G.E. VEERABHADRAPPA, VICE PRESIDENT These cross-appeals arise out of order dt. 29th March, 2004 of CIT(A)-VIII, Mumbai for asst. yr. 2000-01. 2 . first ground in assessee s appeal questions validity of assessment framed under s. 14 7 of IT Act. We have heard both sides and have carefully gone through records. return of income for assessment year under consideration was processed under s. 143(1) of Act and no notice under s. 143(2) of Act was issued. Subsequently, AO was of opinion that income chargeable to tax had escaped assessment in light of fact that in preceding assessment year there was finding that assessee is not eligible for deduction under s. 10B of Act. Accordingly, reassessment proceedings were initiated by issue of notice under s. 148 of Act on ground that income had escaped assessment in terms of Expln. 2 t o s. 14 7 of Act. In respect of this action, main contention of assessee before us is that there was no omission on part of assessee with regard to claim made in return of income filed. All details relating to claim were available in return. In light of same it cannot be said that there had been any escapement of income for assessment. According to him, there existed noprima faciematerial for coming to such conclusion. contention of assessee, as we see in light of discussions in impugned order, reassessment has no legs to stand.Prima faciethe AO had no reason to arrive at conclusion that income had, in fact, escaped assessment. Moreover, income was only determined under s. 143(1) of Act and AO had not issued any notice under s. 143 of Act and only way to bring income escaping tax is by taking recourse to s. 148 of Act. In our view, facts and circumstances of case, reassessment proceedings have been validly initiated and we decline to interfere. 3 . next set of disputes relate to assessee s claim for deduction under s. 10B of Act and alternatively claim for deduction under s. 80HHE of Act. facts relevant to these disputes are that assessee is domestic company incorporated in India on 19th Jan., 1995 doing business of software technology. assessee-company has been approved by Government of India, Ministry of Industry, as Export Oriented Unit (EOU for short). approval of Ministry was granted vide letter dt. 5th Oct., 1995, for manufacture of computer software. Such approval had been renewed vide letter dt. 19th June, 1998. activities of assessee-company have been carried on basis of agreement, it had entered into with various parties working in realm of software development. assessee-company, for purpose of its activities, has entered into agreements with following parties for business of computer software and has received amounts stated against each of them : S. Amount Name of party No. received 1. Unisys 1,86,02,140 2. Cresere Inc 9,3 7 , 77 ,900 3. CTE-BNP 2,03,63, 7 36 4. CIC-e-worker 4,54,61,550 5. SAP Arabia 1 7 ,05,698 6. Geotronics-UK 8,54,322 7. Veritema-Sweden 52,43, 7 18 8. CIC-ATC New agreement 1,81,41,900 9. Old agreement 64,48,200 10. Various-Domestic 38,18,539 CIC-Recruitment & 11. 3, 7 8,4 7 ,6 7 9 Training 12. CIC-Others 2,04,262 Total 25,24,69,644 above receipts have been claimed to be profits and gains derived by it as 100 per cent EOU. Accordingly, assessee claimed deduction under s. 10B of Act or in alternative deduction under s. 80HHE of Act in respect of profits derived by it on development of software. AO, while framing assessment, was of view that assessee did not satisfy conditions for exemption under s. 10B of Act. He relied upon his own findings in earlier assessment years as also finding of CIT(A) in those years to deny benefit of deduction either under s. 10B or under s. 80HHE of Act. 4 . learned counsel for assessee reiterated contentions that were raised before Revenue authorities in relation to assessee s claim for exemption under s. 10B of Act or alternative claim of deduction under s. 80HHE of Act in respect of income in question derived by virtue of agreements, which assessee had entered into with its clients. learned counsel for assessee explained each of these agreements. All disputed agreements are part of paper book. assessee has also supported its claim on basis of sample invoices, filed again as part of paper book. Reference to agreements and sample invoices was made during course of hearing. assessee has also furnished percentage of its total sales in each of such clients to total sales of whole concern. assessee has also filed details of decision taken by CIT(A). order of Tribunal for assessee s own case for asst. yrs. 199 7 -98, 1998-99 and 1999-2000 in ITA Nos. 2 7 81, 2 7 82 and 2863/Mum/2003, dt. 7 th April, 2005, has also been filed. learned counsel for assessee admitted that certain agreements have been considered by Tribunal and with regard to agreements with CIC- ATC (old agreement), various domestic, CIC-recruitment and training and CIT- others, which