TaxTMI 
TaxTMI 
TaxTMI 
2015 (4) TMI 1059
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.... the Ld. CIT (A), who had upheld the order of the Ld. Assessing Officer (i) in denying relief under section 10A of the Act for the assessment years 2006-07 to 2009-10. (ii) Levy of interest U/s. 234B of the Act for the assessment years 2006-07 to 2009-10. (iii) Re-opening U/s. 147 of the Act for the assessment year 2007-08. iv) Disallowance u/s.14A of the Act read with Rule 8D of the Act for expense incurred on earning exempt income viz., dividend income for the assessment year 2007-08. (v) Disallowance U/s. 14A of the Act r.w.r 8D for expense incurred on investments made to earn exempt income for the assessment year 2009-10. 3. The brief facts of the case are that the assessee is a private limited company, engaged in the business of sourcing and trading in auto parts, filed its return of income for the assessment year 2006-07 on 31.10.2006, for the assessment year 2007-08 on 25.10.2007, for the assessment year 2008-09 on 26.09.2008 and for the assessment year 2009-10 on 21.09.2010. All the cases were taken up for scrutiny barring assessment year 2007-08 which was reopened by issuance of notice U/s. 148 of the Act. 4.1 Ground No.1 - Denying deduction under section-10A ....
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....pany has started the activities such as Software development; Web based solutions software, Creation and development of website and web catalogue, manufacturing and export of kits for automobile industry. From these activities, the assessee had received commission from, foreign clients for locating manufacturers, Indian clients for locating buyers, retainer-ship charges from overseas clients for Supplier liaison, and revenue from International auto-fair. It was therefore submitted that the assessee was eligible for claim U/s. 10A of the Act." 4.3 However, the Ld. Assessing Officer denied the benefit of deduction U/s. 10A of the Act to the assessee by holding that the assessee is not engaged in any manufacturing activity because of the following reasons:- (i) The assessee company only acted as intermediary between the overseas customers and the Indian manufacturer to source autoparts from India. ii) The assessee company is engaged in the activity of only identifying a reliable and dependent manufacturer to its overseas customer for procuring small orders because they do not have any establishment in India. iii) The assessee has a data bank of the manufacturers who produced vario....
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....sallowed in its case. The appellant stated that an undertaking would be said to be engaged in manufacturing activity, if it is doing part of the manufacturing activity by itself and for the rest of it, engages the services of somebody else. 7.2. The appellant's submissions are not accepted that the entire manufacturing activity is carried out by an outsider and the appellant is not involved in any of the manufacturing activities. It is also to be noted that the appellant does not have the plant and machinery to manufacture such goods in India. Therefore the activities of the appellant are like a trader, who just procures goods from a manufacturer and exports them. 7.3. Further, during the assessment proceedings, the appellant put forth an alternative argument that the receipts from software consultancy should be given the benefit of deduction u/s l0A. The appellant has disclosed transaction charges of Rs. 50,30,229/- and receipts from software consultancy of Rs. 36,34,439/-. The AO examined the invoices raised in this regard. On examination, AD found that these invoices showed billing under the head 'International sales commission', 'International inspection charg....
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.... same done through job workers supervises and inspects at the suppliers premises. The ultimate responsibility to deliver the end product as per the customers specifications is on the appellant. Therefore it is most humbly submitted that the appellant is a manufacturer and is entitled to claim deduction u/s.10A. 5. For this proposition reliance is placed on the decisions of the Hon'ble Madras High Court in CIT v Elgi Ultra Industries Ltd [2012] 82 CCH 162 (Madras) and Hon'ble Bombay High Court in CIT v Penwalt India Ltd [1992]196 ITR 813 (Born) where it has been held that the fact that the assessee himself is not personally engaged in ~he manufacture would not disentitle the assessee from claiming the relief as one engaged in manufacturing activity, for, so long as the assessee exercises control in the work entrusted to job workers. 6. In the light of the above decisions it is most humbly prayed that the Hon'ble Tribunal may be pleased to hold that the appellant is a manufacturer and direct the Assessing Officer to allow the claim of deduction u/s.10A Rendering Information Technology Enabled Services (ITES) 7.The appellant has entered into agreements with variou....
