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2007 (1) TMI 299 - AT - Income TaxEntitlement to claim benefit of Section 10A - Transfer of computer software by the Indian branch to the head office - Free trade zone - DTAA between India and USA - non-resident enterprise - 100 per cent export oriented unit - whether can be said to be ‘sale’ to the head office out of India - HELD THAT:- In the present case there is no dispute that the assessee developed ‘Computer Software’ and transmitted electronically to its head office. The assessee is an approved 100 per cent export oriented unit for development of computer software duly approved by the STP of India. The export of software during the previous year is evidenced by the Softex form duly certified by the competent officer of STPI. The consideration has been received by the assessee in the form of convertible foreign exchange. The only reason assigned by the Revenue authorities for denying exemption u/s 10A of the Act is that there has been no export sale by the assessee, since the computer software was transmitted to head office and since the assessee and its head office were one entity, there was no sale to any third party. This approach of the Revenue authorities were not correct in view of the provisions of section 10A(7) of the Act. The legal fiction of treating an assessee as a separate entity vis-a-vis sale by it or transfer by it from an eligible business or to an eligible business has been recognized u/s 10A(7) of the Act. A plain reading of the provisions of section 10A(7) together with the provisions of section 80-IA(8) of the Act, which reads as follows reveals statutory recognition of such legal fiction. There cannot be any doubt about the market price also since the transfer pricing officer has already held that the price at which the assessee transmitted the computer software to its head office was at arm’s length price. On this basis, the claim of the assessee deserves to be accepted. Thus, we deem it unnecessary to deal with the other arguments raised by the learned counsel for the assessee and the Ld DR regarding recognition of separate entity concept vis-a-vis an Indian PE and the foreign enterprise under the DTAA between India and USA, the Board Circulars as well as the decision of the Special Bench in the case of ABN Ambro Bank NV [2005 (8) TMI 294 - ITAT CALCUTTA-E]. Assessing Officer is directed to allow the claim for exemption of the assessee u/s 10A of the Act. The appeal of the assessee is allowed. In the result, the appeal by the assessee, is allowed.
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