Appeal details
Counselvise Citation
[2023] 102 COUNSELVISE.COM (IT) 0592 (ITAT-BANGALORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 month(s) 12 day(s)
Appellant
Respondent
Appeal Type
Miscellaneous Application
Pronouncement Date
24-10-2023
Appeal Filed By
Assessee
Order Result
PartlyAllowed
Bench Allotted
B
Next Hearing Date
27-07-2023
Assessment Year
2012-2013
Appeal Filed On
11-06-2023
Judgement Text
MP No.157/Bang/2023 M/s. Infosys Ltd., Bangalore IN THE INCOME TAX APPELLATE TRIBUNAL “B’’ BENCH: BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER MP No.157/Bang/2023 (Arising out of IT(TP)A No.718/Bang/2017 Assessment Year: 2012-13 M/s. Infosys Ltd. Electronic City Hosur Road Bangalore 560 100 PAN NO : AAACI4798L Vs. Deputy Commissioner of Income- tax Circle-3(1)(1) Bangalore APPELLANT RESPONDENT Appellant by : Shri Padam Chand Khincha, A.R. Respondent by : Ms. Supriya Rao O.N., D.R. Date of Hearing : 28.07.2023 Date of Pronouncement : 25.10.2023 O R D E R PER BEENA PILLAI, JUDICIAL MEMBER: This Miscellaneous Petition by the assessee seeking rectification order of the Tribunal in IT No.IT(TP)A No.718/Bang/2017 dated 28.11.2022. 2. The ld. A.R. submitted that the assessee came in appeal before this Tribunal with regard to software expenditure as capital expenditure by way of ground Nos.22 to 24. The Tribunal adjudicated this issue as follows: “11.7 We note that the Ld.AO has not examined the documentary evidences in respect of this claim. We therefore set aside this issue to the Ld.AO with a direction to consider the claim of the assessee in the light of evidences / documents filed. The Ld.AO shall also verify this issue based on the principles laid down by Hon’ble Supreme Court in case of Engineering Analysis (supra). Accordingly, these grounds raised by assessee stands partly allowed.” MP No.157/Bang/2023 M/s. Infosys Ltd., Bangalore Page 2 of 17 2.1 According to ld. A.R., the Tribunal wrongly applied the decision of Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. Vs. CIT reported in 433 ITR 471 and ld. A.R. submitted that Hon’ble Karnataka High Court in the case of CIT Vs. IBM India Pvt. Ltd. (357 ITR 88) (Karn.), wherein held that “payment of application software does not result in acquisition of any asset. It merely enhances the productivity or foundation, it is an aid in the manufacture process rather than the tool itself and hence such payments are to be treated as revenue expenditure. Alternatively, if it has been considered as a capital asset, the depreciation to be granted at 60% as against 25%.” 3. The ld. D.R. relied on the order of the Tribunal. 4. We have heard the rival submissions and perused the materials available on record. In this case, according to ld. A.R, the assessee came in appeal before this Tribunal with regard to treatment of cost of “application software” and it was not a “system software”. The claim of assessee that the total expenditure that the ld. AO treated an amount of Rs.4,51,18,32,386/- as capital expenditure and allowed depreciation at 25% worked out at Rs.1,12,79,58,096/- and addition was made at Rs.3,38,38,74,290/-. Now the contention of the assessee is that the whole of this expenditure should be allowed as a revenue expenditure as this is relating to application software and not relating to system software. In our opinion, if it is an application software, the whole expenditure to be treated as revenue expenditure only, in view of the judgement of Hon’ble Karnataka High Court in the case of IBM India Pvt. Ltd. cited (supra). Hence, it is appropriate to remit this issue to the file of ld. AO to examine all the relevant bills and invoices along with manual Book attached to these bills/invoices and decide the same afresh. Accordingly, we accede to the request of the ld. A.R. that there is a mistake apparent in order of the Tribunal in wrongly placing the decision of Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. MP No.157/Bang/2023 M/s. Infosys Ltd., Bangalore Page 3 of 17 Ltd. cited (supra) and the issue involved herein is remitted to the file of ld. AO to reconsider the issue in the light of our above observations. 