are respectively at serial Nos. 9, 10, 11 and 12 in client wise analysis statement, are agreed to be covered against assessee by aforesaid order of Tribunal. learned counsel for assessee pleaded that matter has been taken up before Bombay High Court as also by way of miscellaneous application before Tribunal. But, in any event, sales involved in these agreements is only to extent of 19.3 per cent of total sales, which does not, in any way, disentitle assessee from claiming relief under s. 10B of Act inasmuch as sales to other clientele was more than 7 5 per cent of assessee s total sales during year under consideration. order of Tribunal, according to learned counsel for assessee, covers eligibility or otherwise of receipts from only aforesaid agreements. learned counsel for assessee also agreed that in respect of these agreements view of Tribunal is expressly in favour of Department and wants us to confirm decision of lower authorities in respect of business income as arising out of these agreements. learned Departmental Representative, on other hand, strongly relied upon order of Tribunal on issue covering very same agreement. 5 . We have carefully considered submissions in relation to these agreements, which are admittedly covered in favour of Revenue by order of Tribunal referred to above. We, therefore, confirm findings of CIT(A) on this issue, wherein in relation to CIC-ATC agreement, domestic agreement, benefit of exemption under s. 10B or deduction under s. 80HHE has been totally denied as these are basically agreements not involving eligible exports under s. 10B of Act. In relation to agreement relating to CIC- recruitment and training and CIC-others, CIT(A) denied benefit of exemption under s. 10B of Act but allowed only 10 per cent of business income as covered and eligible for deduction under s. 80HHE of Act. learned counsel for assessee, who argued before us, has fairly admitted that Tribunal has totally denied both reliefs in relation to these two agreements. Therefore, considering 10 per cent of business profits as covered under s. 80HHE, as was done by CIT(A), in light of order of Tribunal is incorrect. Accordingly, we set aside impugned order in relation to these agreements by restoring order of AO on this issue. ground raised by Revenue in its appeal on this part of issue is to be treated as allowed in light of our own order, cited supra, for earlier assessment years. 6 . Now we take up agreement with other clients, which are subject- matter of determination of relief under s. 10B as well as under s. 80HHE of Act. first agreement for our consideration is one with Unisys. learned counsel for assessee pointed out that exemption under s. 10B of Act was denied by Tribunal in earlier years on reasoning that sales to Unisys was less than 7 5 per cent of assessee s total sales. learned counsel submitted that there appears to be obvious and inadvertent error in abovementioned order of Tribunal because, according to him, what is to abovementioned order of Tribunal because, according to him, what is to be seen is not whether exports to particular client is at least 7 5 per cent of total sales but exports of software to all clients constitute at least 7 5 per cent of total sales. Any other view, according to learned counsel for assessee would make it impossible to satisfy conditions laid down in s. 10B of Act. He illustrated by way of example that if assessee has 100 per cent exports of software to six parties and has no local sales at all to five parties, to each one of them at 20 per cent of total exports, assessee as per Tribunal s view would not be eligible for relief under s. 10B of Act which, according to him, will result in absurd proposition not found in provisions of s. 10B of Act. relevant provisions of s. 10B are reproduced below : "10B. (1) Subject to provisions of this section, any profits and gains derived by assessee from hundred per cent export-oriented undertaking (hereinafter in this section referred to as undertaking) to which this section applies shall not be included in total income of assessee. (2) This section applies to any undertaking which fulfils all following conditions, namely : (i) it manufactures or produces any article or thing; (i)(a) in relation to undertaking which begins to manufacture or produce any article or thing on or after 1st day of April, 1994, its exports ofsuch articles and things are not less than seventy-five per cent of total sales thereof during previous year;" (Emphasis, italicised in print, supplied) He drew our attention to discussion in para 50 of aforementioned order of Tribunal, which discusses this issue. said paragraph is reproduced below : "As far as services rendered by assessee-company to Unisys are concerned, we, still find that situation is not different. As already discussed and mentioned in order, CIT(A) has granted relief under s. 80HHE to