TaxTMI 
TaxTMI 
2020 (1) TMI 144
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....of the Act by the Assessing Officer (`A0'), is erroneous and prejudicial to the interest of revenue within the meaning of section 263 of the Act. The learned CIT has erred in not appreciating the fact that the conditions as prescribed in section 263 of the Act with respect to the revision of orders which are prejudicial to the interest of the revenue (such as the Assessing Officer had conducted inadequate enquiry or there was a lack of enquiry), has not been satisfied in the instant case The learned CIT has erred in not following the below mentioned judicial pronouncements- • Commissioner of Income-tax vs. Sunbeam Auto Ltd. [(2011) 332 ITR 167 (Delhi High Court)] • Vegesina Kamala vs. Income-tax Officer [(2016) 157 ITD 457 (Visakhapatnam - Trib.)] 5. The learned CIT has erred in not appreciating the fact the AO has allowed the claim of deduction under section 10B with respect to the Bioinformatics division after verifying the necessary documents and eligibility of the Appellant. 6. The learned CIT has erred in not considering the approval obtained by the Appellant from the Office of the Development Commissioner, Coch....
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....are (i.e. Vector NTI advance) which is developed by the Appellant in India. 13 The learned CIT has failed to appreciate the documents (such as financial statements evidencing the fact that the earnings of the Appellant in relation to the sale proceeds from the export of the software during the year under consideration are in foreign currency, Foreign Inward Remittance Certificate (TIRO') evidencing the fact that the software developed by the Bioinformatics division of the Appellant during the year under consideration is exported outside India, R& D Agreement) submitted by the Appellant in support of its claim that the software developed in India is actually exported outside India. 14. The learned CIT has failed to appreciate the fact that the deduction under section 10B of the Act includes research and development activities relating to development of software which squarely applies to the research and development activities carried on by the Appellant in the field of Bioinformatics The Appellant craves leave to add, alter, rescind and modify the grounds herein above or produce further documents, facts and evidence before or at the time of hearing of ....
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....CIT has erred in not following the decision of the Hon'ble Delhi High Court in case of CIT vs. Enable Exports [(2012) 17 taxmann.com 182 (Delhi High Court), wherein it was held that, approval granted by the Development Commissioner of EoU is valid for claiming deduction under section 10B of the Act. 9. The learned CIT has failed to appreciate the fact that the Appellant is engaged in research and development activities relating to software development. The said fact is established by Exhibit A to the Research and Development Services Agreement dated January 01, 2005 read with Addendum effective from April 01, 2008 entered into between Invitrogen Corporation and the Appellant (`the R & D Agreement'), which provides that the Appellant is engaged in research and development activities relating to software development. 10.The learned CIT has failed to appreciate that fact that the reply provided by the CSEZ has confirmed that the Appellant is engaged in the business of R & D services in the area of Bioinformatics chemistry. which is further, established by the fact that the Exhibit A to the R & D Agreement provides that the Appellant is engaged in research and....
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....Ld.AO observed that assessee claimed deduction under section10B amounting to Rs. 92,56,242/- and Rs. 1,97,61,465/- respectively for years under consideration. Return was processed under section 143(1) of the Act, and orders under section 143(3) was passed, accepting 'NIL' income for assessment year 2007-08, vide order dated 22/12/09 and for assessment year 2008-09, total income was assessed at Rs. 4,02,970/-. 2.1 Subsequently, while assessment for assessment year 2009-10 was going on, Ld.AO had sufficient reason to believe that, assessee wrongly claimed deduction under section 10B for assessment years 2007-08 and 2008-09. 2.2 Accordingly, assessments were reopened by issuing notice under section 148 dated 25/03/13 for assessment years 2007-08 and 2008-09. The reasons recorded for reopening of assessments for assessment year 2007-08 and 2008-09 on 11/03/13 and 15/03/13 respectively. It is observed that reasons recorded for assessment year 2007-08 is placed at page 77, and for assessment year 2008-09 the same is placed at page 91 of paper book for relevant assessment years. For sake of convenience, we reproduce reasons recorded for assessment year 2007-08; "11-03-2013 ....
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....92,56,242/-. Further, in the in the course of original assessment proceedings, the assessee company did not disclosed nature of business activity of the company fully and truly. It was only disclosed that the assessee company is engaged in the business of research and development in the field of bioinformatics and functional genomics and there was no information to show that as to how the business activity of the company amount to manufacturing and export of computer software or product or service in the nature of notified ITEAS. Hence, the assessee's claim of deduction U/s10B was accepted by the AO. It is only now i.e. in the course of assessment proceedings for the A.Y. 2009-10, the copies of agreement and other relevant information was called for and analyzed. The fresh evidence brought on records, reveal that the R & D activity of the assessee was in fact in the field of biological science and it is not pertaining to any software development and hence, there is no activity of manufacturing or export of any computer software or providing any ITES. In view of the facts mentioned above, there is failure on the part of the assessee to disclose fully and truly all the m....
