TaxTMI 
TaxTMI 
2021 (9) TMI 277
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....there are inconsistencies in names of employees submitted during Assessment proceedings, Appeal proceedings and in reply to remand report. 3. The Commissioner (Appeals) failed to understand that software development is a specialized work and one cannot judge the manpower days, infrastructure required for software development by applying any yardstick. 4. The Commissioner (Appeals) has erred in concluding that the said business receipts are not arising from Baddi because of the following additional reasons: a) The appellant firm has no bank account in Baddi district of Himachal Pradesh. b) The appellant firm has not hired any employees directly in Baddi. 5. The Commissioner (Appeals) has erred in concluding that there is no nexus between the income earned at Baddi and business activity undertaken at Baddi. 6. The Commissioner (Appeals) has erred in concluding that business activity at Baddi was not genuine by questioning the business decision of the appellant of closing down the Baddi unit to avoid litigation and going beyond the scope of law. 7. The Commissioner (Appeals) has erred in not granting exemption u/s 80IC eve....
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....t was stated to be situated in a rented building having 1000 square feet of area at single floor. To execute the projects, technical people were outsourced. The other sister concern i.e., M/s Fox Controls Private Limited was stated to be engaged in trading of PLC, Drives and providing various related services etc in India. The other concern namely Fox Engineering Pvt. Ltd. was stated to be engaged in manufacturing / assembly of control panels. It was stated that the projects were undertaken on turnkey basis in the group concern namely Fox Solutions. The assessee as well as Fox Solution had certain common clients. The assessee carried out on-site development / installation of software etc. at various airports. For the same, contractual employees were stated to be hired for commissioning the projects. In reply to question no.24, it was submitted that the technical manpower was hired from sister concern namely M/s Fox Controls Private Ltd. & M/s Fox Solution. 4.4 On the basis of the statement, Ld. AO alleged that the activities of software development were carried out at Thane or Nashik but not at Baddi location for which deduction u/s 80-IC was claimed. Upon perusal of invoices, i....
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....o evidenced by rent agreement, service tax registration certificate and customer replies received by the assessee from time to time. The assessee also filed photograph of premises, travel tickets of the partner and declaration by technical professionals in support of the fact that work was actually carried out at Baddi unit. The assessee also submitted the copies of purchase orders. It was submitted that there was no contrary evidence on record and the deduction was denied merely on the basis of suspicion. 5.2 The additional evidences submitted by the assessee were subjected to remand proceedings wherein Ld. AO reiterated the stand that deduction was not available to the assessee. It was submitted that photographs would not conclusively prove that the assessee had operations in Baddi. The pictures do not provide concrete evidence of business operations and merely shows people sitting on a computer system which was inconclusive. The declaration could also not be accepted since they did not contain address, PAN or identification details etc. The affidavits submitted by the assessee were not supported by any corroborative evidences. Therefore, the additional evidences fail to refut....
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.... specified in sub-section (3). (2) This section applies to any undertaking or enterprise,- (a) which has begun or begins to manufacture or produce any article or thing, not being any article or thing specified in the Thirteenth Schedule, or which manufactures or produces any article or thing, not being any article or thing specified in the Thirteenth Schedule and undertakes substantial expansion during the period beginning- (i) on the 23rd day of December, 2002 and ending before the 1st day of April, [2007], in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or Theme Park, as notified by the Board in accordance with the scheme framed and notified^ by the Central Government in this regard, in the State of Sikkim; or (ii) on the 7th day of January, 2003 and ending before the 1st day of April, 2012, in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or Theme Park, as not....
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....in existence: Provided that this condition shall not apply in respect of an undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose. 4.1.8 From the above requirements of the provision of section 80IC it is seen that Fox Automation is a Software Technology Park Industry Unit, situated in Baddi, Himachal Pradesh which commenced business operations between the requisite date of 07.01.2003 to 01.04.2012 and has derived profit from the aforesaid business. The appellant has submitted rental agreement, service tax certificate, customer replies and letter from Patwari in Baddi. To this extent it appears that the appellant fulfils the requirements demanded by section 80IC. But fulfillment of legal/basic requirements is not complete proof of operations being conducted at the Baddi unit. 4.1.9 I agree with the observations and findings of the AO in his asses....
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....business generated by the Baddi Unit. There is nothing wrong in making such a claim provided that what is genuinely earned is correctly apportioned to the exempt unit. The partner in his statement confirmed that 80% of business of the appellant was emanating from the Baddi Unit and 20% from the Thane Unit. However, the facts of the case indicate a situation which is logically and practically impossible to arrive at due to the following: i) Inconsistencies about employees/software professionals -working in Baddi. In his statement the partner Shri Shamlal Betharia stated that 4 to 5 employees were working in Baddi whereas the AO in his order at para 9 page 9 mentions nine employees allegedly working in Baddi but were found to reside full time at Nashik. The names of the employees working in the firm at Baddi provided by the assessee during the assessment proceedings are- S. No. Name 1 Aarti Kothule 2 Artee Chougule 3 Depali Zure 4 Kaveri Sonawane 5 Manoj Kale 6 Nasrin Khan 7 Pradyna Thite 8 Sonali Panse 9 Vishal Bhavsar ii) Vide its first submission dtd. 16.02.2015 the appellant provided affidavits....
