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

Facts:

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 taxmann.com 39 (Delhi)

‘Ready to print books’ exported in form of CD or email deemed as customized electronic data; eligible for sec. 10B relief

'Ready to print books' exported by assessee in form of a CD or e-mail were customized electronic data eligible for claiming benefit of deduction under section 10B.

Facts:

a)The assessee was engaged in business of export of software of 'ready to print books'. It had claimed exemption under section 10B on account of export of ready to print books in form of a CD or e-mail.

b)The AO disallowed the said claim and made addition to the income of the assessee. The CIT(A) confirmed the disallowance made by AO.

c)Aggrieved by the CIT(A)’ s order, assessee filed the instant appeal before Tribunal.

The Tribunal held in favour of assessee as under:

1)Section 10B applies to an undertaking which manufactures or produces any articles or things or computer software. Clause (i) of Explanation 2 to section 10B defines ‘computer software as under- "computer software" means—

(a)any computer programme recorded on any disc, tape, perforated media or other information storage device; or

(b)any customized electronic data or any product or service of similar nature as may be notified by the Board,

which is transmitted or exported from India to any place outside India by any means.

2)Thus, the intention of the Legislature is very clear that it provides deduction under section 10B not only to enterprises engaged in manufacture or production of any article or thing but even to those assessees whose end product is any customized electronic data.

3)In the instant case, the assessee after collecting raw data and pictures had utilized its expert designing skills in producing 'a ready to print e-book'. The final product was intended for use of a particular customer and, therefore, the case under consideration would fit in the category of production of 'any customized electronic data' as per the definition of 'computer software' defined in the Explanation 2 to section 10B.

4)Thus, the AO was to be directed to allow deduction under section 10B in accordance with law.- KIRAN KAPOOR V. ITO [2014] 46 taxmann.com 147 (Delhi - Trib.)