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Commissioner of Income-tax, Bangalore v/s Relq Software (P.) Ltd.


Company & Directors' Information:- R S SOFTWARE (INDIA) LTD. [Active] CIN = L72200WB1987PLC043375

Company & Directors' Information:- C K SOFTWARE PRIVATE LIMITED [Active] CIN = U72501DL2000PTC106184

Company & Directors' Information:- RELQ SOFTWARE PRIVATE LIMITED [Amalgamated] CIN = U72200KA1997PTC023161

Company & Directors' Information:- K K SOFTWARE PRIVATE LIMITED [Active] CIN = U72900DL2009PTC193030

Company & Directors' Information:- A K C SOFTWARE PRIVATE LIMITED [Active] CIN = U72200DL2004PTC128462

Company & Directors' Information:- P AND P SOFTWARE PRIVATE LIMITED [Active] CIN = U74899DL1994PTC057212

Company & Directors' Information:- SOFTWARE INDIA PRIVATE LIMITED [Active] CIN = U72200GJ1995PTC025791

Company & Directors' Information:- N. D. SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200TG1998PTC029778

Company & Directors' Information:- T AND H SOFTWARE PRIVATE LIMITED [Active] CIN = U72200UP2000PTC025638

Company & Directors' Information:- M S SOFTWARE PRIVATE LIMITED [Active] CIN = U72200DL2005PTC133997

Company & Directors' Information:- G A S SOFTWARE PRIVATE LIMITED [Active] CIN = U72200DL2004PTC127546

Company & Directors' Information:- B B SOFTWARE LTD [Strike Off] CIN = L30009WB1995PLC072361

Company & Directors' Information:- H K SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200WB2001PTC093967

Company & Directors' Information:- J SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200TZ2000PTC009229

Company & Directors' Information:- K S M SOFTWARE PRIVATE LIMITED [Active] CIN = U72200DL2004PTC128463

Company & Directors' Information:- R B SOFTWARE PRIVATE LIMITED [Active] CIN = U72200DL2005PTC140322

Company & Directors' Information:- SOFTWARE INDIA PRIVATE LIMITED [Active] CIN = U72200RJ1995PTC010577

Company & Directors' Information:- R J SOFTWARE PRIVATE LIMITED [Active] CIN = U72200DL2005PTC133815

Company & Directors' Information:- I & I SOFTWARE INDIA PRIVATE LIMITED [Strike Off] CIN = U72200TN2005PTC056262

Company & Directors' Information:- D F SOFTWARE INDIA PRIVATE LIMITED [Strike Off] CIN = U72200TZ2003PTC010629

Company & Directors' Information:- E. C. SOFTWARE INDIA PRIVATE LIMITED [Active] CIN = U72900TN2007PTC063486

Company & Directors' Information:- Q 3 INDIA SOFTWARE PRIVATE LIMITED [Active] CIN = U72900TN2007PTC065786

Company & Directors' Information:- K Y SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200DL2005PTC136072

Company & Directors' Information:- T M I SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200KA2005PTC036299

Company & Directors' Information:- B C L SOFTWARE (INDIA) PRIVATE LIMITED [Strike Off] CIN = U30007MH1999PTC117922

Company & Directors' Information:- M I S SOFTWARE PRIVATE LIMITED [Active] CIN = U72200TN2008PTC068694

Company & Directors' Information:- A. T. SOFTWARE PRIVATE LIMITED [Active] CIN = U72200TG1996PTC023841

Company & Directors' Information:- J A K SOFTWARE PVT LTD [Active] CIN = U72200DL2001PTC111929

Company & Directors' Information:- R R SOFTWARE PVT LTD [Under Process of Striking Off] CIN = U72200KL1991PTC006051

Company & Directors' Information:- A M H SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200DL2005PTC132410

Company & Directors' Information:- P D A SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72900DL2003PTC123465

Company & Directors' Information:- K C SOFTWARE PRIVATE LIMITED [Active] CIN = U74899DL1989PTC036923

Company & Directors' Information:- I SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72300MH2012PTC225903

Company & Directors' Information:- V M SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72900PN2010PTC136847

Company & Directors' Information:- H M SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200HP2011PTC031756

Company & Directors' Information:- S N R SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72900DL2012PTC243073

Company & Directors' Information:- C M S SOFTWARE PRIVATE LIMITED [Active] CIN = U74899DL2005PTC142352

