Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

M/s. CYIENT Limited (formerly InfoTech Enterprises Ltd) & Others Versus Dy. Commissioner of Income Tax & Others

2015 (4) TMI 55 - ITAT HYDERABAD

Deduction u/s 10B denied - Held that:- Exemptions are not available to the assessee and order of AO on this issue does not need any interference and the issue was decided in favour of Revenue respectfully following the order of the ITAT [2002 (5) TMI 217 - ITAT HYDERABAD-B] - Decided against assessee.

Tax not deducted at source on the payment made to non resident - disallowance u/s 40(a)(i) - amount represents the fee paid to Barnes & Thornburg, Attorneys at Law, USA., the said Attorn .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

at source in terms of section 194J and as such the payment is not hit by section 40(a)(i). As this amount is not taxable in India under the DTAA between India and USA and as no asset is acquired, it is allowable as Revenue expenditure. - Decided in favour of assessee.

Technical service fee - amount paid by the Appellant to M/s. Infotech Software Solutions Inc (ISSI) USA, the subsidiary of the Appellant - whether amount of ₹ 2,01,40,454 paid by the Appellant to M/s. Infotech Soft .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

erned Articles relating to business profits (Article 7 r.w. Article 5) in the respective DTAAs. As no technical knowledge was made available to the assessee company by its foreign subsidiary which is the requirement under the DTAA for payment to qualify as technical services fee, payment in question is not taxable in India and so there is no requirement for deduction of tax at source o the payment and so the assessee company is not hit by provisions of section 40(a)(i). - Decided in favour of as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

export turnover. The principle that what is not included cannot be excluded has been accepted by the ITAT in the assessee’s own case a for the AY 2006-07. - Decided in favour of assessee.

Deduction under section 80HHE - communication expenses are excludible from “export turnover” for granting deduction - Held that:- This amount is not charged to the customer and so not included in the “export turnover” and so cannot be reduced from it. This issue is covered in favour of the assessee b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

software services is not part of the business profits - Held that:- This amount has to be included in “profits of business” by virtue of the Explanation to section 80HHE and also by the CBDT Circular dated 17.01.2013.- Decided in favour of assessee.

Weighted deduction u/s 35 (2AB) - whether cannot be allowed on the ground that there is no requisite approval from the prescribed authority? - Held that:- As it was submitted by the ld Counsel that the assessee had the necessary approval .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the part of the AO for reopening the assessment u/s 147. Following the ratios of the decision in the case of CIT vs. Kelivinator India (2002 (4) TMI 37 - DELHI High Court ), we dismiss the Revenue’s appeal. - Decided in favour of assessee.

Software link service charges are liable for exclusion from both the export turnover as well as the total turnover for the purpose of computing deduction u/s 10A of the IT Act 1961 as relying on Patni Telecom Pvt. Ltd vs. ITO [2008 (1) TMI 452 - ITA .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

2008-09 and 2009-10. Since certain common issues are involved, these appeals are being disposed of with this common consolidated order for the sake of convenience. ITA No.1450/Hyd/2013- A.Y. 2002-03. 2. Facts of the case in brief are that the assessee is a company, engaged in the business of software development and other allied activities. For A.Y 2002-03, it filed its return of income for the A.Y 2002-03 on 31.10.2002 declaring a total income of ₹ 1,01,68,297 and book profits for the pu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

.09.1991 from the Department of Electronics, Software Division, Govt. of India. AO denied both the exemptions available u/s 10A and section 10B by holding that the assessee had started production before 01.04.1994 and also holding that the amended provisions of section 10B were not applicable in the case of the assessee. Following reasons were given for holding as above:- Section 10-A is applicable to the assessees who are carrying on the business activity in Software Technology Park (STP). It i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

