Itxa/51/2018 Of Pr. Commissioner Of Income Tax-16 v. Majmudar And Co

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 51 OF 2018 Pr. Commissioner of Income Tax – 16 V/s.Majumdar And Co. ….Appellant …Respondent Mr. Suresh Kumar for Appellant.None for Respondent. ---- ---- CORAM : K.R. SHRIRAM & M.M. SATHAYE, JJ. DATED : 7[th] JUNE 2023 P.C. : 1.The appeal is impugning an order dated 15[th] February 2017passed by the Income Tax Appellate Tribunal (ITAT) rejecting the appealfiled by the Revenue. The Revenue had impugned an order passed by theCommissioner of Income Tax (Appeals) [CIT(A)] relevant to the AssessmentYear 2010-11. 2.The following substantial questions of law are proposed : SUBSTANTIAL QUESTION OF LAW A. Whether on the facts and circumstance of the case and in law theconversion of exiting physical database into an electronic databasewould amount to manufacture or production of computer softwareas contemplated u/s 10B of the Act; particularly in view of the factthat the assessee has itself confirmed that the partner are thecreators of the database which has been compiled over the years ? B. The assessee being a firm of advocates and solicitors was alreadyengaged in the activity of providing legal services to its foreignclients over the last many years. The assessee has segregated theactivity of computer software by diverting it to an EOU merely tomake the said unit eligible for claiming exemption u/s 10B of the Act. Whether such an act of the assessee would tantamount tosplitting up of the business already in existence and hence wouldrender it ineligible to claim exemption u/s 10B of the Act ? 3.The assessee had filed its return of income on 1[st] December2011 declaring total income of Rs.3,57,00,536/-. The return of income wasprocessed under Section 143(1) of the Income Tax Act, 1961 (the Act).Thereafter, the case was selected for scrutiny and notices under Section143(2) and 142(1) of the Act were issued. 4.The assessee’s source of income consisted of income frombusiness and profession. The assessee had claimed exemption underSection 10B of the Act of Rs.6,55,85,021/-. The Assessing Officer was of theview that the exemption has been wrongly claimed and therefore declinedthe claim under Section 10B of the Act. The income of the assessee wasassessed at Rs.10,12,85,557/-. This was challenged by the assessee beforeCIT(A) who allowed the appeal. 5.The CIT(A) in his order dated 15[th] January 2016, whileallowing the appeal of respondent held that the Assessing Officer has notconsidered the following facts properly in this case, that the prescribedauthority, i.e., Development Commissioner SEEPZ has already granted theassessee firm registration as 100% EOU under the provisions of EXIM Policy2002-07 for the item Legal Services. Further, the CBDT Notification No. 5.The CIT(A) in his order dated 15[th] January 2016, whileallowing the appeal of respondent held that the Assessing Officer has notconsidered the following facts properly in this case, that the prescribedauthority, i.e., Development Commissioner SEEPZ has already granted theassessee firm registration as 100% EOU under the provisions of EXIM Policy2002-07 for the item Legal Services. Further, the CBDT Notification No. S.O. 890 (E) dated 26[th] September 2000 has permitted both products andservices of legal database as eligible information technology enabledproducts or services for grant of deduction under Section 10B of the Act.The services provided by appellant firm are “customized electronic datatransmission” and are user/client specific. Further, the legal service providedby the assessee firm were rendered by use of legal database created byappellant firm over a period of more than 60 years of its professionalexperience. The legal services were rendered by the assessee to its foreignclients by use of electronic mode of communications, i.e., by exchange oflegal information and documents via emails and internet services. Inaddition, the assessee has complied with the other conditions in form 56G,realization of service charges within the permitted time, exporting legalservices to its clients outside India and receiving the services charges for thesame in the foreign currency in India. Therefore, the claim of the assessee isfully justified. Any transmission of “customized electronic data” falls withinthe expression of “computer software” as per explanation 2(i)(b) to theSection 10B of the Act. Therefore, the assessee is entitled to claimdeduction under Section 10B of the Act in respect of its 100% EOU unit. 6.Therefore, the entire issue in this case is fact based. A similarissue had been raised for the Assessment Years 2004-05 to 2008-09. TheAssessing Officer has rejected the claim of the assessee for exemption underSection 10B of the Act and the CIT(A) had set aside the order of the Assessing Officer. The Department had impugned the order of the CIT(A)and those appeals were also dismissed by the Tribunal. Mr. Suresh Kumarstates that the appeal filed by the Revenue have also been dismissed by theHigh Court, Bombay though not on merits but under Rule 986 of the HighCourt, Bombay (Original Side) Rules. 7.While dismissing the appeal of the Department, the ITAT hasrelied upon the decision of the ITAT in the assessee’s own case for theAssessment Years 2004-05 to 2008-09. The ITAT has also observed thatthere are no distinguishable facts or contrary facts placed on record. Wealso find in the grounds of appeal this finding of the ITAT has also not beenchallenged. 8.The entire issue being fact based and the Tribunal having cometo the factual conclusion on the basis of materials on record while upholdingthe order of the CIT(A) no question of law arises. 9.Appeal dismissed. (M.M. SATHAYE, J.) (K.R. SHRIRAM, J.)