5. Next issue in this MA is with regard to findings with relation to ground Nos.31 to 40. The ld. A.R. submitted that the assessee came in appeal before this Tribunal with regard to deduction u/s 10A & 10AA of the Act in respect of interest income on GLES deposit, interest income on loan given to employees, receipts from sale of scrap and incentive received from Airlines and income in the nature of inter-company cessation of trading liability. The Tribunal disposed of this ground vide findings in para 15.9 to 15.11 as follows: “15.9 Amount of income that that qualifies for the deduction under section 10AA is the profits that arises out of the business undertaking, and not from any other income earned by the assessee de horse the business of the undertaking. If the income earned by the assessee is held to be falling under the head, Income from other sources, the same will not qualify for the deduction section 10 AA of the Act. 15.10 From the above sources that have yielded income to the assessee for the year under consideration, except for income from sale of scrap, no other income could be said to have arisen out of the business undertaking. Further in respect of cessation of trading liability, we direct the Ld.AO to verify if the trade receivables were offered to tax by the assessee in any of the preceding assessment years. If the amount has been offered to tax in any of the preceding assessment years, as a sequitur, would obviously for part of the qualifying amount for the purposes of deduction under section 10AA of the Act. 15.11 In respect of interest income from GLES deposit, interest income from loans given to employees and incentive receipts from Airlines, in our opinion cannot be held to be profits that arises out of the business undertaking and therefore we hold the same not eligible for purposes of deduction under section 10AA of the Act. Accordingly these grounds raised by the assessee stands partly allowed.” 5.1 The ld. A.R. submitted that the Tribunal properly observed that the profit that arises out of the undertaking are eligible for deduction u/s 10AA of the Act and further finally not granted deduction u/s MP No.157/Bang/2023 M/s. Infosys Ltd., Bangalore Page 4 of 17 10AA of the Act and also not considered the various decisions cited by the ld. A.R. before this Tribunal. Further, it was submitted that assessee has realized certain amounts on sale of scrap. Similarly, few Airline Companies such as Lufthansa, Katar Airways, Indigo, Spice Jet, etc. have provided incentives for travelling regularly. The Inter-company cessation of liability and right back of the said liability was on account of set off of receivables and payables of Infosys Technologies China Ltd. All these incomes are generated in the course of business of assessee, these incomes were to be treated as business income and the same form part of the profit of the business of the SEZ Units, STPI Units and other units of the assessee and entitled for deduction u/s 10AA of the Act. Further, it was submitted that Inter-company cessation of trading liability and right back of the said liability was on account of set off of receivables and payables of Infosys Technologies China Company Ltd. The right back of liability involves a credit to the profit & loss account. The payables to Infosys Technologies China Company Ltd. was claimed as deduction in the earlier years and thus reduced the profits of the units entitled for deduction u/s 10AA of the Act. The right back of such liability as a credit to the Profit & loss account increased the profits of units entitled for deduction u/s 10AA of the Act. He submitted that the ld. AO may be directed to verify whether the payables to Infosys Technologies China Company Ltd. in the earlier assessment years have been claimed as deduction and reduced the profits of SEZ Units and if so, the right back of such liability to the credit of profit & loss account would be consequently eligible for deduction u/s 10AA of the Act. 6. The ld. D.R. relied on the order of the Tribunal. 7. We have heard the rival submissions and perused the materials available on record. In ground Nos.31 to 40, the assessee has raised the issue regarding granting of deduction u/s 10AA of the Act in respect of following income: MP No.157/Bang/2023 M/s. Infosys Ltd., Bangalore Page 5 of 17 a) Interest income from GLES deposit b) Interest income from loans given to employees c) Receipts from sale of scrap d) Incentive receipts from Airlines e) Income in the nature of Inter Company cessation of trading liability. 7.1 Now the contention of the ld. A.R. is that the Tribunal has not considered the following income properly with regard to granting of deduction u/s 10AA of the Act. a) Group leave encashment scheme interest: The LIC gives interest on loans GLES deposit/premium and the same has been offered to tax under business income held as there is nexus of GLES deposit with the business liability towards accumulated enhanced leave credits. b) Interest of employee loan: As an employee welfare measures, the assessee extends loans to its employees and the interest earned on this loan entitled for deduction u/s 10AA of the Act. c) Sale of scrap d) Incentive from Airlines. e) Inter-company cessation of trading liability. 