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2008 (6) TMI 234 - AT - Income TaxAllowability of deduction u/s 10B - computer software business - whether the assessee should own plant and equipment in which the software is developed for export or whether the job can be outsourced to a person who possesses the necessary equipment and infrastructure - HELD THAT:- It is also necessary to bear in mind that no decision rendered u/s 109 of the Act or under the Finance Act was brought to our notice in which it was held that in order to enjoy the concessional rate of tax, the assessee itself should own plant and machinery and manufacture the goods himself with the help of those plant and machinery. In the light of this legal position, we are persuaded to hold that even u/s 10B it is not necessary that the manufacturing activity has to be carried on by the assessee himself by using his own plant and machinery. If this first condition of cl. (iii) of sub-s. (2) is satisfied then the other two conditions of the clause are not applicable and, therefore, there is no question of assessee fulfilling the same. Facts show that though the assessee was using the infrastructure and facilities available with Seacom for producing the computer software, it was being done under the supervision and control of the personnel of the assessee. The assessee company also had its own computers and its personnel also had their laptop computers for doing the integration of the component programmes produced at Seacom, Pune. This aspect has been brought to the notice of the AO in the assessee's note. The software development charges paid by the assessee were partly for the work stations provided by Seacom and the balance of represented reimbursement of salaries paid by Seacom to the assessee's employees and expenses on travelling, boarding and lodging for them reimbursed. Apparently, the assessee's employees were required to stay in Pune for sometime to carry out the work of developing the software and they have to be paid salaries and the expenses on their boarding and lodging had to be taken care of. The salaries and expenses were paid by Seacom and the assessee reimbursed Seacom the same. The software developed by the assessee with the help of the infrastructure and equipment provided by Seacom were exported by the assessee and for the year under appeal such exports sum. The other conditions of the section, such as, receipt of the sale proceeds into India in convertible foreign exchange within the prescribed period have been satisfied. In these circumstances, we are of the view that the CIT(A) has rightly accepted the assessee's claim for exemption u/s. 10B of the Act. We affirm his order and dismiss the appeal filed by the Department with no order as to costs.
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