Indian Kanoon - Search engine for Indian Law

5. In considering the claim of the assessee for deduction under Section 80-O, the first appellate authority pointed out that the agreement with regard to Martek Inc., did not involve export of computer software for provision of technical services outside India. Hence, the assessee was directly entitled to the deduction under Section 80-O and not under Section 80HHE. As regards the services rendered by two other concerns, it was found that the assessee had supplied the software and technical assistance outside India and hence, the appellant was entitled to claim deduction under Section 80-O as well as Section 80HHE. The Commissioner of Income Tax (Appeals) pointed out that the aim of both Sections are the same, namely, to encourage industries doing export of knowledge and technical services on computer software information. The introduction of the specific provision under Section 80HHE would not, in any manner, interfere with the relief to be granted under Section 80-O. The Commissioner of Income Tax (Appeals) pointed out that when the assessee had been enjoying the benefit from 1991 onwards and the purpose of the introduction of Section 80HHE was to give necessary relief to the assessees engaged in the business of computer software, considering that the type of activities also covered under Section 80-O, the Commissioner of Income Tax (Appeals) felt that if the deduction is to be allowed under Section 80HHE(5) only by withdrawing the larger relief already enjoyed under Section 80-O, then the language of the Section would have been different. Referring to Section 80HHE(5), the Commissioner of Income Tax (Appeals) pointed out that the relief under Section 80-O could not be denied. Thus, in respect of assessment year 1995-96, the appeal of the assessee stood allowed, directing the Officer to grant relief under Section 80-O of the Income Tax Act.

6. It is seen from the records placed before this Court that the Commissioner of Income Tax (Appeals) issued notice to the assessee under Section 263, to revise the order of assessment, taking the view that the assessment orders passed for the assessment years 1992-93 and 1994-95, granting relief under Section 80-O, were erroneous and hence, prejudicial to the interests of the Revenue.

7. After hearing the assessee, the Commissioner of Income Tax (Appeals) issued the order under Section 263 on 31.3.1998, taking the view that when there is a specific provision under Section 80HHE dealing with the export of computer software and provision of technical services outside India in connection with the development or production of computer software and the assessee's business is one of developing computer software and export of the same, the question of the claim being considered under Section 80-O did not arise.

8. After going through the agreement and the portion indicating the professional services rendered by the assessee, the Commissioner of Income Tax pointed out that the Assessing Officer had not verified the materials to decide on the issue. Hence, the relief granted under Section 80-O was erroneous. In the circumstances, recording the submission of the assessee that some of the activities of the assessee would qualify for deduction under Section 80-O and they were not granted for the development of software, the Commissioner of Income Tax directed the Assessing Officer to look into the agreement and other materials to find out the real nature of the transaction and in case the transactions were in connection with the development of computer software for export and providing technical services in connection with the development of software outside India, the income would be considered for deduction under Section 80HHC. Consequent on that, by proceedings dated 29.6.1998 for the assessment year 1993-94 and for the assessment year 1994-95, the Assessing Authority considered the agreement and the bills raised by the assessee and found that the services rendered by the assessee related to systems analysis, systems design program specifications, program development documentation installation and implementation of software packages. The technical services rendered were in connection with the development of production of computer software. Thus on materials available, the Assessing Authority held that the deduction could be considered only under Section 80HHE.

20. Learned counsel appearing for the assessee pointed out that the claim of the assessee has to be considered under a provision whichever is beneficial. We do not find any good ground to accept this plea. As already pointed out, given the fact that unlike Section 80-O, Section 80HHE is a specific provision to deal with export of computer software and providing of technical services in connection with the development and production of computer software, the wording in Section 80HHE(1)(ii) read as "providing technical services outside India" alone and there is no further qualification as is found in the said Section reading as "in connection with the development or production of computer software". Perhaps what the assessee contends herein, as narrated above, may be correct. However, given the fact that Sub Section (ii) to Section (1) of Section 80HHE restricts technical services rendered outside India as one in connection with the development or production of computer software, we do not find that the assessee could fall back on Section 80-O for the purpose of claiming a better deduction. In this connection, the reliance placed on the decision of the Delhi High Court reported in [1999] 235 ITR 769 (C.S.Mathur Vs. Central Board of Direct Taxes) needs to be seen. The said case related to the case of a Chartered Accountant who was engaged in providing professional services to various Indian and foreign clients. He was engaged in rendering professional services to foreign companies by providing advice, information on finance, industrial business and economic matters relating to India as would be useful to foreign companies in relation to their business investments in India. On the ground that the profession of the assessee, namely, chartered accountancy could not contemplate inclusion of a job of business management, advice on business management or industrial management, the approval sought for under Section 80RRA was rejected. Thus the relief granted to the assessee for the assessment year 1996-97 granting benefit under Section 80RRA was withdrawn, by reopening the assessment. On a writ petition, the Revenue contended that the petitioner was entitled to deduction only under Section 80-O to an extent of 50%. On the question as to whether such consultancy services to the foreign companies created employer-employee relationship, the Delhi High Court held that even though the assessee was not employed on full-time basis, the services would nevertheless be deemed to be considered as "employed" so as to attract the applicability of Section 80RRA.