efit of section 10A which was extended to STP units w.e.f. 1.4.94 is not available to the assessee. Section 10B is applicable to assessees who are 100% EOUs. The provisions of law was effective up to A.Y 1994-95. Section 10B was amended with the insertion of clause (ia) to sub-section (2) of section 10B w.e.f. 1.4.95 by Finance Act, 1994. This amendment is applicable to undertakings which began to manufacture or produce any article or thing on or after 1.4.94. The amendment was with regard to pe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ee s own case. On appeal by the assessee the ITAT B Bench Hyderabad vide its order reported in 85 ITD 325 has dismissed the appeal of the assessee. Keeping this in view, the assessee s claim of deduction u/s 10B is not allowed. During the course of assessment proceedings, the assessee company has set up a new unit during financial year ended 31.03.2002 at Bangalore. This unit has been registered as a STPI Unit with the Software Technology Parks of India, Bangalore. The unit commenced operations .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the business from the Bangalore Unit is a loss, no deduction u/s 80HHE is allowable . 3. Before the CIT (A), assessee contended that the exemptions in question, were available to it. However, it was admitted that vide order of ITAT Hyderabad in ITA No.51/HYD/2002 dated 31.05.2002 for A.Y 1998-99, the issue had been decided in favour of Revenue. Since the issues are essentially the same and the facts are identical, respectfully following the order of the ITAT and following the principle of stare .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he issue is pending before the Hon'ble jurisdictional High Court for adjudication. 5. The issue is covered against the assessee by the order of the ITAT for A.Y 1998-99 in ITA No.51/Hyd/2002. This issue is pending before the Hon ble A.P. High Court and the ground has been raised by the assessee only to keep the matter alive. 6. Respectfully following the order of the Tribunal for the A.Y 1998-99 in ITA No.51/Hyd/2002, we decide the issue against the assessee. This ground of appeal is dismiss .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

capital expenditure. He also took the view that the tax was not deducted at source on the payment made to non resident presumably under the provisions of section 194J and so the payment is disallowable under the provisions of section 40(a)(i). 8. It was submitted by the ld Counsel that the services were rendered by the non-resident attorney from outside India, so it is not taxable in India. At any rate under article 15 of the DTAA between India and USA, independent professional charges are to be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f a failed proposal for the acquisition of a company, no asset of enduring benefit has accrued to the assessee company and, as such, it represents only revenue expenditure. For this proposition, the assessee relied upon the decision of the Hon'ble Punjab & Haryana High Court dated 7th March, 1989 in the case of Hindustan Milk Food Mfrs. Ltd vs. CIT (IT reference No.135 of 1979) in which legal expenses incurred for the purpose of acquisition of a capital asset was held allowable as the pr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

a taxable receipt in the hands of the said non resident company and as no tax was deducted at source u/s 195, the said expenditure is disallowable in terms of section 40(a)(i) . 12. It was submitted that the AO erred in disallowing the expenditure of ₹ 2,01,40,454 paid to the 100% subsidiary of the assessee i.e. InfoTech Software Solutions Inc (ISSI) USA by invoking provisions of 40(a)(i). This issue is covered by the decision of the Tribunal in assessee s own case for A.Ys 2006-07 and 200 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

(1)(i) can be invoked only when the Indian company secures orders for the benefit of non-resident. In the present case, the assessee has not canvassed / secured any orders for its nonresident subsidiaries. Hence, section 9(1)(i) cannot be invoked. 37. We have gone through the copy of the "Master Terms Agreement" (in short "MTA") entered into by the assessee with United Technology Corporation (PWC) which is filed at pages 179 to 196 of the paper book. Similarly, we have peruse .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s as under : "Commencing on the date(s) specified in each Work Order, IEAI will allocate qualified personnel through Software Services requirements statements and regular project meetings, which may be modified from time to time by IEL. IEAI shall inform IEL at the time of the request, or as soon thereafter as that the information becomes available, should it be unable to deliver the qualified personnel specified in the Work Order. Parties shall within 30 days negotiate in good faith a revi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

