RIVAL PARTIES. WE HAVE OBSERVED THAT THE ASSESSEE RENDERED SERVICES TO OVE RSEAS CLIENT MAZZA MEDIA ITA 8864/MUM/2010 16 INC., USA FOR WHICH THE ASSESSEE HAS RECEIVED INCOM E IN FOREIGN EXCHANGE AGAINST WHICH THE ASSESSEE HAS SUBMITTED THE COPIES OF FIRC WHEREIN THE PURPOSE OF FOREIGN REMITTANCE MENTIONED IN FIRC IS CONSULTANCY FEES , THE COPIES OF FIRC ARE PLACED AT PAGE 51-66/PAPER BOOK. THE ASSESSEE HAS ALSO SUBMITTED CERTIFICATE FROM MAZZA MEDIA INC., USA TH AT THE ASSESSEE IS ASSIGNED THE OVERALL RESPONSIBILITY OF DEVELOPING T HE WEBSITE, PROVIDING CONTENT AND SITE DEVELOPMENT ACTIVITIES FOR THE SAID CONCER N. THE SAID LETTER IS PLACED AT PAPER BOOK PAGE 44. THE ASSESSEE HAS ALSO PLACE D CERTIFICATE FROM HER HUSBAND MR. GAURAV MOTWANE WITH RESPECT TO THE SERV ICES RENDERED BY HIM TO THE ASSESSEE , WHICH CERTIFICATE IS PLACED AT PAPER BOOK PAGE 45 WHEREIN GAURAV MOTWANE HAS STATED THAT THE HE RENDERED CONS ULTANCY SERVICES TO THE ASSESSEE RELATING TO DEVELOPING BRAND STRATEGY THRO UGH INTERNET AND DEVELOPMENT OF VARIOUS COMMUNICATION TOOLS DURING T HE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2001-02 . THE SAID GA URAV MOTWANE HAS ALSO RAISED INVOICE ON THE ASSESSEE DATED 11-04-2002 FOR RS.20,06,000/- AGAINST WHICH THE ASSESSEE MADE PROVISION OF RS. 18 LACS T OWARDS CONSULTANCY EXPENSES IN THE INSTANT ASSESSMENT YEAR 2001-02 WHI CH IS PLACED IN PAPER BOOK /PAGE 41-43 AND PROFESSIONAL AND EDUCATIONAL P ROFILE OF MR. GAURAV MOTWANE WAS ALSO PLACED VIDE PAPER BOOK PAGES 40 TO CONTEND THE CAPABILITIES OF MR GAURAV MOTWANE TO PERFORM THE JO B UNDERTAKEN BY HIM. IT IS THE SAY OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING WHICH IS SUPPORTED BY THE TAX AUDIT REPORT U/S 44AB OF THE ACT ISSUED BY CHARTERED ACCOUNTANT WHICH IS FILED BY THE ASSESSEE AND ALSO THE BALANCE SHEET, WHICH ARE PLAC ED AT PAPER BOOK PAGES 18 TO 28 WHEREBY IT IS MENTIONED THAT SHE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING IN THE TAX AUDIT REPORT(PAGE 22/PB) ISSU ED BY CHARTERED ACCOUNTANT TO JUSTIFY MAKING THE PROVISION FOR CONS ULTANCY EXPENSES OF RS 18 LACS IN THE BOOKS OF ACCOUNTS FOR THE INSTANT ASSES SMENT YEAR. FURTHER IT IS THE SAY OF LEARNED COUNSEL FOR THE ASSESSEE THAT H ER HUSBAND MR. GAURAV MOTWANE IS FOLLOWING CASH SYSTEM OF ACCOUNTING WHIC H CONTENTION IS ITA 8864/MUM/2010 17 SUPPORTED BY THE AUDITED ACCOUNTS AND TAX AUDIT REP ORT U/S 44AB OF THE ACT ISSUED BY CHARTERED ACCOUNTANT OF SH GAURAV MOTWANE , WHICH ARE PLACED AT PAPER BOOK PAGES 29 TO 39 WHEREBY