TaxTMI 
TaxTMI 
2020 (2) TMI 1272
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.... a detailed working of such deductions claimed were submitted by the appellant. 4. The learned Commissioner (A) erred in upholding the order of the Assessing Officer by wrongly concluding that the income from service are not eligible for deduction under section 80-IC of the Act. Further the learned Commissioner (A) failed to consider the fact that the scheme of deduction under sec 80-IC provides that the benefit of deduction is available to the profits and gains derived by the undertaking from the business carried and to the extent of percentage provided under sub-section (3) to Sec.80-IC of the Act. The deduction shall be 100% of such profits and gains derived from such undertaking. 5. The learned CIT(A) failed to appreciate the profits and gains derived from business included the service charges since the services rendered were part of business and also involved manufacturing activity. 6. The learned Commissioner (A) grossly erred in upholding the observations made by the AO and as such erred in interpreting the provisions by restricting the deductions only to the profits and gains from manufacturing activities and not considering the ....
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....igure and denied the benefit of deduction u/s. 80IC observing as follows:- Deduction U/s 80-IC 1. The assessee has claimed deduction u/s 80IC at Rs. 4,93,84,285/- in the return of Income and as per Form No. 10CCB of the Chartered Accountant. It is seen that the assessee has considered other income amounting to Rs. 6,38,13,310/- in total eligible turnover. The same should have been considered as income from other sources, since it is not related to manufacturing activities. The assessee has not given any reasons for not excluding the same from the Total turnover. Further, it is seen that, income received from service charges is also included in the Total Eligible Turnover. Therefore, considering these discrepancies in claim of deduction u/s 80 IC, the total eligible deduction under section of 801C of the IT Act is reworked as under: i) Profit as per P&L Account : Rs. 7,34,14,261 ii) Less Income which not eligible for deduction u/s 80IC A. Other income a. Interest on FD's : 14,07,962 b. Misc. income : 6,19,55.068 c. Foreign Exchange profit: 1,....
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....rendering services was not eligible for deduction u/s. 80IC of the Act because they are not profits derived from manufacture or production of any article or thing. In this regard the CIT(A) made reference to the nature of services performed by the Assessee as appearing in their virtual domain and first concluded that the Assessee was a Service Provider of a wide range of services which include Proactive Intelligence Analysis Solution, IT Consulting Services, Management Services, Delivery Services, Oss & Bss Solution and Proactive Intelligence Analysis Services. Thereafter he referred to the financial statements of the Assessee and found that the description of income in the profit and loss account contained two types of income viz., Income from product sales Rs. 19,19,84,348/- Income from service fees Rs. 3,89,36,355/- From the above, he concluded that the Assessee had two streams of revenue viz., software development and sale of software license and products. Therefore revenue from service fees cannot be considered as integral to manufacturing and sale of products and hence the same cannot be included in the revenue for the purpose of deduction u/s 80IC. 7. The A....
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.... software being supplied ready to use had to be given/performed by the assessee. Our attention was drawn to the fact that the assessee was bound to install and commission the required software and hardware, besides providing services. Our attention was drawn to the Services Agreement dated 19.9.2012 at page 294 of the assessee's PB, which is captioned 'Services Agreement'. This agreement very clearly specifies that the same is related to the earlier agreement dated 7.8.2012 for supply of software and hardware. The preamble of the agreement reads as follows:- "WHEREAS: XALTED is inter alia engaged in the business of providing end to end Telecom and Homleand Security solution worldwide. ZTE has offered Customer. FMCC and RA Solution and therefore ZTE would like to subcontract FMCC and RA Services by procuring the Services from Subcontractor. The Subcontractor acknowledges that its performance under this Agreement is intended to support the Contractor and satisfy the obligations and liabilities of the Contractor towards the Customer with reference to the Tender, No.CA/CM/GSM-Ph_VII/T-404A/2011-12 dated 14'1' July 2011 and the clarifications/....
