IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH `C' BENCH
BEFORE SHRI B.R.MITTAL(JUDICIAL MEMBER) AND
SHRI N.K.BILLAIYA (ACCOUNTANT MEMBER)
ITA No.6490/Mum/2011
Assessment Year: 2008-09
Caliber Point Business Solutions Ltd., ACIT 10(3),
Bldg. No.3, Sector-2, Millenium Mumbai
Business Park, TTC Business Area,
Mahape, Mumbai-710 Vs.
PA No.AACCC 3705 H
(Appellant) (Respondent)
Appellant by : Shri Hiten R Paurana
Respondent by: Shri Rajarshi Dwivedy
Date of hearing: 4.2.2013
Date of pronouncement: 13 .2.2013
ORDER
Per B.R.Mittal, JM:
The assesee has filed this appeal for assessment year 2008-09 against order
dated 12.7.2011 of ld CIT(A)-22, Mumbai on following grounds:
"1. On the facts and circumstances of the case as well as in law, ld
CIT(A) has erred in upholding the action of the AO to exclude the profit
element of Rs.71,62,020 (subject to rectification) earned out of certain
software development activities which alleged to be merely outsourced to
others, while computing the deduction u/s. 10A of the I.T.Act. Reasons
assigned by him for doing the same are wrong and insufficient.
2. On the facts and circumstances of the case as well as in law, ld CIT(A)
has erred in upholding the disallowance u/s.40(a)(ia) at Rs.54,77,368.
Reasons assigned by him for doing the same are wrong and insufficient.
3. That the order of ld CIT(A) being arbitrary and bad in law, the same
should be quashed and your appellant be given such relief as prayed for.
3 ITA No.6490/Mum/2011
Assessment Year: 2008-09
Profit and Loss Account under the head `income from Operations' and duly
offered to tax."
Assessing Officer has stated that assessee has not furnished the details of sales to M/s.
Jacob Engineering, M/s Trinet HR and M/s. Morneo -- Sobeco separately in respect of
software development. He has stated that on perusal of the details of sales and the
FIRC, it is ascertained that the sales made to the said parties are as under:
6. AO has stated that the said software development work has not been carried out
in the units of the assessee, for which, assessee has claimed deduction u/s 1OA of the
Act. Therefore, the profit from the sales of software development activity aggregating to
Rs.71,66,020 is not derived from the said units. That assessee has merely outsourced
the work, got the work done from the outside party and received export proceeds. The
income from the said activity is not derived from the undertaking. Therefore, the profits
from the said software development are to be excluded from the claim of the assessee
for deduction u/s.10A of the Act.
7. AO after considering decision of Hon'ble Apex Court in the case of Pandiyan
Chemicals Limited v. CIT (262 ITR 278), case in the case of Liberty India Ltd vs. CIT,
(2009-TIOL-100-SC-IT) and also the case of CIT vs. K Ravindranathan Nair, 295 ITR
228(SC) rejected the claim of deduction u/s.10A of the Act on the profit of Rs.71,66,020.
Being aggrieved, assessee filed appeal before the first appellate authority.
8. On behalf of assessee, it was contended that there is nexus between profit and
assessee's undertaking. Although work was outsourced, assessee was responsible for
management, performance, quality control and delivery of contracted services and
5 ITA No.6490/Mum/2011
Assessment Year: 2008-09
has been outsourced by the assessee as stated by AO is of Rs.4.23 crores though the
correct figure is of Rs.3,64,00,000 for which assessee has filed application u/s.154 of the
Act on 4.7.2011 to rectify the quantification and, therefore, only a small part of the work
was outsourced to another entity and it does not become ineligible to claim deduction
u/.s.10A of the Act on the income arising from such work. He submitted that assessee
fulfilled all the conditions prescribed u/s.10A of the Act for availing deduction.
11. On the other hand, ld D.R. supported the orders of authorities below. He
submitted that CBDT circular as relied upon by ld A.R. supports the orders of authorities
below. He submitted that said circular provides that the development work should be at
site of the developer to become eligible to get deduction u/s.10A of the Act. He
submitted that the details of the location of the parent company, premises on which the
work was actually done, is nowhere stated as to whether said parent company is eligible
for export deduction or not. Ld D.R. submitted that in the case of M/s.Technics
Consulting Limited (supra), the work of web maintenance was itself actually
manufactured at the premises which was also located in STPI area but in the case of the
assessee it does not establish as to whether said parent company of the assessee is also
located in STPI area or export jurisdiction zone and entitled to deduction u/s.10A of the
Act. Further, in his submission, ld A.R. submitted that the parent company of the
assessee is also located in STPI area and it is claiming deduction u/s.10A of the Act.
12. We have considered submissions of ld representatives of parties and orders of
authorities below. We have also gone through the cases cited before us.
13. There is no dispute to the fact that assessee has got work done from outside
party i.e. its parent company. Assessee has received export proceeds in respect of the
said outsourced work got it from its parent company and has claimed deduction u/s.10A
of the Act. AO has stated that the outsourced expenses claim is of Rs.4,23,30,875 but
assessee stated that the aggregate figure is Rs.3,64,03,365 and the profit on the said
work is Rs.14,92,538 as against Rs. 71,66,020 considered by the AO. During the
course of hearing, ld A.R. produced a copy of application dt.3.1.2011 filed on 4.1.2011
to the AO u/s.154 of the Act, inter alia, for rectification of the said quantification. It was
7 ITA No.6490/Mum/2011
Assessment Year: 2008-09
16. In the result, appeal filed by assessee is allowed in part.
Pronounced in the open court on 13TH February, 2013
SD/- SD/-
(N.K.BILLAIYA) (B.R. MITTAL)
Accountant Member Judicial Member
Mumbai, Dated 13TH February, 2013
Parida
Copy to:
1. The appellant
2. The respondent
3. Commissioner of Income Tax (Appeals),22, Mumbai
4. Commissioner of Income Tax,10 , Mumbai
5. Departmental Representative, Bench `C' Mumbai
//TRUE COPY// BY ORDER
ASSTT. REGISTRAR, ITAT, MUMBAI
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