IT IS MENTIONED I N THE TAX AUDIT REPORT ISSUED BY CHARTERED ACCOUNTANT IN THE CASE OF MR GA URAV MOTWANE THAT THE SAID MR GAURAV MOTWANE IS IN THE BUSINESS OF WEBSIT E DEVELOPMENT AND CONSULTANCY AS WELL FOLLOWING CASH BASIS OF ACCOUNT ING(PB/PAGE 33) , TO JUSTIFY THE OFFERING OF INCOME OF RS. 15 LACS BY GAURAV MOT WANE TO TAX IN THE SUCCEEDING ASSESSMENT YEAR I.E. 2002-03 ON RECEIPT BASIS AS THE ASSESSEE MADE THE PAYMENT OF RS. 15 LACS IN THE PREVIOUS YEA R 2001-02 RELEVANT TO ASSESSMENT YEAR 2002-03 AGAINST THE PROVISIONS OF C ONSULTANCY EXPENSES OF RS 18LACS IN HER BOOKS OF ACCOUNTS IN THE PREVIOUS YEAR 2000-01 RELEVANT TO THE ASSESSMENT YEAR 2001-02 . THE LD. COUNSEL FOR THE ASSESSEE HAD SUBMITTED THAT THE ASSESSEE MADE PROVISION FOR CONS ULTANCY EXPENSES OF RS. 18 LACS TOWARDS CONSULTANCY FEE PAYABLE TO MR. GAUR AV MOTWANE IN HER BOOKS OF ACCOUNT DURING THE PREVIOUS YEAR RELEVANT TO AS SESSMENT YEAR 2001-02 ON ACCRUAL BASIS AGAINST WHICH THE ASSESSEE HAS MADE PAYMENT OF RS. 15 LACS TO MR. GAURAV MOTWANE IN THE SUCCEEDING PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR I.E. 2002-03 WHICH ARE STATED TO BE INCLUDED BY MR. GAURAV MOTWANE IN HIS RETURN OF INCOME FILED WITH THE REV ENUE AND DUE TAXES ARE STATED TO HAVE BEEN PAID TO THE REVENUE , ON RECEIP T BASIS. THE ASSESSEE HAS ALSO FILED AN AFFIDAVIT EXPLAINING THE MANNER IN WH ICH THE ASSESSEE SURRENDERED THE AMOUNT AT THE INSISTENCE OF THE ASS ESSEE, WHICH IS PLACED AT PAPER BOOK PAGE 48 TO 50 AND ITS RETRACTION THEREOF . IN OUR CONSIDERED VIEW KEEPING IN VIEW THE FACTS AND CIRCUMSTANCE OF THE C ASE AND ALSO IN THE INTEREST OF SUBSTANTIAL JUSTICE , THE ASSESSEE HAS DULY DISC HARGED THE PRIMARY ONUS CAST ON HER AND HAS BROUGHT ON RECORD SUFFICIENT MA TERIAL TO SUBSTANTIATE HER CONTENTION THAT THE ASSESSEE HAS RECEIVED THE CONSU LTATION FEE FOR WEBSITE DEVELOPMENT FROM MAZZA MEDIA INC.,USA AND ALSO WITH RESPECT TO HER CLAIM FOR DEDUCTION OF EXPENSES TOWARDS CONSULTANCY FEE O F RS. 18 LACS PAYABLE TO MR. GAURAV MOTWANE SUBJECT TO VERIFICATION OF THE CLAIM AND CONTENTIONS OF ITA 8864/MUM/2010 18 THE ASSESSEE THAT MR. GAURAV MOTWANE HAS INCLUDED I NCOME OF RS.15 LACS RECEIVED FROM THE ASSESSEE IN THE RETURN OF INCOME FILED BY HIM WITH THE REVENUE FOR THE ASSESSMENT YEAR 2002-03 AND DUE TAX ES ARE PAID TO REVENUE, AS FROM THE RECORDS BEFORE US THE AFORESAID CONTENT ION OF THE ASSESSEE COULD NOT BE VERIFIED. THUS, WE ARE SETTING ASIDE AND RES TORING THIS MATTER TO THE FILE OF THE AO FOR THE PURPOSES OF LIMITED