TaxTMI 
TaxTMI 
2017 (5) TMI 1223
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....2013 for AY 2010-11. The Respondent in the appeal is the Assessee, Inter Globe Technology Quotient Pvt. Ltd. ('Inter Globe'). No ground re: Section 10A in ITA 154 of 2017 4. There were two broad questions raised by the Revenue in its appeal against AIPL. One concerned the deletion of the transfer pricing adjustment in the sum of Rs. 75,40,09,515 made by the Assessing Officer ('AO'). The other concerned the correctness of the impugned order of the ITAT allowing deduction to AIPL under Section 10A of the Act in the sum of Rs. 18,43,84,578. 5. By an order dated 26th April, 2017, the Court confined the notice to the second issue viz., allowing the deduction to AIPL under Section 10A of the Act. 6. It must be noticed at the outset that although in the questions of law, a specific question has been raised by the Revenue on the issue of deduction under Section 10A of the Act (Question 'C') in the grounds in the memorandum of appeal, there is not a single ground on this aspect. There is just one general ground i.e., ground 'E', which reads "For that the order of ITAT is erroneous since it ignores the settled position of law." 7. Nevertheless, since Ms. Vibhooti Malhotra, lea....
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.... the Assessee in its profit and loss account ('P&L Account'), deduction under Section 10A of the Act was claimed for an export turnover of Rs. 25,36,64,616 pertaining only to Unit II. This comprised Rs. 23,37,30,290 on account of 'Data Processing Receipts', Rs. 27,77,969 on account of 'On Site Support Services' and Rs. 1,73,56,357 on account of 'Software Development Services'. Exemption under Section 10A was claimed at Rs. 20,02,81,699. Order of the TPO 12. The AO made a reference of the Transfer Pricing Officer ('TPO') under Section 92CA of the Act in respect of the international transactions involving AIPL and its Associated Enterprise ('AE'). Amadeus Spain. The TPO in his report dated 16th January, 2013 recommended an upward transfer pricing adjustment of Rs. 75,43,18,168 being the difference the Arm's Length Price and the price charged by AIPL. This has ultimately been ordered to be deleted by the ITAT in the impugned order on account of AMP adjustment. That aspect of the matter need not be examined further since in this appeal notice has been confined only to the question of allowing the deduction under Section 10A of the Act. 13. However, it r....
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....ntre receipts of Rs. 4.58 crore could be in nature of receipts eligible for deduction under Section 10A. The Assessee was directed to provide all the details/ certificate(s) in support of its claims of deduction under Section 10A for only Unit II to the AO. The AO was further directed to allow deduction under Section 10A on the profits to the above receipts corresponding to Unit II only, provided that the basic eligibility criteria of deduction under Section 10A was satisfied. 18. Based on the order of the DRP, the AO passed the final assessment order dated 31st January, 2014 restricting the deduction under Section 10-A to Rs. 1,58,97,121. The balance of Rs. 18,43,84,578 was disallowed and directed to be added back to the income of the Assessee. Impugned order of the ITAT in the case of AIPL 19. The Assessee then filed an appeal before the ITAT. It was contended by AIPL before the ITAT that as in the earlier years, even during the AY in question, the sole activity of AIPL was to provide software connectivity for providing access of Amadeus CRS to travel agents for which it received 46% of the revenue earned by Amadeus Spain. Software connectivity was provided by rendering ....
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....arate reference to the Export Promotion Council ('ESC'). In its opinion, the ESC had stated: "It is to confirm and clarify that data processing job is well covered within the scope of the definition of Computer Software. To substantiate this we enclose herewith a copy of Customs Notification No.7/98 and Customs Notification dated 11-2-1998. Further customs Notification No.10/96 dated 17-2-1997 also clarifies that data entry are well covered within the scope of computer software. Since Ministry of Finance has given detailed definition of Computer Software (for Customs Act) it would be appropriate that benefit under section 80HHE be extended to M/s. Amadeus. In case of any doubt the matter be referred to Department of Electronics before any decision is taken." 22. A reference was also made to the National Informatics Centre ('NIC'). By a letter dated 9th February, 1998, the NIC intimated the AO as under: "According to the details given by you, M/s. Amadeus India Pvt. Ltd. is merely collating information (data) from customers and doing bit of processing (collating) and forwarding the collated information (not any software programme) to its German counterpart." 23. However,....
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....ch they have fed various programmes and built up a huge data base of various kinds of information relating to several airlines and service providers. At the other end we have the travel agent with a computer who merely accesses or utilises relevant information which appears on the data base of the computer. In a sense, he also adds to and alters the database available on the computer when he books a ticket for a client by typing in the data regarding his customer such as airline, fare, ticket, nature of services etc. for such entries will be added to the data base and become available for other operators on computers working on the system all over the world. A view may perhaps be taken that what the travel agent does is not "programming" as he merely makes use of adds to or alters the information on the data base but does not touch the process by which such information is brought on to the host computer. 35. The assessee which occupies a position midway between the two fulfils, it will be clear from the facts as stated above, the functions of a programme exporter, it does not add mere entries to a database as done by the travel agent. In fact it has no direct interest in adding ....
