Income Tax Appellate Tribunal - Chennai
Spatial Info Labs, Pondicherry vs Department Of Income Tax on 13 March, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
'C' BENCH, CHENNAI
BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER
AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER
ITA No.1472/Mds/2011
(Assessment Year : 2004-05)
The Income Tax Officer, Ward-1(2), M/s. Spatial Info Labs,
D.P.Thottam, Off M.G.Road, Vs. No.103 & 105, Eswaran Koil Street,
Puducherry-605 003. Puducherry-605 001.
PAN:AAYFS5865R
(Appellant) (Respondent)
Appellant by : Dr. Yogesh Kamath, DR
Respondent by : Shri Philip George
Date of Hearing : 13th March, 2012
Date of Pronouncement : 16th March, , 2012
ORDER
PER VIKAS AWASTHY, JUDICIAL MEMBER:
This appeal has been preferred by the Revenue impugning the order of the CIT(A)-XII, Chennai dated 26.02.2010 relevant to the assessment year 2004-05. The present appeal has been filed with the delay of 468 days. The application for condonation of delay, citing the reasons for the delay, is filed along with the appeal. In the interest of justice, we condone the delay for the reasons mentioned in the application and admit the appeal.
2 ITA No.1472/Mds/2011
2. This is a second round of litigation between the parties. The assessee is a partnership firm registered as a small scale undertaking with the Directorate of Industries & Commerce, Government of Puducherry. The assessee is engaged in the business of computerization of land records and digitization of survey maps. The assessee had filed return of income for the assessment year 2004-05 on 1.11.2004 showing Nil income after claiming deduction under section 80IB of the Income Tax Act, 1961 (hereinafter referred to as "the Act") to the extent of `18,69,353/-. The Assessing Officer during the course of assessment proceedings disallowed the claim for deduction under section 80IB. The assessee filed an appeal before the CIT(A). The appeal of the assessee was allowed by the learned CIT(A) vide order dated 4.4.2007. The department impugned the said order before the ITAT. The Tribunal in ITA No.1700/Mds/2007 vide order dated 25.07.2008 set aside the assessment order and remanded the matter back to the Assessing Officer to examine the operations of the assessee and then pass order in 3 ITA No.1472/Mds/2011 accordance with law. Pursuant to the orders passed by the Tribunal, the Assessing Officer made reassessment vide his order dated 24.12.2009 under section 143(3) read with section 254 and disallowed the claim of deduction under section 80IB. Aggrieved by the said order of the Assessing Officer, the assessee filed an appeal before CIT(A). The learned CIT(A) allowed the appeal of the assessee vide order dated 26.02.2010. Hence the present appeal has been filed by the department impugning the order of the CIT(A).
3. The facts in brief are that the assessee is engaged in the business of computerization of field maps and land records. The assessee entered into an agreement with M/s. Vision Labs Institute, Hyderabad for computerization of land records and digitization of maps. The scope of work undertaken by the assessee is as under:-
"1. Computerization of Revenue Survey Fields and sub-divisions from the Field Measurement books and supply of the same in soft copy on CD's and also a hard copy print out for each of the Revenue Survey Fields with sub divisions in A4 size with appropriate scale in black and white on laser printer.4 ITA No.1472/Mds/2011
2. Computer generation of cadastral maps of villages formed by mosaicking revenue survey fields.
3. Computerising the traverse data of villages and correction of the mosaicked village maps and supply of these maps in soft copy on CD's and hard copy in 1:10,000 scale.
4. Impart training to departmental staff in the maintenance of cadastral information generated during the project."
The assessee returned Nil income for the assessment year 2004-05 after claiming deduction under section 80IB. The Assessing Officer in his assessment order dated 24.12.2009 held that the main work of the assessee is scanning of documents/land records and therefore he was of the view that digital soft copies of cadastral maps data of land records are mere scanning of documents and does not amount to any manufacturing activity. He further held that the digital mapping or land planning does not amount to manufacture or production of new article or thing of industrial undertaking and thus rejected the claim under section 80IB.
5 ITA No.1472/Mds/2011
4. The assessee preferred an appeal before the CIT(A). The learned CIT(A) after going through the facts of the case, documents on record, submissions made by the parties and the judgements referred to by both sides came to the conclusion that the assesse, in terms of the scope of work for computerization of revenue survey field etc., is entitled to deduction under section 80IB. The learned CIT(A) held that the work undertaken by the assessee with the human efforts and machines (computer) has resulted into manufacuturing activity. The learned CIT(A) in order to support his findings has relied on the judgement of the Hon'ble Supreme Court in the case of CIT Vs. Oracle Software India Ltd., reported as 210-TMI-35190 : (2010) 320 ITR 546.
5. The department has come in appeal impugning the order of the CIT(A) primarily on the ground that software development and computerization of land records are not manufacturing activity or production of article or thing, therefore, the assessee is not entitled for deduction under section 80IB of the Act. The learned D.R. submitted that the 6 ITA No.1472/Mds/2011 assessee is only involved in computerization of land records and digitization of maps. The assessee is not developing any new software and there is no change in figures. No new product comes into existence. The assessee is only scanning the documents and maps. In support of his contention, the learned D.R. relies on the judgement of the Hon'ble Bombay High Court in the case of CIT Vs. Shroff Consultants Pvt. Ltd., reported as 238 ITR 1018.
