Cybertech Systems & Software Ltd v. CIT (ITA No. 2781/Mum/2003) – ITAT Mumbai – 02.03.2012
The term ‘computer programme’ had not been defined under Section 10B of the Act, however, it had been defined under Section 10BB of the Act as ‘computer programme’ or ‘process’ or ‘management of electronic data’. After the amendment with effect from 1 April 2001, the definition of computer software had been given in the Explanation 2 to Section 10B of the Act which includes any customised electronic data or any product or services of similar nature as notified by the Central Board of Direct Taxes (CBDT) which is transmitted or exported from India to any place outside by any means. Therefore, the human resource service in the field of development of software programme as notified falls under the definition of computer programme as stipulated in the Explanation as well as the definition under Section 10BB of the Act.
Further, Section 10BB of the Act enlarges the ambit of term ‘computer programme’ by including the process or management of electronic data. Therefore, the engagement of analyst/programmer and imparting training to them in the process of development and customisation of SAP programme was part of process of the customisation of SAP and customisation of data and cannot be treated as a separate activity of the taxpayer. Since the taxpayer was carrying out work as per the specific requirement of the CIC clients, method of invoice cannot be the basis of rejection of the claim of the taxpayer.
Relying on the decision o f iS3C consultancy Services Ltd. the Tribunal held that when the process of customisation involves addition, modification and creation of new programmes as per the requirement of the individual clients by utilising the foundation of standard programme and such exercise involves human expertise and intellectual process to bring the end result a different product or thing, such process fit into the definition of term produce.
The taxpayer had made huge investment in building, plant and software and if the taxpayer was only a recruitment agency, then there was no need of making such a huge investment. Accordingly, in view of above and relying on the Tribunal’s order for earlier AY the Tribunal held that the taxpayer is entitled for benefit available to EOU. Since the decision relied upon by the taxpayer was prior to the decision of the Supreme Court in the case of Liberty India, the Tribunal following the decision of the Liberty India held that the interest income did not have direct nexus to the income derived by the taxpayer from the undertaking and therefore not liable for benefit available to EOU of the Act.