TaxTMI 
TaxTMI 
2017 (10) TMI 998
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....aw and void abinitio. 1.1 Without prejudice, on facts and in law, the AO/DRP erred in not granting a proper opportunity of being heard and thereby violating the settled principals of audi alteram partem. 2. That on facts and in the law the AO/TPO/DRP erred in making/proposing/upholding an addition to total income of Rs. 81,16,72,668/- under Chapter X of the Income Tax Act, 1961 [hereinafter referred as "the Act"]. 3. That on facts and in law the AO/TPO/DRP erred in making/proposing/upholding Transfer Pricing adjustment of Rs. 80,79,61,592/- on account of Advertisement, Marketing and sales promotion expenses. 3.1 That on facts and in law the TPO/DRP erred in not appreciating that in absence of a "transaction" as envisaged under section 92F of the Act between appellant and its AE for brand promotion or for establishing a marketing intangible the TPO had no jurisdiction to propose an adjustment on account AMP expenses. 3.2 That on facts and in law the TPO erred in holding and the DRP inter alia erred in upholding/observing that the: (i) Appellant had incurred AMP expenditure of Rs. 70,41,05,962/- on promotion of proprietary marks and for development of marketing inta....
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....al interest are "closely linked" with the main activities carried out under the Distributorship Agreement and hence they cannot be segregated and benchmarked on a stand-alone basis. 8. That on facts and in law the DRP (without drawing any adverse inference) erred in observing that the approach adopted by the appellant and accepted by the TPO in benchmarking of main "international transactions" under the Distributorship Agreement with Amadeus Spain is erroneous. 9. That on facts and in law the AO/DRP erred in restricting allowance for deduction u/s 10A of the Act to Rs. 13,66,68,296/- as against a deduction of Rs. 37,23,15,6151- claimed by the appellant in its return of income. 9.1. That on facts and in law the AO/DRP erred in holding that Data Processing Receipts of Rs. 28,52,77,453/- pertaining to Unit-ll of the appellant are not eligible for claiming benefit of deduction u/s 10A of the Act. 9.2 That on facts and in law the AO/DRP erred in denying benefit of deduction u/s 10A of the Act as clamed in the return by erroneously being influenced by the findings recorded by appellate courts in cases relating to the AE. 9.3 That on facts and in law the AO/DRP erred in hol....
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....he territory of India, Bangladesh & Nepal to access the 'CRS' system and other software products developed by 'Amadeus Spain' available on the host. For providing this access, the assessee performs various data processing jobs as well as modification of programs online on the host system including generation of reports for tracking problems. The assessee set up its first 100% Export Oriented Unit (EOU) unit in Software Technology Park Scheme (STPS) in July 1995 at 'Hanswala Building'. This unit was subsequently shifted to D-4/4, Vasant Vihar, New Delhi. The assessee set up an another 100% EOU at D-1, Local Shopping Centre No.-2, Vasant Vihar, New Delhi (Unit -II) in April, 2005. 2.2 Amadeus India executes contract with travel agents (hereinafter referred as "subscribers") for providing software access of Amadeus Spain's CRS. Amadeus Spain remunerates the assessee i.e. Amadeus India for the services rendered by it by spreading the net revenue received by the Amadeus Spain from providers of various travel related services (such as airlines, hotels, car rentals etc) for using the CRS platform for display, distribution, sale of providers product( airline tickets or hotels rooms etc) a....
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....in filters. The mean OP/TC of the final comparable set selected by the TPO was 35.98 percent but the OP/TC of the assessee was 38.78%, which being higher than the OP/TC computed by the Ld. TPO, he did not propose any adjustment on this account. 2.5 The Ld. TPO, however, observed that the assessee had incurred more than normal sales and marketing expenses to build "Amadeus" brand in India, which is legally owned by "Amadeus Spain". According to the ld. TPO, in the instant case, incurring of such sales and marketing expenses constituted an "International transaction" between the assessee and its AE. The learned TPO held that the assessee should have been reimbursed with appropriate markup on such additional marketing expenses. In his order, the learned TPO computed the said more than normal marketing expenses (i.e. bright line) by comparing the advertisement, marketing and promotion expenses (AMP) as a percentage to sales of the assessee with the average AMP% of comparable companies finally selected by him for benchmarking the functions of the assessee. Thereafter, by adding a further markup of 14.88%, the TPO computed the final adjustment on the said 'brand promotion' transactions ....