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....es (i) and (iii) of clause (a) or sub-clauses (i) and (iii) of clause (b), of sub-section (2), one hundred per cent of such profits and gains for ten assessment years commencing with the initial assessment year; (ii) in the case of any undertaking or enterprise referred to in sub-clause (ii) of clause (a) or sub-clause (ii) of clause (b), of sub-section (2), one hundred per cent of such profits and gains for five assessment years commencing with the initial assessment year and thereafter, twenty-five per cent (or thirty per cent where the assessee is a company) of the profits and gains. 12. Under Section 80IC of the Act, a deduction is allowed on the profits and gains derived from an industrial undertaking from business referred to Sec.80IC(2) of the Act, viz., from manufacture of article or thing other than the article or thing mentioned in Schedule-13 of the Act. It is not in dispute that the Assessee was engaged in the manufacture of an article or thing viz., computer software and was eligible to claim deduction u/s.80IC of the Act on the profits derived therefrom. The dispute is as to whether the service income received by the Assessee can also be regarded as profit....
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.... Towards FMCC & RA IC Services 13,69,934.50 01.07.2013 47,34,450.00 01.07.2013 57,48,975.00 28.03.2014 10,95,947.60 28.03.2014 13,67,340.00 28.03.2014 45,99,180.00 28.03.2014 28,06,993.80 28.03.2014 26,37,765.00 28.03.2014 37,897,560.00 15. It is clear from the break-up of service fee received that they were all related to the FMCC & RA project of BSNL which the Assessee had to perform as sub-contractor. In the case of CIT v. Meghalaya Steels Ltd. & Pride Coke Pvt. Ltd. (2013) 356 ITR 235 (Gau) it was held that assessee was entitled to deduction u/s 80-IB or 80-IC on transport subsidy, interest subsidy, power subsidy and insurance subsidy as it was held that there is a nexus between the subsidies, on one hand, and the profits and gains derived by, or derived from, the industrial undertakings concerned. The Hon'ble Gauhati High Court in the case of Torsa Machines Ltd. v. CIT (2017) 154 TR (A) 79 (Gau-HC), was concerned with a case wherein the assessee was engaged in business of manufacturing of stone crushing plant and accessories. It claimed deduction under section 80-IC. AO disallowed deduction of claim towards service and ere....
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....- 16. Revenue from Operations Sr. No. Particulars For the year ended 31st March 2014 For the year ended 31st March 2013 1. 2. Sales: Income from Product Sales Income from Service Fees 191,984,348 38,936,355 230,412,937 6,213,596 Total 230,920,703 236,626,533 17. In our opinion, this will not be conclusive to hold that there were two segments or verticals and is contrary to the Agreements under which the Assessee had to perform certain obligations to BSNL in the form of supply of software, hardware, installation and maintenance thereof. As we have already seen, the agreement with ZTE is very clear that the supply of software and hardware necessary to support the software supply, installation & commissioning as well as rendering support services were to be done on a turnkey basis. Though the services agreement is separately entered into by the assessee, it has a direct nexus and connection with the agreement for supply of software. In these circumstances, the decisions cited by the ld. counsel for assessee, clearly supports the case of the assessee. We are therefore of the view that the claim m....
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.... benefit of deduction u/s. 80IC of the Act and therefore it cannot be said that the income was taken into account in computing income of the Assessee. In this regard, the AO observed as follows:- "2.4 The assessee company has claimed bad debts of Rs. 7,47,94,151/- from the following parties: S.NO NAME OF THE COMPANY AMOUNT 1 M/s HCL Infosystems Ltd. 16,46,000 2 M/s Centre for development of Telematics 2,45,00,000 3 M/s Email Infotech Pvt. Ltd. 52,492 4 M/s K S Softnet Solutions Pvt. Ltd. 57,929 5 M/s Sahastra Technologies Pvt. Ltd. 19,066 6 M/s MTNL Convegent Project 40,94,367 7 M/s Centre for development of Telematics 4,44,24,297 TOTAL 7,47,94,151 As per the ledger a/c copies of those parties, the receipt was first recorded in Financial Year 2011-12. For F.Y. 2011-12 assessee has claimed total deduction u/s 80IC of the IT Act of 100% of Total Income. It means, this amount was part of deduction claim. Therefore, it can't be said that, such bad debt or part thereof has been taken into account in computing the income of the assessee of the previous year. If such income was no....