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TMI Blog2012 (11) TMI 848X X X X Extracts X X X X X X X X Extracts X X X X ..... ew that the Assessing Officer had not considered the question as to the eligibility of the assessee to have the deduction granted under Section 80-O. Further, when there is a specific provision under Section 80E, introduced with effect from 1.4.1991 to deal with deduction on the income earned on development of software for providing technical services outside India in connection with the development or production of computer software, the relief granted without considering the applicability of Section 80-O was bad and hence, prejudicial to the interests of Revenue. Thus the Commissioner of Income Tax, on revision, directed the Assessing Authority to redo the assessment for both assessment years de novo after scrutinising the contracts, bills and the Articles of Association of the Company, to find out the real nature of the transaction to consider the granting of relief under the appropriate deduction provision. Subsequent to the order passed by the Commissioner of Income Tax on 31.03.1998, the Assessing Authority passed the assessment orders for 1993-94 and 1994-95, withdrawing the relief under Section 80-O and allowed deduction under Section 80E. The assessee took up the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement with regard to Martek Inc., did not involve export of computer software for provision of technical services outside India. Hence, the assessee was directly entitled to the deduction under Section 80-O and not under Section 80HHE. As regards the services rendered by two other concerns, it was found that the assessee had supplied the software and technical assistance outside India and hence, the appellant was entitled to claim deduction under Section 80-O as well as Section 80HHE. The Commissioner of Income Tax (Appeals) pointed out that the aim of both Sections are the same, namely, to encourage industries doing export of knowledge and technical services on computer software information. The introduction of the specific provision under Section 80HHE would not, in any manner, interfere with the relief to be granted under Section 80-O. The Commissioner of Income Tax (Appeals) pointed out that when the assessee had been enjoying the benefit from 1991 onwards and the purpose of the introduction of Section 80HHE was to give necessary relief to the assessees engaged in the business of computer software, considering that the type of activities also covered under Section 80-O, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 80HHC. Consequent on that, by proceedings dated 29.6.1998 for the assessment year 1993-94 and for the assessment year 1994-95, the Assessing Authority considered the agreement and the bills raised by the assessee and found that the services rendered by the assessee related to systems analysis, systems design program specifications, program development documentation installation and implementation of software packages. The technical services rendered were in connection with the development of production of computer software. Thus on materials available, the Assessing Authority held that the deduction could be considered only under Section 80HHE. 9. In considering the claim of the assessee that the relief could be considered under any of these two Sections, the Tribunal pointed out that some of the services rendered by the assessee might overlap on areas of export of software development and some covered under the head "provision of technical services". Reading Section 80HHE(5) and Section 80HHB(5), the Tribunal pointed out that under Section 80HHB, the assessee was prohibited from claiming deduction under any other provisions of Chapter VIA, whereas, under Section 80H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel submitted that reading Section 80HHE(5), one could note that the introduction of Section 80HHE, has not, in any manner, whittled down the choice of the assessee from claiming the relief under Section 80-O. Consequently, he submitted that the relief granted by the Tribunal could not, in any manner, be interfered with. 12. Heard learned counsel appearing on either side and perused the materials placed on record. 13. Before going into the contentions of the learned counsel appearing for the assessee, the provisions as are available under Section 80-O and Section 80HHE need to be seen. Section 80-O, as it stood during the relevant point of time, speaks about the deduction given to an assessee on the income received by the assessee and it reads as under: " 80-O. Deduction in respect of royalties, etc., from certain foreign enterprises.--(1) Where the gross total income of an assessee, being an Indian company or a person (other than a company) who is resident in India, includes any income by way of royalty, commission, fees or any similar payment received by the assessee from the Government of a foreign State or a foreign enterprise in consideration for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany engaged in providing technical services outside India in connection with the development or production of computer software, is granted deduction in respect of profits derived by the assessee from such business under Section 80HHE. 14. "Computer Software" is defined under Explanation (b) to Section 80HHE as follows: "(b) "computer software" means any computer programme recorded on any disc, tape, perforated media or other information storage device and includes any such programme which is transmitted from India to a place outside India by any means." 