Transfer of computer software by an Indian Branch of a foreign Company (approved as 100 percent EOU) to its head office is an eligible transaction for

Court : Delhi bench of Income-tax Appellate Tribunal

Citation : DDIT Vs. Virage Logic International (ITA No. 494(Del) 2010)

Brief  : The Delhi bench of Income-tax Appellate Tribunal (the Tribunal) in the case of DDIT v. Virage Logic International (ITA No. 494(Del) 2010) held that transfer of a computer software by an Indian branch of a foreign company [approved as 100 percent Export Oriented Unit (EOU) by Software Technology Parks of India (STPI)] to its head office is a transaction eligible for claiming tax benefits under section 1 0A of the Income-tax Act, 1961 (the Act).

Facts of the case

• The taxpayer, a non-resident company having Permanent Establishment (PE) in India, was engaged in the business of development of computer software. The taxpayer was a 100 percent EOU duly approved by STPI. The taxpayer had developed a computer software and transmitted electronically to its head office and received consideration in the form of convertible foreign exchange. For the year under consideration (i.e. Assessment Year [AY] 2006-07), the taxpayer claimed benefits provided under section 1 0A of the Act which were rejected by the Assessing Officer (AO).
• The Commissioner of Income-tax (Appeals) [CIT(A)] observed that Tribunal in taxpayer’s own case for AY 2001-02 to 2005-06 on similar facts had allowed the benefit provided under section 1 0A of the Act. Accordingly, the CIT(A) allowed the claim of the taxpayer.

Tax department’s contentions