2017-TII-38-HC-DEL-TP

PR CIT Vs AMADEUS INDIA PVT LTD: DELHI HIGH COURT (Dated: May 22, 2017)

Income Tax - Section 10A & 10AA.

Keywords - Export Oriented Unit - data processing - software technology park - distribution agreement - IT support services - call centre.

Facts in ITA 154 of 2017

The assessee, AIPL, was granted approval for setting up a 100% EOU under Software Technology Park Scheme ('STPS'). Till AY 2004-05, AIPL claimed deduction u/s 10A/10B . AIPL set up another undertaking and was granted approval for setting up its new 100% EOU. Unit II was engaged in the business of export of data processing/IT Enabled Services ('ITeS') which were all duly certified by STPI. During the AY 2009-10, Unit I had already exhausted the period of exemption u/s 10A. Therefore, the claim for deduction u/s 10A during the AY 2009-10 was made by the Assessee only with regard to Unit II. While filing its return for AY 2009-10 the assessee claimed a deduction u/s 10A. AO made a reference to the TPO involving AIPL and its AE, Amadeus Spain. On the basis of the order of TPO, AO passed a draft assessment order u/s 144C against which assessee went before the DRP. DRP held that AIPL was an agent of Amadeus Spain carrying on marketing and distribution functions. It was held that the revenue received under the Distribution Agreement was not on account of any export of software or data processing for which deduction could be claimed under Section 10A. The DRP noted that the ITAT had in Amadeus Global Travel Distribution SA v. Deputy Commissioner of Income Tax (2008) 113 TTJ 767 (Del) held that the Assessee was a Dependent Agency Permanent Establishment ('DAPE') of Amadeus Spain and hence "the remuneration derived by it from Amadeus Spain in the form of distribution fee was for services rendered by it in India as an agent of the foreign company." However, the DRP found that the IT support services and call centre receipts could be in nature of receipts eligible for deduction u/s 10A. Based on the order of the DRP, AO passed the final assessment order restricting the deduction under Section 10A to Rs. 1,58,97,121. Before the ITAT, assessee relied extensively on the order passed in its own case by the ITAT for AY 1996-97 allowing the deduction claimed for Unit I u/s 80 HHE/10A and the fact that this had been accepted by the Revenue. Likewise, in the claim for AYs 1997-98 and 1998-99, the orders in favour of the Assessee by the ITAT and the CIT(A) respectively had become final. The ITAT noted that the it had in its earlier order for AY 1996-97 in the Assessee's own case undertaken a detailed examination of the activities of the Assessee and held that " the assessee manufactures, produces and exports software within the meaning of the three specified sections of the Act. It is open to it to claim exemption under any one of these sections and as is well established by pertaining to interpretation of taxing statutes is entitled to choose that one which is most favourable to it in any particular assessment year."  The ITAT further noted that the registration granted by the STPI authorities to Unit II was exclusively for manufacture of 'computer software/IT enabled services'. The ITAT held that the DRP could not have possibly taken a contrary view. With there being no change in the modus operandi since 1996-97, the ITAT found no reason not to follow the earlier decision for that AY.

Facts in ITA 330 of 2017 (Inter Globe)

The Assessee, Inter Globe, was engaged in the business of software development and providing information technology services, namely, 'data processing'. It exported the services from the Special Economic Zone ('SEZ') Unit located at Noida. AO denied deduction u/s 10AA on the ground that a majority of the invoices were addressed to the Assessee at the addresses in Mumbai, Gurgaon etc. Very few of those invoices bore the Noida SEZ address. The AO concluded that the Assessee was nothing but a distributor of Galileo, which was the owner of the computer reservation system ('CRS') through which the airline and hotel reservations were done worldwide. As per the Agreement the Assessee installed computer hardware and software at the office of various travel agents throughout India. The agents made bookings on the software and were entitled to commission. The AO disbelieved that the Assessee was required to provide any ITeS to Galileo, namely, export of data processing or that the said services were rendered on Galileo USA from the unit located in Noida and not at the desk of the travel agents.  The CIT(A) found as a matter of fact that "data that is being processed and transmitted by the appellant is gathered in the appellant's Unit at SEZ from across the country from the offices of various travel agents or from the customers, who make booking through CRS system of Galileo. However, in order to transmit the same to Galileo, it has to be processed through appellant's system located at SEZ Unit NOIDA. Further, in the Assessee's own case for AY 2007-08, followed by the CIT(A) for AYs 2008-09 and 2009-10, the deduction u/s 10AA had been allowed by holding that the profits earned from rendering services to Galileo were covered thereunder. The material facts remained the same for AY 2010-11. The CIT(A) accordingly allowed the appeal and allowed the deduction claimed by the Assessee. /Inter Globe under Section 10AA of the Act. ITAT also concurred with the finding of CIT(A).

Having heard the parties, the High Court held that,

Whether Tribunal can deny deduction u/s 10A by holding that assessee's receipts are not on account of export of software when the Tribunal had in assessee's own case in a previous year held such activities to be export of software and the registration granted to assessee is also exclusively for such export - NO: HC

+ the impugned order of the ITAT in the case of AIPL for AY 2009-10 on the issue of allowing of deduction u/s 10A of the Act suffers from no legal infirmity either in its analysis of the legal provisions or in its conclusions. The Court is not inclined to frame any question of law on the issue concerning a Section 10A deduction in the appeal of the Revenue against AIPL for AY 2009-10.

Whether assessee is eligible for deduction u/s 10AA when it is engaged in the activity of data processing which requires collection of data throughout and processing at assessee's unit for export to a non-resident entity - YES: HC

+ the Court is not persuaded that any substantial question of law arises from the order of the ITAT in the case of Inter Globe for AY 2010-2011.

Revenue's appeal dismissed