9911796707
TMI Blog2016 (7) TMI 179X X X X Extracts X X X X X X X X Extracts X X X X ..... ) is erroneous and prejudicial to the interest of the revenue. The conditions precedent for assumption I exercise of jurisdiction under section 263 not being satisfied, the order passed under section 263 is bad in law and liable to be quashed. 2 The Learned CIT erred in concluding that the order of ACIT is erroneous and prejudicial to the interest of the revenue without appreciating the fact that (a) The impugned issue for which notice was issued under section 263 had been examined by the Assessing Officer during the course of re-assessment proceedings and AO had passed the re-assessment Order after application of mind (b) The matter was still pending before the CIT (Appeals) and had not reached finality at the time the order under section 263 was passed. 3 The learned CIT erred in concluding that the appellant is not eligible for deduction under section I0A I 10B in respect of onsite portion of software development sub contracted to associated enterprises of the appellant. On facts and in the circumstances of the case and law applicable and as held by the Jurisdictional ITAT in the case of Mphasis Software and Services India Private Limited, appellant is eligible for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee is engaged in the business of software development. The assessee received the work order from foreign client for software development. The part of the work has been carried out by the assessee in India and some part of development of computer software on site of the client has been performed by the associated enterprises of the assessee under sub contract. The Assessing Officer has denied the claim of deduction u/s 10B on the ground that the income received by the assessee from the on site development of software through its associated enterprises is not eligible for deduction, as it was not the work of export of software by the assessee. 6. On appeal, the CIT(A) has allowed the claim of the assessee by following the decision of the coordinate bench of this tribunal in the case of other group company of the assessee namely Mphasis Software Services India Ltd., Vs. DCIT in ITA No.1209 of 2012 dated 20/12/2013. We have gone through the agreements as well as the work orders received by the assessee from the clients and found that the work of software development was undertaken by the assessee and risk and reward under the agreements belongs to the assessee and not to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work of development or manufacture of the product need not be carried out by the assessee in its own premises in India. The moot question before us is whether the assessee can sub contract part or whole of its development of software work to an agency outside India and claim the income there-from as its income eligible for deduction u/s 10A of the Income-tax Act. The learned counsel for the assessee had placed reliance upon the decisions of this Tribunal at Delhi and Mumbai in various cases which are cited in para 3 above. In the case of Techdrive India Pvt. Ltd. (cited Supra), the Tribunal was considering whether exemption u/s 10B is allowable to the assessee therein where the product was produced by the sister concern of the assessee. The Tribunal at para 17 has culled out the various steps involved in the development/creation or production of software and at para 19 has also held that sec. 10B of the Act only provides for certain negative requirements such as clause (iii) of sub sec. (2) which says that the undertaking could not have been formed by the transfer to a new business of machinery or plant previously used for any purpose. It was held that the section does not provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The other document to be considered is the agreement of the assessee with the customer and it is seen therefrom that though the assessee company is entitled to sub contract the work, it shall alone be responsible for the risks and rewards arising out of the such sub-contract. Clause (23) of the agreement provides for sub contracting of the work, wherein it is stated that the supplier may not sub contract the performance of any of its obligations set out therein without the prior written consent of the customers and the approval of the contractor or sub contractor and the customer shall not constitute a superseding of events or wavier of any right of customer to reject work which is not in conformation with the standard set forth in the agreement and does not constitute nor imply authorization of expenses in excess of budget. It is also provided that to the extent the supplier subcontracts to third parties any of its obligations to be set out in the agreement, the supplier shall remain fully responsible for such obligation and for all acts or omissions of its subcontractors or agents. From the above clauses, it is clear that the assessee is solely responsible for the discharge of it ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
