Commissioner of Income Tax vs Malhar Information Services

M.S. Sanklecha, J.—This appeal by the Revenue challenges the order dated October 15, 2008, of the income tax Appellate Tribunal ("the Tribunal") relating to the assessment year 2003-04. Being aggrieved, the Revenue has formulated the following questions of law for consideration of this court.

(A) Whether, on the facts and in the circumstance of the case and in law, the Tribunal was justified in allowing the assessee''s claim of deduction u/s 80HHE on the ground that the assessee had exported customized electronic data?

(B) Whether, on the facts and in the circumstance of the case and in law, the Tribunal was justified in holding that a similar deduction u/s 80HHE was allowed to the assessee for the earlier years whereas the assessee''s claim was only for deduction u/s 80HHC in those years and the allowance of the same by the income tax Appellate Tribunal has been disputed by the Department before the High Court ?

The respondent-assessee is engaged in the business of information vending. The activities undertaken by the respondent-assessee are transmission of customized data through internet to its clients abroad and that of data entry/processing. For the assessment year 2003-04, the respondent-assessee filed its return of income declaring an income of Rs. 36.10 lakhs. In its return, the assessee, inter alia, claimed deduction u/s 80HHE of the income tax Act, 1961 ("the Act"). The Assessing Officer disallowed the deduction claimed by the respondent-assessee on the ground that the order of the Commissioner of income tax (Appeals) for the assessment year 2000-01 allowing the claim for deduction has not been accepted by the Department as an appeal against the same is pending before the Tribunal.

In the first appeal, the Commissioner of income tax (Appeals) by an order dated February 28, 2006, allowed the respondent-assessee''s claim for deduction u/s 80HHE of the Act. This was on the ground that the issue is settled in favour of the respondent-assessee by the order of the Tribunal for the assessment years 1996-97 and 1997-98 and the orders of the Commissioner of income tax (Appeals) for the assessment year 1998-99, 1999-2000 and 2000-01.

The Revenue carried the matter to the Tribunal. The Tribunal, by its order dated October 15, 2008, held that the respondent-assessee is engaged in selling customized electronic data to customers abroad. The respondent-assessee collects the data from various sources and customizes it to meet its client''s specific requirement. Thereafter, the customized data is transmitted to its client abroad. So far as the activity of data entry is concerned, the Tribunal held that the same is covered by the notification dated September 26, 2000, issued by the Central Board of Direct Taxes wherein it has been specifically provided that data entry is notified as computer software service under Explanation (b) to section 80HHE of the Act. Further, the Tribunal also relied upon its order dated October 5, 2007 (2010) 122 ITD 421 , passed by it for the assessment year 2001-02 holding that the respondent-assessee is entitled to the benefit of deduction u/s 80HHE of the said Act.

Mr. Chhotaray, the learned advocate appearing in support of the appeal, submits that the respondent-assessee is not providing any customized electronic data to its customer but is doing only the work of news agency. Therefore, according to him, the respondent-assessee is not entitled to the benefit of deduction u/s 80HHC of the Act which is available only for computer software as defined in Explanation (b) thereto and, according to him, the appellant does not satisfy the requirement.

On the other hand, Mr. Jasani, the learned advocate on behalf of the respondent-assessee, supports the order of the Tribunal and also points out that the Tribunal''s orders for the earlier assessment years, namely, 1999-2000 and 2000-01, and following the assessment year 2004-05 allowing the benefit of section 80HHE of the Act to the respondent-assessee have already been dismissed by this court for the non-removal of office objections. In the circumstances, he submits that the order of the Tribunal calls for no interference.

We have considered the submissions. We find that the Commissioner of income tax (Appeals) as well as the Tribunal has concurrently come to a finding of fact that the respondent-assessee is engaged in customizing the data collected by it from various sources to meet specific requirement by its clients. Both the authorities under the Act have on a finding of fact negatived the contention of the Revenue that the work carried out by the respondent-assessee was that of a news agency. Therefore, the activity carried out by the respondent-assessee was of transmitting customized electronic data to its client is factually so found by the two authorities under the Act. This finding of fact arrived at by the authorities under the Act is not perverse and nor arbitrary. So far as the deduction u/s 80HHE of the Act for data entry is concerned, the same is covered by the Central Board of Direct Taxes Notification dated September 26, 20001, wherein the job of data entry has been notified as being computer software service. Therefore, the respondent-assessee is entitled to the benefit of section 80HHE of the Act as allowed by the Tribunal in the impugned order. We also find that the orders of the Tribunal for the earlier assessment years, i.e., 1999-2000, 2000-01, 2001-02 and the subsequent year 2004-05 have already been dismissed by this court for non-removal of office objections and the Department has taken no further action to have the dismissed appeal restored. Therefore, the Revenue seem to have accepted the orders of the Tribunal for the earlier and also for subsequent assessment years. In view of the above, we see no reason to entertain this appeal. Therefore, the appeal is dismissed with no order as to costs.