7.2 According to the ld. A.R., this income arises out of business of the undertaking and are eligible for deduction u/s 10AA of the Act. The Tribunal not given categorical findings with regard to granting of deduction u/s 10AA of the Act though ld. AO categorically recorded the finding that the impugned income is attributable to the business but are not derived from the activity of software and export. According to the ld. A.R., this income offered by the assessee under the head “income from business or profession” and not under the head “income from other sources” and same has been assessed by the ld. AO under the had “profit & gains from business”. Hence, according to the ld. A.R., assessee is entitled for deduction u/s 10AA of the Act on these incomes. He also relied on the judgement of MP No.157/Bang/2023 M/s. Infosys Ltd., Bangalore Page 6 of 17 Hon’ble Karnataka High Court in the case of CIT Vs. Hewlett Packard Global Ltd. (87 Taxmann.com 182) (Karn.), wherein deduction u/s 10AA of the Act was allowed in respect of income from bank deposit employee loan. In our opinion, the Tribunal has considered these issues in para 15.9 to 15.11 as discussed earlier. The Tribunal has given a finding in para 15.10 that except income from sale of scrap no other income could be said to have arisen out of business undertaking. In respect of cessation trading liability, the issue was remitted to the file of ld. AO to verify if the trade receivables were offered to tax by the assessee in any of the preceding assessment years. If the amount has been offered to tax in any of the preceding assessment years and offered the same for taxation in this A.Y. would entitle for deduction u/s 10AA of the Act. 7.3 Further, in respect of interest income from GLES deposit, interest income from loan given to employees and incentive received from Airlines the Tribunal has given a finding that it cannot be held to be profit arisen not out of the business undertaking and therefore, it was held that not eligible for deduction u/s 10AA of the Act. Now the contention of the ld. A.R. is that judgement of Hon’ble Karnataka High Court in the case of Hewlett Packard Global Ltd. is directly on the issue and deduction u/s 10AA of the Act to be granted on the above income. 7.4 We have gone through the above judgement cited by the ld. A.R. However, we find that the above judgement cited (supra) is related to section 10A r.w.s. 10B of the Act but in the present case, the exemption sought by the assessee is related to section 10AA of the Act. The Bench on earlier occasion not followed that judgement. Hence, it cannot be said that on these issues raised by the assessee, there is a mistake apparent on record so as to rectify u/s 254(2) of the Act. Accordingly, we dismiss these grounds in this MA. MP No.157/Bang/2023 M/s. Infosys Ltd., Bangalore Page 7 of 17 8. Next ground in this MA is with regard to non-granting of deduction u/s 80JJAA of the Act as raised by the assessee in appeal as ground No.43. 8.1 The ld. A.R. submitted that the assessee came in appeal before this Tribunal with regard to non-granting of deduction u/s 80JJAA of the Act amounting to Rs.307,52,60,884/- in respect of employment of new workmen. The Tribunal considered this issue in para 17 to 17.7 of its order as follows: 17. “Ground no. 43 - Deduction under section 80JJAA being disallowed. 17.1The Ld.AR submitted that copy of the Audit report under section 80JJAA, being Form No. 10DA was submitted to the Ld.AO vide submission dated 28.5.2014. The Ld.AO thereafter called upon assessee to justify the allowability of deduction under section 80JJAA. The assessee explained in detail as to why deduction under section 80JJAA should be allowed along with supporting case laws. It was also submitted that the DRP in its directions for AY 2011-12 allowed deduction claimed under section 80JJAA subject to verification of deduction of only those payments made to ‘workmen’ who are not employed in supervisory capacity. The Ld.AR submitted that, various details were filed before the Ld.AO explaining as to how: (i) salary and wages are synonymous (ii) employees of Infosys are workman under section 80JJAA (iii) amendment to section 80JJAA by the Finance Act, 2013 w.e.f 1.4.2014 cannot be regarded as retro-active. 17.2 The Ld.AO however held that, the assessee is not eligible for deduction under section 80JJAA for the following reasons: 1. The assessee is not an industrial undertaking and is engaged in the business of development of computer software and export thereon. The activities of IT company cannot be considered as manufacturing or production. The intent of section 80JJAA has been clarified by the amended provisions which provides that the deduction is available to an Indian company deriving profit from manufacture of goods in a factory. 2. The assessee does not produce any articles or things. 3. The assessee does not pay ‘wages’ to its employees; but pays salary to its regularly employed engineers. Salary does not come within the definition of ‘wages’. 