TMI Blog2017 (5) TMI 1223X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO to deny the deduction under Section 10AA of the Act for AY 2010-11 was that a majority of the invoices were addressed to the Assessee at the addresses in Mumbai, Gurgaon etc. Very few of those invoices bore the Noida SEZ address. The AO observed that the source of the data processing export had to be unit established at SEZ area Held that:- The claim under Section 10AA of the Act was supported by a certificate of a Chartered Accountant in Form 56F. It was noticed that Article 9 read with Schedule-I of the Distribution Agreement between the Assessee (Inter Globe) and Galileo showed that Galileo was entitled to a fee based on the number of segments completed by the Assessee. ‘Segment’ was defined under Article 2 to mean a booking, either of a direct flight or consisting of various legs of journeys, which is concluded and not cancelled at any stage. The more the number of segments booked by travel agent, the higher would be the revenues of the Assessee. Therefore, it was critical for the Assessee to ensure that the bookings were converted into segments. In terms of Article 8 of the Agreement, the Assessee was required to provide any kind of technical help, support or assist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C ) in the grounds in the memorandum of appeal, there is not a single ground on this aspect. There is just one general ground i.e., ground E , which reads For that the order of ITAT is erroneous since it ignores the settled position of law. 7. Nevertheless, since Ms. Vibhooti Malhotra, learned counsel for the Revenue has argued this issue at length, the Court proceeds to examine it notwithstanding that there is no ground urged in the appeal on the said issue. Facts in ITA 154 of 2017 8. The facts relevant to the issue raised are that AIPL was incorporated on 8th March, 1994 and was granted approval for setting up a 100% export oriented unit under Software Technology Park Scheme ( STPS ) by a letter dated 5th July, 1995. This was followed by an agreement dated 28th September, 1995 between the Government of India and AIPL. The first undertaking of AIPL was set up at Hansalaya Building, New Delhi ('Unit I'). AIPL started commercial production under the Software Technology Park of India ( STPI ) scheme from the financial year ( F.Y. ) 1994-95. Subsequently, the business activity of the undertaking was shifted to D-4/4, Vasant Vihar, New Delhi. The turnover of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the price charged by AIPL. This has ultimately been ordered to be deleted by the ITAT in the impugned order on account of AMP adjustment. That aspect of the matter need not be examined further since in this appeal notice has been confined only to the question of allowing the deduction under Section 10A of the Act. 13. However, it requires to be noted that on the basis of the order of the TPO, the AO passed a draft assessment order under Section 144C of the Act which was communicated to the Assessee on 28th February, 2013. The Assessee then went before the Dispute Resolution Panel ( DRP ). Proceedings before the DRP 14. During the course of proceedings before the DRP, an enhancement show cause notice dated 26th November, 2013 was issued. In it, it was stated that it had been observed that the total revenue received from business had been credited from the said P L Account of AIPL by an amount of ₹ 164.99 crores, which was the distribution fee received from Amadeus Spain. The distribution fee for the AY under consideration was 46% of the net turnover. It was stated therein that the services enlisted in Articles II and XI of the Distribution Agreement suggested ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee then filed an appeal before the ITAT. It was contended by AIPL before the ITAT that as in the earlier years, even during the AY in question, the sole activity of AIPL was to provide software connectivity for providing access of Amadeus CRS to travel agents for which it received 46% of the revenue earned by Amadeus Spain. Software connectivity was provided by rendering ITeS data processing services to Amadeus Spain. AIPL relied extensively on the order passed in its own case by the ITAT for AY 1996-97 allowing the deduction claimed for Unit I under Section 80 HHE/10A of the Act and the fact that this had been accepted by the Revenue. Likewise, in the claim for AYs 1997-98 and 1998-99, the orders in favour of the Assessee by the ITAT and the CIT(A) respectively had become final. Further, Unit II had been set up in AY 2006-07 and for that year the deduction under Section 10A had been allowed. Thus, the rule of consistency was also invoked. 20. In the impugned order dated 21st August, 2016, the ITAT noted that the ITAT had in its earlier order for AY 1996-97 in the Assessee's own case i.e., Assistant Commissioner of Income Tax v. Amadeus India (P) Ltd. (supra) undert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ational Informatics Centre ( NIC ). By a letter dated 9th February, 1998, the NIC intimated the AO as under: According to the details given by you, M/s. Amadeus India Pvt. Ltd. is merely collating information (data) from customers and doing bit of processing (collating) and forwarding the collated information (not any software programme) to its German counterpart. 23. However, before the ITAT, the Assessee had pointed out that the AO had not put the correct facts before the NIC and that in that event the opinion was bound to be incorrect. In para 31 of its order for AY 1996-97, the ITAT observed as under: 31. From the objections raised by the assessee as mentioned above it appears that the Assessing Officer has not supplied the complete information about the activities of the assessee to NIC. The opinion based on incomplete information cannot be relied upon. Moreover, when opinion from NIC was received by the Assessing Officer, the assessee was asked as to why the claim of the assesse for deduction under section 80HHE may not be disallowed, the assessee made a reference to ESC also. ESC vide their letter dated 10-3-1998 addressed to Assessing Officer opined as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation on the data base but does not touch the process by which such information is brought on to the host computer. 