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..... Ltd.) for AYs 2007-2008 to 2010-2011. (This order is incidentally under appeal in the companion appeal here i.e., ITA 330 of 2017 for AY 2010-11). The ITAT noted that although Inter Globe was a competitor for AIPL, "both the Assesses have similar business model and are rendering data processing activity." Contentions of the Revenue 28. It was urged by Ms. Vibhooti Malhotra, learned counsel for the Revenue, that a parallel could not be drawn between the decisions in the Assessee's own case for AY 1996-97 and the AY under consideration because the deduction that was claimed for AY 1996-97 deduction was under Section 80HHE whereas here it is under Section 10A of the Act. 29. There is no merit in the above contention for the simple reason that the Revenue has not been able to show that the activity of the Assessee, which was examined then and the activity now is any different. The essence of both Section 80 HHE and Section 10A in terms of the conditions of eligibility are not very different. 30. It was then submitted by Ms. Malhotra that the beneficiaries of the Assessee's activities are all located in India and, therefore, there was no real export of services. The extrac....
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....ure and export of software and is such a one for all the other aspects referred to above, it would be not only anomalous but unjust to say that it is not an exporter of software for purposes only of Income-tax merely because the various departments of Government have not kept abreast of each other in the issue of their clarificatory notifications and instructions." Conclusion in ITA 154 of 2017 (AIPL) 32. The Court finds that the impugned order of the ITAT in the case of AIPL for AY 2009-10 on the issue of allowing of deduction under Section 10A of the Act suffers from no legal infirmity either in its analysis of the legal provisions or in its conclusions. The Court is not inclined to frame any question of law on the issue concerning a Section 10A deduction in the appeal of the Revenue against AIPL for AY 2009-10. Facts in ITA 330 of 2017 (Inter Globe) 33. Turning now to the Revenue's appeal in the case of Inter Globe for AY 2010-11, it is seen that there are concurrent findings of CIT(A) as well as ITAT regarding the eligibility of the Assessee to deduction under Section 10AA of the Act. 34. The facts were that the Assessee/Inter Globe was engaged in the busines....
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....om its SEZ Unit NOIDA, is the only service which has been exported for the purpose of making booking through CRS to Galileo, therefore, in view of the same, the observation whether the appellant had more number of computers/manpower outside SEZ, and that the data is collected by travel agents (outside SEZ) is of no relevance in determining the nature of services exported by the appellant." 38. Further, in the Assessee's own case for AY 2007-08, followed by the CIT(A) for AYs 2008-09 and 2009-10, the deduction under Section 10AA of the Act had been allowed by holding that the profits earned from rendering services to Galileo were covered thereunder. The material facts remained the same for AY 2010-11. The CIT(A) accordingly allowed the appeal and allowed the deduction claimed by the Assessee/Inter Globe under Section 10AA of the Act. Impugned order of the ITAT in case of Inter Globe 39. The Revenue then went in appeal to the ITAT. The ITAT noted that the Agreement entered into between the Assessee and Galileo envisaged the following technical services being provided: access levels, communication links, scripts, problem ticketing and help desk operations, voice inbound call ....
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....s placed on the decision of the ITAT in the case of AIPL. 42. The ITAT also discussed the case of Acquire Service Private Limited v. Commissioner of Service Tax [2015] 78 VST 292 (CESTAT-New Delhi), which was a part of the group of companies using the CRS of Amadeus or Galileo. The modus operandi was described as under: "7.6. ... These groups had evolved and were maintaining a computer reservation system (CRS), the requisite software and a huge database comprising a variety of information relating to several airlines and other travel services provides, for providing international travel related facilities. The core computer system/server were established at overseas locations at US, Germany or Spain as the case may be. The travel agent, with a computer, merely accesses or utilizes travel information drawn from the data base of the computers. The travel agent also adds to, and alters the data available on the computer when he books a ticket (or other travel facilities like cab services, accommodation at hotels/resorts etc.) for a customer by feeding in the data regarding the customer such as airlines, hotel, local travel fare, tickets, the several intermediary and eventual des....
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....s come to the conclusion that Assessees promote/market CRS services provide by the Overseas entities (Amadeus/Galileo) but do so through computers data processing, amounting to information technology services." 43. It was noticed that the functions of AIPL had also been discussed in the case of Galileo. The ITAT noted that its decision in the case of Galileo was upheld by this Court in its decision in Director of Income Tax v. Galileo International Inc. (2011) 336 ITR 264 (Del.). Reference was also made to the decision of this Court in CIT v. M.L. Outsourcing Services (P) Ltd. (2014) 271 CTR 553 (Del.) where a reference was made to the CBDT notification dated 26th September, 2000 in relation to deduction under Section 10A of the Act. Contentions of the Revenue 44. Mr. Ruchir Bhatia, learned counsel for the Revenue submitted that the decision of this Court in Director of Income Tax v. Galileo (supra)which interpreted the same agreement between the Assessee and Galileo held that it did not provide for rendering of export services. 45. The Court is unable to agree with the above submission. This Court in Director of Income Tax v. Galileo (supra) was not examining whether t....