4. The assessee does not employ any workman within the definition of Industrial Disputes Act, 1947. The definition of workman provided therein does not include software professionals. MP No.157/Bang/2023 M/s. Infosys Ltd., Bangalore Page 8 of 17 5. Section 10B uses the phrase ‘articles or things or computer software’ and therefore ‘articles or things’ do not include ‘computer software’. 17.3 The DRP held that the assessee is not engaged in manufacture or production of article or thing and therefore not eligible for deduction under section 80JJAA. It was held that manufacture or production of article or thing cannot be equated with software development. The Ld.AR submitted that the decision of coordinate bench of this Tribunal in the case of DCIT v OnMobile Global Ltd reported in (2014) 31 ITR (Trib) 348 which allowed the deduction under section 80JJAA for a Company engaged in providing IT enabled services (Computer software), has not been accepted by the revenue and appeal has been filed before Hon’ble Karnataka High Court. The DRP for these reason, up held the addition proposed by the Ld.AO in the draft assessment order. Following the DRP directions, the Ld. AO disallowed the deduction claimed under section 80JJAA. 17.4 The Ld.AR submitted that, the assessee is engaged in the business of development, designing and manufacture of computer software. He elide on the decision of Coordinate Bench of this Tribunal in case of DCIT v OnMobile Global Ltd and vice versa reported in [2014] 31 ITR (Trib) 348 that allowed the deduction under section 80JJAA for a company which was engaged in the business of software services, i.e., business of providing mobile value added services and products such as caller and ring back tones, dynamic voice mail, missed call alert service and other interactive media solutions like tele-voting, interactive programming by observing as under: Relevant observations of the ITAT are as under. “Held, that as the assessee was engaged in the development and manufacture of software, the assessee was covered within the definition of industrial undertaking. The definition of "industrial undertaking" as stipulated in section 10(15) and section 72A of the Act extended to undertakings that were engaged, inter alia, in the manufacture of computer software or recording of programmes on discs, tapes, perforated media or other information devices. The assessee was one such undertaking. The assessee had claimed deduction of only those payments made to "workmen" who were not employed in supervisory capacity. Therefore, the assessee was entitled to the deduction under section 80JJAA of the Act.” 17.5 He submitted that, the question as to whether the software industry can be regarded as an ‘industrial undertaking’ was considered by the Hon’ble Karnataka High Court in the case of CIT v Texas Instruments India P Ltd reported in [2021] 127 taxmann.com 59. The Hon’ble Karnataka High Court held as under. MP No.157/Bang/2023 M/s. Infosys Ltd., Bangalore Page 9 of 17 16.6 In our considered view, the concept of the workman has undergone a drastic change and is no longer restricted to a blue collared person but even extends to whitecollared person. A couple of decades ago, an industry would have meant only a factory, but today industry includes software and hardware industry, popularly known as the Information technology industry. Thus the undertaking of the Assessee being an industrial undertaking, the persons employed by the Assessee on this count also would satisfy the requirement of a workman under section 2(s) of the ID Act. We have perused the submissions advanced by both sides in the light of records placed before us. 17.6 We note that identical issue was considered by the Coordinate Bench of this Tribunal in case of SAP Labs India Pvt. Ltd. in IT(TP)A Nos. 623, 566/Bang/2016 for Assessment Year 2011-12 by order dated 29/11/2021 by observing as under: “13. As far as corporate tax grounds are concerned, Grd.No.6 to 6.4 is with regard to deduction u/s.80JJA of the Act and these grounds read thus: 6. While doing so, the learned DRP/AO erred in: 6.1 Not appreciating the fact that deduction under section 8oJJAA of the Act is Assessee specific and not undertaking / unit specific. [corresponding to ground no. 6.1] 6.2 Invoking the provisions of section 8oA(4) in the context of deduction under section 8oJJAA for 10A units [corresponding to ground no. 6.2] 6.3 Not appreciating the fact that the amendment made in the Finance Act 2013, restricting the deduction to an Indian Company deriving profits from the manufacture of goods in a factory, is applicable with effect from April 1, 2014 and is prospective in nature. [corresponding to ground no. 6.3] 6.4 Considering the orders for earlier years while disallowing the deduction u/s 80JJAA of the Act without considering the fact that each year should be considered separately. [corresponding to ground no. 6.4] 14. As far as the aforesaid ground of appeal are concerned, the assessee claimed deduction under section 80JJAA