TaxTMI 
TaxTMI 
2014 (9) TMI 396
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....laring "nil" income, filed on 27th October, 2007, became a subject matter of regular assessment order under Section 143(3) of the Income Tax Act, 1961 ("Act", for short) dated 30th November, 2009. The Assessing Officer disallowed the claim under Section 10A and held that the net profit of Rs. 88,49,972/-, mentioned in the tax audit report, should be brought to tax by denying exemption under Section 10A of the Act. Disallowance of Rs. 21,351/- was also made, but we are not concerned with the said disallowance in the present appeal. 4. One of the reasons given by the Assessing Officer to disallow the claim under Section 10A of the Act was that the respondent-assessee was rendering services as an employment agent, like any other employment agency, and merely forwarded list of shortlisted candidate to their overseas clients. There was a minimum use of computers or information technology enabled tools. The respondent-assessee was, therefore, not involved in the development of computer software or information technology enabled services as the use of technology was not quintessential for the nature of services rendered and the core activity was that of an employment agent. It was reco....
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....fits and gains as are derived by an undertaking from the export of articles or things or computer software for a period of 10 consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be shall be allowed from the total income of the appellant. XXXXXXX XXXXXXX (2)This section applies to any undertaking which fulfills all the following conditions, namely:- (i) It has begun or begins to manufacture or produce articles or things or computer software during the previous year relevant to the assessment year: (a) commencing on or after the 1st day of April, 1981 in any free trade zone; or (b) commencing on or after the 1st day of April, 1994 in any electronic hardware technology park, or as the case may be, software technology park (c) XXXXXXX" Explanation 2 to Section 10A "Computer software means- (a) Any computer programme recorded on any disc, tape, perforated media or other information storage device; or (b) Any customized electronic data or any product or service of a similar nature, as may be noti....
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.... under:- "S.O.890(E)- In exercise of the powers conferred by clause (B) of item (i) of Explanation 2 of Section 10A, clause (b) of item (i) of Explanation 2 of Section 10B and Clause (b) Explanation to Section 80HHC of the Income Tax Act, 1961 (43 of 1961) the Central Board of Direct Taxes hereby specifies the following Information Technology enabled products or services as the case may be for the purpose of said clauses namely:- (i) Back-Office Operations; (ii) Call Centres; (iii) Content Development or Animation; (iv) Data Processing; (v) Engineering and Design; (vi) Geographic Information System Services; (vii) Human Resources Services; (viii) Insurance Claim Processing; (ix) Legal Databases; (x) Medical Transcription; (xi) Payroll; (xii) Remote Maintenance; (xiii) Revenue Accounting; (xiv) Support Centres; and (xv) Web-site Services." 9. A perusal of the said notification would indicate that the Board has included several distinct types of services under the expression, "product or service of similar nature, information technology enabled product or services" in the fifteen clauses. The Board, in the Notification, has used the ....
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....at the meaning of a word could be judged by the company it keeps; and, therefore, it is a legitimate rule of construction to make reference to words found in immediate connection with the words to be interpreted. However, the said rule of construction cannot prevail or be applied in cases when the wider words have been deliberately used and the intention of the legislation is to the contrary. In the present case, the intention of the legislation would be to the contrary as it had specified that the product or service of similar nature could be notified by the Board. It was left to the Board to notify any product or service of similar nature. The Board as per the Act is the highest authority in the pyramid as set out in Section 116 of the Act. The Board, while issuing the notification, which it was empowered and authorised to do by way of delegated legislation, has thought it appropriate to use the expression, "information technology enabled products and services" without any reference to "data processing" or "customised data processing". It is, therefore, apparent that the contention of the Revenue is clearly contrary to the notification issued by the Board, and is at cross-purpose....
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....ws the soceitas to which the socii belongs, were referred to. It was nevertheless observed that the said maxim or precedents are not to be mechanically applied and they are of assistance only in so far as they furnish guidance by compendiously summing up principles by common sense and logic. Object and purpose of the notification or the legislation being construed, have to be taken into account and all parts are to be read harmoniously and not in derogation of that purpose. In the said case, the Supreme Court accepted the assessee's submission that "coated paper" referred only to "coated paper" used for industrial purposes and not for printing or writing paper, observing that the items mentioned in the group were totally dissimilar and it was impossible to see any thread running through them. Purpose and object of the Legislation was highlighted. 13. Lastly, in Municipal Corporation of Greater Bombay vs. Bharat Petroleum Corporation Ltd. (2002) 4 SCC 219, it was observed that the principle underlying noscitur a sociis is that, two or more words which are susceptible of analogous meaning when coupled together, are to be understood as used in their cognate sense, taking as they ta....
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....e the data of the shortlisted candidates was transmitted to USA. A flow chart exhibiting various steps of processing of data was filed and was also referred to by the Assessing Officer in his order. The impugned order, passed by the Tribunal, records the submission of the respondent-assessee as mentioned in the letter dated 22nd October, 2009, which reads as under:- "Assessee company provides recruitment services by extensively using information technology skills. The services provided by the assessee company are different as it uses various softwares and IT enabled technology for providing such services. Mindlance Inc. USA required IT consultants for the development of software etc. in U.S. The assessee company was appointed to hire the consultants for Mindlance. The assessee company has a team of technical recruiters who provides the candidate"s information etc. through online application tracking tools called CATS. The user id and password is provided to each ML recruiter. The recruitment process involves the following stages:- a) Plcement of orders from Mindlance Inc. to MLOS for placement of IT consultants in USA during a specific period. b) Sourcing of technical c....
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....ergo online tests through internet websites like "skillometer.com", on a software licenced by Mindlance Inc., USA for technical screening of candidates. Respondent-assesse accessed the score results for evaluation and recommendation. Thus, the entire exercise involves access to database for shortlisting, testing, and then compiling the data of candidates. In this manner, the data gets filtered, pruned and customized as per the needs and requirements of the client. After this stage, the respondent-assessee uses, "Mindlance Human Resource Management System" to track the activity of prospective candidates from sourcing till hiring. At this stage, the CATS"s résumé database is also updated. The fifth, and the last, stage involves managing the workflow of the candidates using CATS application software. 17. During the course of hearing, it was pointed out that no local advertisements were issued and in the entire selection process, there was no actual physical contact between the assessee and the prospective candidates who might have been interviewed through audio or video calls or by exchange of e-mails. 18. It is clear from the aforesaid discussion, that the respond....
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...."asset" as, "a useful or valuable thing or person". It may be acceptable, if it emphasises and represents paramountcy and eminence attached to personnel. Humanising the word in the present context, the term, "human resource" would mean, "personnel of a business organisation" and the expression, "service" will mean and include anything associated with the personnel of a business organisation, including their selection or recruitment. 19. In view of the aforesaid position, we do not find merit in the submissions made by the appellant-Revenue that the activities in question were not covered under the Notification S.O. 890(E), i.e. human resource service and, therefore, the respondent-assessee was not entitled to benefit under Section 10A of the Act. 20. During the course of hearing before us, learned counsel for the appellant-Revenue had submitted that Revenue has also raised the question of perversity. It was pointed out that in respect of the Bangalore unit, the Assessing Officer had observed that the invoices were raised by the respondent-assessee on 31st March, 2007, i.e. on the last date of the financial year and on the said date itself registration letter had been issued b....