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.... profit & loss account submitted by the assessee: SI. No. Income Unit-I Unit-ll Total 1 Data processing receipts / Software Export Services 172,23,63,772 27,91,48,215 200,15,11,987 2. IT Support Services 4,08,064 16,45,94,331 16,50,02,395 3. Call Centre receipt 11,13,900 - 11,13,900 4. Other Income 7,89,85,298.11 72,66,491.46 8,62,51.789.57 Total 180,28,71,034.11 45,10,09,037.46 225,38,80.07.57 It has been held by the AO in the draft assessment order that the data processing receipts/software export receipts of Rs. 27,91,48,215/- pertaining to Unit II are not eligible for claim of deduction u/s 10A of the Act. In support of his conclusions AO has extensively relied upon the findings recorded by DRP in assessee's own case for AY 2009-10 wherein identical claim has been disallowed by the DRP for the first time alleging that no export activity was being carried out by the assessee corresponding to the data processing receipts credited in Unit II and that the same merely represents remuneration from normal distribution activities carried on by the assessee under the distribution agre....
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....Ltd. 4.97 14. Vista Entertainment Ltd. 3.16 15. Adrenalin Esystem Ltd. 6.74 16. Interworld Digital Ltd. 0.10 17. NSE IT Ltd. 0.01 18. Newgen Software Technologies Ltd. 2.03 19. Nucleus Software Exports Ltd. 1.03 20. Powersoft Global Solutions Ltd. 0.35 21. Supertech Solutions Ltd. 0.00 22. Accentia Technologies Ltd. 0.00 23. Coskmic Global Ltd. 0.17 24. Eclerx Service Ltd. 0.2 25. Fortune Infotech Ltd. 0.21 26. Igate Global Solutions Ltd. 0.28 27. Infosys BPO ltd. 0.12 28. TCS E-serve International Ltd. 0.01 29. TCS E-serve Ltd. 0.01 30. e-4-3 Healthcare (also known as Nittany Outsourcing Service Pvt. Ltd.) 2.09 31. Omega Healthcare 0.00 32. Aditya Birla Minacs Worldwide Ltd. 0.00 33. Informed Technology India Ltd. 2.75 34. Datamatrics Financial Services Ltd. 2.71 35. Jeevan Softech Ltd. 1.22 AVG 1.25 The DRP also upheld the use of a mark-up of 14.88% in identifying the arm's length price of the alleged excessive bright lines spent. During DRP proceedings it was claimed by the assessee that out of the total AMP expenditure of Rs. 73,22,79,463/- debited by it in the P&L Account, pay....
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....the TPO as under :- TP adjustment on account of AMP expenditure Rs.80,79,61,592/- TP adjustment on account of receivables Rs. 37,11,076/- Total Rs.81,16,72.668/- 2.9 The AO thereafter has passed the final assessment order dated 23rd February, 2015 assessing the total income of the assessee at Rs. 139,03,88,366/-. 2.10 Aggrieved with the additions/disallowances made in the order of the Assessing Officer dated 23/02/2015, the assessee is in appeal before the Tribunal raising the grounds as reproduced above. 3. The ground No. 1 and 2 of the appeal being general in nature, we are not required to adjudicate specifically and accordingly dismissed as infructuous. 4. In grounds No. 3 and 4, the assessee has challenged adjustment on account of AMP expenses. 4.1 Before us, the learned counsel submitted that issue in dispute is covered in favour of the assessee by the order of the Tribunal for assessment year 2009-10 i.e. immediately preceding year. The Ld. counsel submitted that in the year under consideration, the learned TPO has relied on the same agreement between the assessee and AE, which was relied by the TPO in assessment year 2009-10. He further submitted that order of t....
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....see is not a distributor. The Ld. CIT(DR) submitted that assessee is neither distributor nor manufacturer. According to the Ld. CIT(DR) the Tribunal in assessment year 2009-10 has without appreciating the facts of the case properly, relied on the decision of the jurisdictional High Court in the case of Bausch & Lomb Eyecare India Private Limited Vs. Addl. CIT (2016) 381 ITR 227 (Del.) and held that in the case of the assessee incurring of alleged abnormal AMP expenses is not an international transaction. 4.4 We have heard the rival submission and perused the relevant material on record. The Ld. CIT(DR) has argued that that assessee being only service provider, the abnormal AMP expenses has benefited the 'Amadeus' brand of AE only and thus apparently it constituted an international transaction between the assessee and the AE. There might be some substance in the arguments of the Ld. CIT(DR), however, the issue in dispute has already been adjudicated by the Tribunal in ITA No. 1804/Del/2009 in immediately preceding assessment year i.e. 2009-10 as under: "8. We have considered the submissions made by the parties and have also perused the material available on record. Undisputedly t....
