The High Court of Karnataka has set aside three reassessment notices of the Income Tax Department against EIT Services India Ltd (formerly Hewlett Packard) for three assessment years issued by the Income Tax Department and ruled that deputing manpower abroad for software development is eligible for tax exemption under Section 10A of the IT Act.
The Commissioner of Income Tax (CIT), Bengaluru had ordered for the re-examination of the claim for deduction under Section 10A/80HHE of the Income Tax Act for the assessment years 2005-06, 2006-07 and 2007-08 on the ground that "part of the petitioner's profits was related to rendering technical services outside India which was not eligible for deduction."
The company filed three writ petitions challenging the re-assessment notices which was heard by the bench of Justice S Sunil Dutt Yadav.
The HC in its judgement on December 19 cited a circular issued by the Ministry of Finance in 2013 which clarified that "expenditure incurred for services to develop software outside India could be allowed under Section 10A of the IT Act if deputation is for development of software."