Company & Directors' Information:- S M I T SOFTWARE COMPANY PRIVATE LIMITED [Strike Off] CIN = U74899DL2006PTC144816

Company & Directors' Information:- A D SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200KA2002PTC030722

Company & Directors' Information:- H. A. N. R. E. J SOFTWARE PRIVATE LIMITED [Strike Off] CIN = U72200TG2008PTC062044

    IT Appeal No. 892 of 2008

    Decided On, 25 July 2014

    At, High Court of Karnataka

    By, THE HONOURABLE MR. JUSTICE N. KUMAR & THE HONOURABLE MR. JUSTICE B. MANOHAR

    For the Appellant: K.V. Arvind, Advocate. For the Respondent: S. Parthasarathi, Advocate.



Judgment Text

N. Kumar, J.

1. This appeal is directed against the order dated 16-05-2008 passed by the Income Tax Appellate Tribunal, Bangalore Bench 'A' (hereinafter referred to as 'the Tribunal' for short) in ITA No.767(Bang)/2007 wherein the Tribunal has partly allowed the appeal filed by the assessee.

2. The appeal was admitted to consider the following substantial questions of law:

"1. Whether the Tribunal was correct in holding that carried forward business loss are unabsorbed deprecation of non STPI units cannot be set off against income of the STRI unit for the purpose of computation of deduction u/s. 10A of the Act?

2. Whether the Tribunal was correct in holding that the amount of Rs.4,86,63,187/- paid to engineers on site for technical services should be added to the export turnover when computing deduction u/s. 10A of the Act?

3. Whether the Tribunal was correct in holding that a sum of Rs. 17,73,906/- communication charges incurred for technical services rendered was directed to be added to the export turnover for purpose of computation of deduction u/s. 10A of the Act?"

3. Insofar as the first substantial question of law is concerned, this court had an occasion to consider the same in the case of CIT v. Yokogawa India Ltd. [IT Appeal No.356/2010] and other connected appeals, whereby this court had answered the said substantial question of law in favour of the assessee and against the Revenue. However, it is submitted that the judgment of this court in the aforesaid case is the subject matter of the appeal before the Apex Court. In the event of the Revenue succeeding in the said appeal, the Assessing Authority shall pass consequential order under Section 260(1A) of the Income Tax Act, 1961 in terms of the order passed by the Hon'ble Supreme Court. Accordingly, we answer the said substantial question of law.

4. Insofar as the substantial questions of law 2 and 3 are concerned, the Tribunal following its earlier order in the case of Asstt. CIT v. Infosys Technologies Ltd. [2008] 172 Taxman 134 (Chennai - Mag.) held that when the expenditure is in respect of payments made on site development, the same cannot be excluded from the export turnover by holding it as technical services. When the export of services only is not entitled to deduction under Section 10A then the legislature made clear that foreign exchange relating to the technical services will be excluded. If there is export of goods as well as services, then only that portion will be eligible for deduction which relates to goods and therefore, the Tribunal held that the Assessing Officer is not justified in excluding Rs.4,86,63,187/- from the export turnover. The said judgment in INFORSYS was the subject matter of the appeal before this court. This court by its order dated 2nd June 2014 in ITA Nos.422/2008 and other connected matters held that the technical services rendered in post-sale services would stand on a different footing when compared to pre-sale services. If any technical service is rendered in the course of export of computer software then the expenditure incurred in that regard cannot be excluded. What has to be excluded is only technical services rendered which is independent of export of computer software. In that case, the matter was remanded to the Assessing Authority to decide whether the said technical services rendered was in connection with the computer software business, export of computer software or it is the case of exclusively rendering technical services. Based on that factual finding, the liability to tax or exemption would arise. The said exercise has not been done in the instant case also. Therefore, we pass the following:

ORDER

(1) The finding of the Tribunal, First Appellate Authority as well as the Assessing Authority are hereby set aside

(2) The matter is remitted back to the Assessing Authority to determine on the basis of the materials to be produced by the assessee as to whether the technical services rendered was in connection with the export of computer software or is it

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a case of rendering technical services exclusively and then decide in the light of two statutory provisions and various decisions on the point whether the assessee is entitled to exclusion of the expenditure incurred towards technical services. Therefore the said substantial questions of law are not answered. Hence the matter is remitted to the Assessing Authority for fresh consideration on these two questions. Accordingly, the appeal is allowed in part.
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