TMI Blog2008 (8) TMI 383X X X X Extracts X X X X X X X X Extracts X X X X ..... se were to be disallowed under section 37(4) of the Act. Resultantly this ground deserves and is hereby allowed. 3. The second and the main ground of this appeal is against the direction given by the ld. CIT(A) for allowing exemption under section 10B amounting to Rs. 2,63,24,448. Briefly stated the facts of this ground are that the assessee was engaged in the business of execution of turnkey projects, short duration projects and construction along with the provision of consultancy services etc. It claimed exemption under section 10B amount-ing to Rs. 2.63 crores on the profits of its Export Oriented Unit (EOU), which was set up in assessment year 1995-96. The approval was obtained vide the letter dated 9-12-1994 from the Government of India, Ministry of Industry, indicating the item of manufacture as "Engineering Software Designs Specifications and Drawings". The Assessing Officer noted that the exemption under section 10B was available on the manufacture or production of any articles or thing on the fulfilment of other conditions laid down in this section. By referring to Explanation to this section, at the material time, it was observed that "manufacture" includes any Process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reproduced on pages 16 and 17 of the impugned order. In this remand report, the Assessing Officer elaborated the activity of the assessee as under : "In the case of the assessee company, the assessee receives an input data structure from the client in the form of hard copy or in the electronic file format. The assessee then creates a date based structure in the Oracle software. This data based structure comprises the various component dimensions, specifications and other attributes. Based on these component specifications, the plant which is proposed to be set up, as required by the assessee's clients are entered into the system as a graphical input. The inputs fed into the data base for the evolving of the proposed project consists of civil, structural electrical etc. disciplines. The final design is then handed over to the clients in the electronic form which comprises the handing over of the entire data base wherein the various inputs have been evolved by the assessee company." 5. The crux of this remand report is that with the insertion of a new section 10BB into the Act, with retrospective effect from 1-1-1994, the scope of exemption has been enlarged to further include pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch in nutshell is that of producing designs and drawings for the set up of projects of foreign clients on the basis of their specifications. This activity is done by considering the data received from abroad and the final output, being the drawings and designs of the plant to be set up are delivered back to the clients through E-Mail and FTP. The making of drawings and designs of the proposed project is done by the engineers of the assessee with the aid of computers. Now we have to examine the factual matrix for ascertaining if the activity done by the assessee amounts to manufacture or production of any article or thing within the meaning of the relevant provision. 8. Section 10B(2), at the material time, provides that the profits and gains derived by an assessee from 100 per cent EOU shall not be included in the total income of the assessee subject to the provisions of this section. Certain conditions have been laid down in sub-section (2). In the present appeal we are concerned with clause (i) of sub-section (2), which states that "it manufactures or produces any article or thing". Whereas the assessee claims to have satisfied this condition, the case of the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the final product to be exported by the assessee should be some programme or computer programme and not that the output should be the outcome of any programme or computer programme. The activity done by the assessee, in our considered opinion does not amount to 'manufacture' or 'production' in terms of section 10B. 10. We now turn to the contention put forth by the ld. AR that section 10BB has expanded the scope of section 10B and as a result of that it has become eligible for exemption. We have to examine and evaluate if section 10BB has brought out any change to alter the fate of the assessee. 11. The Finance Act, 2001 inserted new section 10BB with retrospective effect from 1-4-1994, which reads as under:- "The profits and gains derived by an undertaking from the production of computer programmes under section 10B, as it stood prior to its substitution by section 7 of the Finance Act, 2000 (10 of 2000), shall be construed as if for the words 'computer programmes' the words, 'computer programmes or processing or management of electronic data' had been substituted in that section." 12. A bare perusal of this provision divulges that the phrase "computer programme" in sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy business, the assessee undertook data processing work with the help of electronic computers. It claimed investment allowance on the cost of computers. The Assessing Officer rejected the claim of the assessee on the ground that there was no manufacturing activity undertaken by the assessee. The Hon'ble High Court held that the assessee was not entitled to allowance because it was not an industrial undertaking engaged in the business of manufacture or production of any article or thing. In the other case of Prudential Management Services (P.) Ltd. Consultants (P.) Ltd., the assessee was carrying on the business of data processing with the help of computers. The claim of the assessee for the investment allowance was jettisoned at the assessment stage on the ground that there was no manufacturing or production of any article or thing. The Tribunal upheld the assessee's claim. But the Hon'ble High Court remitted the matter to the Tribunal for deciding as to whether the assessee could be said to have been engaged in the manufacture or production of an article or thing. 14. It is therefore, clearly borne out that the realm of dispute in these cases was about the determination of qu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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