TaxTMI 
TaxTMI 
2018 (4) TMI 324
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Technology Park Authorities have certified both manufacturing of software as well as export of software by the appellant 2. On the facts and in the circumstances of the case and in Law, the learned CIT(A) erred in enhancing the income by Rs. 3,39,75,960/- without following procedures as laid down u/s.251. 3. Without prejudice to above ground CIT(A) erred in enhancing the income holding that the appellant had not undertaken any manufacturing and export of software. 4. On the facts and in the circumstances of the case and in Law, the learned CIT(A) erred in stating that the appellant had failed to demonstrate any evidence of manufacturing of computer software or compute programs or computerized electronic data or project or service of similar nature as notified by CBDT and further erred in concluding that the appellant is not entitled for deduction u/s.10A. 5. On the facts and in the circumstances of the case and n Law, the learned CIT(A) erred in finally concluding that appellant is not entitled to deduction u/s.10A on the basis of "new facts" which have emerged in the year in contrast and comparison to earlier years, whereas as a matter of fact....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d, scalable enterprises and e-business solutions and operated through development centers at Mumbai, Pune & Bangalore. The assessee was active both in domestic as well as in overseas market. 2.3 The assessee reported turnover of 114.86 crores with Net profit of Rs. 11.36 crores. Against the same, it claimed deduction / exemption u/s 10A on account of profit generated by its Software Technology Park Unit [STP] situated at Bangalore. The assessee had two units at Bangalore at 201-2224, 2nd Floor, Tower-B, Diamond District, Kodihally Village Airport Road, Bangalore-560008. The said premises was shared by STP as well as non-STP units. The STP units as well as non-STP units were engaged in rendering software services. The date of commencement of STP unit was 08/07/2004 and this was the fourth year of claiming deduction u/s 10A. 2.4 Before Ld. AO, the main dispute revolved around allocation of common expenditure between STP units and non-STP units. Initially, the assessee claimed deduction u/s 10A for Rs. 406.08 Lacs as per Auditor's certificate in Form 56F which was later revised downward to Rs. 287.13 Lacs in the revised return of income on the basis of expense allocation formula....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l employee strength of 1086 employees and the services rendered for STP unit was separately and distinctly earmarked and deduction has been claimed only against revenue generated by STP unit which is duly certified by the auditors. The attention was also drawn to Annual Performance Report for 2008-09 filed by the assessee with appropriate authority under Software Technology Parks of India, Bangalore. It was further contended that the software services were provided to the sister concern of the assessee namely Bristlecone GmbH & Bristlecone Inc. pursuant to agreements and the activities were carried out with respect to work executed for the end customers of Bristlecone GmbH (SAP AG) and Bristlecone Inc. (Nike). The attention was drawn to various clauses of the agreement and CBDT notification No. 890(E) dated 26/09/2000 issued in terms of explanation 2(i) to Section 10A to support the stand that the impugned services was covered within the framework of statutory provisions of Section 10A. However, not convinced, Ld. CIT(A), inter-alia noted that the assessee failed to demonstrate any evidence of manufacturing of computer software or computer program or customized electronic data or p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s not eligible to claim any deduction u/s 10A at all since the nature of services being rendered by the assessee were not covered within the ambit of statutory provisions as contained in Section 10A. 5.3 At the outset, so far as the interpretation of Section 10A read with explanation 2(i) and CBDT Notification No.S.O.890(E), dated 26th September, 2000 is concerned, we would like to reproduce the scope and ambit of these provisions, as succinctly noted by Hon'ble Delhi High Court in CIT Vs. ML Outsourcing Services Private Limited [228 Taxman 54] in the following manner:- 6. The relevant provisions of Section 10A of the Act read as under:- "(1) 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 10 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 income of the appellant. XXXXXXX XXXXXXX (2)This section app....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ide and broad expression, "any product or service of similar nature, as may be notified by the Board". The intention and desire of the Legislature, which is palpable and lucid from the words and expression used, is that the term, 'computer software' specifically includes 'customised electronic data' and also 'any product or service of similar nature' notified by the Board (Central Board of Direct Taxes). In other words, the Parliament has left it to the Board to notify the products or services of similar nature, which would be covered under clause (b) and treated as 'customized electronic data' for the purposes of clause (b) to Explanation 2 to Section 10A. 8. In exercise of the power conferred under Section 10A, the Board has issued a notification No. S.O. 890 (E), dated 26th September, 2000, and the said notification reads as under:- "S.O.890(E)- In exercise of the powers conferred by clause (B) of item (i) of Explanation 2 of Section 10A, clause (b) of item (i) of Explanation 2 of Section 10A and Clause (b) Explanation to Section 80HHC of the Income Tax Act, 1961 (43 of 1961) the Central Board of Direct Taxes hereby specifies the following Infor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rough voice and/or video communications. These services would not normally involve processing or sending customised electronic data abroad, yet these are information technology enabled services and specifically covered under the Notification. 10. Leaned senior Standing Counsel for the Revenue submitted that the principle of ejusdem generis should apply. The said doctrine has no application in the present case for the simple reason that there is no enumeration of specific words of a particular class or category preceding the words, 'or any other product or service of similar nature'. In clause (b), prior to the said expression, the word used is, 'any customised electronic data'. Thus, we do not find any genus in the earlier portion of clause (b) of Explanation 2 to Section 10A or the subjects enumerated therein. Principle of noscitur a sociis, though broader in application, again in the facts of the present case would have no application. The said rule of construction, as explained by Lord Macmillan, states that the meaning of a word could be judged by the company it keeps; and, therefore, it is a legitimate rule of construction to make reference to words found in i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he definition of 'industry' because the Legislature had deliberately used wider words and defined the word correspondingly wider. The principle being that only when the intention of the Legislature in associating wider words with words of narrower significance is in doubt, or otherwise not clear, that the rule of construction, noscitur a sociis can be usefully applied. Therefore, the said doctrine applies when the words used are vague, imprecise, and ambiguous, and there is no indication that those have been deliberately used for wider meaning. As noticed above, in the present case, the Explanation 2 has been inserted to give wider meaning and that this was deliberately so enacted by the Legislature. The intention, therefore, is to the contrary for the doctrine of noscitur a sociis to apply. 12. In Rohit Pulp and Paper Mills Ltd. vs. Collector of Central Excise, Baroda (1990) 3 SCC 447, the said doctrine was considered and remarks of Diplock, C.J. in Letang vs. Cooper (1964) 2 All ER 929, describing the said doctrine as a treacherous one unless one knows the soceitas to which the socii belongs, were referred to. It was nevertheless observed that the said maxim or prece....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ain or restrict but to enable the Board to include several services or products of similar nature in the ambit of the provision. This is what precisely the Board has done when it used the expression, 'information technology enabled products or services' in the notification. Upon perusal of the same, we find that Hon'ble Court while interpreting the language of statutory provisions and cited notification came to conclusion that the principles of ejusdem generis or Principle of noscitur a sociis could not be applied since there was no ambiguity and the intention of the Legislature was not to constrain or restrict the scope of products or services but to enable the Board to include several services or products of similar nature in the ambit of the stated provisions. We completely agree with the said interpretation of statutory provision as noted by the Hon'ble Court. No other contrary judgment is available on record. Although we are conscious of the fact that SLP against the said judgment of Hon'ble Court has been admitted by Hon'ble Apex Court on 06/03/2017 [2017 79 Taxmann.com 254], however, upon perusal of the same, we find that the operation of said judgment has not been su....