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....) indicate that a total of Rs. 1,51,147 has been spent on the software professionals through the year in sharp contrast to their declaration that that Rs. 7000/- per person per day has been spent. Software professionals working in Baddi in Himachal Pradesh Sr. No. Submitted during assessment proceedings Submitted in appeal proceedings vide first letter dtd. 27.02.2015 Submitted in appeal proceedings vide letter dtd. 09.09.2018 1 Aarti Kothule Dhannajay Patil Gajanan Rokade 2 Artee Chougule Deependra Parikh Sunil Powar 3 Depali Zure Jitendra Kocher Tukaram Darekar 4 Kaveri Sonawane Soumitra Bhattachayya Pavan Gosavi 5 Manoj Kale Rohan Tokekar Pankaj Bhavsar 6 Nasrin Khan Gajanan Rokade Sanjay kumar Saha 7 PradynaThite Vijay Ingle Tarik Islam 8 Sonali Panse Prashant Sonawane Sameer Pathan 9 Vishal Bhavsar Kanishka Bhattacharya 10 Vinit Taware 11 Raju Harpale 12 Samrat Datta 13 Rohan Tokekar 14 Mayur Mirase 15 ....
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....d only October, November, December and January registered presence of five professionals or more. • The total tour expense report (TER) as reported in the table C is Rs. 1,51,147/- and the total no. of work as per the table is 196 days. • It is nothing sort of a miracle to achieve the gross profit declared by the Baddi Unit of Rs. 6,79,77,197/- with 17 software professionals who worked a total of 196 days combined as indicated in the table D above. • The submissions of the appellant stating that Rs. 7,000/- Per day is given for hiring of manpower from sister concerns and payment to independent consultant of Rs. 22,91,290/- & Rs. 50,10,929/- is not reflected as per the table C submitted by the appellant. • The facts of the case and the statement of the partner reveal that for a company hugely and solely reliant on internet and software have only one Basic Dongle for internet access i.e. there is no LAN/Broadband provision. • The partner has also confirmed that the office premises in Baddi wherein such huge software development projects/contracts are being undertaken consists of only one room with one Air conditioner de....
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...., the grounds of appeal nos. 1 to 4 is Dismissed. Aggrieved as aforesaid, the assessee is in further appeal before us. Our findings & Adjudication 6. Upon perusal of para 4.1.8 of the impugned order as extracted above, it is quite evident that the assessee is a Software Technology Park Industry unit situated in Baddi, Himachal Pardesh. It has commenced business operations during the prescribed period and derived profits from the eligible business. In support of the fact that work was actually carried out at that unit, the assessee has furnished rental agreement, service tax registrations, customer replies as received from time to time and letter from patwari in Baddi. Thus, apparently, the assessee fulfils all the prescribed conditions of claiming deduction u/s 80-IC. As per the rent agreement dated 20/02/2010, the assessee has agreed to take on rent first floor of a premise having approx. area of 850 square feets situated at Baddi. The said premises have been registered as per Service Tax Rules which is evident from Form ST-2 as placed on record. 7. The assessee is engaged in the business of software under information and communication technology industry. This softwar....
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.... work was furnished which was as follows: - No. Name of the Agency Nature of Work Work Sheet Details of Manpower Details of location of work 1. Fox Controls P. Ltd. Rs. 16,36,852 Software Development Work Sheets are submitted in response to question 1 VINOD SHINGATE VIJAY INGLE UMESH GHARDE OMKAR SOLASKAR FOX AUTOMATION Khasara No 437, Kashav Complex, NH-21 A, Pinjore Nalagarh Road.Village Surajmajra Labana. Prg Dharampur.Tehsil Baddi.District Solan.Himachal Pradesh. 2. Fox Solutions Rs. 33,74,077 Software Development Work Sheets are submitted in response to question 1 SANJAY KUMAR SAHA TARIK ISLAM SAMEET PATHAN KANISHKA BHATTACHRY VINIT TAWARE SUBRATA MANNA RAJU HARP ALE SAMRAT DATTA ROHAN TOKEKAR MAYUR MIRASE MOHAN SAMPKAR PRUTHVIRAJ TOGE SUBHAS CHANDRA KIRAN SHELAR GAJANAN ROKADE NILESH SHIMPI SATISH LOKHANDE MOHAMMAD A.LI TUKARAM DAREKAR PRASHANT SONAWANE PAVAN GOSAVI PANKAJ BHAVSAR FOX AUTOMATION Khasara No 437, Kashav Complex, NH-21 A, Pinjore Nalagarh Road.Village Surajmajra Labana. Prg Dharampur.Tehsil Baddi.District Solan.Himachal Pradesh. 3. Shree Consultancy Services Rs. 3,19,425 Software Development  ....
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.... concern was Rs. 50.10 Lacs. Thus, the manpower was sourced from various streams viz. independent consultants directly hired by the assessee himself and the manpower hired from sister concerns and outside agencies. This fact has not been fully appreciated by Ld. CIT(A) and hence, the observations that the assessee supplied different names at different point of time and there were inconsistencies in the information supplied by the assessee. However, upon perusal of above table, it becomes clear that these employees were contractual employees whereas the details submitted before Ld. AO was with respect to employees directly hired by the assessee. In the above table, the assessee has specified the nature of work done, details of manpower as well as work sheets showing utilization of the professionals to carry out the work of software development. The sample copies of timesheets have also been placed before us on page nos. 84 to 86 of the paper-book. Upon perusal of the same, it could be seen that elaborate timesheets have been maintained for time spent by software professionals on various projects. The invoices raised by various agencies for supply of manpower to the assessee has also....