TMI Blog2012 (12) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... . And it was at freedom to get the export order executed by its own employees or by outsourcing the work to certain consultants or third parties. Hence the actual export of computer software programme of the maintenance of the website for the foreign clients cannot be considered to be bogus or fictitious, if the Assessing officer had any doubt regarding the possible collusion between the foreign client and India company for any over estimation of export proceeds or understating of Indian expenses necessary incriminating evidence should have been brought on record to prove such points. On the contrary a reference made by the AO to the transfer pricing authority at Hyderabad u/s. 92 of the Income Tax Act, 1961, it has been officially held by the concerned authority that the export proceeds shown by the assessee company for IT enabled services rendered comprising of wave maintenance for the foreign client could be taken as a correct reflection of the exports proceeds - appeal by revenue is dismissed. - ITA No.376/Hyd/2007 & ITA No.79/Hyd/2008 - - - Dated:- 19-7-2012 - SMT. ASHA VIJAYARAGHAVAN AND SHRI D.KARUNAKARA RAO, JJ. Appellant by : Shri Gangadhar Pandey Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gains from the business of execution of export contract works, claiming exemption/deduction u/s. 10A of the Income-tax Act, 1961. While for assessment year 2000-01, 2001-02 and 2002-03, the returns filed were processed under S.143(1), thereby allowing the companies claim of exemption/deduction u/s. 10A of the Act, for the assessment year 2003-04, scrutiny assessment proceedings were initiated. During the assessment proceedings, the assessing officer had called for various details/evidence from the company to examine the admissibility of the claim for deduction under S.10A of the Act. The findings of the assessing officer in that behalf, as summarized by the CIT(A) on pages-3 and 4 of the impugned order for the assessment year 2003-04 read as follows- a) The company TCL for the financial year 2002-30 had got certain export contracts relating to the maintenance of website of a foreign client named Technics Consulting INC. USA in which a relative of the Director of the Indian Company TCL happens to be a major promoter. b) The Indian company TCL had no full time computer engineers/software professionals/manpower in its pay roll as its employees. c) The entire export contract f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The only suspicion or surmise that had arisen in the minds of the Assessing officer related to certain findings that all the parts of the I.T. enabled services i.e. Web Maintenance were not carried out in the assessee s business premises. But since the re-outsourcing or sub-contracting of an export order obtained by an Indian concern is not restricted under statutory provisions where the facts clearly establish to the satisfaction of the controlling and monitoring authority, i.e. STPI regarding actual exports of computer software, the denial of exemption contemplated u/s. 10A in principle to the assessee company in the assessment order is patently misconceived. 17. Even in normal business undertakings where all of the phases of manufacturing process are not carried out within the business premises of the industry but part of such activities are carried out, it has been judicially held that the undertaking can still be considered to have carried out manufacturing or processing activities for the purposes of the IT statute. He drew support from the relevant case-law in support of the above findings, duly discussing the ratio laid down therein on pages 28 to 30 of the impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I zone produces the computer programmes and exports them, it would be eligible for the benefits of S.10A of the Act. The Learned Departmental Representative also took objection to the CIT(A) s line of approach that outsourcing or sub-contracting part of the Web maintenance works does not disentitle the assessee to the benefits of S.10A. Further, the Learned Departmental Representative also took objection to the liberal interpretation of the provisions relying on the decision of the Hon ble Supreme Court in the case of CIT V/s. Straw Board Manufacturing Co.Ltd. (177 ITR 431) and CIT V/s. Gwalior Rayon Silk Manufacturing Ltd. (196 ITR 149 ). The Learned Departmental Representative also relied on the decision of the Jodhpur Bench decision of the Tribunal in the case of Kwal Pro Exports V/s. ACIT(110 ITD 59), for the proposition that the assessee is not entitled for benefits of S.10B, when assessee was not engaged in manufacturing or producing any article or thing, but simply engaged in the polishing and finishing of the fully manufactured items purchased by it. 8. Per contra, learned counsel for the assessee, strongly opposing the above contentions of the Learned Departmental Repres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e restriction on it too has to be construed so as to advance the objective of the section and not to frustrate it. 11. In view of the decisions of the Supreme Court cited above and also considering the fact that these provisions are beneficial provisions; the explanation given by the CBDT in Circular No.697 dated 23.11.1999 entitling the assessee to the benefits of S.10A; and also the the legal position that the Act has not restricted the assessee from outsourcing of certain services necessary for producing an article or a thing, say, web maintenance in this case, assessee should be held as eligible for relief under S.10A of the Act. 12. We have also gone through the conclusions drawn by the CIT(A) in paras 24 and 25 of his impugned order for the assessment year 2003-04. We find that they do not call for any interference. For the sake of completeness of this order, the said paras are reproduced below- 24. On the totality of the facts and circumstances of the case, the assessee company is considered to have actually carried on the business of IT enable services being maintenance of website of the foreign client Technics, INC, USA through certain consultants on contract bas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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