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2017 (8) TMI 382
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....judication of the case, as emerged from the record, are that respondent-assessee, who is engaged in the manufacture of voice and fax encryption systems, imported the necessary hardware as well as corresponding software from the United States and subsequently imported hardware was integrated at the assessee's premises at Shoghi, District Shimla, Himachal Pradesh and the software was customized and modified before loading it to the hardware. Respondent-assessee claimed deductions under Section 801B and 80 HCC for the assessment purpose, which came to be disallowed by the Assessing Officer vide assessment order under Section 143(3) dated 1.3.2004. 3. Being aggrieved and dis-satisfied with the aforesaid assessment order dated 1.3.2004, respondent-assessee preferred an appeal under Section 250(6) of Income Tax Act before the Commissioner, Income Tax (Appeals), Shimla, which came to be registered as IT/182/2003- 04/SML. However, fact remains that aforesaid appeal preferred by respondent-assessee was dismissed, as a result of which order of assessment passed by Assessing Officer dated 1.3.2004 under Section 143(3) came to be upheld. 4. Respondent-assessee, being dis-satisfied with t....
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....n 133A(3)(iii) of the income-tax Act in the course of survey under-section on the assessee's premises did not have any evidentiary value, since the said section does not provide for recording a statement on oath, and since the statements recorded in the present case did not indicate the concerned officer/authority who recorded the same?" 6. Ms.Vandana Kuthiala, learned counsel representing the appellant-department, vehemently argued that impugned order passed by learned Appellate Tribunal is not sustainable as the same is contrary to the facts as well as law. While referring to the impugned judgment passed by learned Appellate Tribunal, Ms.Vandana Kuthiala, strenuously argued that no manufacturing activity was actually carried out by respondent-assessee and as such deduction claimed by assessee under Section 80 1B and 80 1C was rightly disallowed by Assessing Officer. She further stated that so called integration of software in the assessee's premises at Shogi did not amount to manufacture and as such software could not/ought not be said an article or thing. Mrs.Kuthiala, learned counsel further contended that learned Appellate Tribunal wrongly applied ratio of judgment passed b....
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...., stated that it clearly emerge from the record that assessee did not employ more than 10 workers in any manufacture unit and also not maintained separate books of accounts in respect of the eligible manufacturing activity/business and as such, he failed to fulfill the conditions contained in Section 80 1B of the IT Act entitling him to claim deductions under the same. 9. Per contra Mr.Rupesh Jain, learned counsel appearing for the respondent-assessee, supported the impugned order passed by learned Appellate Tribunal. While refuting the aforesaid submissions having been made by learned counsel representing the appellant-department, Mr.Rupesh Jain, while inviting the attention of this Court to the questions of law framed at the time of admission, vehemently contended that by no stretch of imagination the same can be termed to be the substantial questions of law, rather the same are pure questions of facts, which have been rightly adjudicated by learned Appellate Tribunal taking into consideration the material adduced on record by both the parties. Mr.Jain further contended that bare examination of aforesaid arguments, having been made by learned counsel representing the appellant....
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.... (iii) it manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India : Provided that the condition in this clause shall, in relation to a small scale industrial undertaking or an industrial undertaking referred to in sub-section (4) shall apply as if the words "not being any article or thing specified in the list in the Eleventh Schedule" had been omitted. Explanation 1.-For the purposes of clause (ii), any machinery or plant which was used outside India by any person other than the assessee shall not be regarded as machinery or plant previously used for any purpose, if the following conditions are fulfilled, namely :- (a) such machinery or plant was not, at any time previous to the date of the installation by the assessee, used in India; (b) such machinery or plant is imported into India from any country outside India; and (c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of this Act in computing the total income of any person for any peri....
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....existence. The concept of splitting up involves a break-up of the integrity of the business. In order to hold that an Industrial undertaking was formed by splitting up business already in existence, there must be some material to hold that either some assets of the existing business is divided and another business is set up from such splitting of assets, or that the two businesses are the same and the one formed was an integral part of the earlier one. Where there is no tangible evidence of transfer of any assets from an earlier business to the new business, a conclusion can not be reached that the new business is formed by the splitting up of the business already in existence (T.Satish U.Pai Vs. CIT, 119 ITR 877 (kar.). In the present case, no machinery has been transferred from M/s Secure Telecom Ltd., Delhi. Both the companies are doing their business, though there is sharing of expenses as the corporate office of the two companies is at the same place and the directors are common. In such a case, it can not be held that this is a case of splitting up of the business already in existence. Thus, the appellant does not violate conditions laid down u/s 801B(2)(i) of the Act." 14....
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....ther a property is "goods", for purposes of sales tax, is not whether the property is tangible or intangible or incorporeal. The test is whether the concerned item is capable of abstraction, consumption and use and whether it can be transmitted, transferred, delivered, stored, possessed etc. Admittedly in the case of software, both canned and uncanned, all of these are possible. Intellectual property when it is put on a media becomes goods. A software programme may consist of various commands which enable the computer to perform a designated task. The copyright in that programme may remain with the 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 case of painting) or computer discs or cassettes, and marketed would become "goods". We see no difference between a sale of a software programme on a CD/floppy disc from a sale of music on a cassette/CD or a sale of a film on a video cassette/CD. In all such cases, the intellectual property has been incorporated on a media for purposes of transfer. Sa....
