Source: thehindu.com<\/p>\n\n\n\n
In a relief to software giant Infosys Ltd., the Karnataka High Court has held that there is \u201cnot an iota of material available in the reasons recorded by the assessing officer to believe escapement of tax\u201d on any agreement in which the company had received revenue from foreign companies for deputing technical staff independent of software development work during 2004-07.<\/p>\n\n\n\n
The court passed the order while quashing the notices issued by the Income Tax (I-T) assessing officer during 2011-13 for initiating reassessment of the I-T returns of the company related to assessment years 2004-07, based on a finding on income from foreign companies for deputing technical staff made in the assessment year 2007-08.<\/p>\n\n\n\n
Justice S. Sujatha, in her judgment, said \u201cthere was no material on record before the assessing authority to establish failure on the part of the assessee [company to disclose truly and fully the relevant material while passing the original assessment order under Section 143[3] of the Income Tax Act and as such the respondent authority had no jurisdiction to invoke Section 147 and 148 of the Act for reassessment for the assessment years in question\u201d due to the expiry of limitation period.<\/p>\n\n\n\n
Observing that a \u2018note\u2019 on software development projects and the various stages of software development placed by the company before the assessing authority and the annual reports had disclosed how the company was required to carry out the project at the customer\u2019s site\/onsite, the court said that the original assessment order considered all these aspects while allowing benefit of deduction of profits or gains from total income under Section 10A of the I-T Act related to special provision in respect of newly established undertakings in free trade zone, etc.<\/p>\n\n\n\n
The court also noted that a circular, issued subsequently by the Central Board of Direct Taxes on January 17, 2013, clarified that the profits earned as a result of deployment of technical manpower at the client\u2019s place specifically for software development work pursuant to contract between the client and the eligible unit should not be denied benefits under Section 10A of the Act provided such deputation of manpower is for the development of such software.<\/p>\n