other foreign parties and also sub contract the work to the assessee depending on exigencies. 39. We also find that no operations have been undertaken by foreign subsidiaries in India and no engineers have been deputed by them to India and even they do not have permanent establishment in India. In terms of the respective DTAA, no income of the foreign subsidiary is taxable in India in terms of either section 9(1)(i) of the I.T. Act or the concerned Articles relating to business profits (Article .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ay of fees for technical services payable by- (a) …. (b) a person who is a resident, except where the fees are payable in respect of services utilised in a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India; or c…………. 14. The Tribunal held that the retrospective amendment brought in by way of Explanation to section 9(1) by Finance Act (No.2) 2010 w.e.f. 1.6.76 does not .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

en if the requirement mentioned at 2 above is held to be no longer valid in view of the provisions of Explanation to section 9 which has been substituted retrospectively w.e.f. 1.6.1976 by Finance Act 2010, it has to be noticed that the requirement mentioned at 1 above still holds the field. Tribunal also observed that the retrospective amendment by way of Explanation to 9(1) introduced by Finance Act 2010 could not have been visualized by the assessee company for deducting tax at source u/s 195 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is is because no technical knowledge has been made available by the non-resident to the assessee. Further, no technical plan or technical design placement has been transferred by US subsidiary to the assessee. What IEAI did was only in fulfillment of contractual requirement with PRATT & WHITNEY and not for the benefit of the assessee. The non-resident has simply executed the portion of work parceled out to it by the assessee . 17. As no technical knowledge was made available to the assessee .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

contracted a portion of the work and it sent its employees to do that job with Pratt & Whitney and received remuneration for it. The job involved on-site work by technical and professional experts of ISSI as a part and parcel of the overall contract of Pratt and Whitney with the Appellant for the development of specialized software. It is important to understand that the original contract was with the Appellant for the development and supply of very specialized software. A certain portion o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

IT(A) except that it is not correct to say that only the employees of ISSI were deputed to Pratt & Whitney. Actually, some employees of the Assessee Company were taken off its rolls and were taken on to the rolls of ISSI and assigned to the contractual work with Pratt & Whitney. This was done for operational reasons like the difficulty in getting work permits, visas and to facilitate local supervision. Having, thus, agreed that the Assessee company is into the development of specialized .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ISSI had absolutely no nexus with any relationship or contract of ISSI with Pratt & Whitney. In fact ISSI only worked on behalf of the Appellant. Its employees were sent to the premises of Pratt & Whitney at the behest of the Appellant and to provide technical work and expertise on behalf of the Appellant. Therefore, it is absolutely incorrect on the part of the Appellant to state that it never had any contract with IS SI and the work done by ISSI was its own contract with Pratt & Wh .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nding goes against the entire record of the assessee Company. As only a portion of the contractual work with Pratt & Whitney has been parcelled out to ISSI, it means that, if ISSI has provided technical services to the assessee, the assessee has also provided to Pratt & Whitney, not software development services but technical services. Actually, the Assessee Company has been allowed relief U/s.80HHE which is available only for export of software. The assessee Company was also allowed for .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

es and the distinction is evident from clauses (i) & (ii) of 80HHE itself. The reliance by the CIT(A) on the decision of the Chennai bench of the Tribunal in the case of Asst. CIT vs Evolv Clothing Co. Pvt. Ltd (142 ITO 0618) for the proposition that the ISSI provided technical services to the assessee Company is misplaced. In that decision, the provider of technical services had to undertake systematic research and the benefits of the research went directly to the recipient of the services. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e purpose of earning income from a source outside India and are not "utilized' in India. The payment in question has been made for earning income from the contract with Pratt & Whitney which is a 'source' outside India. As per the decision of the Tribunal in IBM World Trade Corpn. Vs Deputy Director of Tax, International taxation, Circle 1(1), Bangalore [IT Appeal No.759 (Bang) of 2011 S.P.No.50 (Bang) of 2012 AY 2007-08 dated 13th April, 2012] each separate contract constit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