assessee-company with reference to its receipts from Unisys. grounds proposed to be raised by Revenue objecting to above relief have not been admitted by Tribunal. Therefore, as pointed out by learned counsel appearing for assessee, it is, to be seen that services rendered by assessee-company to Unisys qualified for deduction under s. 80HHE. But, that fact alone does not qualify assessee-company to seek exemption under s. 10B mainly for reasons that exports of such services to Unisys were less than 7 5 per cent of total sales of assessee-company and therefore, does not satisfy condition laid down in s. 10B(2)(ia)." other major fatal mistake in order, according to learned counsel for assessee, is that Tribunal did not consider provisions of s. 10BB of Act inserted by Finance Act, 1999 w.e.f. 10th April, 1999. non- consideration of this provision by Tribunal has lead to miscarriage of justice. third point on which learned counsel for assessee stressed our attention is that in earlier years Tribunal considered sequence of events carried on by assessee-company in respect of CIC-USA, wherein it has come to conclusion that such activity carried on was that of professional recruiting agency. In opinion of Tribunal value added service provided by assessee-company is that recruits are trained in specific software programme viz., SAP Software, Imparting of such training according to Tribunal was necessary in line of computer software. training activity, Tribunal opined, conducted by assessee-company was integral part of recruiting professional for foreign company and not for development of computer software programme. discussion in paras 4 7 and 48 of aforesaid order of Tribunal was read out. Tribunal considered agreement with CIC to deny benefit even in relation to agreement with Unisys without appreciating fact that scope of work in both these concerns has never remained same. learned counsel for assessee pointed out that relief under s. 10B of Act, in light of these contentions, has not been properly considered in light of express provisions of Act. So, observations in order of Tribunal should be taken asper incuriam,relevant to facts of those years and, therefore, it was pleaded that agreement, which have different scope in nature, should be independently construed in light of same argument and generalization, according to learned counsel for assessee, has only resulted in miscarriage of justice. He, therefore, vehemently pleaded that order of Tribunal in relation to relief under s. 10B of Act should be considered in light of facts existing in each of agreement vis-a-vis requirement of statute under s. 10B of Act. He pointed out that, in any event, agreement at serial Nos. 2, 4, 5, 6, 7 and 8 mentioned in para 3 above are all contracts that were entered into after 31st March, 1999 and, therefore, there is no question of applying ratio of decision of Tribunal for earlier years to facts emerging out of these agreements. 7 . learned Departmental Representative, on other hand, pleaded that contentions of assessee have been rejected by Tribunal while considering assessee s claim for relief under s. 10B of Act in earlier years and that order, according to him, we hold field in favour of Department. According to him, order of Tribunal has concluded matter in relation to assessee s claim for relief under s. 10B of Act and assessee should not be permitted to re-agitate issue in any manner. He mainly relied upon order of Tribunal in relation to denial of relief under s. 10B of Act. 8 . We have anxiously considered rival contentions and have gone through record. relevant provision of s. 10B extracted in para 6 above relates to special provision in respect of 100 per cent export-oriented undertaking. It provides that any profits and gains derived by such undertaking shall not to be included in total income of assessee. In other words, exemption is total and complete. Clause (i)(a) of sub-s. (2) provides for relief where undertaking exports such articles or things and such exports are not less than 7 5 per cent of total sales thereof during previous year. plain and simple meaning of this provision is that it should be either 100 per cent EOU or at least its export should be not less than 7 5 per cent of total sales. In other words, Act itself envisages relief where such exports are at least in excess of 7 5 per cent of total sales. This provision enables assessee to claim such relief even its major manufactured articles or things are exported to large extent as explained earlier. In case before us assessee has domestic turnover of 1.51 per cent and ineligible exports to extent of 19.3 per cent where assessee cannot be said to be exports to extent of 19.3 per cent where assessee cannot be said to be exporting any such articles or things. In other words, other exports in total are more than 7 5 per cent of total sales. Therefore, denial of