of the Act a sum of Rs.4,26,67,792/-. The AO denied the claim of the assessee for deduction on 2 grounds namely: (1) that persons working in software units cannot be regarded as workmen as contemplated by the provisions of section 80JJAA of the Act. (2) Deduction under section 80JJAA cannot be allowed in respect of additional wages paid to employees who are working in 10A units because under the provisions of 80A(4) of the Act, the assessee cannot enjoy benefits both under sections 10A and 80JJAA of the Act in respect of the same income. On objections by the assessee before the DRP, the DRP rejected the claim of the assessee. The DRP also took the view that, the assessee has not given Form 10DA for each 10A unit separately. The AO in MP No.157/Bang/2023 M/s. Infosys Ltd., Bangalore Page 10 of 17 the order giving effect to the order of the DRP on this aspect has observed as follows: “7.5 Apart from the above, I would like to highlight the fact that as per the provisions of section 80JJAA, deduction is allowable taking each unit as a basis rather than the assessee as an undertaking. Accordingly, the assessee is required to compute deduction u/s 80JJAA in respect of each eligible unit separately. While doing so, all the conditions stipulated would be applied taking each unit as the reference point, i.e The additional wages are required to be restricted by excluding the additional wages payable to 100 workmen in respect of each unit. There should be increase in workmen in each year to the extent of minimum 10% of the existing workmen at each unit level. It is required to be seen that the workmen employed for less than 300 days during the previous year under reference to be excluded from the computation of additional wages payable. In the instant case, the assessee has not considered each unit as a basis for the purpose of fulfillment of conditions enumerated above as per working given in Form 10DA. In a sense, the assessee has considered total number of employees/workmen working in all the units put together as basis in order to reckon 10% increase in workforce during the year under reference, inclusion of only 100 employees in respect of all the units for the purpose of quantifying the additional wages paid instead of considering 100 employees for inclusion in each and every unit. 7.6 In view of the above, I am of the opinion that in the absence of furnishing unit wise certificate in respect of fulfillment of conditions stipulated u/s 80JJAA, the assessee is rot eligible to claim deduction u/s 80JJAA. On this specific ground itself, I have no hesitation to deny the deduction u/s 80JJAA for the current year also.” 15. The learned Counsel for the assessee has accepted the decision of the DRP in so far as ground No.6.1 is concerned and is willing to give the details as per each unit. The deduction can therefore be considered for each 10A unit separately. The assessee is directed to furnish the necessary details in this regard and the AO may examine the same in accordance with law. As far as ground 6.2 is concerned, it was agreed by the parties that in assessee’s own case for Assessment Year 2007-08 in IT(TP)A No.1006/Bang/2011 by order dated 30.06.2016, this Tribunal rejected the claim of the assessee by observing as follows: “25. However coming to the second limb of the reasoning given by the lower authorities, which is section 80A(4), the said section is reproduced hereunder : MP No.157/Bang/2023 M/s. Infosys Ltd., Bangalore Page 11 of 17 “(4) Notwithstanding anything to the contrary contained in Section 10A of section 10AA or section 10B or section 10BA or in any provisions of this Chapter under the heading ‘C.- Deductions in respect of certain incomes”, where, in the case of an assessee, any amount of profits and gains of an undertaking or unit of enterprise or eligible business is claimed and allowed as a deduction under any of those provisions for any assessment year, deduction in respect of, and to the extent of, such profits and gains shall not be allowed under any other provisions of this Act for such assessment year and shall in no case exceed the profits and gains of such undertaking or unit or enterprise or eligible business, as the case may be.” However coming to the second limb of the reasoning given by the lower authorities, which is section 80A(4), the said section is reproduced hereunder : As per the assessee even if deduction under section 10A of the Act is allowed for these units, a further deduction u/s.80JJA of the Act, is also allowable. Argument of the assessee's counsel is that the limitation put in by Section 80A(4) of the Act, would apply only to profit linked deductions. There can be no dispute that deduction under Section 10A of the Act, is profit linked. In so far as deduction u/s.80JJA is concerned, a look at sub-section (1) of the said section is required, which is