VERIFICATION WHETHER THE SAID MR. GAURAV MOTWANE HAS INCLUDED RS. 15 LACS RECEIVED FROM THE ASSESSEE AS AN INCOME IN HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 200 2-03 FILED WITH THE REVENUE AND PAID DUE TAXES TO THE REVENUE AND WITH RESPECT TO BALANCE RS. 3 LACS SIMILAR VERIFICATION BE CARRIED OUT BY THE AO ON THE SAME LINES. IN OUR CONSIDERED VIEW, THE CLAIM OF THE ASSESSEE FOR DEDU CTION OF RS 18 LACS AS CONSULTANCY FEE PAYABLE TO HER HUSBAND MR GAURAV MO TWANE IS ALLOWABLE SUBJECT TO THE NECESSARY LIMITED VERIFICATION BY TH E A.O. AS INDICATED BY US ABOVE.WE ORDER ACCORDINGLY. 16. WITH RESPECT TO THE CLAIM OF DEDUCTION U/S 80 H HE OF THE ACT, WE HAVE OBSERVED THAT THE SAID CLAIM WAS RAISED FOR THE FIR ST TIME BEFORE THE LD. CIT(A) IN THE FIRST ROUND OF LITIGATION AND THE SAME WAS N OT RAISED BY THE ASSESSEE VIDE RETURN OF INCOME FILED WITH THE REVENUE NOR VI DE REVISED RETURN FILED WITH THE REVENUE. THE TRIBUNAL HAS DIRECTED THE A.O. TO VERIFY THE SAME AND THE OBSERVATION OF THE TRIBUNAL ARE AS UNDER:- WE HAVE CONSIDERED THE ISSUES AND SUBMISSIONS. AS SEEN FROM THE FILE THE ASSESSEE EARNED SOFTWARE CONSULTANCY C HARGES/FEE FROM M/S MAZAA MEDIA, INC AND CLAIMED AN AMOUNT OF RS. 18,00,000/- PAYABLE TO M/S PIXEL MULTIMEDIA, OWNED, BY HER HUSBAND SHRI GAURAV MOTWANE. IT IS ALSO A FACT THAT ONLY AN AMOUNT OF RS. 15,00,000/- WAS PAID IN THE LATER YEA R WHICH WAS OFFERED TO TAX. AS DIFFERENT METHODOLOGY OF ACCOUN TING IS FOLLOWED BY HUSBAND AND WIFE THE ASSESSING OFFICER CONSIDERE D THE AMOUNT ITA 8864/MUM/2010 19 AND DID NOT ALLOW AS THE SAME WAS NOT OFFERED BY TH E HUSBAND IN THE ASSESSMENT YEAR. IT IS THE SUBMISSION OF THE AS SESSEE THAT MR. GAURAV MOTWANE IS ALSO A QUALIFIED SOFTWARE PERSON AND THE AMOUNT IS PAYABLE TO HIM FOR DEVELOPING THE WEB SER VICES AND THERE ARE EVIDENCES THAT SERVICES WERE UTILIZED BY THE ASSESSEE. AS THE NATURE OF SERVICES AND THE EXPENDITURE ON SERVI CES HAS NOT BEEN EXAMINED BY THE ASSESSING OFFICER IN DETAIL AN D FURTHER AS THE CLAIM OF 80 HHE HAS BEEN MADE FOR THE FIRST TIM E BEFORE THE CIT(A) AND BOTH THE ASSESSEE AND THE DEPARTMENT ARE AGGRIEVED, IN THE INTEREST OF JUSTICE, WE RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION. THE AS SESSING OFFICER IS FREE TO EXAMINE THE CLAIM OF THE ASSESSEE WITH REFE RENCE TO THE AMOUNT PAID OR PAYABLE TO MR. GAURAV MOTWANE AND AL SO WITH REFERENCE TO THE CLAIM OF 80 HHE. THE ISSUE IS TO BE DECIDED AFRESH ON THE FACTS AND AS PER THE LAW. TO THAT EXTENT GRO UNDS ARE CONSIDERED PARTLY ALLOWED