puter software of ₹ 4,13,14,674. The fact is that aassessee bought some new computers and also some software and calculated depreciation @60% on both the assets. The AO granted depreciation @ 60% on the opening WDV of the computers and value of additions to computers, but restricted it to @25% on the additions to the software. The AO held that, in terms of Item 2(b) under Machinery and Plant (Item III of Part A of the Depreciation schedule) relevant for the assessment years 1988-89 to 2002 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is the general rate applicable to Plant & Machinery. He added the difference of ₹ 4,13,14,874/- as excess depreciation claimed. 22. The ld Counsel submitted before the CIT (A) that the Assessing officer has missed the point that purchase of software doesn't add to the production capacity of the assessee. It may add to the efficiency of operations. In the scenario of fast changing technology, the software gets outdated very fast. It has been held by the apex court in the case of Emp .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t brings the case within the principle laid down in this test. What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the Appellant's trading operations or enabling the management and conduct of Appellant's business to be carried on more efficiently or more profitability while leav .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n capacity but only increases the efficiency is not acceptable because any increase in efficiency invariably gives rise to greater production. Further, worldwide the introduction of specialized software has greatly reduced the production time, thereby vastly improving the quantum of production. I find that the assessing officer is correct in allowing depreciation at the rate of 25% in the current year". 24. On appeal before us, the ld Counsel submitted that the above reasoning of the CIT(A) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nd day-by-day systems are being developed in a new way, software may be needed like raw material. The view taken by the Tribunal was certainly a possible view. Thus, no substantial question of law arose". 25. It was argued that in the case of CIT vs Asahi India Safety Glass Ltd. (203 Taxman 277), it was held that expenditure incurred to enable management to run its business effectively, efficiently and profitably, leaving fixed assets untouched, would be an expenditure in nature of revenue .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in holding that the expenditure/ incurred in foreign currency of ₹ 12,08,19,698/- is to be reduced from "export turnover" while granting the deduction under section 80HHE. The breakup of this expenditure is available at page 86 of the annual report for FY 2001-02 it is as under: Expenditure in Foreign Currency:- a) Travelling Rs.9,93,64,053 b) Subscriptions Rs.4,71,156 c) Professional services Rs.2,09,84,489 Total Rs.12,08,19,698 28. The ld Counsel submitted that the definition .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ical services outside India". 29. It was further submitted that the above definition doesn't rope in expenditure on travel and subscriptions. So, the reduction from export turnover of ₹ 9,98,35,209/- (Rs.9,93,64,053 + ₹ 71,156/- is not at all warranted. The balance of ₹ 2,09,84,489/- includes ₹ 2,01,40,454/- paid to ISSI for the services rendered in the context of the assessee contractual obligations to Pratt & Whitney. The amount of ₹ 2,09,84,489/- rep .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

technical services received from that entity. It is not the case of even the CIT(A) that the assessee company provided technical services to ISSI. The definition of export turnover covers only "expenditure incurred in foreign exchange in providing the technical services outside India" and not expenditure incurred while receiving technical services or providing software services. So there is no basis for reducing this amount of even ₹ 2,09,84,489/- from export turnover while gran .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ot; in clause (iv) of Explanation 2 to section 10A, it was held as under: "If it is really a fact then there cannot be any reduction of the said amount from the export turnover when the assessee has not at all included it in the export turnover while computing deduction U/s. 10A of the Act. We therefore direct the Assessing Officer to verify this fact and if on verification it is found that the assessee has not included the said amount while computing the deduction U/s. 10A then there is no .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ose of computing deduction u/s. 10A of the Act. This view of ours gets support from the decision of Hon'ble Bombay High Court in the case of CIT Gem Plus India Ltd. (330 ITR 175 and Income-tax Appellate Tribunal Chennai Bench in case of Sak Soft Ltd. (30 SOT 55). Hence this ground is allowed for statistical purposes" 32. We have heard both the parties. We are of the opinion that the amount of ₹ 12,08,19,698 can be considered for exclusion, only if it represents expenses incurred i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