reproduced below : 80JJAA(1) : Where the gross total income of an assessee, being an Indian company, includes any profits and gains derived from any industrial undertaking engaged in the manufacture of production of article or thing, there shall, subject to the conditions specified in sub-section (2)m be allowed a deduction of an amount equal to thirty per cent of additional wages paid to the new regular workmen employed by the assessee in the previous year for three assessment years including the assessment year relevant to the previous year in which such employment is provided. A reading of the above sub-section would clearly show that the deduction is given on profits and gains derived from industrial undertaking engaged in manufacture of production of article or thing. It is only for quantification of the amount that 30% is applied. In our opinion the deduction is very much linked to the profits of the undertaking. We are therefore unable to accept this line of argument taken by the counsel. In the result, we hold that assessee is not eligible for deduction u/s.80JJAA of the Act, in respect of its units 2 , 3 and 4. However, denial of such claim in respect of unit-1, where it was not claiming any deduction, in our opinion is incorrect. We, therefore set aside the orders of authorities below for the limited purpose of quantifying the eligible deduction u/s.80JJA in respect of Unit-1. In the result, ground no.6 is treated as partly allowed for statistical purpose.” 16. As far as ground No.6.3 is concerned, the issue has been decided in Assessment Year 2007-08 in the order referred to above and this Tribunal held that the employees engaged in software industry cannot be regarded as MP No.157/Bang/2023 M/s. Infosys Ltd., Bangalore Page 12 of 17 workmen for the purpose of section 80JJAA of the Act. The following were the relevant observations of the Tribunal: “24. We have perused the orders and considered the rival contentions. The claim of assessee with regard to additional wages paid to new workman was denied for a reason that engineers who were newly employed by the assessee were not considered as workers by the lower authorities. However, in a similar situation in the case of Texas Instruments India P. Ltd, (supra), it was held by the coordinate bench at para 6 and 7 of its order, as under: 6. We have heard the rival submissions and carefully perused the records. Considering the factual position after referring to the various documents filed by the assessee, the learned CIT(A) held as under: "According to the AO if an employee or workman is getting a salary of more than Rs.1,600 per month he is not covered by the definition of workman. However as per cl. (iv) of s. 2(s) of the Industrial. Disputes Act a worker, employed in supervisory capacity and getting a salary of more than Rs. 1,600 per month only be excluded from the definition of workman. In appellant's case the software engineers in respect of whom deduction under s. 80JJAA has been claimed have not been employed in a supervisory capacity even though they may be getting a salary of more than Rs.1,600 per month. As the software engineers were not employed in supervisory capacity they cannot be excluded from the definition of workman. Further as per the notification of the Karnataka Government, the appellant company engaged in the development of software is covered by the Industrial Disputes Act. As such, I am of the considered opinion that the appellant has satisfied all the conditions for claiming relief under s. 80JJAA. However, I find that the appellant has claimed deduction of Rs.2,55,81,220 with reference to the additional wages of Rs.8,52,70,736 which included the wages of Rs.4,87,64,029 in respect of the new workmen employed during the year ended 31st March, 2000 relevant to the asst. yr. 2000-01. As there was no claim for relief under s. 80JJAA for the asst. yr. 2000-01, the relief in respect of the workers employed in asst. yr. 2000-01 cannot be considered for relief under s. 80JJAA in the asst. yr. 2001-02. As such the appellant will be entitled for relief under s. 80JJAA of Rs.1,09,52,012 being 30 per cent of the additional wages of Rs.3,65,06,707 (Rs.8,52,70,736 Rs.4,87,64,029) in respect of the new workmen employed during the previous year relevant to the asst. yr. 2001-02. Similarly, for asst. yr. 2002-03 the appellant has claimed deduction of Rs.4,78,05,176 being 30 per cent of the wages of Rs. 1,59,30,588 which also included the wages of Rs.4,38,68,182 pertaining to the new workers employed in the previous year 1999- 2000. For the reasons mentioned above the appellant is not entitled for relief under s. 80JJAA in respect of the wages pertaining to the workers employed in the previous year 1999-2000. As such the appellant would be eligible for relief of Rs. 3,46,44,722 being 30 per cent of the additional wages of Rs.11,54,82,406 (Rs.15,93,50,588 Rs.4,38,68,182) in respect of the workmen employed in previous years 2000-01 and 2001-02. The learned Authorised Representatives of the appellant vide order sheet noting dt. 24th Aug., 2004 agreed that the relief under s. 80JJAA in respect of the employees who MP No.157/Bang/2023 M/s. Infosys Ltd., Bangalore Page 13 of 17 joined in the previous year relevant to the asst. yr. 2001-02 onwards only may be considered and in respect of the employees who joined in earlier years the appellant is not pressing for relief under s. 80JJAA. In the circumstances, the AO is directed to allow the relief under s. 80JJAA of Rs. 1,09,52,012 and Rs.3,46,44,722 for asst. yrs. 200102 and 2002-03 respectively." 