relief to assessee on ground that export to particular client is less than 7 5 per cent of total sales is not requirement of section itself. It is highly impossible to satisfy condition that export to each individual client should be more than 7 5 per cent of total sales when, in fact, assessee has multiple clients as in case of assessee. In this case of assessee export to eight of overseas clientele in total is more than 7 5 per cent but in each case obviously it cannot exceed 7 5 per cent. Therefore, we agree that such proposition will only result in absurdity or impossible and not exact requirement of statute. We, therefore, have to appreciate assessee s claim in light of plain provisions of section, which nowhere requires that export to each such client should exceed 7 5 per cent. Therefore, decision rendered by Tribunal in earlier years in relation to these issues, in our humble opinion, cannot be applied to facts of this case in light of express provisions of Act. Moreover Tribunal appears to have lost sight of provisions of s. 10BB, wherein computer programmes have been given extended meaning. It reads as under : "The profits and gains derived by undertaking from production of computer programmes under s. 10B, as it stood prior to its substitution by s. 7 of Finance Act, 2000 (10 of 2000), shall be construed as if for words computer programmes , words computer programmes or processing or management of electronic data had been substituted in that section." term manufacture or produce used in aforesaid section has been explained by provisions of s. 10B reproduced above. In light of aforesaid provision, in our view, relief under s. 10B of Act cannot be denied to assessee on ground that export of such software to each of parties was not at least 7 5 per cent of total sales. 9. We now take up agreements in each of cases and see whether assessee has only acted as recruitment agent or assessee has engaged itself in manufacture or production of articles or things in form of computer programme, which is also part of manufacture as explained by statute and has specifically given extended meaning to provisions of s. 10BB already extracted hereinbefore. agreement with Unisys is placed at pp. 8 7 to 119 of paper book. This is technical service agreement between Unisys Corporation and assessee. technical agreement No. 10063 and statement of work have been placed at pp. 89 to 121 of paper book. W e may refer to statement of work placed at pp. 101 to 108 of paper book. Relevant portion of which is reproduced below : "CyberTech International has available and will provide to Unisys Corporation manpower, technical expertise, and product knowledge required to completely support all CTOS Software products as specified herein. CyberTech will make every effort to support products within Unisys Support Policy as outlined in Technical Services Agreement. CyberTech will maintain same interface with external Unisys support organizations as previously supported by San Jose Engineering organization." In order to mutually accomplish goals stated herein : Unisys will "(1) provide CyberTech with CTOS hardware and operating software for both Yardley, PA and Bombay, India sites, as identified in Addendum E. Enough hardware and/or software will be provided to allow CyberTech to analyze/duplicate reported problems, develop...., build and test products to verify all changes, create and.... scenarios to respond to contacts or other questions, build any required special or other system releases, and to, in at lest similar environment, verify overall system performance of modified software product. development systems will include, test beds, special controllers (slices), test equipment and administrative systems at least two of each unique hardware system or peripheral released by Unisys for CTOS customer base plus enough components to assessable following complete systems : Yardley PA office : (front and support) Five complete systems, one or more controller slices as required for CSC telephone support, and one server configuration. Specific concentrations will be identified and outlined in transition plan Bombay India office : (off-shore continuation engineering) Eight full development systems, at least one server configuration, and one X E system within test beds. Specific configurations and details will be outlined in transition plan (2) will provide direct contact to customer environment needed to demonstrate problem. CyberTech will be provided access to network connections including TCP/IP, BNet, SNA and OSI. (3) provide access to and license to use source and object code for all C T O S products and Compilers and Utilities required for development, system generation and configuration management. Written......... any object code f o r each supported release level must be established and agreed between Unisys and CyberTech. If special system