Marmon Food and Beverage Technologies India Pvt. Ltd. v. Income Tax Officer
(2021) 323 CTR 455 : (2021) 435 ITR 327
In the High Court of Karnataka
IT Appeal 725-728/2017 and 206/2018
Before Justice S.C. Sharma and Justice V. Srishananda
Decided on April 09, 2021

Relevancy of the Case: Ambit of “computer software” for availing deductions under Section 10B of the Income-Tax Act, 1961

Statutes and Provisions Involved

• The Income-Tax Act, 1961 (Section 10B, 141(1), 143(2), 144A)
• The Information Technology Act, 2000 (Section 65)

Relevant Facts of the Case

• The appellant filed for an income tax return for its business in the year 2009-10. Since the company had no taxable income, it claimed the deducted amount under Section 10B of the Income-Tax Act, 1961.
• The Assessing Officer (AO) initiated scrutiny and issued notices under Sections 141(1) and 143(2).
• The appellant actively responded to the draft directions with detailed submissions. Subsequently, AO issued final directions under Section 144A. Further, AO passed an assessment order, ultimately denying the claimed deduction.
• The appellant contested the assessment order, first before the CIT(A) and then before the Tribunal, but both appeals resulted in dismissal.
• Subsequently, the appellant brought the matter to this court with substantial questions of law. The appellant also expressed the intention to withdraw specific questions in connected appeals.

Prominent Arguments by the Advocates

• The applicant’s counsel argued that the lower authorities have adopted conflicting positions, converging only in denying the deduction under Section 10B. The counsel emphasised that the CBDT notification dated September 26, 2000 includes “Engineering and Design”. The counsel further asserted that the AO, CIT(A), and Tribunal erred in law and fact by denying the deduction under Section 10B.

Opinion of the Bench

• The appellant exports the software data, and the appellant’s activities will fall under the term “computer software”.
• Processing and management of electronic data can be regarded as an eligible activity under Section 10B.
• Activities like analysing, researching, developing, carrying out tests, designing, and testing products will fall under Section 10B.
• The Tribunal had erred in not classifying the appellant’s activity under the meaning of engineering and design.

Final Decision

• The bench allowed the appeal and appeals connected to this appeal.

Adyasha Sahoo, an undergraduate student at the Institute of Law, Nirma University Ahmedabad, and Ritesh Karale, an undergraduate student at Maharashtra National Law University, Mumbai, prepared this case summary during their internship with The Cyber Blog India in January/February 2024.