7. As stated earlier the assessee had filed the details of the software engineers employed during the years under consideration containing the names of the employees, designation and date of joining. Further, in the same list the details of total number of employees joined during both the assessment years, number of employees without supervisory roles, workmen joined, number of supervisors joined and workmen joined and relieved during the years under consideration. A cursory perusal of this list shows that the assessee had claimed deduction in respect of employees, who had joined as engineers in their respective field such as systems engineer, test engineer, software design engineer, IC design engineer, lead engineer etc. A cursory perusal of those lists establishes that the assessee had claimed deduction in respect of the engineers employed not in the category of supervisory control. All these details were filed before the AO during assessment proceedings. These facts were not properly considered by the AO. Further, from the order of the CIT(A), it is seen that he had taken note of the notification issued by the Government of Karnataka and concluded that as per the notification issued, the assessee company engaged in the development of software is covered by the Industrial Disputes Act, 1947. Further it is not the case of the Revenue that the assessee did not fulfil the conditions extracted elsewhere in this order. Considering all those factual matters we do not find any infirmity in the order of CIT(A) according relief to the assessee. In fact he had clarified the relevant portions related to Industrial Disputes Act, 1947 and IT Act while granting relief to the asssessee which are extracted at pp. 5 and 6 of this order. After carefully considering the same, we are inclined to accept the reasons shown by the learned CIT(A). The learned CIT Departmental Representative could not assail the finding reached by the learned CIT(A) by bringing in any valid materials. The order of the CIT(A) is confirmed. It is ordered accordingly. There is no case for the Revenue that assessee had failed to file details of software engineers employed by it. In our opinion software engineers newly employed by it fell within the meaning of the word 'workmen'.” 17. We are of the view that ground Nos.6 and 6.4 should be decided in the light of the directions given above by the AO afresh after affording opportunity of being heard to the assessee.” 17.7. The facts and circumstances under which the disallowance is made in the year under consideration is similar with the case referred above. Respectfully following the above view, we direct the Ld.AO to consider the claim in accordance with the observations and principles laid down by this Tribunal in MP No.157/Bang/2023 M/s. Infosys Ltd., Bangalore Page 14 of 17 herein above. Needless to say that proper opportunity of being heard is to be granted to the assessee. Accordingly, this ground raised by assessee stands allowed for statistical purposes.” 8.1 According to the ld. A.R., the only issue in dispute is whether the assessee, being engaged in the business of software development is eligible for a claim of deduction u/s 80JJAA of the Act. In other words, the ld. AO disallowed the deduction u/s 80JJAA of the Act for the reason that the activity of the software development cannot be regarded as manufacturer or production of articles or goods and employees in software industry cannot be regarded as “workmen” under the Industrial Dispute Act, 1947. The denial of deduction u/s 80JJAA of the Act was not made due to applicability of section 80A(4) of the Act i.e. for the reasons mentioned herein below: a) Deduction u/s 80JJAA of the Act as assessee specific and not undertaking/unit specific. b) Invoking of section 80A(4) of the Act in the context of deduction u/s 80JJAA of the Act for section 10A units. 