IN BOTH THE APPEALS. IN THE SECOND ROUND OF LITIGATION, THE AUTHORITIES REJECTED THE CLAIM OF THE ASSESSEE WITH RESPECT TO DEDUCTION U/S 80HHE OF THE ACT. THE CLAIM HAS BEEN REJECTED ON THE GROUND THAT THE SAME HAS NOT B EEN FILED IN THE RETURN OF INCOME FILED WITH THE REVENUE AS WELL NOT FILED VID E REVISED RETURN OF INCOME WITH THE REVENUE WHILE THE SAID CLAIM WAS RAISED IN THE APPELLATE PROCEEDINGS FOR THE FIRST TIME BEFORE THE LEARNED CIT(A) IN THE FIRST ROUND OF LITIGATION. THE OTHER GROUND OF REJECTION WAS THAT THE CLAIM OF THE ASSESSEE IS NOT SUPPORTED BY ANY EVIDENCE. SECTION 80 HHE OF THE ACT AS WAS APPLICABLE FOR THE ASSESSMENT YEAR 2001-02 STOOD AS UNDER:- SECTION 80 HHE OF THE ACT READ AS UNDER: [DEDUCTION IN RESPECT OF PROFITS FROM EXPORT OF CO MPUTER SOFTWARE, ETC. ITA 8864/MUM/2010 20 80HHE. (1) WHERE AN ASSESSEE, BEING AN INDIAN COMPANY OR A PERSON (OTHER THAN A COMPANY) RESIDENT IN INDIA, IS ENGAGED IN THE BUS INESS OF, (I) EXPORT OUT OF INDIA OF COMPUTER SOFTWARE OR IT S TRANSMISSION FROM INDIA TO A PLACE OUTSIDE INDIA BY ANY MEANS; (II) PROVIDING TECHNICAL SERVICES OUTSIDE INDIA IN CONNECTION WITH THE DEVELOPMENT OR PRODUCTION OF COMPUTER SOFTWARE, THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSES SEE, [A DEDUCTION OF THE PROFITS ] DERIVED BY THE ASSESSEE FROM SUCH BUSINESS. [***] [ PROVIDED THAT IF THE ASSESSEE, BEING A COMPANY, ENGAGED IN THE EXPORT OUT OF INDIA OF COMPUTER SOFTWARE, ISSUES A CERTIFICATE REFERRED TO IN CLAUSE (B) OF SUB-SECTION (4A), THAT IN RESPECT OF THE AMOUNT OF THE EXPORT SPECIFI ED THEREIN, THE DEDUCTION UNDER THIS SUB-SECTION IS TO BE ALLOWED TO A SUPPORTING SOFTWA RE DEVELOPER, THEN THE AMOUNT OF DEDUCTION IN THE CASE OF AN ASSESSEE SHALL BE REDUC ED BY SUCH AMOUNT WHICH BEARS TO THE TOTAL PROFITS DERIVED BY THE ASSESSEE FROM THE EXPORT, THE SAME PROPORTION AS THE AMOUNT OF THE EXPORT TURNOVER SPECIFIED IN SUCH CER TIFICATE BEARS TO THE TOTAL EXPORT TURNOVER OF THE ASSESSEE. (1A) WHERE THE ASSESSEE, BEING A SUPPORTING SOFTWAR E DEVELOPER, HAS DURING THE PREVIOUS YEAR, DEVELOPED AND SOLD COMPUTER SOFTWARE TO AN EXPORTING COMPANY IN RESPECT OF WHICH THE SAID COMPANY HAS ISSUED A CERT IFICATE UNDER THE PROVISO TO SUB- SECTION (1), THERE SHALL, IN ACCORDANCE WITH AND SU BJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED IN COMPUTING THE TOTAL INCOME O F THE ASSESSEE A DEDUCTION OF THE PROFITS DERIVED BY THE ASSESSEE FROM THE DEVELOPING AND SELLING OF COMPUTER SOFTWARE TO THE EXPORTING COMPANY IN RESPECT OF WHICH THE