6. On the other hand, Shri Philip George, learned Authorised Representative for the assessee submits that it is not the scanning of documents alone which is undertaken by the assesse. The scope of work undertaken by assessee includes computerization of Revenue Survey Field and sub- divisions from the field measurement books and supply of the same in soft copy on CDs as well as hard copy print out for each of Revenue Survey Field with sub-divisions, computer generation of the cadastral maps of villages formed by mosaicing Revenue Survey Fields, computerization of traverse data of villages and correction of mosaiced village 7 ITA No.1472/Mds/2011 maps and supply of these village maps in soft copy on CDs and hard copy in 1:10,000 scale and impart training to departmental staff in the maintenance of cadastral information generated during the project. He submits that substantial manpower is used in the processing of data and training of staff and new product comes into existence after the digitization of records and maps. The process of digitization of maps is highly technical and are not merely scanned copies of manual maps which includes the following process:-
"Digital maps are based on vector graphics which uses geometrical primitives such as points, lines, curves and shapes or polygons, which are all based upon mathematical equations, to represent images.
Vector graphics formats are complementary to raster graphics, which is the representation of images as an array of pixels, as it is typically used for the representation of photographic images. Vector graphics files store the lines, shapes and colours that make up an image as mathematical formulae. Since these formulae can produce an image scalable to any size and detail the quality of 8 ITA No.1472/Mds/2011 the image is only determined by the resolution of the display. The image can be changed by editing screen objects which are then saved as modifications to the mathematical formulae.
Process of Generation of digital maps:-
1. Obtain Field Measurement Books from Government.
2. FMB's contain boundary data in respect of the concerned survey, each survey containing a number of subdivisions. The boundaries of these entities were originally surveyed by the government. The survey measurements follow a system of triangulation and baseline and offset method to exactly represent the boundaries of these entities. The data is in the FMB's are represented by a system of Numerical Ladders.
3. The Data from the FMB is keyed through the computer system into a software program, for every Survey & subdivision.
4. The program then generates the Land Parcel Geometry for the data supplied, based on the inputs keyed in.
5. Based on this land parcel geometry generated, plotted land parcels are then generated.9 ITA No.1472/Mds/2011
6. The output generated is then checked for accuracy and correctness by comparing the same with the measurements in FMB's.
7. The Land Parcel data is then mosaicked to form Village Maps.
8. The village maps are then fitted into traverse circuits and errors, if any are corrected.
9. The final output (cadastral maps/village maps) is then printed out in a A4/A3 paper size paper in black and white using appropriate scales for every survey number/village. The output is also provided to the customer in a CD.
These accurate Digital maps/land plans manufactured/produced are not the same as copies of land plans made by draftsmen as these are accurate generation of geometry of land parcels through use of numerical measurements and do not follow the conventional copying techniques."
In support of his case, the learned A.R. relies on the judgement of the Hon'ble Supreme Court in the case of CIT Vs. Oracle Software India Ltd., reported as 320 ITR 546, wherein the Hon'ble Supreme Court held "that the court had to move along with the times when there was technological 10 ITA No.1472/Mds/2011 advancement as in computer science. In each case when an issue of this nature arose for determination the Department had to study the actual process undertaken by the assesse. If an operation/process rendered a commodity fit for use for which it would otherwise not be fit, the operation/process fell within the meaning of the word "manufacture". Applying this test, the assessee had undertaken an operation which rendered the blank CD fit for use for a purpose for which it would otherwise not be fit. The blank CD was an input. By the duplicating process undertaken by the assesse, the recordable media which is unfit for any specific use got converted into the programme which is embedded in the master media and thus the blank CD got converted into recorded CD by such an intricate process. The duplicating process changed the basic character of a blank CD dedicating it to a specific use. Without such processing, blank CDs would be unfit for their intended purpose. Therefore processing of blank CDs dedicating them to a specific use constituted 'manufacture' in terms of section 80IA(12)(b) read with section 33B of the Act. The marketed copies of the CD 11 ITA No.1472/Mds/2011 were goods and the process in which they became goods was covered by 'manufacture or processing of goods'."
7. Taking into consideration of the above facts and circumstances of the case and also the case laws relied on by both sides, we are of the considered opinion that after the processing of data a new product comes into existence and thus the activities undertaken by the assessee can be termed as manufacture. The assessee uses specialized methods and technical staff for computerization of land records and digitization of maps. The physical raw data after processing takes a new shape, which can be transported/stored by means of CDs as well as hard copy print outs. The case of the assessee is squarely covered by the ratio laid down by the Hon'ble Supreme Court of India in Oracle Software India Ltd.(supra). The activities undertaken by the assessee fall within the ambit of deduction allowable under the provisions of section 80IB of the Act. In view of our above findings, we uphold the order of the CIT(A) and dismiss the appeal filed by the Revenue.
12 ITA No.1472/Mds/2011
8. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 16th March, 2012.
Sd/- Sd/-
(Abraham P.George) (Vikas Awasthy)
Accountant Member Judicial Member
Chennai,
Dated the 16th March, 2012.
somu
Copy to: (1) Appellant (4) CIT(A)
(2) Respondent (5) D.R.
(3) CIT (6) G.F.