35. The assessee which occupies a position midway between the two fulfils, it will be clear from the facts as stated above, the functions of a programme exporter, it does not add mere entries to a database as done by the travel agent. In fact it has no direct interest in adding to, or drawing extracts from the data base built into the computer like the several operators all the world over. What it does actually is to supplement the functions of the Amadeus Group by preparing and transmitting programmes to the latter for incorporation into portions or partitions in its mega-computer at Erding in Germany, so as to enable the travel agents in its marketing region draw on the available information for their benefit. Its activities are to issue instructions to the master computer to recognise the operators, identify them and provide them access to specific portions of the data base. There can be no doubt whatever, for the reasons discussed above, that the assessee manufactures, produces and exports software within the meaning of the three specified sections of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to show that the activity of the Assessee, which was examined then and the activity now is any different. The essence of both Section 80 HHE and Section 10A in terms of the conditions of eligibility are not very different. 30. It was then submitted by Ms. Malhotra that the beneficiaries of the Assessee s activities are all located in India and, therefore, there was no real export of services. The extracted portions of the order of the ITAT for 1996-97 reveal that the very same activity of the Assessee was examined not only by STPI but also by ESC. It was also noticed that the NIC had been furnished wrong information about the activity of the Assessee by the Revenue. The categorical finding of the ITAT, on the basis of the reports of the STPI and ESC was that the Assessee manufactures, produces and exports software and that it could claim exemption under any of the three provisions viz., Section 80HHE or Sections 10A or 10B of the Act. The said order for AY 1996-97 and followed in the subsequent two AYs has been accepted by the Revenue. 31. Ms. Malhotra raised a doubt whether the Assessee could be said to be exporting computer software. The Court finds that this doubt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appeal of the Revenue against AIPL for AY 2009-10. Facts in ITA 330 of 2017 (Inter Globe) 33. Turning now to the Revenue's appeal in the case of Inter Globe for AY 2010-11, it is seen that there are concurrent findings of CIT(A) as well as ITAT regarding the eligibility of the Assessee to deduction under Section 10AA of the Act. 34. The facts were that the Assessee/Inter Globe was engaged in the business of software development and providing information technology services, namely, data processing . It exported the services from the Special Economic Zone ( SEZ ) Unit located at Noida. AO's order 35. The basis for the AO to deny the deduction under Section 10AA of the Act for AY 2010-11 was that a majority of the invoices were addressed to the Assessee at the addresses in Mumbai, Gurgaon etc. Very few of those invoices bore the Noida SEZ address. The AO observed that the source of the data processing export had to be unit established at SEZ area. However, there were only 38 employees there. The value of the computers at the Noida SEZ address was only ₹ 31.63 lakhs. 36. The AO in the assessment order dated 1st March, 2013 concluded that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed the deduction claimed by the Assessee/Inter Globe under Section 10AA of the Act. Impugned order of the ITAT in case of Inter Globe 39. The Revenue then went in appeal to the ITAT. The ITAT noted that the Agreement entered into between the Assessee and Galileo envisaged the following technical services being provided: access levels, communication links, scripts, problem ticketing and help desk operations, voice inbound call centre 24X7, Network Monitoring Operations, Ticket Stock Control Operations, Vendor Support Operations, Fares Support Operations. Further, constant update network was done by the Assessee from time to time. The Software Export Declaration (SOFTEX) form showing the work of the Assessee of data entry and conversion of software data processing was also referred to. The Auditor s report certified that the Assessee had been engaged in the development of computer software and information technology enabled products and services. This had been certified by the Office of the Development Commissioner, Noida SEZ. 40. Before the ITAT as it was contended by the Revenue it was urged that the activity involving AIPL was very different from the activities be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith a computer, merely accesses or utilizes travel information drawn from the data base of the computers. The travel agent also adds to, and alters the data available on the computer when he books a ticket (or other travel facilities like cab services, accommodation at hotels/resorts etc.) for a customer by feeding in the data regarding the customer such as airlines, hotel, local travel fare, tickets, the several intermediary and eventual destination; and the nature of services to be provided etc. This data enters the composite data based stream and becomes available to other operators via computers operating on Amadeus or Galileo system, all over the world, whenever a fulfilling transactions occurs at the travel agents end. The Assessee's role like the present Assessee before us, was occupying the position of hyphen between the overseas Amadeus and Galileo which have conceived evolved, maintained and operates the CRS (Computer Reservation System) facility on the one hand; and travel agent on the other. What the Assessee does is to supplement functions, of the overseas entities (Amadeus or Galileo) by preparing and transmitting the locally generated travel related data to them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Contentions of the Revenue 44. Mr. Ruchir Bhatia, learned counsel for the Revenue submitted that the decision of this Court in Director of Income Tax v. Galileo (supra)which interpreted the same agreement between the Assessee and Galileo held that it did not provide for rendering of export services. 45. The Court is unable to agree with the above submission. This Court in Director of Income Tax v. Galileo (supra) was not examining whether the Assessee was entitled to deduction under Section 10AA for the services provided by it. The focus there was on whether Galileo could be said to have a PE in India. As noted by the CIT(A) and the ITAT even in that case, the ITAT discussed the functions of the Assessee. The said decision of the ITAT, which was affirmed by this Court, was not inconsistent with what the ITAT held in its impugned order in the present case as far as the Assessee's functions are concerned. 46. The concurrent factual findings of both the CIT (A) and the ITAT as regards the Assessee/Inter Globe fulfilling the conditions of eligibility for deduction under Section 10AA of the Act have not been shown to be perverse. Conclusion in ITA No. 330 of 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