expenses of ₹ 92,60,349 are excludible from export turnover for granting deduction u/s 80HHE. Export turnover is defined under clause (iv) of Explanation 2 to sec.1 OA of the IT Act and it reads as under: "export turnover" means the consideration in respect of export [by the undertaking] of articles or things or computer software received in, or brought into, India by the assessee in convertible foreign exchange in accordance with sub-section (3), but does not include freight, te .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f Explanation 2 to section 10A is "telecommunication charges" and not soft link charges. Telecommunication charges cannot, it is submitted, be identified with soft link charges. The former relates to telephonic expenditure whereas the latter relates to internet. Strictly, they are different and so the soft link charges incurred by the assessee are not liable to be excluded in terms of the said definition. 35. It was further submitted that amount of ₹ 92,60,349/-. If it cannot be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

distinction: "The assessee did not render any independent technical services. It developed software on contract basis as per the agreement and handed over the same to the customer........ There is software development agreement between the client and the assessee. The expenditure incurred is for development of Software.... Such expenses incurred cannot be said to be expenditure for technical services. If the technical services are rendered independently which are being agreed to be separat .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ln 2 to S. 10A". 37. It was also submitted that the amount of ₹ 92,60,349/- is a payment made by the Assessee which has not been charged to the customers. It is not included in the invoices raised by the appellant on the customers. It is separately debited to the Profit & Loss account. It is not included in the export turnover. What is not included in the export turnover cannot be reduced from it for working out the deduction under Section 10A. In the case of Patni Telecom Pvt Ltd .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

;ble High Court of Karnataka in the case of Commissioner of Income-tax Vs. Tata Elxsi Ltd ([2012] 17 Taxmann.com 100 (Kar.)) which follows the decision of the Apex Court in the case of CIT v. Lakshmi Machine Works ([2007] 290 ITR 667 I 160 Taxman 401) In view of the above, the exclusion of ₹ 92,60,349/- from the export turnover may be deleted and the deduction U/s.10A may be allowed without such exclusion. 40. We heard both the parties. We find that this amount is not charged to the custom .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

as submitted by the ld Counsel that the AO grossly erred in holding these amounts represents revenue receipts of the Aassessee Company. 42. The CIT(A) mentioned in Para 14.1 of his order that "the assessee had also stated that the issue was to be adjudicated in this year and not in the AY 2004-05". In the course of the appeal before the CIT(A) for the AY 2004-05 in ITA NO.0133/2011/2012 the Appellant Company pleaded that the above amounts were not taxable in the AY 2004-05 as the forfe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ointed that the AO added these amounts in a re-opened assessment for this assessment year i.e., 2002-03 and this assessment was cancelled by the CIT(A) himself vide his order dated 16th August, 2013 for the AY 2002- 03 in ITA NO.0186/ACAIT 2(1)/CIT(A)-1I1/2007-08 on the ground that the reopening was invalid. It was argued that having, the cancelled the assessment and thus deleting the addition of these two amounts, the CIT(A) assumed jurisdiction to bring these two amounts to tax in this assessm .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er a forfeited amount is a capital receipt or a revenue receipt was also considered by the Supreme Court in the decision of Travancore Rubber and Tea Co., Vs. CIT [243 ITR 158] 45. The ld Counsel also placed reliance is also placed upon the following decisions. i. Deputy Commissioner of Income Tax vs Brijlaxmi Leasing & Finance Ltd (118 ITD 546). ii. Sunita Gupta Share Brokers Limited vs ACIT, Circle-9(1), New Delhi (ITA No.4188(Del)201 0, [G Bench]). iii. CNB Finwiz Ltd, New Delhi vs Depart .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

erson compensation for the trader's failure to receive a sum of money which, if it had been received, would have been credited to the amount of profits (if any)arising in any year from the trade carried on by him at the time when the compensation is so received, the compensation is to be treated for income tax purposes in the same way as that sum of money would have been treated if it had been received, instead of the compensation". 47. Hence, we are of the opinion that the forfeited am .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the case. 2. The Ld. CIT(A) erred in holding that the expenditure incurred in foreign currency of ₹ 20,85,23,625 is to be reduced from "export turnover" while granting the deduction under section 80HHE. 3. The Ld. ClT(A) erred in holding that the amount of ₹ 2,79,081/-,being on-site software services is not a part of the business profits for the purpose of calculating the relief under section 80HHE. 4. The Ld. CIT(A) erred in holding that the amount of ₹ 11,99,94,156/ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