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....w that both the lower authorities have categorically given a finding that there existed a "transaction" for brand promotion between appellant and its AE. This is also under challenge before us. Hence it cannot be said that necessary facts are not on record. With regard to the submissions of the Ld DR that the issue of AMP be restored back to the file of Ld. TPO, we would like to state that since facts necessary to determination are on record the law laid down by Hon'ble Jurisdictional High Court has to be given effect to. It is not even the argument of Ld CIT(DR) that any fresh fact is required for such a determination. Under the circumstances a direction for remand is not called for. Hon'ble Jurisdictional High Court in various cases have highlighted the tests to be applied for ascertaining whether there exists a transaction for brand promotion in a particular case. Ld AR has impartially summarized the relevant propositions from these decisions in his note, which we have reproduced above. We find that in the cases of Maruti Suzuki India Ltd. (supra), Whirlpool of India Ltd. (supra), Bausch & Lomb Eyecare (India) (P.) Ltd. (supra) Hon'ble High Court on the issue of AMP expenses....
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....n associated enterprise shall, for the purposes 'of sub-section (1), be deemed to be a transaction entered into between two associated enterprises, if there exists a prior agreement in relation to' the relevant transaction between such other person and the associated enterprise, or the terms of the relevant transaction are determined in substance between such other person and the associated enterprise." 56. Thus, under Section 92B(1) an 'international transaction' means- (a) a transaction between two or more AEs, either or both of whom' are nonresident (b) the transaction is in the nature of purchase, sale or lease of tangible or intangible property or provision of service or lending or borrowing money or any other transaction having a bearing on the profits, incomes or losses of such enterprises, and (c) shall include a mutual agreement or arrangement between two or more AEs for allocation or apportionment or contribution to the any cost or expenses incurred or to be incurred in connection- with the - benefit, service or facility provided or to be provided to one or more of such enterprises. 57. Clauses (b) and (c) above cannot be read disjunctively. Even....
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....chi Sankyo Company Ltd. v. Jayaram Chigurupati 2010 (6) MANU/SC/0454/2010, which arose in the context of acquisition of shares of Zenotech Laboratory Ltd. by the Ranbaxy Group. The question that was examined was whether at the relevant time the Appellant, i.e., 'Daiichi Sankyo Company and Ranbaxy were "acting in concert" within the meaning of Regulation 20(4)(b) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. In para 44, it was observed as under: "The other limb of the concept requires two or more persons joining together with the shared common objective and purpose of substantial acquisition of shares etc. of a certain target company. There can be no "persons acting in concert" unless there is a shared common objective or purpose between two or more persons of substantial acquisition of shares etc. of the target company, For, de hors the element of the shared common Objective' or purpose the idea of "person acting in concert" is as meaningless as criminal conspiracy without any agreement to commit a criminal offence. The idea of "persons acting in concert" is not about a fortuitous relationship coming in....
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....s no explicit arrangement, the fact that the benefit of such AMP expenses would also encure to the AE is itself self sufficient to infer the existence of an international transaction has been negatived by the Court in Maruti Suzuki India Ltd. (supra) as under: "68. The above submissions proceed purely on surmises and conjectures and if accepted as such will lead to sending the tax authorities themselves on a wild-goose chase of what can at best be described as a 'mirage1. First of all, there has to be a clear statutory mandate for such an exercise. The Court is unable to find one. To the question whether there is any 'machinery' provision for determining the existence of an international transaction involving AMP expenses, Mr. Srivastava only referred to Section 92F(ii) which defines ALP to mean a price "which is applied or proposed to be applied in a transaction between persons other than AEs in uncontrolled conditions", Since the reference is to 'price' and to 'uncontrolled conditions' it implicitly brings into play the BLT. In other words, it emphasises that where the price is something other than what would be paid or charged by one entity from an....
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....f such, AMP spend that the India entity should be compensated. 63. Further, in Maruti Suzuki India Ltd. (supra) the Court further explained the absence of a 'machinery provision qua AMP expenses by the following analogy: "75. As an analogy; and for no other purpose; in the context of a domestic transaction involving two or more related parties, reference may be made to Section 40A(2)(a) under which certain types of expenditure incurred b. way of payment to related parties is not deductible where the AO is of the opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods." In such event, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction." The AO in such an instance deploys the 'best judgment' assessment as a device to disallow what he considers to be an excessive expenditure. There is no corresponding 'machinery, provision in Chapter X which enables an AO to determine what should be the fair 'compensation' an Indian entity would be entitled to if it is four: that there is an International transaction in that regard. In practical te....
