Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (7) TMI 179 - ITAT BANGALORE

2016 (7) TMI 179 - ITAT BANGALORE - TMI - Reopening of assessment - Deduction under Section 10B - Held that:- Since the issue on merits regarding the restriction of the deduction under Section 10B of the Act arising from the original assessment order has been decided by this Tribunal therefore, subsequent revision order becomes infructuous. Accordingly, we set aside the impugned revision order. - Decided in favour of assessee. - I.T.A. No. 652/Bang/2014 - Dated:- 24-6-2016 - Shri A. K. Garodia, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng grounds of appeal are independent of, and without prejudice, to one another. On the facts and in the circumstances of the case, the impugned order passed by the learned Commissioner of Income-tax, Bangalore - I1I ['the CIT'] under Section 263 of the Act is bad in law and void ab inito. The learned CIT erred in concluding that the order of the Asst. Commissioner of Income-tax, Circle 12(1), Bangalore ('the ACIT') is erroneous and prejudicial to the interest of the revenue. 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

ad 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 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

umerator being the software development charges paid to associated enterprises. The rationale I basis for such conclusion of the learned CIT is incorrect, contrary to facts and consequently bad in law and liable to be quashed. 5 The Appellant therefore prays that the order passed by the CIT under section 263 of the Act and the consequential effect thereof is bad in law and consequently the said order should be quashed/annulled. The Appellant craves leave to add to or alter, by deletion, substitu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

for software development charges. Accordingly, the CIT has invoked the provisions of section 263 and revised the assessment order while passing the impugned order. The CIT has directed the Assessing Officer to consider the issue of allowing the deduction under Section 10B after excluding the on site expenses. At the outset we note that the Assessing Officer in the original assessment under Section 143(3) rws 147 restricted the deduction under Section 10B of the Act in proportion to the on site e .....

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 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

eived 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 the associated enterprises of the assessee. The assessee has received the entire consideration of development of software in foreign exchange and earned profit on that part of the job executed by the associated enterprises under sub-contract after reducing the expenses incurred by the assessee. We find th .....

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 who are outside India and to discharge its liabilities under the contract, the assesse sub- contracted the work to its AE outside India who in fact develop the software, test and implement the software at the premises or customer s place using its own personnel and infrastructure. The assessee received the payment from the end user i.e the customer and makes the payment of software development charges to the AE for the services rendered by it. The contract development charges paid by the asses .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y under its direct supervision and control. Undisputedly, the assessee has sub- contracted the entire work of development of software for the customer to its AEs outside India. The assessee has placed reliance upon the Circular No.694 dated 23.11.1994 to submit that the development of software need not be carried out at the premises of the assessee company and if the assessee performs the work at the site of the customer outside India, even then it is eligible for deduction u/s 10A of the Income .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ced 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

vision or control of the assesse, the claim for deduction or exemption has to be allowed. Similar view is expressed by the other benches of the Tribunal on which the assessee has placed reliance upon. 13. Therefore, to apply the principles laid down in the above cases, the next issue to be examined is to whether the development of software by the AE is under the supervision and the control of the assessee? 14. As seen from the Master Services Agreement (which is placed at page 36 of the paper bo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. Clause (4) setsout obligation of the contractor and clause (7) relates to right over the intellectual property. The AO has held that the intellectual property relating to development of products is with the contractor and, therefore, it cannot be said that the work is carried out under the supervision of the assessee company. But a literal reading of the agreement reveals that the rights and responsibilities attached to the deliverables vests with the contractor, only till the company has paid .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssessee company a non-exclusive license to use such intellectual property enabling the company to use such source code for forming part of the deliverables developed for the company. 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 fo .....

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 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 its obligation under the agreement to the customer and the subcontractor has no say in the matter. It is seen from 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

 

 

 

 

 



|| 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