15. Section 80HHE(5) reads as follows: "(5) Where a deduction under this section is claimed and allowed in respect of profits of the business referred to in sub-section (1) for any assessment year, no deduction shall be allowed in relation to such profits under any other provision of this Act for the same or any other assessment year. " Sub section (5) to Section 80HHE states that when a deduction is claimed under this Section and allowed in respect of the profits of the business referred to under Sub Section (1) for any assessment year, no deduction shall be allowed in relation to such profits under any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elds. 17. It is no doubt true that prior to the introduction of Section 80HHE under the Finance Act No.2 of 1991 with effect from 01.04.1991, there was no specific head under which technical or professional services would qualify for deduction other than under Section 80-O of the Income Tax Act. It may be noted that even for Section 80-O, Section 85-C was the fore-runner, in substitution of which alone, Section 80C was inserted under Finance (No.2) Act, 1967 with effect from 01.04.1968 and Section 80-O was later on amended. In other words, the phrase "technical or professional services" is given a generic meaning for any type of technical or professional services. However, with the introduction of Section 80HHE with effect from 01.04.1991, one finds a specific provision for granting deduction of any income earned on providing technical services outside India in connection with the development or production of computer software. This is a specific provision providing fiscal incentive for promoting export of computers. Thus, any technical service thus rendered in connection with the development of computer software also is taken within the fold of Section 80HHE along with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Perhaps what the assessee contends herein, as narrated above, may be correct. However, given the fact that Sub Section (ii) to Section (1) of Section 80HHE restricts technical services rendered outside India as one in connection with the development or production of computer software, we do not find that the assessee could fall back on Section 80-O for the purpose of claiming a better deduction. In this connection, the reliance placed on the decision of the Delhi High Court reported in [1999] 235 ITR 769 (C.S.Mathur Vs. Central Board of Direct Taxes) needs to be seen. The said case related to the case of a Chartered Accountant who was engaged in providing professional services to various Indian and foreign clients. He was engaged in rendering professional services to foreign companies by providing advice, information on finance, industrial business and economic matters relating to India as would be useful to foreign companies in relation to their business investments in India. On the ground that the profession of the assessee, namely, chartered accountancy could not contemplate inclusion of a job of business management, advice on business management or industrial management, the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailable under the statute book, show that while Section 80-O is with reference to the technical or professional services rendered outside India, Section 80RRA is with reference to deduction on the remuneration received by the individual from the employer for the services rendered by him outside India. There is no definition as to the nature of service contemplated for the purpose of Section 80RRA. Given the fact that Section 80-O deals with rendering of technical or professional services outside India, Section 80RRA is equally on services rendered by the assessee outside India, the only requirement under Section 80RRA is that there should be an employer-employee relationship. Given the commonality of the subject matter, namely, rendering of technical or professional services under Section 80-O and Section 80RRA on services rendered outside India, the Delhi High Court came to the conclusion that better deduction should be given to the benefit of the assessee. The decision of the Delhi High Court is distinguishable and has no relevance as far as the present case is concerned. We are concerned herein as regards the income earned on providing technical services outside India in connect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner of Income Tax (Appeals) for the assessment years 1993-94 and 1994-95. So too before the Tribunal, the said finding had not, in any manner, been controverted. Apparently, persuaded by what had been contended by the assessee in the Section 263 proceedings, without even giving a finding of fact, the Tribunal observed that the services of the assessee were overlapping on areas of export of software development and some covered under the head "provision of technical services". 26. When the specific provision under Section 80HHE is concerned about technical services rendered in connection with software development, we do not approve of the line of reasoning of the Tribunal. One cannot read any such choice available to the assessee for claiming deduction either under Section 80-O or under Section 80HHE of the Income Tax Act. In the face of the finding of the Officer as to the nature of technical services rendered as in connection with the development of production of computer software as spoken to by the company's Director, we do not find any good ground to accept the assessee's plea. In view of the above, the order of the Tribunal stands set aside and these appeals, filed b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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