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.... 5. In this connection, you are requested to file your clarifications on the objections, if any, to the proposed action on or before 05.01.2016. You are also given an opportunity of personal hearing before the undersigned at his office at BMTC Building,5th Floor, 80 Feet Road, Koromangala, Bengaluru -95 on 05.01.2016 at 11.30 AM. Yours faithfully, Sd/- (K.KRISHNA RAO) Pr. Commissioner of Income-tax, Bengaluru-3, Bengaluru, 3.2 Ld.CIT, after considering the submissions advanced by assessee concluded by observing as under: "5. The discussion above is concluded as follows: a) The terms of the agreement between the assessee company and its parent company clearly specifies that the assessee is carrying on R & D activities. The approval given by the Cochin SEZ indicates that the bioinformatics division is only carrying on R&D in bioinformatics chemistry which does not fall under the realm of Computer software. The assessee's claim to be an exporter of software is unsubstantiated. The export invoices furnished by the company also indicate that what is being exported is not software but only R&D research since the invoice states the considera....
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....comprehensive seaward of tools which allow mapping and analysing DNA and protein sequence, aligning different DNA and protein sequence to compare them and creating a viewing 3-D models of protein structures. 4.3 Ld.AR placed reliance upon the research and development service agreement dated 01/01/05, placed at page 118 of paper book for assessment year 2007-08, wherein the inventions created by assessee are assigned by assessee to its parent company. Further, referring to page 122 of paper book, it has been submitted that under Bioinformatics, segment research and development activities carried on by assessee will be in following areas: 1. development of bio informatics tools in analysing gene sequence, protein sequence Insilco cloning, gene expression profiling, pathways development and software customisation. The platforms to be used are C++, Java, Pearl, SQL. Tools will be in the Windows and UNIX. 2. Development of tools to create and manage database. 4.4 Ld.AR, thus emphasised that assessee satisfies all requirements to claim deduction under section 10B, as the software development carried on by assessee is either for its own products or independent proj....
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.... • CIT vs Gokuldas Exports (2012) 20 taxman.com 491 (Kar) 4.7 Ld.AR has submitted that there has to be prima-facie material on record to show that, tax which was lawfully exigible has not been imposed or that by application of relevant statute or an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. 5. On the contrary, Ld.CIT DR, submitted that the Assessing Officer has not applied his mind to the facts of the case. She submitted that in concluding para 10 of re-assessment order, Ld.AO has observed as under: "10. As regards activity of the bio Informatics division the assessee's claim is acceptable. The assessee company has appointed few software engineers who basically work in this division. Moreover, the classification given by the assessee about activity of bio Informatics division indicate that this division is developing applications for dissemination of R&D results of functional genomics and also this division has been maintaining and updating website facility of the company. Hence deduction under section 10 B is allowed to the profit derived from bio Informatics division." 5.1 Ld.CIT DR submitted that this is....
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....at Ld.AO after verification of details filed by assessee disallowed deduction u/s 10B in respect of functional genomics division. It is observed that Assessee furnished various details and/documents to establish that product developed by Bioinformatics division is software, which is available on public domain the details of which are placed in the written submissions filed by assessee before Ld.CIT vide letter dated 26/03/16 at page 116-122 of paper book assessment year 2008-09 and letter dated 05/01/2016 for assessment year 2007-08 at page 126-131 of paper book. Ld.AO referred to agreements entered into by assessee with its parent company and has called upon details from SEZ Cochin, which is placed at page 123 of paper book. It has been submitted that all these details have been verified by Ld.AO during reassessment proceedings and it was upon his satisfaction that Ld.AO granted deduction for Bioinformatics division whereas denied deduction under section 10 B for Functional Genomics division. 6.3 On perusal of impugned orders for assessment years under consideration, it is observed that Ld.CIT records assessee developed software i.e Vector NTI advance. However, Ld.CIT obs....
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....facture computer software. We refer to the term computer software as defined in Explanation 2 to section 10B of the Act, to mean: "(a) any computer program recorded on any disk, tape, perforated media or other information storage devices; or (b) any customised electronic Tata or any product or service of similar nature as may be notified by the board which is transmitted or exported from India to any place outside India by any means." A co-joint reading of definition of computer software and the CBDT Circular No.1/2013 what comes to our understanding is that assessee is developing a customised software in the form of bio-infirmatics tools using platforms like C++, Java which is used to analyse gene sequence, protein sequence in Silicon Valley owning, gene expression profiling, pathways development etc, This is what Ld. AO intend from what he mentioned in para 10 of assessment order, specifically referred to by Ld. CIT DR. In our opinion Ld.AO was satisfied upon verification of documents placed by assessee at the time of reassessment proceedings. He called upon various details to verify claim of assessee under both segments. And then allowed deduction under s....