TaxTMI 
TaxTMI 
2015 (3) TMI 930
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....2008. I.T.A. No. 1023/Chd/2008 3. In this appeal, the assessee has raised the following grounds : 1. That the worthy Commissioner of Income-tax (Appeals), Chandigarh, has erred in confirming the action of the Assessing Officer that sup plying of computer software solution to various shipping companies is not export income from sale of such softwares, thereby disallowing exemption under section 10B on this ground. 2. That the worthy Commissioner of Income-tax (Appeals), Chandigarh, has not considered properly our submissions along with various judicial pronouncement/circulars, etc., cited by us to substantiate our stand. 3. That the worthy Commissioner of Income-tax (Appeals), Chandigarh has not considered the fact that the assessee-company, who is engaged in developing of computer softwares is registered with Software Technology Park of India, Department of Communication and Information Technology, Government of India is 100 per cent. export-oriented unit ....
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....Assessing Officer after examining the submissions did not find force in these submissions because there was no provision in the Income- tax Act to treat a licence to use as mentioned in the agreement as "sale", therefore, the company cannot claim grant of licence as sale. In this background the Assessing Officer concluded that the assessee is not conducting sales and, therefore, was not entitled to deduction under section 10B. 5. On appeal, the submissions made before the Assessing Officer were reiterated and it was emphasised that agreement entered into by the assessee for sale of software to the end user and to the distributor were normal agreement prevalent in the case of sale of software. It was further pointed out that software export is canned software and sold in the compact discs or through electronic media. In licence sale agreement words "buyer" and "sale" are used to denote the contracting parties. In the consideration clause the "price" is mentioned in both the agreements. It was pointed out that software was developed in STPI area and invoices were reported to STPI, RBI and Customs Department. Reliance was also placed on the following decisions- &nb....
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.... any number of copies and shall start selling the same to any number of customers, i.e., why software is always sold through a licence. He gave another example of a book, i.e., when a book is sold, the reader can read the book, retain the book, use it in any manner and at the sametime such reader customer does not get copyright to the book and he cannot copy the book and start selling such books. He gave another example of legal reports which is now available in the form of compact dics. Such reports are given to a particular customer and a key number is provided though which the report can be used but it cannot be copied. 8. He then referred to the decision of the hon'ble Supreme Court in the case of Tata Consultancy Services [2004] 271 ITR 401 (SC) wherein the sale of software was held to be "sale of goods". He also strongly relied on another decision of the hon'ble Supreme Court in the case of CIT v. B. Suresh [2009] 313 ITR 149 (SC) wherein even exploitation of a film rights to export outside India was held to be export and allowable for deduction under section 80HHC. 9. On the other hand, the learned Departmental representative strongly supported the order of the Ass....
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.... originator of the programme. But the moment copies are made and marketed, it becomes goods which are susceptible to sales tax. Even intellectual property, once it is put on to a media, whether it be in the form of books or canvas (in the case of painting) or computer discs or cassettes, and marketed would become 'goods'. There is no difference between sale of a software programme on a compact disc/floppy disc and sale of music on a cassette/compact disc or sale of a film on a video cassette/compact disc. In all such cases, the intellectual property has been incorporated on a media for purposes of transfer. Sale is not just of the media which by itself has very little value. The software and the media cannot be split up. What the buyer purchases and pays for is not the disc or the compact disc. As in the case of paintings or books or music or films the buyer is purchasing the intellectual pro perty and not the media, i.e., the paper cassette or disc or compact disc. A transaction of sale of computer software package off the shelf is clearly a sale of 'goods' within the meaning of that te....
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.... is also doing some data entry work. On query, the assessee submitted the following replies : "Data entry 'Sub-section (2) of section 10B read with clause (i) of the sub-section provides that this section applies to any undertaking which fulfils all the following conditions, namely :- (i) It manufactures or produces any articles or things or computer software ; 'since the query relates only on the above said condition, the same has been reproduced hereinabove. The works "articles or things or computer software" signify themselves that computer software is something different from an article or things'. Explanation 2 to section 10B reads : "For the purposes of this section,- (i) 'Computer software' means (a) Any computer program recorded on any disc, tape, pertorated media or other information storage device ; or (b) any customised electronic data or any product or service of similar nature as may be notified by the Board, which is transmitted or exported from India to any place outside India by any means....
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....ction 10B of the Act. 16. On appeal before the Commissioner of Income-tax (Appeals), it was submitted that the observation of the Assessing Officer that company is providing only data entry services which does not involve any skilled technical software engineers is not correct. In this regard, a reference was made to clause 3.2 of the services level agreement which reads as under : "Vertex will provide a project team with skills and experience commensurate with the needs of this service and who are capable of ensuring the successful delivery of this service agreement . . . More over, the learned Assessing Officer has nowhere provided basis of her observation in this regard and there applicability vis-a-vis eligibility of the assessee under section 10B." 17. It was further pointed out that such activity would be termed as "back office operations". The learned Commissioner of Income-tax (Appeals) found force in these submissions and allowed the deduction, vide para 32, which reads as under : "I have considered th....
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.... carefully. We find that the Chandigarh Bench of the Tribunal in the case of Bebo Technologies P. Ltd. [2011] 139 TTJ (Chandigarh) 428 has observed as under : "Exemption under section 10B-Export of computer software- Software development and quality assurance services vis-a-vis back office operations-Assessee company is running a STPI unit and providing con sulting services to a US company-It is engaged in programming to render quality and testing assurance services as per the requirements of its clients and the same is transmitted to the clients through internet-Such services rendered by the assessee are in the nature of back office operations and are covered by CBDT Notification No. 890(E), dated September 26, 2000, which has notified information technology enabled products or services for the purpose of Explanation 2 to section 10B-Objection of the Assessing Officer regarding non-availability of production data has no merit as the assessee is carrying out back office operations for its clients which is a project of service industry for which production data is not required -Further, finding of ....