TaxTMI 
TaxTMI 
2018 (11) TMI 1553
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.....Whether on the facts and in the circumstances of the case, the Tribunal was right in law in directing the inclusion of the component of unrealised sale proceeds in total turnover while directing the exclusion of the same from export turnover? 3.Whether on the facts and in the circumstances of the case, the Tribunal was right in law in not directing the simultaneous exclusion or the inclusion of the sale proceeds in both the export as well as the total turnover in keeping with the principles of parity? 4.Whether on the facts and in the circumstances of the case, the Tribunal was right in law in setting aside the issue of deduction of expenditure in connection with the earning of dividend income and not allowing the same in full since all the required details to decide the same were before the Tribunal? 5.Whether on the facts and in the circumstances of the case, the Tribunal was right in law in not noting that the amendment to Section 14A of the Income Tax Act granting the assessing officer the power to estimate expenditure incurred with the earning of income that was not taxable was prospective and not applicable to assessment years prior to 01.06.2007?"....
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....p its units in Software Technology Parks of India ('STPI' for short). For the assessment years 2001-02 and 2002- 03, the assessee filed its return of income on 30.10.2001 and 29.01.2002 returning taxable income of Rs. 1,00,01,129/- and Rs. 9,17,13,730/-, respectively, after claiming deduction under Section 10A of the Act for an amount of Rs. 53,04,24,403/- and Rs. 45,80,46,512/- towards development of software business. The assessee claimed that they had incurred expenditure for an amount of Rs. 45,43,07,883/- for the assessment year 2001-02 and Rs. 64,27,91,100/- for the assessment year 2002-03, respectively, in foreign currency towards onsite software development projects. The Assessing Officer, while determining the deduction under Section 10A of the Act, excluded the expenditure incurred in foreign currency from 'export turnover' by alleging that the same was incurred for the purpose of rendering 'technical services'. The assessee's case was that the expenditure was incurred in connection with the onsite software development services performed by them. The stand taken by the assessee was not accepted by the Assessing Officer and he completed the asse....
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....fore the CITA as well as before the Tribunal, placed the entire materials as regards the development of the computer software. The assessee contended that they are engaged in the development of computer software programme, which is distinct from rendering of pure technical services, which would comprise of advice/consulting in relation to computer programmes. They are registered with STPI and as per the Registration Certificate, the assessee's activity is developing computer software and they are not considered as an exclusive technical service provider, as understood in the software industry parlance. The assessee proceeded to explain its activities, as per the agreement with its clients, for developing software, which consisted of eight steps, they are as follows: "1.Scope-Ascertaining the requirement of the customer and undertaking an indepth study on the proposal. 2.Requirements definition - Specification of the basic concepts and operation design, in relation to the final deliverable. 3.Designing-Designing of the deliverable, from a macro (overall flow of the integrated software) and micro perspective (designing of each module of the programme). ....
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....; and hence it will be erroneous to consider them as a provider of 'technical services'. Further, by referring to the customer contract and related statements of work and invoices, the assessee contended that it is engaged only in the activity of developing computer software and is not a technical services provider. The assessee also contended that there is a distinction in law between development of computer programme and rendering of technical services and in this regard referred to Section 10AA of the Act, defining 'export turnover'. 12.From the order passed by the CITA, we are able to see that the submissions made by the assessee, in the form of paper book, was forwarded to the Assessing Officer and a report was called for and the the Assessing Officer has also submitted his report, but we do not find any reference to such report in the order of the CITA nor it is clear whether the assessee was favoured with a copy of the report of the Assessing Officer. 13.Be that as it may. We may point out that the CITA did not endeavour to examine the scope of the agreement. In fact, certain observations made by the CITA would enure in favour of the assessee. By way....
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....and we find none. 15.Admittedly, the decision of the Tribunal should revolve on the facts of a particular case. The Tribunal has not been established to give declaratory reliefs sans facts. Therefore, the primordial requirement for the authorities as well as the Tribunal is to examine the nature of contract between the parties i.e. the assessee and the foreign entity. 16.On a perusal of the nature of the contract and the various steps, which have been enumerated therein, we find that the element of 'technical services', have been rendered as integral part of the software development process. There was no material available before the Assessing Officer to split up the transaction into two or to bisect the transaction to find out an element of 'technical services'. As rightly pointed out by the assessee, this exercise has been done by the Assessing Officer based on the notes to the accounts in the financial statements, which would be impermissible. What is required to be examined is the nature of services rendered by the assessee to the foreign entity. Thus, we are fully satisfied that the 'technical services' rendered by the assessee is not on a 'st....
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....ments, dividend receipts Vis-a-Vis other investments, which are not immediately ascertainable. After considering the reply and taking note of the decision of the Tribunal, the Assessing Officer fixed 10% of the managerial remuneration as expenditure that was incurred in relation to earning of dividend income and accordingly, disallowed the expenses towards earning of exempt dividend income and the amount of Rs. 6,76,598/- was disallowed under Section 14A of the Act as expenditure incurred towards earning the exempt dividend income. On appeal before the CITA, the Appellate Authority took note of the decision of the Hon'ble Supreme Court in the case of United General Trust (200 ITR 488) and directed the Assessing Officer to restrict the dis-allowance to 2% of the dividend income, which would be 2% of Rs. 2,61,75,567/- (Rs.5,23,511/-). Accordingly, the balance amount of Rs. 1,54,087/- (Rs.6,76,598/- - Rs. 5,23,511/-) was deleted. On appeal before the Tribunal, the Tribunal took note of the decision of the Special Bench, Chandigarh, in the case of Panjab State Industrial Development Corporation Ltd., vs. DCIT (102 ITD 10), wherein it was held that only actual expenditure incurre....