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2011 (4) TMI 870 - AT - Income TaxDeduction u/s 10B - assessee engaged in providing varieties of services of software development, quality assurance and testing services, support services - AO denied exemption claimed u/s 10B on various grounds - Held that:- On contention of Revenue that services like quality assurance and code testing is not covered u/s 10B and Notification No. 11521 it is held that assessee is doing back office operations for its clients which is covered as per Notification No. 50890 (E) dated 26.9.2000 notifying that a number of I.T. enabled sources such as back office operations, call centers, data process etc. would qualify as computer software for the purposes of section 10A/10B Non availability of production data - Held that:- Denial of exemption on this ground has no merit in view of the assessee carrying out back office operations for it clients, which is project of service industry for which production data is not maintainable. Restructuring of business already in existence as the assessee was found to be operating from three different places and no new computers were purchased by the assessee for carrying on its business of computer software - Held that:- Assessee was carrying on its business from Unit I at SPIC Centre, Chandigarh and Unit II at Sector 34-A, Chandigarh. The address of Mohali was only a registered office of the assessee company from which no activity was carried out by the assessee company. There is no restructuring of business of the assessee. Further, the assessee having carried out its work on the loaned equipments and evidence in respect of which was considered by the CIT(A), the assessee is entitled to the claim of deduction u/s 10B of the Act. Invoices do not bear the address of the unit from which such invoices had been issued - Held that:- The assessee with its registered office at Mohali and its Unit I and Unit II at Chandigarh was operating as a composite unit and there is no requirement to furnish the addresses of the individual places from which services were rendered as against the mentioning of registered office on the invoices issued by the assessee. No approval from the Board appointed by the Central Government for 100% EOU status - Held that:- CIT(A) held the status of 100% EOU to be granted to the assessee on the basis of approval letter from STPI as 100% EOU status given to assessee company placed by assessee. Since Revenue before us has failed to point out any contrary evidence to the same hence we hold that assessee is eligible to the exemption claimed u/s 10B. Understatement of profits - Held that:- We find that the total remuneration declared by the assessee is backed by the bills raised by the assessee as per the terms of agreement between the parties, which in turn are open for scrutiny before the STPI authorities, which had recognized the status of the assessee to be 100% EOU. In the gamit of evidence available on record, we find no merit in the rejection of the book results shown by the assessee from year to year. The Assessing Officer in any case had failed to bring any contrary record except for its contention that the profits shown by the assessee were relatively on a higher side for period starting October 2004, which in any case were on account of change in the remuneration clause. Accordingly, we direct the Assessing Officer to accept the results shown by the assessee in the captioned years i.e. assessment years 2005-06 to 2007-08 as the profits of the eligible business, which in turn are entitled to the benefit of exemption u/s 10B of the Act. Dis-allowance u/s 69C - Held that:- The provisions of section 69C are not attracted in the present case as there is no finding of the AO of the assessee having incurred such expenditure for earning of the receipts of the eligible business. The addition was made on the presumption that in order to earn such higher revenues, the assessee is deemed to have incurred such an expenditure. Dis-allowance u/s 14A - AO dis-allowed 10% of personal and administrative expenses incurred by the assessee as being relatable to the earning said dividend income - Held that:- The said disallowance is on a higher side hence we restrict the dis-allowance to Rs. 2 lacs, keeping in view the quantum of dividend income earned by the assessee - Appeal are partly allowed
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