l extent, to IBM Inc.USA, is under Section 40(a)(i) of the Income tax Act on the ground that this amount represented taxable incomes of the non-residents and, no tax was deducted at source on this amount in terms of section 195 of the Act. 6. The Ld.ClT(A) erred in holding that the amount of ₹ 48,25,974/- claimed under section 35(2AB) as weighted deduction cannot be allowed on the ground that there is no requisite approval from the prescribed authority. 7. The Ld. CIT(A) erred in holding t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Nos. 32 & 33, we have adjudicated as follows: 32. The ld Counsel placed reliance on the decision of the Tribunal for the AY 2006-07 in ITA No. 775/Hyd/2013 wherein, while considering the analogous definition of "export turnover" in clause (iv) of Explanation 2 to section 10A, it was held as under: "If it is really a fact then there cannot be any reduction of the said amount from the export turnover when the assessee has not at all included it in the export turnover while compu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

charges or insurance attributable to the delivery of the articles or things or computer software outside India are to be excluded from the export turnover, then the same is also required to be excluded from the total turnover for the purpose of computing deduction u/s. 10A of the Act. This view of ours gets support from the decision of Hon'ble Bombay High Court in the case of CIT Gem Plus India Ltd. (330 ITR 175 and Income-tax Appellate Tribunal Chennai Bench in case of Sak Soft Ltd. (30 SO .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e excluded has been accepted by the ITAT in the assessee s own case as reproduced at Para No.32 above. 4. In Ground No. 3 assessee submitted is that the CIT(A) erred in holding that the amount of ₹ 2,79,081/- received on account of on-site software services is not part of the business profits. The Assessing Officer excluded this amount with the following remarks; "On verification of the details of export of computer software services, it is observed that the assessee has shown onsite .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

does not qualify for exemption/deduction under Sec 80HHE. Accordingly, the same is excluded from the profits of the business while computing the deductions". 5. The ld Counsel submitted that the services provided by the appellant are in the nature of item (v) and (vi) of the above notification which read as under; (v) Engineering and Design; (vi) Geographic Information System Services; 6. He further submitted that the services rendered to our customer Pratt & Whitney etc. fall under ite .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

xplanation to section 80HHE and also by the CBDT Circular dated 17.01.2013. 8. In Ground no. 4 assessee submitted that the CIT(A) erred in holding that the payment of ₹ 11 ,99,94, 156/- paid to ISSI, the 100% US subsidiary of the appellant, is disallowable under Sec 40(a)(i) of the Income tax act on the ground that this amount represented taxable income of the non-resident and no tax was deducted at source on the payment in terms of section 195(1) of the Act. 9. Regarding the allowability .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ar also. This ground is allowed. 11. Ground No.5 is that the CIT(A) erred in holding that the amount of ₹ 67,56,552/- paid to G E Network Solutions, Netherlands and IBM Inc, USA are disallowable under section 40(a)(i) of the I T Act as relevant remittances to them were made without deduction of tax at source in terms of section 195(1) of the Act. 12. The assessee has purchased computer software of ₹ 67,56,552/- and also written off ₹ 1,95,38,471/- and thus debited ₹ 2,62, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

