TMI Blog2001 (1) TMI 918X X X X Extracts X X X X X X X X Extracts X X X X ..... ocessing Centre abroad in Erding, Germany and confirmed through creation of a record locator. Every time an agent makes an air, hotel, car or other travel related booking through Amadeus system it is measured in terms of segments. For example a ticket booking done for Delhi-Bombay-Frankfurt-Delhi for one passenger would amount to three segments-One segment for Delhi-Bombay, the second for Bombay-Frankfurt and the third segment for Frankfurt-Delhi. After the agent creates these segments this data is received and exported to Host System Amadeus abroad through Amadeus Computers where segmentsmessages are immediately processed. Amadeus India (P.) Ltd. raises invoices every month to Amadeus Madrid on the basis of total number of segments generated/exported as explained above which is remitted in hard currency by Amadeus Madrid. The Assessing Officer examined the allowability of deduction under section 80HHE of the Act claimed by the assessee. He observed that such deduction was allowable when the assessee was engaged in the business of export out of India of computer software or its transmission from India to a place outside India by any means . While relying on Explanation (b) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gents in India, via, satellite links. Whenever a reservation has to be made the travel agents get connected to the Central Reservation System (CRS) at Amadeus which processes the data for its correct format. If the format is correct the data is sent to Germany for the availability of the tickets on a particular flight on a given date and time. Amadeus (I) Pvt. Ltd. is connected to their German counterpart, via, leased lines. The data is further processed in Germany for the correct status of booking. The data are sent in segments. Amadeus (I) Pvt. Ltd. bills their counterpart on the basis of per segment basis. A sample copy is enclosed, also enclosed is a sample invoice. The nature of activity of Amadeus (I) Pvt. Ltd. is as data entry/data processing job. Data entry/data processing is a software development as defined by Customs Notification No. 10 of 1996, dated February 17, 1997, issued by the Ministry of Finance, Department of Revenue. In view of the reply of the STP, the Assessing Officer also examined the Customs Notification No. 10 of 1996, issued by the Ministry of Finance. Para. 1(d)(i) of the said notification lays down the following : In clause (a) for the words dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n exemptions the same should be applicable to deduction under section 80HHE of the Act. The Assessing Officer also referred to the reference made by the assessee to NIC vide letter dated March 11, 1998, for further clarification in which the assessee itself had mentioned that the nature of their activities was data processing/data entry. After considering the submissions of the assessee in response to show cause by the Assessing Officer as to why deduction under section 80HHE may not be disallowed, the Assessing Officer, inter alia, held that : (1) As admitted by the assessee vide its letter dated December 8, 1997, the activities of the assessee were that of data processing and not software development. (2) As admitted by the assessee in the said letter it was engaged in the export of data processing/software segments on computerised reservation system. (3) Various technical authorities have confirmed that the assessee was undertaking data processing activity and not computer software development. (4) The assessee has failed to file any evidence to support that it was developing software and exporting it. (5) It has not been able to rebut the opinion given by the STP and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en Amadeus Marketing S.A. Spain and the assessee which has prescribed the obligation of the assessee-company the learned Departmental Representative stated that software development, if any, made by the assessee was for the reasonable needs of the subscribers and was not to be exported out of India. Regarding customs notification issued by the Ministry of Finance, Department of Revenue (on which ESC has placed reliance in its opinion), the learned Departmental Representative stated that the Customs Act and the Income-tax Act were two different Acts. For the purpose of the Customs Act certain activities might have been treated as computer software programme. But under the Income-tax Act, the word computer software has been defined in Explanation (b) to section 80HHE and, therefore, the contents of the customs notification cannot be imported to the Income-tax Act. He, therefore, pleaded that the order of the Commissioner of Income-tax (Appeals) deserves to be reversed and the Assessing Officer s order deserves to be restored. On the other hand, the learned counsel for the assessee while relying on the order of the Commissioner of Income-tax (Appeals) argued that the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exported by the assessee was only processed data and not computer programme . Learned counsel wound up his arguments by stating that the assessee was preparing a computer software programme and was exporting the same through computers. The Commissioner of Income-tax (Appeals) has rightly appreciated these facts and allowed relief to the assessee under section 80HHE of the Act. We have considered the rival submissions. The main business activity of the company is to make customers (mainly travel) agents online with AMADEUS CRS System. For connectivity to Amadeus system agents are supplied with free of cost computers systems which are being provided by GTS. The agents are also provided with training and system usage, free of charge by Amadeus India Pvt. Ltd. The agents receive latest information regarding schedules and availabilities of worldwide participants in the Amadeus system and create reservation data and records which are processed and exported immediately into the system, while data created is simultaneously processed in the Amadeus Data Processing Centre abroad in Erding, Germany and confirmed through creation of record locator. Every time an agent makes an air, ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d media or other information storage device ; or (ii) any customised electronic data or any product or service of similar nature as may be notified by the Board, which is transmitted or exported from India to a place outside India by any means: The Revenue's case is that whatever the assessee records on disc, tape, perforated media or other information storage device is not a computer programme . Similarly what is transmitted from India to a place outside India by any means was not a computer programme but only data which could make a programme. But the claim of the assessee is contrary to what is stated by the