CE RTIFICATE HAS BEEN ISSUED BY THE SAID COMPANY [TO SUCH EXTENT AND FOR SUCH YEARS AS SPECIFIED IN SUB-SECTION (1B) ] .] THE FOLLOWING SUB-SECTION (1B) SHALL BE INSERTED AF TER SUB-SECTION (1A) OF SECTION 80HHE BY THE FINANCE ACT, 2000, W.E.F. 1-4-2001: (1B) FOR THE PURPOSES OF SUB-SECTIONS (1) AND (1A), THE EXTENT OF DEDUCTION OF PROFITS SHALL BE AN AMOUNT EQUAL TO (I) EIGHTY PER CENT OF SUCH PROFITS FOR AN ASSESSM ENT YEAR BEGINNING ON THE 1ST DAY OF APRIL, 2001; (II) SIXTY PER CENT OF SUCH PROFITS FOR AN ASSESSM ENT YEAR BEGINNING ON THE 1ST DAY OF APRIL, 2002; ITA 8864/MUM/2010 21 (III) FORTY PER CENT OF SUCH PROFITS FOR AN ASSESS MENT YEAR BEGINNING ON THE 1ST DAY OF APRIL, 2003; (IV) TWENTY PER CENT OF SUCH PROFITS FOR AN ASSESS MENT YEAR BEGINNING ON THE 1ST DAY OF APRIL, 2004, AND NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF THE ASSESSMENT YEAR BEGINNING ON THE 1ST DAY OF APRIL, 2005 AND ANY SUBSEQUENT ASSESSMEN T YEAR. (2)THE DEDUCTION SPECIFIED IN SUB-SECTION (1) SHALL BE ALLOWED ONLY IF THE CONSIDERATION IN RESPECT OF THE COMPUTER SOFTWARE REFERRED TO IN THAT SUB-SECTION IS RECEIVED IN, OR BROUGHT INTO, INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE, WITHIN A PERIOD OF SIX MONTHS FROM THE END OF THE PREVIOUS YEAR OR, [W ITHIN SUCH FURTHER PERIOD AS THE COMPETENT AUTHORITY MAY ALLOW IN THIS BEHALF]. EXPLANATION [1].THE SAID CONSIDERATION SHALL BE D EEMED TO HAVE BEEN RECEIVED IN INDIA WHERE IT IS CREDITED TO A SEPARATE ACCOUNT MA INTAINED FOR THE PURPOSE BY THE ASSESSEE WITH ANY BANK OUTSIDE INDIA WITH THE APPRO VAL OF THE RESERVE BANK OF INDIA. [EXPLANATION 2.FOR THE PURPOSES OF THIS SUB-SECTIO N, THE EXPRESSION COMPETENT AUTHORITY MEANS THE RESERVE BANK OF INDIA OR SUCH OTHER AUTHORITY AS IS AUTHORISED UNDER ANY LAW FOR THE TIME BEING IN FORCE FOR REGUL ATING PAYMENTS AND DEALINGS IN FOREIGN EXCHANGE.] (3) FOR THE PURPOSES OF SUB-SECTION (1), PROFITS DE RIVED FROM THE BUSINESS REFERRED TO IN THAT SUB-SECTION SHALL BE THE AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINESS, THE SAME PROPORTION AS THE EXPORT TURNOVER BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE. [(3A) FOR THE PURPOSES OF SUB-SECTION (1A), PROFITS DERIVED BY A SUPPORTING SOFTWARE DEVELOPER SHALL BE, (I) IN A CASE WHERE THE BUSINESS CARRIED ON BY THE SUPPORTING SOFTWARE DEVELOPER CONSISTS EXCLUSIVELY OF DEVELOPING AND SE LLING OF COMPUTER SOFTWARE TO ONE OR MORE EXPORTING COMPANIES SOLELY ENGAGED IN EXPOR TS, THE PROFITS OF SUCH BUSINESS; (II) IN A CASE WHERE