As the payment is made to a nonresident company, the Assessing officer held that the payment represented, not the purchase price of the software but, actually, royalty payment to the Dutch company. He also noticed that no tax was deducted at source on the said royalty payment u/s 195 of the Income tax act, and invoked the provisions of 40(a)(i) and accordingly disallowed the expenditure on the alleged royalty payment. 13. This issue is covered in favour of the assessee by the order of the Tribun .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e cannot meddle with the copies of the software in the process of its customization. We also observe that the assessee has to purchase the said software each time it wanted to sell the bundled software to its customers and if it had got any right to the copyright to the said software it would not have bought it every time when it wanted to sell. Further, perusing the books of the assessee at pages 170 to 175 of the paper book, we find that there are multiple purchases of software during the year .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mentioning name of the end customer supports our view. Hence, in our opinion, when there is no transfer of even the license to the assessee even through it is the purchaser, it cannot be said that there is any royalty payment by the assessee to the vendor company. The amount of ₹ 52, 55, 881/- is simply the cost of imported trading goods and not royalty payment". 14. We also find that the appeal filed by the Department against the order of the Tribunal has been dismissed by the jurisd .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

necessary approval of the Dept. of Scientific and Industrial Research for the last so many years and it has been renewed periodically. The recognition for the relevant period dated 11 Mar 2003 bearing No. TU/IV-RD/1812/2003 was filed before the CIT(A) and before the ITAT at page 266 of paper book. 16. We have perused the approval from the prescribed authority at page No.266 of the paper book and in view of the approval of the concerned Dept; the disallowance in question is deleted. In the result .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

g an addition of ₹ 1,46,34,0001- being the upfront amount paid by Carrier International Mauritius Ltd., in an earlier year by way of subscription to the share warrants of the assessee Company and forfeited during this year. He made the disallowances with the following remarks: "In normal course when a company approaches the public through issue of prospectus for subscription of the amount towards it share capital, the public at large are the contributors but not a specified person. In .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d in it that both the parties agreed that the assessee company's ability to deliver such services to Pratt& Whitney would benefit from a closer affiliation between Pratt & Whitney and the assessee company. This shows that the entire transaction of issuing Warrants that represents a right to acquire Equity shares of the assessee company in future is nothing but a transaction which has the impact of improving business/business promotion. Therefore, as the very purpose of this transacti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to raise capital but to improve the performance of the company and that the subscriber to the share warrants i.e., Carrier International Mauritius Ltd (CIML) is a group company of Pratt & Whitney. 20. This issue has already been decided in assessee s own case in the AY 2002-03 at Para Nos.46 & 47. 21. In the result, appeal in ITA No.1452/Hyd/2013 is allowed. ITA No.1451/Hyd/2013- A.Y.2005-06 1. Grounds raised by the assessee read as under: 1. The order of the ld CIT (A) dt. 20.8.2013 is .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

: This amount along with the amount of ₹ 17,50,000 also forfeited during financial year 2001-02 will be considered in the appeal order for A.Y 2002-03 . This amount refers to ₹ 34,65,000 forfeited from M/s. Callaghan Partners Corp. i) The CIT(A) has assumed powers he does not have by the above unwarranted remark and has artificially extended the time bar limit to consider the above amounts of ₹ 34,65,000 and ₹ 17,50,000 for A.Y 2002-03. 5. The ld CIT (A) ought to have rea .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sessee filed appeal before the CIT (A). 3. The ld CIT (A) held as under: 4.4 I have seen carefully the facts and evidence. I have also gone through the paper book where the appellant has attached most of the documents which were submitted before the AO. I find that vide letter dt. 13.12.2007 and addressed to the Asstt. Commissioner of Income Tax, Circle 2(1) Hyderabad, the appellant has stated in Para 9 of its reply that as per the agreement the amount payable to the appellant by Callaghan Partn .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

