TMI Blog2013 (8) TMI 823X X X X Extracts X X X X X X X X Extracts X X X X ..... can be transferred to the customer. The transfer of property is therefore not an ongoing process at the each stage of work as will be the case of a provision for services - Following decision of of CIT vs. Oracle Software India Ltd. [2010 (1) TMI 9 - SUPREME COURT OF INDIA] - Decided in favour of assessee. - ITA No.46/Ahd/2013 - - - Dated:- 28-6-2013 - Kul Bharat And Pramod Kumar, JJ. For the Appellants : S N Soparkar, alongwith S R Shah and Bhawin A Shah For the Respondent : Y P Verma ORDER:- PER : Pramod Kumar By way of this appeal, the assessee appellant has challenged correctness of learned Commissioner (Appeals) s order dated 3 rd October 2012, in the matter of order under section 143(3) r.w.s. 254 of the Income Tax Act, 1961 for the assessment year 2003-04. Grievances raised by the assessee are as follows: 1. The ld. CIT(A) grossly erred in law and on facts in upholding rejection of the claim made by the appellant u/s. 80IB for a sum of Rs.26,40,619/ - as decided by the learned AO. It is submitted that in the facts and circumstances of the case, the appellant is entitled to the aforesaid deduction u/s. 80IB and should be granted to him. 2. (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustries Ltd. 123 ITR 669. It is submitted that it be so held now and deduction u/s. 80IB as claimed by the appellant be allowed. 2. The short issue that we are required to adjudicate in this appeal is whether or not the learned Commissioner (Appeals) was justified in declining deduction of Rs 26,40,619 under section 80 IB, on the facts and in the circumstances of this case. What are termed as grounds of appeal are primarily arguments in support of this core grievance. We will, therefore, take up all these grounds of appeal together. 3. To adjudicate on this appeal, a few material fact need to be taken note of. This is second round of proceedings before the Tribunal. In the first round of proceedings, and vide order dated 15th September 2010, a coordinate bench of this Tribunal remitted the matter back to the file of the Assessing Officer with following observations: 9. We have heard the rival submissions and perused the materials available on record. The undisputed facts of the case are that the assessee is engaged in the business of development of customized software on job work basis. The assessee claimed deduction under section 80IB of the Act in respect of his busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or operation which renders a software usable for which it is otherwise not fit the operation/process can be termed as manufacture. However, we are alive to the fact that the development of a customized software may be in the form of manufacture or may be as a result of provision of services. 15. In our considered opinion a transaction resulting in the acquisition of the property should be understood to include a transaction where a digital product, whether provided on a tangible media or in the form of a digital signal, is acquired by a customer. If one party engages another party to create an item of property that the first party will own from the moment of its creation, then no property will have been acquired by the first party from the other and the transaction should be characterized as the provision of services. However, in case of customized software when the originally developed software is owned by the developer and not by the receiver of such software prior to its transmission then the consideration paid by the receiver is towards the software and not towards the intellectual skills employed by the software developer and in such cases the developer can be held as en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty, and, therefore, the transaction should be characterized as provision for services . In other words, the Assessing Officer was essentially of the view that since basic area maps were the material on the basis of which the software was developed, and since basic area maps always belonged to the customer, it was only a case for provision for services. Learned CIT(A) also confirmed this stand and, inter alia, stated as follows: In the instant case, the government bodies of Gujarat and Maharshtra are owners of the manual data pertaining to geographic information of the districts. The GIS information technology software used by the appellant in development of such manual data into digital form was never developed by the appellant. Thus, in this case, the appellant neither owned the manual nor the software. Even the product prepared by him is the digitized GIS data of respective districts was also not the property of the appellant either during or after its creation. Thus seen, the property claimed to have been manufactured by the appellant was never owned by him. Once again, thus, the arguments of the appellant regarding admissibility of claim of deduction under section 80 IB fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment function much better. Given below are some of the screen shots of various stages of product development as also various outputs, reflected by the software, in the course of demonstration before us and in response to various queries fired : 9. As the above screen shots would show the software produced by the assessee is not a map simpliciter but an interactive digital product which produces lots of reports and relevant information, on the basis of various inputs including maps of the area. The fact that it is produced on a platform not owned by the assessee is irrelevant inasmuch as what is being transferred by the assessee is not the platform but the end product. The mere fact that one of the input is owned by the client itself, does not mean that the property in the product never belonged to the assessee. In any case, all this is really irrelevant inasmuch as there is a specific direction from a coordinate bench to the effect that all that is to be seen is the point of time when property in end product is transferred. It is clear that the product, i.e. software, comes into existence after carrying on several processes, and its only on completion of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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