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Whereas the first clause encompasses a computer programme which has already been developed by the assessee on a standard basis and is exported as such, the second clause covers developing a new computer software as per the specific requirements of the customer.

21. One has to pass through various stages to develop a computer software, such as, Conceptualization, Planning, Designing, Developing, Testing and then Maintaining. In the Conceptualization stage, the requirements of the customer are first identified to form a view of the work to be done. In the Planning stage, an ITA Nos.2395 & 2624/PUN/2017, A.Y. 2011-12 overall plan of proceeding with is formalized. In the Designing stage, blueprint of the work to be done is drawn. In the Development stage, which is also called coding stage, the actual work is started for translating the plan into action. It is one of the most important stages of software development. In this stage, the work is divided into several modules/programmes, each of which is independently developed and coded. This activity of development of modules and coding may be done simultaneously or one after another, depending upon the nature of module and its placement or setting within the overall product. The development stage produces a final software product, which is then tested on stringent standards to ensure that it measures up to the required specifications. Once the computer software or the product passes through the testing stage, it is given to the customer for actual use. Any product so developed may need maintenance and then upgradation with the passage of time. A close scrutiny of the life cycle of a customized software, as discussed above, discerns that a lot of interaction is required between the computer software developer and the customer, which is almost present in most of the stages of software development, starting with conceptualization itself. In developing a computer software of large magnitude, it is quite possible that a Software Developer may have to visit the site of the customer several times for having an on the spot information and properly appreciating the needs so as to make the final product compliant with the requirements. There can be several other reasons necessitating a customer abroad insisting a software developer in India to develop software fully or partly at his site overseas. The stage of testing in a customized software can be properly done only at the site of the customer. The nitty-gritty of the matter is that a customized software cannot be ordinarily developed without spending some time on site with the customer. Considering the objective of deduction u/s 10A and realizing practical issues and difficulties, the Finance Act, 2001 inserted Explanation 3 w.e.f. 1.4.2001 providing: `For the removal of doubts, it is hereby declared that the profits and gains derived from on site development of computer software (including services for development of software) outside India shall be deemed to be the profits and gains derived from the export of computer software outside India.' The Explanation contains a deeming provision and gives a practical solution to the problem by providing that profits from on site development of computer software and services for development of software outside India shall be deemed to be the profits and gains derived from the export of computer software outside India. Undeterred by the Explanation 3, some of the authorities kept on refusing the claim of the assesses u/s 10A, as is the case under consideration, to the extent of the profits derived from onsite development of computer software and rendering of services by technical manpower outside India. The CBDT had to step in by issuing a Circular no.1/2013 dated 17.1.2013 providing that (a) : `it is clarified that the software developed abroad at a client's place would be eligible for benefits under the respective provisions, because these would amount to 'deemed export' and tax benefits would not be denied merely on this ground' and (b) `that profits earned as a result of deployment of Technical Manpower at the client's place abroad specifically for software development work pursuant to a contract between the client and the eligible unit should not be denied benefits under sections 10A, 10AA and 10B provided such deputation of manpower is for the development of such software and all the prescribed conditions are fulfilled.' It was brought to the notice of the CBDT that the AOs were not even following the clarification given in the Circular dated 17.1.2013. Once again, the CBDT issued Instruction no. 17/2013 dated 19.11.2013 clarifying that: `The undersigned is directed to convey that the field authorities are advised to follow the contents of the Circular in letter and spirit. It is also advised that further appeals should not be filed in cases where orders were passed prior to issue of Circular but the issues giving rise to the disputes have been clarified by the Circular'. There is hardly any need to accentuate that income-tax authorities are mere implementing agencies of the Parliament intent expressed through the enactment. They cannot suo motu usurp the power to indirectly legislate by not following the mandate of the provisions. Other income-tax authorities are bound to follow the command of the CBDT given through Circulars, even if they are not personally agreeable with the same.

22. On going through the directive of the Explanation 3 and the Circulars issued by the CBDT, which are binding on the authorities under the Act, it is vivid that the benefit of deduction under section 10A caters not only to profits earned from export simplicitor of computer software but also to any profits and gains derived from onsite development of computer software and also services for development of software ITA Nos.2395 & 2624/PUN/2017, A.Y. 2011-12 rendered outside India. So long as there remains a live link between onsite development of computer software and services for development of software with the development of software from the eligible undertaking, the consideration awarded for onsite development for computer software and rendering services for development of services outside India cannot be excluded from the purview of deduction u/s.10A. However, what is essential for such onsite development or rendering of software development services outside India to qualify for the benefit of deduction is that these should be in furtherance of the development of the software product undertaken by the eligible enterprise. If onsite services are de hors the product which the assessee undertook to deliver to the foreign customer, then any profit and gain arising from such services cannot be considered as eligible for deduction. The determinative test to qualify for the benefit of deduction, in our considered opinion, is that the rendition of onsite services etc. outside India by the assessee should be an integral part of the overall computer software development project, which the assessee undertook to do for its foreign customer. So long as the onshore activities etc. performed outside India remain in furtherance of the final product to be delivered, there can be no doubt on the eligibility of profit from such activities for deduction.

26. On circumspection of the sample copy of the Agreement, filed by the ld. DR, between the assessee and Royal Bank of Canada as a representative of all such similar Agreements, it turns out that the assessee entered into Masters Service Agreement with several customers outside India. There was a specific tenure within which the assessee was to develop and deliver computer software or render the eligible service. A total consideration was received by the assessee under such Master Service Agreements. The AO has excluded a part of such total consideration as attributable to DTM and onsite software services by treating the same as unrelated to STP undertakings in India. The two amounts disqualified by the AO at Rs.2.43 crore and Rs.12.17 crore are part of the total consideration agreed between the assessee and its overseas customer for development of computer software or rendering of the eligible service, income from which has otherwise been held to be eligible for deduction u/s.10A. We fail to comprehend as to how a part of the total consideration as per Master Service Agreement with several customers can be separated as relatable to Deputation of Technical Manpower business and onsite software development services unrelated to STP undertakings. Such DTM and onsite software services are part and parcel of the overall computer software development projects which the assessee undertook and income from which has been otherwise held to be eligible for deduction u/s.10A. Such disqualified amounts are not independent of consideration for computer software development or rendering other eligible service, which has otherwise been conferred with deduction u/s.10A of the Act. The situation would have been otherwise if the assessee had rendered onsite software services or sent some manpower on deputation to customers outside India without having any linkage with the computer software development projects undertaken by it. As in the facts under consideration, there is only one composite amount of consideration for the eligible computer software development, in our considered opinion, the ld. CIT(A) was fully justified in rejecting the AO's point of view in bifurcating such consideration into two parts, namely, the one which is eligible towards computer software and the other which is not eligible towards DTM and onsite software services.