T.R. Sood, (AM). - (1.) THESE appeals by the assessee and the department involve certain common issues, they were heard together and are being disposed of by this common order for the sake of convenience.
(2.) ITA No. 450/Mds./98In this appeal, the revenue has raised the following effective ground of appeal: "2.1 The CIT(A) has erred in holding that the assessee has a choice to claim the deduction under section 80HHE or 80-O. 2.2 The CIT(A) ought to have appreciated that a comprehensive fiscal incentive was given to the Software Industry by giving deduction under section 80HHE. Customs duty concession, non-levy of income-tax on lump sum payable for using the software, concessional rate of tax under section 15A for royalty payment for use of software vide Finance (No. 2) Act, 1991 and as explained in Circular No. 621. 2.3 The CIT(A) ought to have appreciated that by introducing the new section 80HHE, the Legislature intended to give deduction under section 80HHE only with regard to the software export. 2,4 The CIT(A) ought to have appreciated that the principle "Special bus Non Derogant is applicable to the assessee's case." The brief facts of the case are that the assessee had claimed deduction under section 80-O because the assessee-company was providing technical and professional services to persons outside India. However, the assessing officer was of the view that there was specific provision under section 80HHE of the Act allowing deduction in respect of profit from export of computer software, etc. According to him, the assessee was mainly engaged in the export of computer software. Therefore, it should have claimed deduction under section 80HHE. In this background, the assessing officer rejected the claim of the assessee company for deduction under section 80-O and allowed under section 80HHE. Before the learned CIT(A) it was mainly argued that the assessee was engaged not in computer software exports but it was providing technical services outside India though it was admitted that agreements with Overseas Technologies (OST) and Constella Inc. (C.I.) could be considered as agreements for providing technical services outside India in connection with development of computer software which fell under category II of section 80HHE(1). It was further submitted that where parallel deduction was available under sections 80HHE and 80-O, then the assessee was right to choose the section which was more beneficial, with restriction that deduction shall be claimed only under one of the two provisions. It was also contended that the Central Board of Direct Taxes had apprised the agreements with these companies for the Purpose of deduction under section 80-O of the Act. The learned CIT(A) after considering these contentions and some judicial pronouncements came to the conclusion that there was no bar in section 80HHE that deduction could not be claimed under section 80-O. Since section 80-O was also existing in the statute, therefore, the assessee could have claimed deduction under section 80-O. Before us the learned Departmental Representative referred to the contents of the assessment order at page 2 where the assessing officer had given a finding that in this case specific provision was available under section 80HHE. Therefore, the assessee was entitled to claim deduction only under that section. He strongly supported the order of the assessing officer.
(3.) ON the other hand, the learned authorised representative of the assessee reiterated the contentions raised before the learned CIT(Appeals) and emphasized that the assessee cannot strictly be said to be engaged in export of software development services. He referred to page 3 of the assessment order, where the nature of services provided by the assessee company has been discussed which mainly comprised of system study at customer Site, translation of system findings to functional specifications, design preparation, programming, testing, site implementation and customer inter-face. Overseas clients were sending their products to the assessee-company which were modified according to the requirements of the customers of overseas and supplied accordingly. These activities cannot strictly be called export of computer software programmes. Then he referred to page 6 of the order of the CIT(A) where it has been found that approval of agreements was granted by the CBDT for the purpose of deduction under section 80-O in earlier years. No such approval was required after the amendment was made by the Finance Act, 1991, with effect from 1-4-1992.;