THE BUSINESS CARRIED ON BY A SUPPORTING SOFTWARE DEVELOPER DOES NOT CONSIST EXCLUSIVELY OF DEVELOPIN G AND SELLING OF COMPUTER SOFTWARE TO ONE OR MORE EXPORTING COMPANIES, THE AMOUNT WHIC H BEARS TO THE PROFITS OF THE BUSINESS, THE SAME PROPORTION AS THE TURNOVER IN RE SPECT OF SALE TO THE RESPECTIVE EXPORTING COMPANY BEARS TO THE TOTAL TURNOVER OF TH E BUSINESS CARRIED ON BY THE ASSESSEE.] ITA 8864/MUM/2010 22 (4)THE DEDUCTION UNDER SUB-SECTION (1) SHALL NOT BE ADMISSIBLE UNLESS THE ASSESSEE FURNISHES IN THE PRESCRIBED FORM, ALONG WITH THE RE TURN OF INCOME, THE REPORT OF AN ACCOUNTANT, AS DEFINED IN THE EXPLANATION BELOW SUB -SECTION (2) OF SECTION 288, CERTIFYING THAT THE DEDUCTION HAS BEEN CORRECTLY CL AIMED IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION. [(4A) THE DEDUCTION UNDER SUB-SECTION (1A) SHALL NO T BE ADMISSIBLE UNLESS THE SUPPORTING SOFTWARE DEVELOPER FURNISHES IN THE PRES CRIBED FORM ALONG WITH HIS RETURN OF INCOME, * (I) THE REPORT OF AN ACCOUNTANT, AS DEFINED IN THE EXPLANATION BELOW SUB- SECTION (2) OF SECTION 288, CERTIFYING THAT THE DED UCTION HAS BEEN CORRECTLY CLAIMED ON THE BASIS OF THE PROFITS OF THE SUPPORTING SOFTWARE DEVELOPER IN RESPECT OF SALE OF COM- PUTER SOFTWARE TO THE EXPORTING COMPANY; AND (II) A CERTIFICATE FROM THE EXPORTING COMPANY CONT AINING SUCH PARTICULARS AS MAY BE PRESCRIBED AND VERIFIED IN THE MANNER PRESCR IBED THAT IN RESPECT OF THE EXPORT TURNOVER MENTIONED IN THE CERTIFICATE, THE EXPORTIN G COMPANY HAS NOT CLAIMED DEDUCTION UNDER THIS SECTION : PROVIDED THAT THE CERTIFICATE SPECIFIED IN CLAUSE (B) SHALL BE DULY CERTIFIED BY THE AUDITOR AUDITING THE ACCOUNTS OF THE EXPORTING ASSE SSEE UNDER THE PROVISIONS OF THIS ACT OR UNDER ANY OTHER LAW.] (5) WHERE A DEDUCTION UNDER THIS SECTION IS CLAIMED AND ALLOWED IN RESPECT OF PROFITS OF THE BUSINESS REFERRED TO IN SUB-SECTION (1) FOR ANY ASSESSMENT YEAR, NO DEDUCTION SHALL BE ALLOWED IN RELATION TO SUCH PROFITS UNDER ANY OTHER PROVISION OF THIS ACT FOR THE SAME OR ANY OTHER ASSESSMENT YEAR. EXPLANATION.FOR THE PURPOSES OF THIS SECTION, (A) CONVERTIBLE FOREIGN EXCHANGE SHALL HAVE THE MEANING ASSIGNED TO IT IN CLAUSE (A) OF THE EXPLANATION TO SECTION 80HHC; (B) COMPUTER SOFTWARE MEANS ANY COMPUTER PROGRAM ME RECORDED ON ANY DISC, TAPE, PERFORATED MEDIA OR OTHER INFORMATION S TORAGE DEVICE AND INCLUDES ANY SUCH PROGRAMME [OR ANY CUSTOMISED ELECTRONIC DATA] WHICH IS TRANSMITTED FROM INDIA TO A PLACE OUTSIDE INDIA BY ANY MEANS; THE FOLLOWING ITEM (B) SHALL BE SUBSTITUTED FOR