The ITO, Ward-4(1),, Ahmedabad v. Elegant Microweb Technologies Pvt. Ltd.,, Ahmedabad

ITA 1140/AHD/2010 | 2006-2007
Pronouncement Date: 01-10-2010 | Result: Dismissed

Appeal Details

RSA Number 114020514 RSA 2010
Assessee PAN AAACE3459J
Bench Ahmedabad
Appeal Number ITA 1140/AHD/2010
Duration Of Justice 5 month(s) 18 day(s)
Appellant The ITO, Ward-4(1),, Ahmedabad
Respondent Elegant Microweb Technologies Pvt. Ltd.,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 01-10-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 01-10-2010
Assessment Year 2006-2007
Appeal Filed On 13-04-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABA D (BEFORE HON'BLE SHRI G.D. AGRAWAL V.P.(AZ) & HON BLE SHRI T.K. SHARMA J.M. ) I.T.A. NO. 1140/AHD./2010 ASSESSMENT YEAR : 2006-2007 INCOME TAX OFFICER WARD-4(1) -VS.- M/S. ELEGANT MICROWEB TECHNOLOGIES PVT. LTD. AHMEDABAD AHMEDABAD (PAN : AAACE 3459 J) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI C.K. MISHRA S R. D.R. RESPONDENT BY : SHRI A.C. SHAH O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE CO MMON ORDER DATED 04.01.2010 OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -VIII AHMEDABAD ALLOWING THE CLAIM OF ASSESSEE UNDER SECTION 10A OF THE INCOME TAX ACT 1 961 FOR THE ASSESSMENT YEAR 2006-07. 2. AT THE TIME OF HEARING BEFORE US ON BEHALF OF R EVENUE SHRI C.K. MISHRA LD. SR. D.R. APPEARED AND CONTENDED THAT THE LEARNED COMMISSIONE R OF INCOME TAX (APPEALS) HAS NOT APPRECIATED THE FACT THAT THE ASSESSEE HAS GOT THE WORK DONE THROUGH CONSULTANTS AND PAID CONSULTANCY CHARGES TO THEM. THE ASSESSEE HAS NOT P RODUCED OR MANUFACTURED ANY ITEM WHICH WILL ENTITLE THEM TO CLAIM DEDUCTION UNDER SECTION 10A OF THE INCOME TAX ACT AND LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE HELD THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION UNDER SECTION 10A. 3. ON THE OTHER HAND SHRI A.C. SHAH LD. COUNSEL A PPEARING ON BEHALF OF THE ASSESSEE VEHEMENTLY SUPPORTED THE ORDER OF LEARNED COMMISSIO NER OF INCOME TAX (APPEALS). THE LD. COUNSEL OF THE ASSESSEE POINTED OUT THAT FACTS AND CIRCUMSTANCES OF THE CASE IN THE ASSESSMENT YEAR UNDER APPEAL ARE SAME AS IN THE EARLIER TWO AS SESSMENT YEARS. IN THE EARLIER TWO ASSESSMENT YEARS LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FOLLOWING THE DECISION DATED 23.10.2009 OF ITAT B BENCH AHMEDABAD IN ASSESSEES OWN CAS E IN ITA NOS. 2138/AHD/2006 & 2 ITA NO. 1140/AHD/2010 2509/AHD/2007 FOR THE ASSESSMENT YEARS 2003-04 & 20 04-05 RESPECTIVELY HELD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 10A OF THE A CT. IN THE ASSESSMENT YEAR UNDER APPEAL THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ME RELY FOLLOWED THE DECISION OF THE TRIBUNAL IN THE ASSESSMENT YEARS 2003-04 AND 2004-0 5 (SUPRA) THEREFORE THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) BE UPHE LD. 4. HAVING HEARD BOTH THE SIDES WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THE IMPUGNED ORDER THE LEARNED COMMISSIO NER OF INCOME TAX (APPEALS) HAS RECORDED A FINDING OF FACT THAT ASSESSEE IS ENGAGED IN THE B USINESS OF DEVELOPMENT AND EXPORT OF SOFTWARE FROM CUSTOM BONDED WAREHOUSES RECOGNIZED BY THE STP I. THE ASSESSING OFFICER HAS REJECTED THE ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 10A ON THE GROUND THAT IT DID NOT PRODUCE THE SOFTWARE ITSELF AND IT ENGAGED PROFESSIONALS. IT IS PERTINENT TO NOTE THAT IN THE EARLIER TWO ASSESSMENT YEARS ALSO FACTS ARE IDENTICAL WITH THA T OF THE ASSESSMENT YEAR UNDER APPEAL. IT IS EVIDENT FROM THE OBSERVATION OF THE