TMI Blog2004 (12) TMI 637X X X X Extracts X X X X X X X X Extracts X X X X ..... hartered accountants firm and is a member of Arthur Anderson Worldwide SC ( AWSC , in short), a co-operative company organized under the laws of Switzerland. In the relevant previous year, the assessee had claimed a deduction of Rs. 8,30,98,810 on account of reimbursement of expenses under the member firm inter-firm agreement with Arthur Anderson Worldwide, Switzerland . This deduction was, however, disallowed by the Assessing Officer. The assessee carried the matter in appeal before the CIT(A) but without any success. However, when the matter travelled to the Tribunal in second appeal, a co-ordinate Bench of the Tribunal, in which one of us (the Accountant Member) was also present, restored the matter to the file of the Assessing Officer by observing as follows: "The claim of the assessee needs to be examined on the touchstone of section 37(1) of the Income-tax Act, 1961 and other related sections. We find that the Assessing Officer did not have the opportunity to consider this aspect in the light of the aforesaid evidences*, which the Tribunal permitted the assessee to adduce at the time of hearing. As such, we aside the impugned order and restore the issue to the file of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rthur Anderson and access to knowledge and database and fees for technical services for provision for various other services. On this basis, the Assessing Officer held that the expenditure is incurred wholly and exclusively for the purposes of business. Having held so, however, the Assessing Officer disallowed 20% of the said expenditure on the ground that "considering the magnitude and complexity of expenditure, it cannot be ruled out that there may be an element of excess expenditure embedded in the reimbursement of cost of AWSC". A reference was then made to the training expenses, in addition to the training expenses incurred directly, and to the hotel expenses which, according to the Assessing Officer, completely verified. The disallowance was thus worked out at Rs. 1,66,19,762. Aggrieved, assessee carried the matter in appeal before the CIT(A) who deleted the impugned disallowance. While deleting the disallowance, the Assessing Officer observed as follows: "The Assessing Officer has discussed at length the benefits turned by the appellant from the association of appellant with AWSC in various fields. In the light of voluminous evidence submitted by the appellant and examine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts all the contentions but not the consequences flowing from accepting the same. That cannot meet our approval. The CIT(A) was quite justified in deleting the disallowance. We approve and confirm the stand of the CIT(A). His action of deleting the disallowance does not call for any interference by us. Accordingly, we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter. 8. ITA No. 6192/Mum./04 is, thus, dismissed. 9. We now take up ITA No. 1735/Mum./02, i.e., assessee s appeal for the assessment year 1998-99. 10. In the first ground of appeal, the assessee has raised the following grievance: The CIT(A) has erred in confirming the disallowance of Rs. 9,25,02,953 paid to Arthur Anderson Worldwide SC (AWSC) towards reimbursement of its establishment costs on the ground that Commissioner of Income- tax (Appeals) - III has held in respect of the assessment year 1997-98 that the reimbursement of establishment expenses is not payment made wholly and exclusively for the professional purpose and that the facts of the case in assessment year 1997-98 being the same, the CIT(A) has no reasons to differ from the view taken by the CIT(A)-III, Mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... development job. The details of technical personnel, along with their technical qualification, deployed in connection with development of computer software were also filed. Upon examining these details and upon considering the submissions made by the assessee, however, the Assessing Officer was not impressed with the merits of the said claim of deduction. The Assessing Officer took note of the position that the assessee-firm was a member of Arthur Anderson Worldwide (AWSC) to which the assessee-firm also provided management and consultancy services. As per details submitted, according to the Assessing Officer, the assessee-firm was deputing its personnel to the AWSC who in turn were deputing those employees to various contracts/projects undertaken by them. By a single invoice, the assessee billed AWSC for US $ 19,24,686 in respect of the computer services and software. The assessee s deduction under section 80HHE was in respect of US $ 5,98,579 billed on account of computer services and software. The Assessing Officer also observed that there was no specific contract between AWSC and the assessee for development of software. The Assessing Officer took note of the appraisal reports ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnical services for development of software in order to get the deduction under section 80HHE cannot be ruled out. The Assessing Officer s action was thus confirmed in first appeal. The assessee is not satisfied and is in second appeal before us. 15. We have heard the rival contentions, carefully perused the material before us and duly considered factual matrix of the case as also the applicable legal position. 16. We find that section 80HHE of the Act provides the condition of eligibility for deduction under that section as that the assessee should be engaged in the business of ( i ) export out of India of computer software or its transmission from India to a place outside India by any means; or ( ii ) providing technical services outside India in connection with the development or production of computer software. Therefore, once an assessee can establish that the technical services were provided in connection with or for the purpose of the development of computer software, the assessee will be eligible for being considered for deduction under section 80HHE. In the case before us, the assessee has furnished full details of the clients to whom the services were rendered in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs are on record. It is not necessary that in respect of each billing unit a separate entry is required to be made by the AWSC. In our considered view reasonable evidence in support of the services having been rendered by the assessee s personnel is on record. Even though the evidences are internal to the extent the evidences are primarily from AWSC, this fact by itself cannot indicate that the evidences are fabricated or unreliable. These are contemporaneous evidences and constitute reasonable basis for a finding that the assessee s personnel have rendered technical services for or in connection with development of computer software. We have also noted that the requisite chartered accountant certificate under section 80HHE(4) is also placed on record and no faults have been noticed in the same. The doubts raised by the Assessing Officer and the CIT(A) are in our considered view, ill founded and unsustainable in law. 18. Keeping in view of these facts, as also entirety of the case, we deem it fit and proper to direct the Assessing Officer to grant deduction under section 80HHE in accordance with the law and in the light of our above observations. The assessee will get relief ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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