Revenue. We find that the words computer programme has not been defined in the Income-tax Act. However, the same has been defined in the Copyright Act, 1957, as amended in 1994. As per this definition a computer programme means a set of instructions expressed in words, codes, scheme or any other forms including a machine readable medium capable of causing a computer to perform a particular task or achieve a particular result. If we look at this definition it will be clear that the instructions which were capable of causing a computer to perform a particular task ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articular result. As the words computer programme has not been defined under the Income-tax Act but has been defined under the Copyright Act, 1957, the activities carried on by the assessee clearly fulfils the conditions mentioned in the Copyright Act. Thus, the Page No: 0033 activities carried on by the assessee clearly fulfils the conditions for claim of deduction under section 80HHE of the Act. We also find that when the Assessing Officer was not satisfied with the explanation of the assessee he had made a reference to STP. The Assistant Director, STP, vide his letter dated February 26, 1998, had replied to the Assessing Officer which is reproduced in the body of this order earlier. They had confirmed that the nature of the activity of the assessee is as data entry/ data processing job which was a software development programme as defined by the Customs Notification No. 10 of 1996, dated February 17, 1997, issued by the Ministry of Finance, Department of Revenue. The Assessing Officer took note of the letter received from the STP but he was of the view that as the finding of the STP was based on customs notification and not any notification under the Income-tax Act the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India could grab a significant share in exports. These activities are covered by the definition of computer programme as given in Copyright Act. Accordingly, the CBEC on the recommendations of the Department of Electronics issued further clarifications that export benefits will be available to EOU/STP units who export out of India all software developed, data entry and conversion done, data processed, data analysis and controlled or data management done. The CBEC substituted the words development of software with the words development of software, data entry and conversion, data analysis and control or data management vide Notification No. 89 of 1996, Customs dated November 19, 1996. The said broad banding of scope of software activities provided desired momentum in software exports. The CBEC has further clarified computer software-scope of exemption vide its Notification F. No. 341/20/97-TRU, dated 10th February, 1998 (Circular No. 7 of 1998-Cus.). Even the Reserve Bank of India has also clarified that such exports or services in non-physical form could be done on SOFTEX Form and that the designated officer of the Department of Electronics could process and certify such S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o a person who is engaged in the business of export out of India of computer software. . . . Since, the Ministry of Finance at various occasions have given elaborate definition of computer software after detailed consultations with the technical authority like the Department of Electronics, it would be appropriate that benefit under section 80HHE are extended to Amadeus India Pvt. Ltd. against their export of computer software to which they are entitled. In case of any doubt it is requested that the matter may kindly be referred to the Department of Electronics before any decision is taken in this regard. The facts discussed above show that the Government of India has identified computer software as an area of extreme focus. In order to give impetus to the software export industry in a concrete manner and for providing conducive environment to the industry to conduct business at a pace commensurate with international practices, the Government has conceived the STP scheme, one of the significant features of which is to provide single point contact services. In this context, computer software (used in contrast with computer hardware ) will include all services where computer h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... litudes of expressions common to a whole batch of legislations forming part of an integrated policy in relation to the same sets of activities in an industry. Even if undue importance is to be attached to the use of the word programme under the Act and to the need for the presence of a computer programme stricto sensu (in contrast to the wider compass of the language used in the customs notifications) as essential for claiming an exemption, under the Act, we are of the opinion that the assessee qualifies for exemption under the quoted sections. In the computer industry, a distinction no doubt exists among three different processes : (i) preparing a programme ; (ii) compiling a data base on the basis of the programme ; and (iii) processing for purpose of adding to, or altering, the documents on the data base. In the present case, at one end, we have the Amadeus group of companies with a mega computer at Erding into which they have fed various programmes and built up a huge data base of various kinds of information relating to several airlines and service providers. At the other end we have the travel agent with a computer who merely accesses or utilises relevant information wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment of Electronics authorised official also certifies that the software described in the SOFTEX form was actually transmitted and the export value declared by the exporter has been found to be in order and accepted by the authorised officer. We also find that the assessee has furnished a report of the chartered accountant in the prescribed format along with the return of income certifying that the deduction has been correctly claimed in accordance with the provisions of the section. Keeping in view the above facts we hold that the assessee was entitled to deduction under section 80HHE of the Act as all the necessary conditions for such claim have been satisfied with. As the order passed by the Commissioner of Income-tax (Appeals) is in accordance with law and facts no interference in the same is called for. We, therefore, uphold the same. We also find that before the Commissioner of Income-tax (Appeals) the assessee had made an alternate claim for deduction under section 10A/10B and section 80HHC of the Act. The Commissioner of Income-tax (Appeals) held that the assessee-company having been set up as a 100% export oriented unit under the STP scheme, its claim under section 10A/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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