Document Fragment View

Matching Fragments

ITA No 2863/Mum/2003 (AY 1999-00) ITA No 3670/Mum/2003 (AY 1997-98) ITA No 3671/Mum/2003 (AY 1998-89).

ITA No 4482/Mum/2003 (AY 1999-00).

would inform the assessee about the current and expected programme and their scope of requirement. Therefore, to meet the current and future requirements of the clients, the assessee was required to do the various activities like formation of different teams of professionals, attend various functions to execute the work orders placed by clients.; explaining the exact functional requirement to the professionals and programmers comprised of such teams; formation of conceptual design documents; setting up features in SAP and other computer software; customization of various modules to meet the specific needs of clients; developing and writing new patches of programmes which are not available in the standard format of system; testing the functional competence of new modules designed by the assessee; Functioning integration of modules and testing of its functional accuracy and finally storing the results project wise etc. etc. The final process would take 4 to 6 months and then the project would be put to implement upon the client.

I quote from letter dtd.9.3.2001(submitted during the course of assessment proceedings for AY. 1 998-99) of the assessee company:
"The activity of the company which was called as training involved a lot of work such as formation of a conceptual design documents, setting up features in SAP and other software, customization of various modules etc."

These submissions clearly show that the assessee was merely engaged in the customization of software already available, according to the needs of various clients of CIC. The assessee company has agreed that it was paid for the skills, knowledge and technical expertise of various professionals." 13.1 It is clear from the above that the Assessing Officer has not disputed the fact that the assessee was engaged in customising the software as per the needs of the clients.

18. The central and pivotal question before us is whether the assessee is engaged in the "Manufacture" or "Production of software as mentioned in clause (iii) and (vi) of the Explanation to Sec. 10A as it then stood for he Asst. Year 1998-99. As is evident from the facts of the case, the assessee company is engaged in the manufacture of software and It had entered into agreements with BaaN, Netherlands and BaaN India, whereby it got the standard 'software and then such a standard software had to undergo the metamorphosis by a technique known as 'CUSTOMIZATION'. The assessee company bought standard software from BaaN, Netherlands and the standard software had to undergo transformation through the process of customer level customization. The customization exercise converts standard software into customized Cybertech Systems & Software Ltd ITA No 2781/Mum/2003 (AY 1997-98) ITA No 2782/Mum/2003 (AY 1998-89).

ITA No 2863/Mum/2003 (AY 1999-00) ITA No 3670/Mum/2003 (AY 1997-98) ITA No 3671/Mum/2003 (AY 1998-89).

ITA No 4482/Mum/2003 (AY 1999-00).

software rendering-the standard software practically operational in a manner that it runs as per- the demands of the customer and garners the desired results. In the customization process, the assessee harnesses the development tools and programming platforms embedded in the standard software as "raw materials" and manufacture/produce end usable software applications thereby furnishing to the customer his special and individualistic product. This fact is clear from the graphic representation of the customization placed at pages 219 to 277 of PB No.11 which has been discussed by us in pára 8 above. The whole customization drill entails creation and addition of new programs. The assessee only utilizes the development and programming platforms embedded in the standard software to develop and evolve the customized software program. Customization exercise involves intellectual process and at the end of the process, new things come into existence. The customization process carried out by the assessee, in our opinion, meets the criteria propounded by the classical connotation of the term "Manufacture". 14.1 Thus it is clear that when the process of customisation involve addition, modification and creation of new programmes as per the requirement of the individual clients by utilising the foundation of standard programme and such exercise involves human expertise and intellectual process to bring the end result a different product or thing and fit into the definition of term produce. Further, in the case of ACIT vs Amadeus India P Ltd (supra) the coordinate Bench of the Tribunal has considered and decided a similar question in para 35 as under: