Indian Kanoon - Search engine for Indian Law

3. The Petitioner filed its return of income tax for Assessment Year 2002-3 and claimed a deduction under Section 10A of the Income Tax Act, 1961. During the course of the assessment proceedings, queries were raised by the Assessing Officer, inter alia, on 7 March 2005. The Petitioner was called upon to explain how the services rendered by the Petitioner while engaged in Domain name registrations and Web Hosting Dmt 3 wp1479-11 Services were covered within the meaning of the expression "web-site services" under a circular issued by the Central Board of Direct Taxes. The Petitioner responded by a letter dated 14 March 2005 clarifying the circumstances in which it provides web-site services within the meaning of a CBDT circular dated 26 September 2000. The circular was issued, inter alia, in exercise of powers conferred by clause (b) of item

(i) of Explanation 2 of Section 10A. By the circular several information technology enabled products or services came to be specified. The specified services included 'Web-site Services'.

4. An order of assessment was passed for the Assessment Year 2002-3 under Section 143 (3). The Assessing Officer held that the Petitioner had not been able to establish that Domain name registration and Web Hosting Services fall within the meaning of 'Web-site Services' mentioned in the notification dated 26 September 2000. The claim of the Petitioner for deduction under Section 80HHE as well as under

Dmt 13 wp1479-11

12. Section 10A(1) contemplates a deduction from the profits and gains derived by an undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software. The expression 'computer software' is defined by clause (i) of Explanation 2 to mean (a) any computer programme recorded on any disc, tape, perforated media or other information storage device; or (b) any customized electronic data 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. The Central Board of Direct Taxes has issued a notification on 26 September 2000 specifying fifteen technology enabled products or services for the purposes of clause (b) of item (i) of Explanation 2 to Section 10A. Amongst them is 'Web-site Services'. The point to be noted at this stage is that Section 10A provides for a deduction over a period of ten Dmt 14 wp1479-11 consecutive years. The issue as to whether the Petitioner conducts a web-site service was considered in a significant amount of detail by the Assessing Officer when he disallowed the deduction for Assessment Year 2002-03. The view of the Assessing Officer was that the activities of domain name registration and web hosting services were not covered under the head of 'web-site services'. These activities, according to the Assessing Officer did not constitute 'software export' and he was of the view that the income generated from the sale of domain name registrations and web hosting would not qualify for deduction under Section 10A. The Assessing Officer followed the same view for the Assessment Year 2003-04. The Assessee carried the matter in appeal. The Commissioner (Appeals) held that the assessee was entitled to the benefit of the deduction since the service of domain name registration as well as web hosting constitutes an integral part of 'web-site services' within the meaning of the notification dated 26t September 2000 issued by the CBDT. The order of the Commissioner (Appeals) for Assessment Year 2002-03 was Dmt 15 wp1479-11 followed while allowing the appeal of the Assessee for Assessment Year 2003-04. The Revenue accepted the order for Assessment Year 2002-03 and no appeal was filed to the Tribunal. The Assessee thus availed of a deduction for the first year, namely, Assessment Year 2002-03. For Assessment Year 2003-04 there was an appeal of the Revenue before the Tribunal but significantly the grounds of appeal would indicate that there was no appeal on the entitlement of the Assessee to avail of a deduction under Section 10A. Consequently both for Assessment Years 2002-03 and 2003-04 the orders passed by the Commissioner (Appeals) granting to the Assessee the benefit of the deduction under Section 10A attained finality. Following this position, the Assessee was allowed a deduction under Section 10A for Assessment Years 2004-05, 2005-06, 2006-07 and 2007-08.