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....e, are acceptable. These clauses nowhere provide that the appellant will be incurring brand promotion expenses for and on behalf of its AE or solely for its business purposes and interests. Agreement dated 01st October 2004 between appellant and its AE is based upon revenue sharing model in which 46% revenue is being shared by Amadeus Spain with the appellant and hence it is difficult to visualize that appellant will not be incurring routine advertisement expenses in its entrepreneur capacity. Excluding payment of incentives, which in earlier years have been held, to be pure selling expenses the ratio of AMP/Sales of the appellant is mere 2.29%. Ld AR is also right in relying upon the decision of Hon'ble Jurisdictional High Court in case of Sony Mobile Communications (supra) for submitting that events which would transpire on termination of distribution might require a TP adjustment at that stage but the same will be immaterial to presume existence of an agreement, arrangement or understanding in the year under consideration. In this regard Hon'ble High Court at para 153 of its reported judgment has been pleased to be hold as under: "153. Economic ownership of a brand is an inta....
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....hich is taxable in India. Moreover, we may refer here decision of Hon'ble Jurisdictional High Court in case of Whirlpool of India Ltd (supra) wherein it is held by the Hon'ble High Court as under: "37. The provisions under Chapter X do envisage a 'separate entity concept'. In other words, there cannot be a presumption that in the present case since WOIL is a subsidiary of Whirlpool USA, all the activities of WOIL are in fact dictated by Whirlpool USA. Merely because Whirlpool USA has a financial interest, it cannot be presumed that AMP expense incurred by the WOIL are at the instance or on behalf of Whirlpool USA. There is merit in the contention of the Assessee that the initial onus is on the Revenue to demonstrate through some tangible material that the two parties acted in concert and further that there was an agreement to enter into an international transaction concerning AMP expenses. 46. As already mentioned, merely because there is an incidental benefit to Whirlpool USA, it cannot be said that the AMP expenses incurred by WOIL was for promoting the brand of Whirlpool USA. As mentioned in Sassoon J. David (supra) "the fact that somebody other than the Assessee i....
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....dition of Rs. 80,79,61,592/- is therefore directed to be deleted. The ground Nos. 3 to 3.3 are therefore allowed. In view of our conclusion above, the ground Nos. 4 to 4.2 do not require any adjudication. 5. The next issue arising out of ground Nos. 5 and 6 of the appeal pertains to an adjustment of Rs. 37,11,076/- on account of notional interest attributable to delayed payments receivable from the AE. 5.1 The Ld. counsel of the assessee submitted that the Tribunal in assessment year 2009-10 has held that no ALP adjustment can be made in respect of delay in realization of sale proceeds. He said that issue in dispute is covered by the order of the Tribunal for assessment year 2009-10 in favour of the assessee and the Revenue has not filed any further appeal before the Hon'ble High Court against the said finding of the Tribunal and accordingly requested for deletion of addition in dispute. 5.2 Ld. CIT(DR), on the other hand, relied on the finding of the lower authorities and submitted that any receivable outstanding more than the normal period of the trade, per se is an international transactions and should be benchmarked. 5.3 We have heard the rival submission and perused the re....
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....nstitute operational income, there is no need to be guided by such hypothesis and generalities. There is nothing on the records, to show such exclusions on the facts of this case. In any event, setting off of interest expenditure with interest on account of delay in realization of debts, even if so, is not too common an occurrence and more of exceptions than the rule. The apprehensions of the revenue are purely hypothetical and, therefore, devoid of legally sustainable merits. [Para 16] In view of these discussions, as also bearing in mind entirety of the case, no ALP adjustments can be made, in respect of delay in realization of sale proceeds. Such being conclusion, there is no need to address the specific factual arguments advanced by the assessee in effect thus the grievance of the assessee, is upheld and direct the Assessing Officer to delete the impugned arm's length price adjustment [Para 17] Explanation to section 92B There is, however, one more aspect of the matter for which the impugned ALP adjustment must be deleted. [Para 19] It is noted that everything hinges on application of Explanation to section 92B, vide Finance Act 2012, though with retrospective e....
