TMI Blog2010 (8) TMI 750X X X X Extracts X X X X X X X X Extracts X X X X ..... xemption u/s 10A. In our opinion, this is a consequential issue as higher rate of depreciation is allowed on the software. Accordingly, ground is dismissed. Exemption u/s 10A - income generated from training given to the customer for the use of the software - he AO was of the view that the income generated from the training activity cannot be considered for the computation of deduction/exemption under section 10A and it is not on account of any development of software, but, training is given after software is delivered to the customer - HELD THAT:- In the case of Sovika Infotek Ltd[ 2007 (7) TMI 441 - ITAT MUMBAI] an identical issue has been considered by the Tribunal and it is held that the training activity of the assessee is intricately connected with the software development, sale, maintenance etc. and the same would be entitled for exemption under section 10B. Identical view is also taken in WOODWORD GOVERNORS INDIA (P.) LTD. [ 2007 (4) TMI 391 - ITAT DELHI] while interpreting the scheme of section 80IB and held that income generated for providing the training to his employees of his customers for the use of the product sold to them and was also maintaining after sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it's subsidiaries as commission has been paid on customisation fees - D.R. vehemently argued that there is no reason to pay the additional commission to the subsidiaries then the independent local distributors. It is argued that entire customisation work is done by the assessee only and there is no contribution by the subsidiaries in the customisation work entrusted by the users of the software manufactured by the assessee company HELD THAT:- Though the subsidiaries are not directly involved in the customisation work of the software but at the same time they are only authorised to collect the customisation work in the market and other independent distributors are not doing said work. It is also seen that some of the independent distributors are paid higher commission then the subsidiaries without doing any job for collection of customization work. No interference is called in the order of the Ld CIT(A) on this issue. Accordingly, the same is confirmed. Ground taken by the revenue is dismissed. - R.S. PADVEKAR AND R.K. PANDA, JJ. Narender Singh for the Appellant. Arvind Sonde for the Respondent . ORDER R.S. Padvekar, Judicial Member. - The re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rate of depreciation on the computer software. 5. The assessee has claimed the total expenditure of Rs. 8,83,05,000 incurred on soft ware, which was treated as a capital expenditure. The Assessing Officer allowed the depreciation @ 25 per cent on Rs. 8,83,05,000. The Learned CIT(A) was of the opinion that software is part of the computer operation and it cannot be separated and hence, the depreciation rate applicable to the computer is to be applied to the software. The Learned CIT (A) accepted the claim of the assessee to allow the depreciation @ 60 per cent. The revenue is in appeal before us. 6. We have heard the parties. In the assessment year 2002-03, the software was not identified as a separate item for depreciation but from the assessment year 2003-04 software is the part of the computer for the purpose of the depreciation. Otherwise also, as rightly held by the Learned CIT (A) the software cannot work in isolation but has to be loaded on computer and the later also cannot work without software. In sum and substance, the software is integrated part of the total operation of the computer. Moreover, the Legislature has treated the same as part of the computer for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the export profits. The revenue is in appeal, challenging the findings of the Learned CIT (A) that the training income are eligible for exemption/deduction under section 10A of the Act and assessee is in appeal against the impugned finding of the Learned CIT (A) that the same is to be excluded from the export turnover . Though, he directed to include the same in the total turnover. The Learned Counsel for the assessee submits that this issue is squarely covered in favour of the assessee by the decision of other coordinate Benches in the following cases : ( i ) Sovika Infotek Ltd. v. ITO [2008] 19 SOT 412 (Mum.). ( ii ) Asstt. CIT v. Woodword Governors India (P.) Ltd. [2007] 15 SOT 362 (Delhi). 10. We have also heard the Learned D.R. who submits that training activity is after sale of the Software and same cannot be treated as an income derived from the industrial undertaking. In our opinion, this issue has to be decided in favour of the assessee. In the case of Sovika Infotek Ltd. ( supra ) an identical issue has been considered by the Tribunal and it is held that the training activity of the assessee is intricately connected with the software development, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Assessing Officer rejected the plea of the assessee, which was also confirmed by the Learned CIT (A). Now, assessee is in appeal by taking this ground in Cross Objection before us. 14. We have heard the parties. We have also perused the reasons given by the Learned CIT (A). Admittedly, the gain is on account of reimbursement of expenditure incurred by the assessee from his customers and that is also on account of fluctuation in the rate of the foreign exchange. It can not be treated as an income derived by an undertaking from the export of articles or computer software. In our opinion, the same cannot form part of eligible profit for claiming deduction under section 10A of the Act as it can not be treated as income derived from the export of the software. We, accordingly, confirm the order of Learned CIT (A) and ground No. 1 in the CO. is dismissed. 15. Next and last ground No. 2 from the revenue s appeal is in respect of transfer pricing adjustment made by the Assessing Officer under section 92CA(3) of the Act. The facts pertaining to the issue are as under. 16. The Assessing Officer made reference under section 92CA(1) of the Act to the Transfer Pricing Officer ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al assignments or jobs for collection of customisation work is done by the subsidiaries (A.Es.). Ld. Counsel also referred to the sample copy of the agreement, which is placed in the paper book and submits that so fare as the local independent distributors are concerned, some of them are paid between 15 to 20 per cent only on the selling the product of the assessee. He submitted that though the entire customisation work is done by the assessee but all the data collection work is done by the subsidiaries. The Learned Counsel supported the order of Learned CIT (A) deleting the addition. 18. We find force in the argument of Learned Counsel. We have also gone through the reasons given by the Learned CIT (A). Though the subsidiaries are not directly involved in the customisation work of the software but at the same time they are only authorised to collect the customisation work in the market and other independent distributors are not doing said work. It is also seen that some of the independent distributors are paid higher commission then the subsidiaries without doing any job for collection of customization work. Moreover, the Learned D.R. could not controvert the findings of the L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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