TMI Blog2002 (8) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee has claimed the deduction under s. 80-I at 20 per cent of the profit of s. 98,930. It was required by the AO to substantiate the aforesaid claim. In compliance it is stated that the assessee manufactures and assembles software named as Devyani Project by using computerised technology. According to AO this activity could not be considered as manufacturing, industrial activity or production of any article or thing, therefore, the condition as per s. 80-I(2) cl. (iii) was not fulfilled and the claim was denied. 3. In first appeal Ltd. CIT(A) was of the view that the appellant could not be considered as industrial undertaking because the software was not manufactured but developed for device, therefore, not produced any articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduct in itself. She has produced jacket of Microsoft MS-DOS 6.22 operating system where software work is described as a product. In support a literature in connection of the product is also filed along with paper book. She has also mentioned that as per Bombay ST Act, entry No. 26(5) the software packages are listed as goods. She has also displayed the product which has placed on the shelves in a carton in the showroom for sale. Photocopies of Devyani floppy labels, box of Windows 98, box of Wordstar, and a software product are filed along with the paper book. She has also pointed out certificate from the Times of India stating that dataflow software as developed in Devanagari and English typesetting software used to produce outputs on Lin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the memory to understand Indian regional languages. 7. As per the provisions of s. 80-I where the gross total income of an assessee includes any profits derived from and industrial undertaking there shall be allowed in computing the total income of the assessee a deduction from such profit an amount equal to 20 per cent thereof. Accordingly the assessee has claimed a deduction of Rs. 98,980 in respect of this software product. According to AO this section applies to an industrial undertaking which manufactures or produces any article or thing as mentioned in s. 80-I(2)(iii), however, the assessee has not produced any article or thing, therefore, failed to satisfy the condition, hence, disallowed the claim. On the other hand, the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f engineering methods, such as process of design, prototyping, testing, integration, commissioning and such process is nothing but an engineering process. With these background the assessee has tried to establish that the software engineering is a manufacturing activity being an outcome of application of tools and technique of highly sophisticated equipments. The other argument of the assessee is that the said software is also treated by the ST authority as a product and sales-tax is separately charged and not treated as customized service tax but as a packaged software. This fact is evident from the Bombay ST Act, 1959, entry No. 26(5) specifying the rates of tax on software packages. The use of the assessee's software has also been certif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of Hon'ble Bombay High Court in the case of CIT vs. London Star Diamond Co. (I) Ltd. (1995) 124 CTR (Bom) 109 : (1995) 213 ITR 517 (Bom) and the decision of M/s Gem India Manufacturing case 140 Taxation 329 (Bom) are worth mentioning. In this regard a decision of Hon'ble Supreme Court in the case of Tata Consultancy Services vs. State of Andhra Prsdesh is to be relied upon being direct on the subject, wherein the Andhra Pradesh High Court has concluded that software is of two categories (1) software which is specialised and exclusively custom made to cater to the needs of individual no clients, and (2) software which is standardized and marketed in the use of certain classes of clients. The High Court took the view that the first ..... X X X X Extracts X X X X X X X X Extracts X X X X
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