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....ction defined under section 92B, assuming that it indeed does not this provision has already been judicially interpreted, and the matter rests there unless it is reversed by a higher judicial forum. However, if the 2012 amendment does increase the scope of international transaction under section 92B, there is no way it could be implemented for the period prior to this law coming on the statute, i.e., 28-5-2012. The law is well settled. It does not expect anyone to perform an impossibility. [Para38] It is for this reason that the Explanation to section 92B, though stated to be clarificatory and stated to be effective from 1-4- 2002, has to be necessarily treated as effective from at best the assessment year 2013- 14. In addition to this reason, in the light of Delhi High Court's guidance in the case of DIT v. New Skies Satellite BV [2016] 382 ITR 114/68 taxmann.com 8 also, the amendment in the definition of international transaction under section 92B, to the extent it pertains to the issuance of corporate guarantee being outside the scope of 'international transaction' cannot be said to be retrospective in effect. The fact that it is stated to be retrospective, in the....
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....on to the extent of Rs. 13,66,68,296/- and disallowed the balance deduction claimed by the assessee. The Ld. DRP upheld the disallowance made by the Assessing Officer. 6.2 Learned counsel of the assessee submitted before us that issue in dispute is covered in favour of the assessee by the order of the Tribunal (supra) in assessment year 2009-10, which has been further upheld by the Hon'ble jurisdictional High Court in ITA 154/2017 dated 22/05/2017. 6.3 Learned CIT(DR), on the other hand, relied on the order of the Assessing Officer and the DRP and submitted that activity of the relevant unit of the assessee is not eligible for deduction under section 10A of the Act. 6.4 We have heard the rival submission and perused the relevant material on record. We find that Tribunal (supra) while adjudicating the issue of deduction under section 10A of the Act, in para-15 of the order, has relied on the coordinate bench decision in assessee's own case for assessment year 1996-97 and 1997-98 and also decision of the Tribunal in the case of M/s Interglobe Technology Contents Private Limited for assessment year 2007-08 to assessment year 2010-11 in ITA Nos. 419/Del/2011, 5830/Del/2011, 1463/Del....
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....e appellant have also been partially taken into consideration. Ld DRP takes note of top 25 employees but omits to take into consideration crucial fact that director of appellate company Shri Ankur Bhatia is a Software Engineer with 16 years of experience. Moreover division wise break up of total employee strength has also partially been reproduced by Ld DRP in its order. Appellant vide submissions dated 29th November 2011 has submitted following details: Division wise break up of total staff strength Operations 518 Accounts / Admin 40 Business Development 103 Marketing and corporate communication 8 Utility Staff 13 Total 747 Name of division No. of software engineers in the division No.of software engineers in the division No. of data processors / other personnel providing services eligible u/s 10A No. Minimum required qualification No. Minimum required qualification No. Minimum required qualification 75 BSc-Eng, B.E., BCA, B. Tech or similar qualification 18 Diploma in software application/ programming or similar qualification 425 Varies as per job profile and experience Above details clearly show that appellant did ....
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....draw. To repeat what all that was done by the assessee fell within the parameters of supplying of information which is preparatory to and auxiliary to the formation of the final contracts. " Appellant has clarified above that like earlier years in the year under consideration also the sole activity carried on by it was that of providing the travel agents an access to the Amadeus CRS System by rendering ITeS data processing services. Facts on record also show that the appellant has not carried on any "distribution" functions though the agreement provided for same DRP's action in the present case is motivated by the "distribution" part of agreement which was not actually carried on by the appellant. Since fee to be paid to appellant as per Annexure A of the agreement was defined in aconsolidated manner probably that has lead to the present confusion in Ld DRP's action of making disallowance of deduction u/s 10A. As held by the Tribunal in appellant's own case for AY 1996-97 (supra) it merely provides ITeS services to Amadeus Spain. Appellant renders no services to the travel agents but does render data processing services only to Amadeus Spain and for this it is being remunerated o....
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....the DA. The second taxable unit in this transaction is the DA itself, but this taxability is in respect of the remuneration of the DA. The provisions of the tax treaty are silent on this issue, and rightly so, because the taxability of the DA is quite distinct of the taxability of the enterprise of the contracting state which is in respect of PE of such an enterprise. At the cost of repetition, it is not the DA who constitutes PE of the GE, but it is by the virtue of a DA that the GE is deemed to have a PE, a DAPE though, in the other contracting state. We are of the considered view that in addition of the taxability of the DA in respect of remuneration earned by him, which is in accordance with the domestic law and which has nothing to do with the taxability of the foreign enterprise of which he is dependent agent, the foreign enterprise is also taxable in India, in terms of the provisions of Article 7 of the tax treaty, in respect of the profits attributable to the dependent agent permanent establishment. As we have elaborated earlier in this order, a dependent agent permanent establishment is distinct from the dependent agent. While computing the profits of this dependent agent ....
