TaxTMI 
TaxTMI 
2014 (4) TMI 1147
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.... 1,10,71,914 in respect of export of computer software in its STP unit set up and approved by the STPI authorities. The required report of an auditor as required under Form. 56F r.w. Rule 16E of the Rules was filed by the assessee. A copy of the report is at pages 38 to 40 of the assessee's paperbook (PB). Though at page 38, the report is said to be one u/s. 10B of the Act, Annexure-A of the report in col. 16 refers to section 10A of the Act. In col. 5 of Annexure-A, the nature of business of undertaking is stated to be 100% EOU/IT enabled services. There is no difference between deduction u/s. 10A and 10B of the Act as in both the sections, the condition is that the profits & gains should be derived from export of articles or things or computer software. The difference is that section 10B applies to 100% EOU while section 10A is applicable to units registered with STPI. 4. The Assessing Officer called upon the assessee to explain the nature of services rendered by the assessee so as to examine the claim of the assessee for deduction u/s. 10B of the Act. The assessee submitted that it was a STPI is registered in the year, 2000 and has been claiming deduction u/s. 10A for the past ....
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.... commission is recognized in the year in which processing." According to the AO, the above notes it was clear that Assessee was not in the business of software development nor I T enabled service and was in the business of e-trading and in the business of providing technical services. The above Service provided by the assessee company was therefore held to be not eligible for exemption u/s 10B of I.T.Act. II. Directory compilation & Updating Services: The Assessee helps foreign publishers in compiling, editing and updating directories and reference works by employing people trained in the task of web based research, surveys, telephonic interviews, etc. to compile and verify data about companies, products, people and such other information published or in public domain. The services are performed by the technical experts of the assessee by helping foreign clients/publishers in compiling and uploading Directories and reference works. The clients of the Assessee will send raw data to Assessee to do the compilation and uploading services. After receiving the data from the clients, Assessee will assign the above work to technical experts, in turn these technical experts do the inte....
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....oks in a particular way in the catalogue of books. The Assessee was expert /specialized in creating Metadata. But the activity of creating Metadata is nothing but providing technical service to clients. 6. For the reasons given above, the AO concluded that the assessee was in the business providing only technical services to the clients and earning income. He held that the claim for exemption u/s. 10B of the Act is allowed for Company or undertaking in the business of manufacture or produce article or things or in the business of software development. The AO also made a reference to the Master service Agreement with Chemical Abstract Services (CAS) division of American Chemical Society and observed that the services rendered to the said client by the Assessee as per the Agreement was a) Monitoring the web (Journals Web Sites) b) Select appropriate article processing. c) Assign and appropriate section number. d) Key bibliographic abstract data's. e) Acquire delivery the text images in TIFF format. f) Finally provide a cleaned data to the client. The AO also referred to the deliverables under the Agreement to contain the following: * Images send by the assessee c....
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....e competent authority. His observations in this regard were as follows:- "3.9 As already discussed earlier vide letter dated 16.03.2000, the appellant has been granted permission as 100% EOU unit and since then the appellant company claiming exemption u/s 10B of the Act. "Explanation 2(iv) makes it abundantly clear that a 100 per cent Export Oriented Undertaking referred to under subsection (i) means an undertaking which has been approved by the competent authority. Thus, the approval of the undertaking by competent authority as 100 per cent EOU is primary condition and after that such undertaking should be engaged in manufacturing or production of any article or thing or computers software. Thus, the mere recognition as 100 per cent EOU by a competent authority does not enable the appellant to claim exemption u/s 10B unless it satisfies other condition, such as it manufactures or produce any articles or things or computer software. For the purpose of section 10B of the act 100 per cent EOU is only that which is so approved by the Board appointed by the Central Government in exercise of powers conferred u/s 14 of the IDAR Act 1951. A 100 per cent EOU under the STP scheme could no....
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..... There is no provision under the section exemption to be shifted from 10B to 10A if not satisfied the conditions on which claimed exemption. The condition for allowance of deduction u/s 10A and 10B are stood on different footing as held by the Hon'ble ITAT, Hyderabad in the case of VNS MAKRO Technologies Pvt. Ltd Vs DCIT (ITA No 577/HYd/2012). Thus there is no merit in the appellant's contention, hence rejected on this issue." 11. Aggrieved by the aforesaid order of the CIT(A), the assessee has filed the present appeal before the Tribunal. 12. We have heard the rival submissions. Sec.10A of the Act and Expln.-2 thereto reads thus: "SECTION 10A: Special provision in respect of newly established undertakings in free trade zone, etc. Subject to the provisions of this section, a deduction of such profits and gains as are derived by an undertaking from the export of articles or things or computer software for a period of ten 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 inc....
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.... ITO, ITA No.562/Bang/2013. In the aforesaid decision, one of the issues that arose for consideration was, whether the assessee could be permitted to change its claim for deduction from section 10B to section 10A of the Act. In that case, the assessee made a claim for deduction u/s. 10A of the Act before the first appellate authority and deduction u/s. 10B of the Act was rejected on the ground that 100% EOU of the assessee was not approved by the Development Commissioner as ratified by the Board of Approval for EOU scheme. Since the assessee could not file the approval required u/s. 10B of the Act and since the assessee was registered as 100% EOU under STP scheme, an alternative claim for deduction u/s.10A of the Act, (as was made by the Assessee in the present appeal) was made before the CIT(Appeals). The Tribunal examined the above claim and found that the ITAT Chennai Bench in the case of ITO v. Heartland K.G. Information Ltd., (2010) 131 TTJ 216 (Chennai) had dealt with an identical claim of the assessee, wherein it was held that revenue was bound to examine the availability of deduction under any of the provisions of law. Thereafter, the Bench held that if the claim u/s. 10A i....
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....usiness of distribution of journals, CD ROM, data bases and electronic data. The assessee also set up a STP Unit for export of content development services. The assessee has an approval for setting up of STP Unit. The AO has clearly proceeded on a wrong basis in concluding that the "Abstracting & Indexing Services" were not in the nature of Data Processing or contend development. We are of the view that the expression "Data Processing" will have to receive a broad meaning, keeping in view the purpose behind the provisions of Sec.10A/10B of the Act which is to augment foreign exchange earnings. 18. With regard to the 'directory compilation and updating services', the AO has merely observed that the same is nothing but providing technical services to clients. In our view the above service going by the very nature of service will be data processing. The data received in one form is converted into another form and delivered abroad. There is certainly value addition to the data re-transmitted abroad. It is for this value addition and getting back the data in a different form that the Assessee receives remuneration. Clearly the same will be in the nature of data processing. 19. With re....