8.2 According to the ld. A.R., there was no ground before this Tribunal on this aspect. The ld. Standing Counsel for the department also did not argue before the Tribunal on this aspect. Thus, the facts and circumstances of the present case are not identical to decision relied by the Tribunal in the case of SAP Labs India Pvt. Ltd. IT(TP)A Nos. 623, 566/Bang/2016 for Assessment Year 2011-12 by order dated 29/11/2021. Hence, the direction of the Tribunal to follow the ratio laid down in the decision of SAP Labs India Pvt. Ltd. cited (supra) is not correct. If the ld. AO is allowed to examine the applicability of section 80A(4) of the Act in the context of section 80JJAA of the Act, it amounts to permit the ld. AO to re-examine the said claim from a new perspective which was not at all the revenue’s case or argument or ground before the Tribunal. It would also result in giving second chance for the revenue to have a re-look into the claim of deduction u/s 80JJAA of the Act, when the revenue itself MP No.157/Bang/2023 M/s. Infosys Ltd., Bangalore Page 15 of 17 not argued on the applicability of section 80JJAA of the Act from a new perspective. Further, he relied on the judgement of Hon’ble Karnataka High Court in the case of CIT Vs. Texas Instrument India Pvt. Ltd. (127 Taxmann.com 39) (Karn.), wherein held that “Software development activity qualifies as manufacture and production of articles or things and salary paid to software employees are eligible for deduction u/s 80AA of the Act.” Non-consideration of correct facts of the case and also the judgement of Hon’ble Karnataka High Court cited (supra) constitutes a mistake apparent on record, which requires to be rectified. He also relied on the following judgements:- a) CIT Vs. K.M. Sugar Mills (275 ITR 247) (All.) b) Decision of Tribunal in the case of Bharath Biotech Ltd. Vs. DCIT (2015) 57 Taxmann.com 117 (Hyd. – Trib.) c) CIT Vs. Ramdas Pharmacy (77 ITR 276) (Mad.) 9. The ld. D.R. relied on the order of the Tribunal. 10. We have heard the rival submissions and perused the materials available on record. The Tribunal considered the issue relating to section 80JJAA of the Act along with reliance placed in the case of Hon’ble Karnataka High Court in the case of CIT Vs. Texas Instrument India Pvt. Ltd. cited (supra) and recorded the findings in para 17 and 17.7 and remitted the issue to the file of ld. AO for reconsideration. Now the contention of the ld. A.R. is that the Tribunal ought not to have placed reliance on earlier decision of Tribunal in the case of SAP Labs India Pvt. Ltd. cited (supra) which gives another chance to the ld. AO to examine the issue in a new perspective. 11. In our opinion, u/s 254(1) of the Act, wherein appeal is preferred before the Tribunal by a party concerned, the Tribunal, after giving both the parties an opportunity of being heard passes such order thereon as it thinks fit. The powers of the Tribunal u/s 254(1) of the Act are of widest amplitude. The word “thereon”, of course, restricts the jurisdiction of the Tribunal to the subject matter MP No.157/Bang/2023 M/s. Infosys Ltd., Bangalore Page 16 of 17 of appeal. The word “pass such orders thereon as the Tribunal thinks fit” includes all the power except power of enhancement which are conferred upon the Tribunal. Though the powers are conferred u/s 254(1) of the Act are very wide, the Tribunal cannot arm powers which are inconsistent with the express provisions of the Act or Scheme. In the present case, the Tribunal examined the issue raised before it and remitted the issue in dispute to the file of ld. AO to reconsider the same in the light of earlier decision of the Tribunal and the Tribunal recorded conclusion with regard to disputed issue raised before it and setting out with reasons in support of its conclusion. Now the argument of ld. A.R. is that it gives another chance to the department to examine the issue on the new perspective. In our opinion, the Tribunal taken a note of all the facts and circumstances of the case and remitted the issue in dispute to the file of ld. AO. We do not see any irregularity in this action of the Tribunal. In our opinion, Tribunal actually confined itself to the issue that arises in the appeal before it and not travelled outside ambit of jurisdiction and expressed opinion in accordance with law, which may be prejudicial to the assessee’s interest or help the department and that cannot be lead to the conclusion that there is a mistake apparent on record to be rectified u/s 254(2) of the Act. Hence, in our opinion, we find no merit in the argument of ld. A.R. and same is devoid of merit. Accordingly, this issue in this MA is dismissed. 12. In the result, the MA filed by the assessee is partly allowed. Order pronounced in the open court on 25 th Oct, 2023 Sd/- (Chandra Poojari) Accountant Member Sd/- (Beena Pillai) Judicial Member Bangalore, Dated 25 th Oct, 2023. VG/SPS MP No.157/Bang/2023 M/s. Infosys Ltd., Bangalore Page 17 of 17 Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(Judicial) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore.
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