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....ly 2016 division bench of this Tribunal allowed the claim for deduction u/s 10A of the Act by M/s Interglobe Quotient, which is a competitor of the appellant. Both the assessees have similar business model and are rendering data processing activity. Factual allegations levied by the authorities below are also same. In the said order, after following Tribunal's decision of appellant for AY 1996-97 (supra), the Tribunal has opined as under: "We find that the learned CIT(Appeals) while dealing with the issue has basically followed the decision of the IT AT in the case of Amadeus India (supra). He has elaborately discussed the terms of distribution agreement between the assessee and Galileo and has compared the activities of the assessee with that of Amadeus India before coming to the conclusion that the assessee before us is very much eligible for claiming deduction under section 10AA of the Act with this finding that the Assessing Officer was not justified in denying the claimed deduction under section 10AA of the Act in the present case. In para No.5.2, the Learned CIT(Appeals) firstly has discussed the terms of distribution agreement and on the basis of those description of serv....
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....orm has been filed). The competent authority Le., Department of Electronics authorized official also certified that the software described in the SOFTES form was actually transmitted and the export value declared by the exporter has been found to be in order and accepted by the authorized officer. Similar are the functions of the assessee in the present case before us and similar types of certificates have been issued to the assessee about the transmission of software and the export value declared by the exporter has been found to be in order and accepted by the authorized officer. We are thus of the view that the Learned CIT(Appeals) was justified in equating the facts of the present case with that of the Amadeus India, also in the same line of business and following the decision of the IT AT on an identical issue, in the case of Amadeus India, in para No. 5.2 of the first appellate order reproduced hereinabove, the Learned CIT(Appeals) has summarized the fulfillment of all the requirements of the eligibility of the deduction claimed under sec. 10AA of the Act in the case of the assessee, which we are not reiterating here for the sale of brevity. Besides, Software export dealer ac....
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.... 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 destination; and the nature of services to be provided etc. This data enters the composite data based stream and becomes available to other operators via computers operating on Amadeus or Galileo system, all over the world, whenever a fulfilling transactions occurs at the travel agents end. The assessee's role like the present assessee before us, was occupying the position of hyphen between the overseas Amadeus and Galileo which have conceived, evolved, maintained and operates the CRS (Computer Reservation System) facility on the one hand; and travel agent on the other. What the to assessee do, is to supplement functions, of the overseas entities (Amadeus or Galileo) by preparing and transmitting the locally generated travel related data to them....
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.... S0890(E) dated 26.09.2000 in relation to deduction under sec. 10A, reproduced as under: "9. A perusal of the said notification would indicate that the Board has included several distinct types of services under the expression, "product or services" in the fifteen clauses. The Board, in the notification has understood that product or services, to be included within clause (b) of Explanation 2 to Section 10A, need not be computer software as understood in the common parlance of even customized electronic data, as generally understood. Any product or service of similar nature would include in its ambit, product and services which were enabled by, i.e. would rely upon, or are driven by information technology. This becomes clear when we refer to the wide ambit of the divergent and varied services covered in the different clauses like, "(ii) call centres...(viii) human resources services...(viii) insurance claim processing... (xii) remote maintenance" and "(XIV) support centres". These services would not necessarily and primarily involve customized data processing, but nevertheless, these are information technology enables services. In case of call entres, queries and questions from ....
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....the case of Cheminvest Ltd. Vs. CIT reported in 378 ITR 33(Del). 7.2 The Ld. CIT(DR) though relied on the finding of the lower authorities, he could not controvert the fact that there was no tax-free income earned during the year. 7.3 We have heard the rival submission and perused the relevant material on record including the decision of the Hon'ble Delhi High Court in the case of Cheminvest Ltd (supra). The finding of the Hon'ble High Court is reproduced as under: "23. In the context of the facts enumerated hereinbefore the Court answers the question framed by holding that the expression 'does not form part of the total income' in Section 14A of the envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. In other words, Section 14A will not apply if no exempt income is received or receivable during the relevant previous year." 7.4 Thus, respectfully following the above decision of the Hon'ble High Court, the Assessing Officer is directed to delete the disallowance of Rs. 7,10,677/- under section 14A ....