THE EXISTING ITEM (B) IN THE EXPLANATION BELOW SUB-SECTION (5) OF SECTION 80HHE BY THE FINANCE ACT, 2000, W.E.F. 1-4-2001 : (B) COMPUTER SOFTWARE MEANS, ITA 8864/MUM/2010 23 (I) ANY COMPUTER PROGRAMME RECORDED ON ANY DISC, T APE, PERFORATED MEDIA OR OTHER INFORMATION STORAGE DEVICE; OR (II) ANY CUSTOMISED ELECTRONIC DATA OR ANY PRODUCT OR SERVICE OF SIMILAR NATURE AS MAY BE NOTIFIED BY THE BOARD, WHICH IS TRANSMITTED OR EXPORTED FROM INDIA TO A PL ACE OUTSIDE INDIA BY ANY MEANS; (C) EXPORT TURNOVER MEANS THE CONSIDERATION IN R ESPECT OF COMPUTER SOFTWARE RECEIVED IN, OR BROUGHT INTO, INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN EXCHANGE IN ACCORDANCE WITH SUB-SECTION (2), BUT DO ES NOT INCLUDE FREIGHT, TELECOMMUNICATION CHARGES OR INSURANCE ATTRIBUTABLE TO THE DELIVERY OF THE COMPUTER SOFTWARE OUTSIDE INDIA OR EXPENSES, IF ANY, INCURRE D IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICES OUTSIDE INDIA; [(CA) EXPORTING COMPANY MEANS A COMPANY REFERRED TO IN SUB-SECTION (1) MAKING ACTUAL EXPORT OF COMPUTER SOFTWARE;] (D) PROFITS OF THE BUSINESS MEANS THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PR OFESSION AS REDUCED BY (1) NINETY PER CENT OF ANY RECEIPTS BY WAY OF BROK ERAGE, COMMISSION, INTEREST, RENT, CHARGES OR ANY OTHER RECEIPT OF A S IMILAR NATURE INCLUDED IN SUCH PROFITS; AND (2) THE PROFITS OF ANY BRANCH, OFFICE, WAREHOUSE O R ANY OTHER ESTABLISHMENT OF THE ASSESSEE SITUATE OUTSIDE INDIA; (E) TOTAL TURNOVER SHALL NOT INCLUDE (I) ANY SUM REFERRED TO IN CLAUSES (IIIA), (IIIB) AND (IIIC) OF SECTION 28; (II) ANY FREIGHT, TELECOMMUNICATION CHARGES OR INS URANCE ATTRIBUTABLE TO THE DELIVERY OF THE COMPUTER SOFTWARE OUTSIDE INDIA; AN D (III) EXPENSES, IF ANY, INCURRED IN FOREIGN EXCHAN GE IN PROVIDING THE TECHNICAL SERVICES OUTSIDE INDIA.] [(EA) SUPPORTING SOFTWARE DEVELOPER MEANS AN IN DIAN COMPANY OR A PERSON (OTHER THAN A COMPANY) RESIDENT IN INDIA, DEVELOPIN G AND SELLING COMPUTER SOFTWARE TO AN EXPORTING COMPANY FOR THE PURPOSES OF EXPORT.] ITA 8864/MUM/2010 24 AS COULD BE SEEN ABOVE THAT THE SAID SECTION IS A B ENEFICIAL PROVISIONS AND HENCE THE SAID PROVISIONS IS TO BE STRICTLY CONSTRU ED AT THE FIRST INITIAL STAGE TO DETERMINE THE ELIGIBILITY OF THE TAX-PAYER FOR THE GRANT OF THE RELIEF AND ONCE THE ELIGIBILITY AND ENTITLEMENT OF THE TAX-PAYER FO R THE DEDUCTION U/S. 80HHE OF THE ACT IS ESTABLISHED , THEN FULL EFFECT IS TO BE GIVEN TO THE BENEFICIAL PROVISION BY LIBERALLY CONSTRUING THE SAME SO THAT INTENDED OBJECTIVE OF BENEFICIAL