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....endering the IT enabled services .eligible for claiming deduction u/s.10A. 15. The appellant is engaged in development of computer software like making customized electronic catalogs etc. 16. Sample copy of the invoice raised in the name of Nu-Line Heavy Duty along with ledger copies were submitted during the course of hearing to show that the appellant is engaged in the development of computer software for the customers. 17.ln the light of the above submissions it is most humbly prayed that the Hon'ble Tribunal may be pleased to decide whether or not the appellant is engaged in development of computer software and if the Hon'ble Tribunal is satisfied that the appellant is in fact is engaged in development of computer software then the Hon'ble Tribunal may be pleased to set aside the matter to the Assessing Officer only for the limited purpose of quantifying the amount of income earned from development of computer software eligible for claiming deduction u/s.10A. 4.6 Ld. D.R reiterated the reasons cited in the orders of the Revenue to justify the stand of the Revenue that the assessee was neither engaged in manufacturing activity nor software development activity an....
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.... Pvt Ltd. For IPD Group Sd/- Sd/- Mr.K.Vaidyanathan ....
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....ctivity is to:- i) Create and maintain web site. ii) Create ERP Software to perform purchase functions. iii) Produce software related to sales oriented development and corporate presentation on need basis. iv) The code developed for the project was passed on to the clients of the assessee. v) Design and data was also passed on to the client of the assessee. 4.8 This scope of work performed by the assessee establishes that the assessee is carrying out information technology enabled services. As pointed out by the assessee, the CBDT Circular No.S.O.890(E) dated 26.09.2000 reported in 163 CTR (St) 25 specifies that for the purpose of Section-10A of the Act, back office operations and web site services are information technology enabled services. The Ld. A.R. has also explained the nature of activity rendered by the assessee with respect to giving access of the ERP to its clients for their purchases as follows:- "For initiating purchase: When the stock at the customers' location reaches the pre-determined reorder level, it triggers the action at the assessee's end for initiating a Purchase order. Based on this requirement, the assessee generates a Purchase order through the cus....
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....lity control or supply of material and dyes for the manufacture of parts of the grinders or machinery, even in the case of assembling done through job work, the assessee would be entitled to have the benefit U/s. 80-IA of the Act." 4.9 From perusing the invoices produced by the assessee, the following facts are also revealed. Sl. No. Invoice No. Date Name of party Particulars 1 021-06 Nuline 30.06.2006 Nu-Line Heavy duty Development of Nuline Website & Nuline Web and cd catalog 2 004-WM-06 30.04.2006 Waterman Industries Inc. Engineering services & Business development online support April 2006. 3 091-06 Reliance 31.01.2007 Reliance Parts Corporation Web based sourcing cum logistics solutions for January 2007 4 055-Waterman 20.12.2005 Waterman Industries Inc. Software consultancy 5 070-Reliance 31.01.2006 Reliance Parts corporation Transaction charges Software consultancy 6 025-Relaince 25.08.2005 IP Parts INC Transaction charges 7 Exp-127-B 25.3.2006 Waterman Industries Inc. Description of goods supplied 4.9.1 From the above discussions, invoices raised by the asses....
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....A) because the return was only processed U/s. 143(1) of the Act and within a period of four years the assessment was reopened based on the information gathered while making assessment in the case of the assessee for the earlier period viz. A.Y. 2006-08. Accordingly this ground raised by the assessee is dismissed. 7.1. Ground No.4 - Disallowance u/s.14A of the Act read with Rule 8D for expense incurred on exempt dividend income for the assessment year 2007-08. The Ld. Assessing Officer observed that the assessee received an amount of Rs. 10,35,637 as dividend during the relevant assessment year which was claimed as exempt U/s.10(34). It was further noticed that the assessee has incurred an amount of Rs. 7,10,139/- as interest on its borrowed capital during the year. Ld. A.O was of the view that though the assessee had claimed that the borrowed funds were not utilized for making investment, the same cannot be clearly established because funds were utilized from the common kitty of the company. Thereafter, the Ld. Assessing Officer invoked the Section 14A read with Rule 8D relying in the decisions of ITAT Special Bench, Mumbai vide its order dated 20.10.2008 in CIT Vs. Daga Capital ....