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Case Law Details

Case Name : Xalted Information Systems Pvt. Ltd. Vs ITO (ITAT Banglore)
Appeal Number : ITA No. 821/Bang/2019
Date of Judgement/Order : 26/02/2020
Related Assessment Year : 2014-15
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Xalted Information Systems Pvt. Ltd. Vs ITO (ITAT Banglore)

Section 80IC deduction allowed for service charges based on direct nexus between service rendered & product

The issue under consideration is that whether deduction u/s 80-IC will be allowed against service charges since services rendered were part of business and also involved manufacturing activity?

The assessee is a company engaged in telecommunication software development and trading in telecommunication hardware required mainly to run their software that are being supplied to the prospective consumers. Assessee has claimed deduction u/s 80-IC in its return. The income received from service charges is also included in the Total Eligible Turnover for calculation of deduction u/s 80-IC which is disallowed by A.O.

The assessee in this regard pointed out the nature of service fees is such that the assessee needs to render the services even after the sale of product, to meet the complete scope of work which includes services like Integration testing, Validation/System testing and Acceptance testing, changes requirements, etc. Hence it becomes part and parcel of the software being developed and supplied by the assessee. Hence, the same should be considered while calculation deduction u/s 80-IC of the Act. In other words it was submitted that service fee received like installation, training, support services etc form integral part of the products supplied by the assessee, therefore have nexus between the products supplied and services provided by the assessee in connection with the said products.

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