OMNIGLOBE INFORMATION TECH INDIA PVT. LTD Vs. CIT

JUDGEMENT

(1.) THIS appeal by the assessee pertains to assessment year 2005 -06 and was admitted for hearing vide order dated 19th October, 2012, on the following substantial question of law: -

(2.) THE appellant -assessee was incorporated on 19th March, 2004, as a subsidiary of one M/s Omniglobe International, USA, as a business process service provider. The appellant -assessee had claimed deduction under section 10B, of the Income Tax Act ("Act", for short), for a period commencing from 1.4.2004 to 31.5.2004, contending that it had obtained approval as a 100% Export Oriented Unit under STPI scheme and had commenced operations from 1.4.2004. The Assessing Officer as well as the Tribunal have held that the appellant assessee had commenced its operations only from 1.6.2004, i.e. the date on which the appellant assessee entered into "service agreement" with its parent company and, therefore, the expenditure incurred between 1.4.2004 to 31.5.2004 should be capitalised. Tribunal, in its impugned order had also observed that the appellant assessee had entered into a lease agreement and had hired premises as its office, only on 15.6.2005. Commissioner of Income Tax (Appeals), however, had decided the issue/question in favour of the respondent assessee.

(3.) THE appellant -assessee, as recorded above, was in the business of voice activation and local number portability, i.e. Business Process Outsourcing (BPO) services, which were made available to M/s Omniglobe International, USA. The Activities fall in the category of 'service industry. The appellant -assessee had placed on record, before the Commissioner of Income Tax (Appeals), a copy of the agreement dated 30th March, 2004, between M/s Agilis Information Technologies International Pvt. Ltd ("M/s Agilis", for short) and the appellant company. Under the said agreement, the appellant assessee was entitled to use to use the premises taken on lease by M/s Agilis, during 2000 hrs to 0800 hrs. It stipulated that the appellant assessee was entitled to use personal computers of M/s Agilis or install their new personal computers in the premises, but upon termination of the agreement, personal computers belonging to the assessee would be removed. The appellant - assessee could use furniture and fixtures of M/s Agilis. However, the appellant assessee was to pay on pro rata basis, charges for water, electricity, energy, or power consumed. Lastly, it was agreed that the appellant -assessee would not use the internet facility of the provider, i.e. M/s Agilis, but would install a separate internet link from an internet service provider.