PROVISION IS ACHIEVED . THE ASSESSEE HAS STATED TO HAVE RECEIVED PAYMENT FROM MAZZA MEDIA INC.,USA TOWARDS CONSULTAN CY FEES FOR DESIGNING WEBSITE AND CONTENT DEVELOPMENT AS PER RECORDS BEFO RE US. WE HAVE OBSERVED THAT THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE AND P ROVE BY COGENT EVIDENCES THAT THE ASSESSEE EXPORTED ANY COMPUTER SOFTWARE W HICH FALLS WITHIN THE FOUR CORNERS OF THE DEFINITION OF COMPUTER SOFTWARE MAND ATED BY THE PROVISIONS OF THE SAID SECTION. ON BEING ASKED BY THE BENCH TO B RING ON RECORD EVIDENCES OF ACTUAL EXPORT OF COMPUTER SOFTWARE, THE ASSESSEE COULD NOT BRING THE SAME ON RECORD SUCH AS FILING OF SOFTEX FORM ETC . AND O THER COGENT EVIDENCES TO SUBSTANTIATE ACTUAL EXPORT OF COMPUTER SOFTWARE TO BECOME ELIGIBLE FOR CLAIM U/S 80HHE OF THE ACT. IN OUR CONSIDERED VIEW, THE ASSESSEE COULD NOT BRING ON RECORD COGENT EVIDENCES OF HAVING ACTUALLY EXPOR TED ANY COMPUTER SOFTWARE WITHIN THE MANDATE OF SECTION 80HHE OF THE ACT TO B E ELIGIBLE FOR DEDUCTION U/S 80HHE OF THE ACT. THE ASSESSEE HAS ALSO NOT PR ODUCED ANY CERTIFICATE SUCH AS SOFTEX FORM ETC REGARDING DECLARATION OF EX PORT OF COMPUTER SOFTWARE WITH THE GOVERNMENT AUTHORITIES WHICH IS A MANDATOR Y REQUIREMENT STIPULATED BY GOVERNMENT OF INDIA FOR DECLARATION O F EXPORT OF COMPUTER SOFTWARE. IN THE ABSENCE OF ANY EVIDENCE ON RECORD , THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80HHE OF THE ACT CANNOT BE ALLOWE D AS THE ASSESSEE IS CONSULTANT PROVIDING WEBSITE DESIGNING AND CONTENT DEVELOPMENT FOR WEB SITE OF MAAZA MEDIA, INC , USA, WHEREBY BASED ON MATERIA L ON RECORD IT CANNOT BE SAID THAT THE ASSESSEE HAS ACTUALLY EXPORTED ANY CO MPUTER SOFTWARE AS MANDATED U/S 80HHE OF THE ACT IN THE ABSENCE OF COG ENT EVIDENCES ON RECORD. AS SUCH THE CLAIM OF DEDUCTION U/S 80 HHE OF THE AC T AS FILED BY THE ASSESSEE ITA 8864/MUM/2010 25 CANNOT BE ALLOWED TO THE ASSESSEE AND HENCE IN OUR CONSIDERED VIEW THE DEDUCTION U/S 80 HHE OF THE ACT CANNOT BE GRANTED T O THE ASSESSEE ON MERITS ITSELF AS CLAIMED BY THE ASSESSEE BASED ON MATERIA L ON RECORD.WE ORDER ACCORDINGLY. 17. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IN ITA NO. 8864/MUM/2010 FOR THE ASSESSMENT YEAR 2001-02 IS PARTLY ALLOWED A S INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH OCTOBER, 2016. # $% &' 05-10-2016 ( ) SD/- SD/- (C.N. PRASAD) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 05 -10-2016 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI E BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI
