THE INCOME TAX APPELLATE TRIBUNAL IN
(DELHI BENCH "H" NEW DELHI)
BEFORE SHRI N.K.SAINI, ACCOUNTANT MEMBER
AND
SMT GEORGE GEORGE K, JUDICIAL MEMBER
ITA NO. 516 /DEL/2013
(Assessment Year: 2001-02)
DDIT Vs. Virage Logic International India
International Taxation, Branch Office
Circle-2 (2), A-75, Sector-57
New Delhi Noida
PAN : AACFV3976E
(Appellant) (Respondent)
Appellant by : Sh. P.Dam Kanunjna, Sr. Dr
Respondent by : Sh. Pawan Kumar, Adv. Sh. P. Gupta, CA
Date of hearing : 01/06/2015
Date of pronouncement : 03 /06/2015
ORDER
Per N.K.Saini, A. M. :
This is an appeal by the department against the order dated
19/11/2012 of CIT(A)- XXV, New Delhi.
2 ITA No. 516/ Del/2013
2. Following grounds have been raised in this appeal :-
"1. Whether on the facts and circumstances of the
case, the CIT(A) has erred in allowing deduction u/s
10A to the assessee by not distinguishing between
actual `Export' and mere `Transfer to Head Office' as
the assessee has merely transmitted the software to its
head office which cannot be termed as `Export' in the
sense as used in Section 10A of the Income Tax Act,
1961.
2. Whether on the facts and circumstances of the
case the CIT(A) has erred in interpreting the true
intention of legislature for bringing provisions of Sec.
10A(3) to the statute which stipulates bringing in of
precious foreign exchange into the country whereas in
case of the assessee being a foreign company the sale
proceeds would not be retained in India but only the tax
on a fraction of the profit which is attributable to Indian
branch of the foreign company that would be retained in
India.
3. The appellant prays for leave to add, amend,
modify or alter any grounds of appeal at the time or
before the hearing of the appeal."
3. The only grievance of the department in this appeal relates to
the deduction u/s 10A of the IT Act 1961 (hereinafter referred to as
the Act).
4. Facts of the case in brief are that the assessee filed its return
of income on 30.10.2001 declaring nil income. The assessee had
shown income of Rs. 10,877,823/- however, claimed the same as
3 ITA No. 516/ Del/2013
exempt u/s 10A of the IT Act, 1961(hereinafter referred to as the Act).
The AO framed the assessment u/s 143(3) of the Act on 19.3.2004 at
a total taxable income of Rs. 6,64,57.670/- and the exemption
claimed u/s 10A was denied. Against the said order, the assessee
preferred an appeal to the Ld. CIT(A) who confirmed the finding of
AO in respect of denial of exemption claimed u/s 10A of the Act.
Against the said order, the assessee preferred an appeal to the ITAT
wherein vide order dated 16.12.2005, the matter relating to transfer
pricing was restored to the AO, who again framed the assessment
on 19.12.2006 and allowed the cost incurred at Indian Branch which
was Rs. 2,44,47,140/-. The AO did not allow exemption u/s 10A of
the Act by observing that the revenue was earned for the parent
company from royalty and licensing of the software and that the
software developed in India were never sold. He further observed
that only right to use was granted to various customers, therefore, it
cannot be said that the software were sold or exported out of India".
5. In the meanwhile, assessee referred Miscellaneous Application
no. 135/Del/2008 against the order dated 16.12.2005 passed by the
ITAT in ITA no. 77/Del/2005 and the ITAT vide order dated
11.07.2008 recalled the order dated 16.12.2005 and subsequently
4 ITA No. 516/ Del/2013
disposed off the appeal by allowing full deduction u/s10A of the Act
vide order dated 19.02.2009. When the assessee preferred an appeal
to the Ld. CIT(A) against the order dated 19.12.2006 passed by the
AO. The Ld. CIT(A) directed the A.O. to allow the deduction u/s 10A
by observing in para 3.3. of the impugned order as under :-
"3.3. I have considered the order of the AO and the
submissions of the assessee and I find considerable merit in
the submission of the assessee that the Hon'ble Tribunal
has allowed full deduction u/s 10A and as such the case of
the assessee is covered by the order of the Hon'ble Tribunal
vide Para No. 6 of ITA No. 77/Del/2005 dated 19/12/2009. It
is also apparent that the provisions of TP in Chapter-10 has
been introduced w.e.f. AY 2002-03 and as such the AO is
not justified to invoke the provisions of TP. After considering
all the case facts and circumstances of the case, I am of the
view that there is considerable merit in the submissions of
the assessee that the case of the assessee is covered by
the assessee's own case of the Hon'ble Tribunal and
accordingly, the assessee is allowed deduction u/s 10A as
allowed by the Hon'ble Tribunal and as such the addition
made by the AO is deleted."
