Export – Exemption u/s 10A – Effect of section 10A and notification of CBDT issued u/s 10A – Assessee providing human resources services – Entitled to deduction u/s 10A

Export – Exemption u/s 10A – Effect of section 10A and notification of CBDT issued u/s 10A – Assessee providing human resources services – Entitled to deduction u/s 10A

The assessee is a private limited company and is in the business of software development and professional services. For the A.Y. 2007-08 the assessee claimed deduction u/s 10A. The A.O. recomputed the deduction u/s 10A by reducing the recruitment fee from the export turnover.

The Commissioner held that income from human resource services is not eligible for deduction u/s 10A and accepted the alternative plea to tax only net income from the business of manpower supply. The Tribunal held that transmitting the data of qualified information technology personnel is human resource services and information technology-enabled services. Accordingly, the appeal preferred by the assessee was allowed.

On appeal by the Revenue, the Karnataka High Court upheld the decision of the Tribunal and held as under:

‘i)    The expression “computer software” has been defined in Explanation 2 to section 10A and means even any customised electronic data or any product or service of a similar nature as may be notified by the Board. Thus, the Legislature has empowered the Board to notify the products or services of similar nature which would be covered under clause (b) and treated as “customised electronic data” and also, “any product or service of similar nature”. The Board has issued a notification dated 26th September, 2000 which admittedly contains human resources as well as information technology-enabled products or services.

ii)    The role of the assessee company was to create an electronic database of qualified personnel and transmit data through electronic means to the client. The Commissioner (Appeals) had found that the assessee was in the business of supply of manpower from India to its foreign clients after their recruitment in India. Thus, irrespective of whether or not the assessee provided training to its employees or to the employees who were recruited by its clients, since the assessee was engaged in providing human resource services, its case was squarely covered by notification dated 26th September, 2000. Therefore, the assessee was entitled to the benefit of deduction u/s 10A.’