TMI Blog2007 (7) TMI 441X X X X Extracts X X X X X X X X Extracts X X X X ..... sed under section 143(1) on 8-11-2000. Notice under section 148 was issued on 4-4-2002, i.e., within a period of four years. Thus, it is not a case where the original assessment was completed under section 143(3) and where the reopening is beyond a period of four years as claimed by the assessee. As the return was processed under section 143(1), it cannot be said that the Assessing Officer formed an opinion and hence, there cannot be a question of change in opinion. Hence the re-opening is valid. We apply the judgment of the Apex Court in the case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500 as the facts are similar and uphold the reopening of assessment. For these reasons these grounds of the assessee are dismissed. 5. Coming to next ground of appeal regarding computation of exemption under section 10B, section 10B as applicable for the assessment year 1998-99 read as follows: " Special Provision in respect of newly established hundred per cent export-oriented undertakings. - (1) Subject to the provisions of this section, any profits and gains derived by an assessee from a hundred per cent export-oriented undertaking (hereafter in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome at Rs. 23,47,637 as against NIL income returned by the Appellant; Recalculation of exemption under section 10B 2.erred in confirming the action of the Assessing Officer, of recalculating the exemption allowable under section 10B at Rs. 1,56,350 as against Rs. 28,94,353 claimed by the Appellant; 3.erred in confirming the non-allowability of exemption under section 10B on the technical charges/fees received of Rs. 20,00,000 for software installation/implementation without appreciating the facts properly; 4.should have appreciated that the fees received was part of the operational income of the business of the appellant and therefore eligible for exemption under section 10B; 5.erred in confirming the action of the Assessing Officer, of reducing the training income received of Rs. 1,48,000 while working the profits exempt under section 10B; 6.failed to appreciate that the income from technical service fees as well as training income was intrinsically and inextricably linked with the export activity of the appellant and hence eligible for exemption under section 10B; 7.erred in confirming the action of the Assessing Officer, in denying the exemption under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 10B. ( c )That the professional fees and other sales affected locally amounted to Rs. 26,11,928, i.e., professional fee Rs. 20,00,000 and other sales Rs. 6,11,928. ( d )That it is clear from sub-section (2)( ib ) of section 10B, export of such articles and things should not be less than 75 per cent of the total sales in the previous year. ( e )That the proviso mandates that the sales of the computers software ought to have been made locally i.e., in the domestic market. That in the instant case the assessee had not sold any software product in the domestic market but received fees in form of consultancy service and this cannot be considered sale . That professional and consultancy fees received, have not been derived from sale of computer software. ( f )That since the professional fee earned is income which is not derived from or directly relatable to the sale of computer software, such services rendered do not qualify for deduction under section 10B and the assessee does not satisfy the deeming provisions of sub-section (2)( ib ) to section 10B. 17.4 The first appellate authority, after considering the detail arguments of the assessee upheld the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19.4 On the issue of professional fees it was submitted that ICRM is designed with a multi-tire architecture using the internet and object technologies. The clients are of two categories, i.e., thin or full client. Thin client has specific user interfaces and whereas the full clients includes certain application objects. Assessee had developed a static website and further implemented the ICRM modules as well as developed WEB strategies for M/s. Fortune Financial Services (India) Ltd. for such implementation of ICRM Modules etc. in FFS. The assessee received professional fees of Rs. 20 lakhs. The assessee claims the above income was part of operational income and has to be considered as part of turnover. Thus, he submits that export turnover in question exceeds 75 per cent of the total turnover and thus the deeming provision of sub-section (2)( ib ) of section 10B makes it eligible for deduction. 19.5 The learned Departmental Representative submits that the receipt in question is not local sales and that the receipt cannot be said to be derived from the export-oriented undertaking. 20. On a careful consideration of the facts and circumstances of the case we hold as follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rinsically connected with a software development, sale, maintenance etc., the income is to be classified as operational income. Thus, in our view it has to be taken into consideration for the purpose of computation of deduction under section 10B. Thus, this ground of the assessee is allowed. 22. Coming to the alternative ground of the assessee i.e., the exemption under section 10B should have been computed only on the net income arising in each activity, in case they are excluded as ineligible for deduction under section 10B, we hold that while eliminating interest income, the expenditure incurred for earning such income should be set off and only net income be considered for exclusion from the quantum of deduction as it is the net figure of interest, which goes into the profit of firm. Thus, this ground of the assessee is also allowed. 23. The last ground is on the levy of interest under sections 234B and 234C. 23.1 The same is mandatory and consequential in nature. Thus this ground of the assessee is dismissed. 24. In the result, appeal for assessment year 1998-99 is dismissed and that for assessment year 2000-01 is allowed in part. - - TaxTMI - TMITax - Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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