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....nt Income Tax Department cannot be allowed to state that "goods" defined under service tax are different from meaning construed by Income Tax. Aforesaid circular having been issued by the CBDT makes it ample clear that software comes under definition of "goods" and there is no distinction between branded and unbranded software and learned Appellate Tribunal, taking note of aforesaid instructions issued by CBDT, rightly considered the development of software as manufacturing activity. Since, in the instant case, learned Appellate Tribunal, on the basis of aforesaid notification as well as other documents, came to the conclusion that software developed is manufactured by the assessee and as such rightly concluded that assessee fulfilled the conditions laid down under Section 80 IB(2)(iii) as the software is not an article/ thing specified in the list of 11th Schedule. 22. Apart from above, this Court finds that plant and machinery installed by the respondent-assessee was verified by the G.M., D.I.C. after having got spot verification and personal inspection. Similarly, there appears to be no dispute that the assessee was having General Sales Tax and Central Sales Tax exemption and....
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....ving the technical educations who were engaged in the manufacturing process i.e. in development of the software and it is not necessary that each and every employee alone should do all the works in the manufacturing process. 26. Learned Tribunal, while deciding the question whether assessee required requisite number of employees during the relevant period to avail benefit of deduction under Section 80 1B of the IT Act, after having carefully perused the record as furnished by the assessee, which was also taken note by Assessing Officer in its assessment order dated 1.3.2004, rightly concluded that once the expenses claimed by the assessee for temporary and part time workers amounting to Rs. 10,25,180/- were allowed and the expenses on account of establishment debited to P&L Account amounting to Rs. 25,56,188 were taken into consideration as genuine, there was no scope left to doubt that the workers employed by the assessee were less during the relevant period. 27. Learned Tribunal, taking note of assessment order passed by Assessing Officer, held that when the wages paid to the workers and the payment made to the part time/temporary workers were considered to be genuine, no s....
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....n of software would be eligible for the deduction under Section 10A. Learned Appellate Tribunal in the aforesaid case has categorically held that development of software falls within the definition of production as defined under Section 10A and 10B. 30. It also emerge from the record that similar view has been taken by learned Income Tax Appellate Tribunal Hyderabad Bench 'B' in the case of Infotech Enterprises Ltd. vs. JCIT, 85 ITD 325 (Hyd). Learned counsel representing the appellant-department was unable to dispute aforesaid findings returned by learned Income Tax Appellate Tribunals Mumbai and Hyderabad Benches in cases referred above and as such ratio laid down in the aforesaid cases were rightly applied in the instant case by the learned Income Tax Appellate Tribunal Chandigarh Bench. 31. Though this Court, after having gone through material adduced on record by appellant-department vis-àvis impugned order passed by learned Appellate Tribunal, is of the view that no substantial question of law arises for determination of this Court, but otherwise also, as has been discussed hereinabove, learned Tribunal has correctly dealt with each and every aspect of the matter....
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....ifferently is not a question of law justifying interference." 35. In Panchugopal Barua v. Umesh Chandra Goswami, (1997) 4 SCC 713, it has been laid down by Hon'ble Apex Court that existence of substantial question of law is sine qua non for the exercise of jurisdiction. The Hon'ble Apex Court has held as under:- "7. A bare look at Section 100 C.P.C. shows that the jurisdiction of the High Court to entertain a second appeal after the 1976 amendment is confined only to such appeals as involve a substantial question of law, specifically set out in the memorandum of appeal and formulated by the High court. Of course, the proviso to the Section shows that nothing shall be deemed to take away or abridge the power of the Court to hear, for reasons to be recorded, the appeal on any other substantial question of law, not formulated by it, if the Court is satisfied that the case involves such a question. The proviso presupposes that the court shall indicate in its order the substantial question of law which it proposes to decide even if such substantial question of law was not earlier formulated ate by it. The existence of a "substantial question of law" is thus, the sine-qua-non for t....
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....case involves such question, and (ii) the High Court records reasons for its such satisfaction." 37. All the aforesaid judgments have been referred to in the later judgment of K. Raj and Anr. v. Muthamma (2001) 6 SCC 279. A statement of law has been reiterated regarding the scope and interference of the court in second appeal under Section 100 of the Code of Civil Procedure. 38. Reliance is also placed upon the decision of the Hon'ble Delhi High Court in Mahavir Woolen Mills v. C.I.T. (Delhi) (2000), 2000 245 ITR 297 Delhi, wherein meaning of "substantial question of law" has been explained. The Hon'ble Court has held as under:- "6. The issue raised by the assessee in the appeal cannot be said to involve any question of law, much less a substantial question of law. A question of fact becomes a question of law, if the finding is either without any evidence or material, or if the finding is contrary to the evidence, or is perverse or there is no direct nexus between conclusion of fact and the primary fact upon which that conclusion is based. But, it is not possible to turn a mere question of fact into question of law by seeking whether as a matter of law the authority came t....