obligation, there is specific condition in the agreement between the assessee and CP as under: Use of proceeds: The amount shall be utilized for acquisition, capital expenditure, working capital requirements and other direct corporate requirements . 9. The quoted value of the shares which are quoted in the stock exchange as on the date of issue of option to the above share holders i.e. 15-11-1999 was ₹ 128500 & ₹ 1179.05 (open and close respectively). The offer was at the rate o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he financial reports and other documents submitted to the AO during the course of assessment proceedings. 4.7. In view of the above facts and circumstances, the AO is directed to verify the contention of the appellant that the forfeiture actually took place in the FY 2001- 02. If such is the case then no amount is taxable in the current year. This amount along with the amount of ₹ 17,50,000 also forfeited during FY 2001-02 will be considered in the appeal order for AY 2002-03. 5. The other .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e again putting the assessee to double jeopardy. Hence these grounds of appeal (i.e Ground Nos. 1 to 5 ) of the assessee are allowed. ITA No.1453/Hyd/2013 - AY 2005-06 1. Ground No.1 is general in nature. 2. Ground No.2 is that the ld CIT (A) erred in holding that the amount of ₹ 60,09,040 paid to M/s G.E.Network Solutions, Netherlands is disallowable u/s 40(a)(i) of the I.T. Act. 3. We find that this issue is covered by order in assessee s own case for AY 2004-05. In Ground No.5 for AY 20 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d Software from Netherlands and bundled it with its own software and thus customized it and sold it to its own customers both in India and abroad. The assessee cannot meddle with the copies of the software in the process of its customization. We also observe that the assessee has to purchase the said software each time it wanted to sell the bundled software to its customers and if it had got any right to the copyright to the said software it would not have bought it every time when it wanted to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

pany. Copies of the invoices raised by the Net Work Solutions on the assessee and at paper book 261 to 265 support the view of the assessee where the invoice mentioning name of the end customer supports our view. Hence, in our opinion, when there is no transfer of even the license to the assessee even through it is the purchaser, it cannot be said that there is any royalty payment by the assessee to the vendor company. The amount of ₹ 52, 55, 881/- is simply the cost of imported trading go .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

paid to ISSI, USA, 100% subsidiary of the Appellant is hit by the provisions of sec.40(a)(i) of the I.T. Act by failing to realise that the amount was not a sum chargeable under the I.T. Act. 5. We find that this issue is covered in favour of the assessee by the decision of the Tribunal in assessee s own case for AYs 2006-07 and 2007-08 in ITA Nos. 115 & 2184/Hyd/2011. This ground is similar to that of Ground No.4 for AY 2002-03 wherein we have adjudicated our conclusions at Para 21 and the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ions may be followed in this year also. This ground is allowed. 8. In the result assessee s appeal in ITA No.1453/Hyd/2013 is allowed. ITA No.1455/Hyd/2013 - A.Y 2002-03 Revenue s Appeal 1. Grounds raised by the Revenue read as under: 1.The CIT (A) erred on facts in law in holding that the re assessment is invalid though there was clear incorrect claim on the part of the assessee to disclose amount received on forfeiture of share warrants as income. 2. The CIT (A) erred on facts and in law in ho .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mpleted the assessment on 28.12.2007 u/s 143(3) r.w.s. 147 of the Act and determined total income at ₹ 11,55,64,714. The notice u/s 148 was issued on 13.6.2007. 3. The CIT (A) has held as follows: 4.13 The A.Y ended on 31.03.2003. As per proviso to section 147 discussed supra the conditions for reopening of the assessment change after 31.03.2007, i.e. after 4 years from the end of the assessment year. If the assessment was now to be reopened, it was the duty of the AO to prove that there w .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d Accountant. Thereafter there being no collection of any further information on record, the AO once again issued notice u/s 148 of the Act as discussed supra. 4.15 There is no new information on record and the AO has not brought out any details showing how income had escaped assessment and what was the default committed by the appellant and what inaccurate information had been provided by the appellant. The record does not show any default committed by the appellant in this regard. 4.16 From ab .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

at all the material facts were disclosed by the assessee and it was merely a change of opinion on the part of the AO for reopening the assessment u/s 147. Following the ratios of the decision in the case of CIT vs. Kelivinator India (256 ITR 1), we dismiss the Revenue s appeal. 4. Hence, in our opinion, the reopening of the assessment itself is bad in law, therefore, the reopened proceedings are held ab initio void. Hence the Revenue s appeal is dismissed. ITA No.1456/Hyd/2013 - A.Y 2005-06 Reve .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     bird's eye view     ↓  


|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version