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TMI Blog2015 (7) TMI 1113X X X X Extracts X X X X X X X X Extracts X X X X ..... ue has raised following grounds: 1) The order of the learned CIT(A) is opposed to law and facts of the case. 2) On the facts and in the circumstances of the case the learned CIT(A) erred in law in directing the AO to allow the deduction u/s 10B (wrongly mentioned as 10A) with regard to the income earned by sub contracting of on site part of software development activity through assessee's Associated Enterprise without appreciating the fact that the deduction u/s 10B is to be allowed only for the profits earned from the activity of an site development of computer software and not for the profits earned from the associated enterprises of the assessee by subcontracting the activity. 3) On the facts and in the circumstances of the case th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the associated ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... development of software by the AE. According to the authorities below, the software is to be developed by the assessee and even the onsite implementation or on site development work to be carried out at the premises of the customer are to be performed by the employees of the assessee company 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 el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side agency or contractors under the supervision 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 book) entered into by the assessee with its AE at USA, the scope of the work is to provide onsite and offshore services relating to information technology to the assessee company, which shall include produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecisions of the coordinate benches relied upon by the learned counsel for the assessee apply to the case on hand also. In view of the same, we hold that the assessee is eligible for deduction u/s 10B of the Income- tax Act with regard to the income earned by the assessee company from the 'onsite development of software' carried out by the AE. It is also noteworthy to mention that the payment made by the assessee to the AE for the work done by the AE at the site of the customer has been accepted by the TPO to be at Arm's Length Price. Therefore, there cannot be any imputation that the assessee has been trying to shift the profits out of India by outsourcing the work to the AE. 7. Since the facts and circumstances in the case of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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