Now, the department is in appeal.
6. The Ld. DR strongly supported the order of the AO but failed to
rebut the findings given by the Ld. CIT(A) in the impugned order. In
his rival submissions, the Ld. Counsel for the assessee submitted
that since the issue has been decided by the ITAT vide order dated
5 ITA No. 516/ Del/2013
19.02.2009 for the assessment year under consideration and the ld.
CIT(A) has followed the said order of the ITAT, therefore, the appeal
of the department deserves to be dismissed.
7. We have considered the submissions of both the parties and
carefully gone through the material available on the record. In the
present case, it is noticed that the Ld. CIT(A) directed the AO to allow
the claim of the assessee by following the decision dated 19.02.2009
of the ITAT in assessee's own case. Copy of the said order is placed
at page no. 50 58 of the assessee's paper book and the relevant
findings have been given in para 5.3, 5.4 and 6 of the order dated
19th February, 2009 which read as under :-
"5.3 On examining the orders of tax authorities below, we
find that they have refused the deduction u/s 10A to the
assessee mainly on the reasoning that the assessee has not
made any export sale to a third party rather all the work has
been transferred to HO, so, it could not be said that
assessee exported software within the meaning of Sec. 10A.
Similarly in A.Y. 2002-03 on almost same reasoning
deduction u/s 10A was refused to the assessee by the tax
authorities below and the Tribunal allowing the appeal of the
assessee vide order (supra) directed the AO to allow the
assessee's claim of exemption u/s 10A of the Act while
observing at page 16 of the order as under.
" The only reason assigned by the Revenue authorities for
denying exemption u/s 10A of the Act is that there has been
no export sale by the assessee since the computer software
was transmitted to head office and since the assessee and
its head office were one entity, there was no sale to any
third party. This approach of the revenue authorities were
6 ITA No. 516/ Del/2013
not correct in view of the provisions of S.10-A(7) of the Act.
The legal fiction of treating an assessee as a separate entity
vis-à-vis sale by it or transfer by it from an eligible business
or to an eligible business has been recognized u/s 10-A(7)
of the Act."
5.4. Similarly, in the case of Moser Baer (I) ltd. (supra) their
Lordships while upholding the order of the Tribunal wherein
the Tribunal allowed the clause u/s 10A, observed as under.
"The matter was looked at by the ITAT from two stand
points. The first being from the stand point of its earlier
decision in the case of Virage Logic International vs. DDIT
wherein, under similar circumstances, the Tribunal was of
the view that the transmission of computer software from the
Indian entity to its head office situated outside, since it was
an arms length price amount to export, entitled the assessee
therein to claim exemption u/s 10A of the said Act. Following
this decision, the Tribunal agreed with the plea raised by the
assessee and rejected the revenues contention that the
assessee was not entitled to exemptions u/s 10A / 10B of
the Act."
6.In this view of the matter, since the identical issue
regarding claim of exemption u/s 10A of IT Act as involved
in the ground no. 1 of the instant appeal of the assessee,
now stands covered in favour of the assessee, we are
required to follow the decisions (supra) as no decision
contrary to the same has been cited before us by ld. DR for
the revenue. Respectfully following the decisions (supra) it is
held that assessee is entitled to claim the deduction u/s 10A
of I.T.Act. Consequently the order of CIT(A) declining the
deduction claimed u/s 10A by the assessee is set aside. The
ground no. 1 of the appeal of the assessee is allowed."
8. We therefore, considering the totality of the facts as discussed
hereinabove do not see any merit in this appeal of the department.
9. In the result, appeal of the department is dismissed.
7 ITA No. 516/ Del/2013
(Order pronounced in open court on 03 June, 2015.)
Sd/- Sd/-
(George George K) (N.K.Saini)
Judicial Member Accountant Member
Dated 03 June, 2015
Binita
Copy forwarded to
1. APPELLANT
2. RESPONDENT
3. CIT
4. CIT (A)
5. CIT (ITAT), New Delhi.
AR, ITAT
N. Delhi
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