ITAT B BENCH AHMEDABAD VIDE ORDER DATED 23.10.2009 IN PARA 8 IN ASSESSEES OWN CASE IN ITA NOS. 2138/A HD/2006 & 2509/AHD/2007 FOR THE ASSESSMENT YEARS 2003-04 & 2004-05 RESPECTIVELY WH ICH IS AS UNDER :- '8 THE FACTS AS POINTED OUT BY THE LEARNED AUTHOR ISED REPRESENTATIVE OF THE ASSESSEE CLEARLY INDICATED THAT THE SOFTWARE WE RE DEVELOPED IN-HOUSE BY THE ASSESSEE. THERE IS NO BAR IN APPOINTING CONSULT ANT ON THE JOB AND FURTHER MERELY BECAUSE CONSULTANTS ARE EMPLOYEES O F SISTER CONCERN ASSESSEE CANNOT BE DENIED THE BENEFIT OF EXEMPTION U/S.10A OF THE I.T. ACT 1961 BY HOLDING THAT SOFTWARE WERE NOT DEVELOPED IN -HOUSE. FOR THE PURPOSE OF DEVELOPMENT OF SOFTWARE THE ASSESSEE IS REQUIRED TO HIRE EMPLOYEES/PROFESSIONALS OR MAY OUTSOURCE PART OF TH E JOB. MOST IMPORTANT IS THAT THE BASIC DESIGN THEME STRUCTURE SHOULD B ELONG TO THE ASSESSEE. THE NEGOTIATIONS WITH THE CLIENTS; HOW THE PAYMENT ARE RECEIVED BY THE ASSESSEE. AND LEGAL ACCOUNTABILITY FOR CORRECTNESS OF THE SOF TWARE SHOULD VEST ON THE ASSESSEE. MERELY BECAUSE PART OF THE SOFTWARE WAS D EVELOPED IN-HOUSE WITH THE HELP OF CONSULTANT OF SISTER CONCERN IT IS INC ORRECT TO INFER THAT ASSESSEE HAS HIMSELF NOT DEVELOPED THE SOFTWARES. THE ASSESS ING OFFICER HAS CONVENIENTLY IGNORED OTHER FACTORS SUCH AS IN-HOU SE DEVELOPMENT OF SOFTWARE AGREEMENT WITH SISTER CONCERN PAYMENT OF THE CONSULTANCY CHARGES BY THE ASSESSEE TO THE SISTER CONCERN FOR U TILIZING ITS CONSULTANTS AND FURTHER THAT ONLY PART OF THE TOTAL EXPORTS WE RE DEVELOPED WITH THE HELP OF CONSULTANTS OF THE SISTER CONCERN AND THEREFORE ENTIRE EXPORT RECEIPTS AND INCOME THEREFROM SHOULD NOT BE SUBJECTED TO DIS ALLOWANCE OF EXEMPTION. NOTWITHSTANDING WE DO NOT UPHOLD THE ST AND OF THE ASSESSING OFFICER AND OF LEARNED D.R. THAT ASSESSEE HAS NOT H IMSELF DEVELOPED THE SOFTWARE. THE ASSESSEE IS RECOGNIZED SOFTWARE DEVEL OPING CONCERN. ACCORDINGLY THE FIRST REASON ADVANCED BY THE LD D. R. DISALLOWING THE EXEMPTION IS REJECTED. REGARDING NON-TRANSMISSION O F SOFTWARES IT IS 3 ITA NO. 1140/AHD/2010 WORTHWHILE TO POINT OUT THAT HE HAS RECEIVED PAYMEN TS IN CONVERTIBLE FOREIGN EXCHANGE WHICH IS CERTIFIED BY RBI. IT IS THEREFOR E DIFFICULT TO HOLD THAT THE SOFTWARES SO DEVELOPED BY THE ASSESSEE WERE NOT TRA NSMITTED TO FOREIGN CLIENTS. FURTHER THE DATA SUBMITTED BY THE ASSESSE E AS TO HOW AND WHEN SOFTWARES SO DEVELOPED WERE TRANSMITTED WERE CONVEN IENTLY IGNORED BY THE ASSESSING OFFICER. THE FACT OF TRANSMISSION OF THE DATA AND SOFTWARE IS ALREADY PLACED ON RECORD AND THERE IS NOTHING BROUG HT ON BY THE ASSESSING OFFICER TO COUNTER THE DATA SUBMITTED BY THE ASSESS EE. EVEN STPI HAS CONFIRMED THE TRANSMISSION OF SOFTWARE TO FOREIGN C LIENTS. ACCORDINGLY THIS REASON OF THE ASSESSING OFFICER IS ALSO REJECTED.' 5. IN THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS MERELY FOLLOWED THE DECISION DATED 23.10.2009 OF THE TRIBU NAL IN ASSESSEES OWN CASE IN ITA NOS. 2138/AHD/2006 & 2509/AHD/2007 FOR THE ASSESSMENT YE ARS 2003-04 & 2004-05 RESPECTIVELY. IN THE ASSESSMENT YEAR UNDER APPEAL FACTS ARE IDEN TICAL WITH THAT OF THE EARLIER YEARS WE THEREFORE INCLINE TO UPHOLD THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 6. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 01.10.201 0 SD/- SD/- (G.D. AGRAWAL) (T.K. SHARMA ) VICE-PRESIDENT (AZ) JUDICIAL MEMBER DATED : 01/10 / 2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A.) CONCERNED (4) CIT CONCERNED (5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGIS TRAR ITAT AHMEDABAD LAHA/SR.P.S.