TaxTMI 
TaxTMI 
2010 (2) TMI 93
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....y technical services as contemplated under section 80HHE? (b) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in upholding the order of the Commissioner of Income-tax (Appeals) in deleting the addition of overseas maintenance allowance of Rs.75.18 lakhs, disallowed on the ground that the assessee failed to deduct tax at source on such payment as required under section 40(a) of the Act?" 2. In the companion appeal, save and except for a variation in the amount of the deduction claimed under section 80HHE and in the quantum of the overseas maintenance allowance, the questions of law are the same. 3. The orders of the Tribunal relate to the assessment years 1998-99 and 2000-01. 4. The assessee entered into an agreement with an entity by the name of Kindle Banking Systems Ltd. (KBS) for rendering software development services. The agreement contained a recital to the effect that the assessee is a company which, inter alia, renders services by employing or retaining software professionals possessing software development skills; and personnel duly competent in design and development of software skills, KBS was a company based in D....
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....nt year 1998- 99, the assessment was sought to be reopened by the Revenue under section 148. The Commissioner of Income-tax (Appeals), for the assessment year 1998-99 held against the assessee against which the assessee carded the matter in appeal before the Tribunal. The Income-tax Appellate Tribunal, in respect of the assessment year 2000-01, dismissed the appeal filed by the Revenue and confirmed the order of the Commissioner of Income-tax (Appeals), allowing a deduction under section 80HHE. In view of the decision for the assessment year 2000-01, the Tribunal, for the assessment year 1998-99 followed its earlier decision on the merits. The validity of the reopening of the assessment, therefore, became a matter of subsidiary importance and the Assessing Officer was directed to allow a deduction under section 80HHE. 7. In these appeals, two questions are involved. The first question relates to whether the assessee was entitled to a deduction under section 80HHE. The second question relates to whether the overseas maintenance allowance paid by the assessee to its employees would qualify for deduction. 8. In order to appreciate the nature of the controversy in the present cas....
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....of computer software outside India, or in the provision of services for the development of software, that would be deemed to be the export of computer software for the purposes of the provision. The fact that the Explanation is clarificatory, is elucidated in a circular issued by the Central Board of Direct Taxes on February 12, 2004 [Circular No. 3 of 2004 (see [2004] 266 ITR (St.) 54)]'. 10. Cause (ii) of sub-section (1) of section 80HHE deals with the provision at technical services outside India in connection with the development or production of computer software. In order to qualify for the deduction under clause (ii), the assessee must provide technical services and these services must be provided in connection with the development of computer software. The expression "technical service" not having been defined, the ordinary and commercial understanding of the expression must be adopted. In Continental Construction Ltd. v. CIT [1992] 195 ITR 81 the Supreme Court, while construing the expression "technical services" in the context of section 80-O held thus (page 116): "These services were no doubt technical services as they requ....
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....e assessee's employees were verified and certified by KBS and at the end of each month, KBS would fax these time sheets to the assessee. Upon verification, the assessee raised its invoices and received remittances. As a matter of business expediency and to obviate any dispute, the contracting parties agreed that the scope of work, duration and the rate per month be determined. On this basis, the agreement in question was drafted and signed by the assessee and KBS. 14. The Tribunal, on a review of the record held thus (i) The personnel deputed by the assessee to Dublin for work onsite with KBS were technically qualified; (ii) The personnel deputed by the assessee were on the rolls of the assessee as its employees and the assessee was not simply loaning the services of the employees; (iii) It was not necessary for the employer, having regard to section 80HHE, to train employees in the area where such employees were rendering technical services abroad, nor was it necessary for the employer to have developed such technical expertise himself; (iv) The validity of the agreement between the assessee and KBS was a matter between the contracting parties and would not affect the question ....
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....g done by the employees of the assessee was integral to the ongoing development of software. 16. Counsel appearing on behalf of the Revenue submitted that KBS had a software of its own and that consequently, the work which was being rendered cannot be regarded as amounting to the export of computer software or for that matter, provision of technical services. The submission which has been urged on behalf of the Revenue cannot be accepted. Section 80HHE contemplates a deduction where an Indian company or a person resident in India is engaged in the business of export out of India of computer software or in the provision of technical services outside India in connection with the development or production of computer software. On the evidence, as it has emerged from the record of these proceedings, it is abundantly dear that the assessee met the requirement of section 80HHE. The assessee had a contract with KBS under which the scope of work involved the provision of analysis, programming and testing skills to the bank master development project. The contract envisaged design, development and testing of software. The assessee was undoubtedly required to depute qualified personnel to....