TMI Blog2015 (2) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the assessee - ITA NO.13/2015, ITA NO.14/2015, ITA NO.15/2015, C.M. APPL.157/2015 - - - Dated:- 19-1-2015 - MR. S. RAVINDRA BHAT AND MR. R.K. GAUBA, JJ. For the Appellant : Sh. Balbir Singh, Sr. Standing Counsel with Sh. Angad Sandhu and Ms. Rubal Maini, Advocates for CIT. For the Respondent : Sh. Mayank Nagi, Advocate JUDGEMENT MR. JUSTICE S. RAVINDRA BHAT (OPEN COURT) 1. The questions of law which the revenue urges in support of these appeals, directed against three orders of the ITAT for AY 2003-04, 2004-05, 2005-06 and 2006-07 are: (1) Whether the assessee is engaged in activity which can be termed manufacture so as to claim benefit of Section 10B of the Income Tax Act, 1961 (hereafter the Act ) and (2) Whether the activity (of collection, collation, formatting of data and information and its export) fulfils the conditions stipulated in Section 10B(2)(i) of the Act. 2. The brief facts of the case that the assesse, an individual, in her return claimed exemption under Section 10B of the Act to the tune of ` 39,32,654. She claimed to be a software exporter to Netherlands. The importer was one Mr. Rolli Janssen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich such a conclusion can be reached. Counsel also relied upon the terms of the CBDT circular, which reads as follows: S.O.890(E) - In exercise of the powers conferred by clause (b) of item (i) of Explanation 2 of section 10A, clause (b) of item (l) of Explanation 2 to section 10B and clause (b) to Explanation to section 80HHC of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby specifies the following Information Technology enabled products or services as the case may be for the purpose of said clauses namely :- (l) Back-Office Operations (ii) Call Centres (iii) Content Development or animation (iv) Data Processing (v) Engineering and Design (vi) Geographic Information System Services (vii) Human Resources Services (viii) Insurance claim processing (ix) Legal Databases (x) Medical Transcription (xi) Payroll (xii) Remote Maintenance (xiii) Revenue Accounting (xiv) Support Centres and (xv) Web-site Services. It was submitted that preparation of data for its ready printing use could not amount to manufacture of software, entitling the assessee to claim benefit of Section 10B. 6. The I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2001] 1 SCC 549; CIT v. Tara Agencies [2007] 292 ITR 444; Union of India v. Delhi Cloth and General Mills Company Limited AIR 1963 SC 791 and CIT vs. Lovesh Jain 204 Taxman 134(Del) and held as follows: 17. In the instant case we find that the appellant after collecting raw data and pictures has utilized its expert designing skills in producing a ready to print e-book. Shri Syali in his submissions has neatly narrated the entire sequence of activities carried on by the appellant. The samples produced before us were also shown to the AO, however he has conveniently chosen to remain quite on this aspect. The final product is intended for use of a particular customer and therefore the case under consideration does fit in the category of production of any customized electronic data as per the definition of computer software defined in Explanation 2 to section 10B of the Act. The above Third Member decision is germane to the issue before us and therefore it clearly supports the case of appellant. In our considered opinion even if it is said that the appellant has merely customized the data, which was already available and has not created altogether new software then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that The data which a customer may require, may be gathered either by manual effort or by electronic means, as for example, through internet. By whatever means the data is collected, once it is stored in an electronic form, it becomes a customized electronic data which can be exported to qualify for deduction u/s 10A . 19. The requirement of the provision (Section 10B) is that there should be a customized electronic data and such data should be exported outside India. The data which a customer may require may be gathered either by manual effort or by electronic means, as for example, through internet. By whatever means the data is collected, once it is stored in an electronic form, it becomes a customized electronic data which can be exported to qualify for deduction u/s 10A. The process of actually collecting the data need not be IT enabled. What all is required is that the data collected should be in an electronic form. The exact language of sub-clause(b) of clause (1) of Explanation 2 is any customized electronic data. 20. Thus we find that Assessee‟s business involved export of ready to print books which in the instant case is the cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act did not define manufacture turned to the definition of that expression in the Central Excise Act, 1944 The relevant extracts of that decision are as follows: 11. The term manufacture has not been defined in the Incometax Act, 1961. 12. The term manufacture has been defined in section 2(f) of the Central Excise Act, 1944. Parts (i) and (ii) of section 2(f) read as under:- 2(f). 'Manufacture' includes any process- (i) incidental or ancillary to the completion of a manufactured product; and (ii) which is specified in relation to any goods in the Section or Chapter notes of the Schedule to the Central Excise Tariff Act, 1985 as amounting to manufacture . Referring to Anheuser-Busch Brewing Assn. v. United States (1907) 52 L Ed. 336 it was held by the ITAT that the concept of manufacture was followed in subsequent American, English and Indian cases. The Supreme Court then held that: The definition reads as under: Manufacture implies a change, but every change is not manufacture, and yet every change in an article is the result of treatment, labour and manipulation. But something more is necessary. 10. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions of the Supreme Court, the construction placed on the term manufacture was a liberal one. The extracts of those decisions are Deputy Commissioner of Sales Tax v. M/s. Pio Food Packers, 1980 Supp. SCC 174: commonly manufacture is the end result of one or more processes through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognized as a new and distinct article that a manufacture can be said to take place. Again, in Aspinwall Co. Ltd v Commissioner of Income Tax (2001) 251 ITR 323 it was held as follows: the word manufacture has not been defined in the Act. In the absence of a definition of the word manufacture it has to be given a meaning as is understood in common parlance. It is to be understood as mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er assessee s manufacturing activity described earlier results in computer software . The main thrust of the revenue s contention here was that final product or thing does not answer that description because it is not software per se, but mere compilation of data. This court is of opinion that this contention is unpersuasive. The expression computer software is wide enough to embrace diverse activities. To eliminate any doubt, the reference to customized electronic data in the second Explanation to Section 10B (2), Parliament enabled the Board (CBDT) to include (by notification) diverse activities - which involve export of software, etc. The Notification relied on in the present case uses the expressions (iii) Content Development or animation (iv) Data Processing (vii) Human Resources Services and (ix) Legal Databases . Here, the very first head content development or animation describes the process and is wide enough to cover compilation of material or data and its transformation into a ready to print/ ready to publish book. It is also a legal database . The expression legal here cannot be confined to databases that cater to law students or legal practitioners or a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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