TMI Blog2018 (5) TMI 1081X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act - Held that:- The case of the assessee is squarely covered in the case of CIT vs. M/s. Mphasis Software and Service India Pvt. Ltd. (2015 (10) TMI 2062 - KARNATAKA HIGH COURT) wherein it has been held that profit is attributable to onsite work of development of software through sub-contracting of certain operation to AEs is part of the net profit for the purpose of claiming deduction under section 10A. We set aside the order of Ld. CIT(A) and direct the AO to allow the deduction in respect of sub-contracting amount - Decided in favour of assessee. - ITA No.4462/M/2016 - - - Dated:- 15-5-2018 - SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER For The Assessee : Shri Karthik Natarajan, A.R. For The Revenue : Shri M.V. Rajguru, D.R. ORDER Per Rajesh Kumar, Accountant Member: The present appeal has been preferred by the assessee against the order dated 27.04.2016 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2008-09. 2. The assessee has raised the following grounds of appeal: The CIT(A) erred in holding that Commissioner of Income Tax - 2 (C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) affirmed the order of AO by not giving any detailed finding. 7. The Ld. A.R. vehemently submitted before us that the Ld. CIT(A) has erred in law and on facts in upholding the order of AO by ignoring the fact that unbilled revenue represented the work done by the assessee which could not be billed till the year end pending completion of certain milestones and thus the unbilled revenue is billed in the subsequent year as per the contract conditions. The Ld. A.R. submitted that the assessee has correctly accounted for the amount of unbilled revenue as per the accounting standard 9 issued by ICAI on which provides for recognition of revenue in the books of accounts on accrual /mercantile basis. The Ld. A.R. further submitted that the said unbilled revenue was duly billed during the next year and the money was recovered within the period as stipulated by the RBI. The Ld. A.R. contended that this is the practice which is consistently followed by the assessee over the years. In defense of his arguments, the Ld. A.R. relied on a series of decisions namely M/s. iNautix Technologies India Pvt. Ltd. vs. ACIT in ITA No.541/Mds/2006 ors. for A.Y. 2002-03 ors. vide order dated 09.08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal in the case of M/s. iNautix Technologies India Pvt. Ltd. vs. ACIT (supra) wherein a similar issue has been decided that the amount of unbilled revenue should be included in the export turnover and also in the total turnover for the purpose of calculating deduction u/s 10A of the Act. In another case, in the case of Patni Telecom Solutions P. Ltd. vs. ITO (supra) the co-ordinate bench of the Tribunal has held as under: 9.1. We also find that the assessee in this case has included unbilled revenues in its total turnover in its annual accounts. So to claim otherwise, while computing deduction under section 10A of the Act in our view is not correct. Under these circumstances, the correct position would be to include this unbilled amount, both in total turnover as well as in export turnover. The assessee has specifically submitted that unbilled turnover was subsequently billed and substantial amount has been realised in the immediately subsequent year, within the statutory period permitted for claim of exemption under section 10A of the Act. All the details were filed both before the Assessing Officer and the Ld. CIT(A). Both these authorities ignored these submissions. Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... production of article or thing or computer software and export of the same and not in respect of sub-contracting manufacturing activities. The assessee has sub-contracted some of its activities for which sub-contractor charges of ₹ 11,45,75,769/- were paid. In the set aside proceedings the AO observed that assessee has sub contracted some of his activities which does not amount to production or manufacture and therefore not eligible for deduction under section 10A of the Act on the said proportionate amount and reduced the same from export turnover to the extent of ₹ 11,45,75,769/-. 13. In the appellate proceedings, the Ld. CIT(A) dismissed the appeal of the assessee after considering the submissions of the assessee by observing and holding as under: 5.2 I have carefully considered the facts of the case and submission made by the Ld. AR. I have also gone through the order of Ld. CIT-2, Mumbai. He has decided the issue against the assessee at para 5 of his order by holding as follows: with regard to sub-contracting, deduction is eligible to an assessee for production or manufacture of articles or things or computer software and hence the deduction is not elig ..... X X X X Extracts X X X X X X X X Extracts X X X X
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