Monday, May 18, 2015

Compilation of data and its transformation into e-book for foreign clients held as export of software u/s 10B

Where assessee was collecting text, compiling material, designing same and exported it in form of computer software, assessee was entitled to claim benefit of section 10B


a)The assessee was involved in process of collecting text, compiling material, designing layout, scanning, etc., for projects of foreign clients. She claimed herself to be a software exporter and, accordingly, claim exemption under section 10B.

b)The Assessing Officer (AO) disallowed said claim holding that process deployed by the assessee was neither manufacture nor did it amount to creation of software.

c)On appeal, CIT(A) upheld the order of the AO which was reversed by the tribunal. Aggrieved with the order of tribunal, revenue filed the instant appeal before the High Court.

The High Court held in favour of assessee as under:

1)Section 10B uses the expression "manufactures or produces…… things or computer software". The four stage process of collecting text , compiling material, designing the layout, scanning, digital image editing (to remove distortion) and final arrangement of the data, ultimately transmitted according to the customer's specification - and ready to be used for printing, (or even e-Book publication) is undoubtedly manufacture or production.

2)CBDT vide Notification No. 11521, dated 26.09.2000 had specified ‘content Development or animation’ or ‘Data Processing’ as information technology enabled products or services.

3)"Content Development or animation" covers compilation of material or data and its transformation into a ready to print/ready to publish book.

4)In the instant case, the work which ultimately results in the culmination of the assessee's efforts of compiling, editing, digital designing, etc. “is transmitted or exported from India to any place outside India by any means”. It is, therefore, computer software that is produced or manufactured, to qualify for benefit under section 10B.

5)Hence, tribunal rightly allowed assessee’s claim of deduction under section 10B. - CIT v. Ms. Kiran Kapoor [2015] 57 39 (Delhi)

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