configurations are required to test any specific release, Unisys will provide access to either Unisys or customer equipment for this testing. (4) provide CyberTech with complete documentation of all CTOS products, including product specifications, user documentation, release notes, patch listings, release status reports and statistics for each release level to be supported. (5) will provide active on-line, update access to Unisys Primus Database, Mapper Database for tracking escalated problems by Walerts and CSRs, and Internet Web Pages and Patch Net System. Cyber Tech will additionally need CTOS OFIS Mail connections with San Jose (and thus all other Unisys sites) Electronic Mail service for both Yardley and Bombay. CyberTech will : (1) provide technical expertise for following : CTOS Operating System Design and Development Microsoft Windows and Windows NT Integration CTOS Compilers, Linkers and Standard Software CTOS Data Communications Products CTOS OFIS Mail, BNet, OFIS Products CTOS Hardware Products Unisys Software product development and support cycles (2) make every effort to analyze and respond to all UCFs within Unisys response guidelines listed below. When necessary, CyberTech will develop and distribute fixed product to affected client within guidelines for priority of problem. When fix is unnecessary or work around is established, CyberTech will close UCF as allowed by Unisys guidelines or support policy. CyberTech will make every effort to follow Unisys policy for Priority and Priority B problems. Priority C problems will be treated as new feature suggestions. Statistics for response and closure will be maintained and reported to Unisys as required." payment for these work is provided in article 4, which is also reproduced below : "Compensation 1. total software support compensation to contractor for work performed hereunder shall not exceed one million two hundred thousand dollars ($1,200,000) as outlined below, plus any authorized travel and living expenses as specified in sub-para A2 of this Article, and any applicable sales and/or use tax as specified in para C of this article. following payments for support are in US dollars and based on monthly billing by CyberTech. Transfer cost $50,000 June, 1996 300,000 (the first two months payment through May, 199 7 ($50,000) will be due upon contract signing) June, 199 7 250,000 through May, 1998 June, 1998 200,000 through May, 1999 June, 1999 200,000 through May, 2000 June, 2000 200,000 through May, 2001 2. Upon Unisys reasonable request, CyberTech will furnish qualified personnel for on-site assistance to Unisys to resolve problems. In such even, Unisys will pay CyberTech at rates set forth in Addendum B of agreement for time of such personnel and reimburse CyberTech for travel and living expenses in accordance with Addendum C. However, CyberTech will not be entitled to any such payment if problem is negligently caused by CyberTech." For maintaining brevity we have extracted relevant portions, but going through copies of agreement as also several addendums, it does not, in any way, lead to conclusion that assessee has been paid so much of money just for recruiting employees or for imparting training of employees for and on behalf of Unisys. In our view, it is taking too narrow view of matter if agreement were to be construed as agreement for recruitment of personnel. In any event, CIT(A) himself granted both in earlier years as also in assessment year under consideration relief under s. 80HHE of Act. Tribunal has confirmed order of CIT(A) giving deduction under s. 80HHE of Act in earlier years. But appreciating facts of case in light of agreement provided, we are unable to accept Departmental view that assessee cannot considered as engaged in business of manufacture of production of articles or things within meaning of ss. 10B and 10BB of Act in respect of profits and gains arising out of this agreement. denial of such relief, in our view, is on wrong reasoning that export of articles and things under this agreement with Unisys did not exceed 7 5 per cent of total sales. It only results in miscarriage of justice if such proposition of Department were to be accepted. We, therefore, direct AO to allow deduction under s. 10B of Act. relief under s. 80HHE, in facts and circumstances of case, as alternative prayer, becomes academic. 10. Coming to second agreement, which is placed at pp. 36 to 44 of paper book, same is entered into on 1st July, 1999 Cressese Inc. Yardley. statement of work placed at p. 3 7 of paper book is as under : " State of Work or SOW shall mean written document or documents mutually agreed between customer and consultant providing general description of consulting services, applicable rates and other terms reasonably necessary to govern work orders and shall be attached hereto as contained in Statement C work . Work product. As used in this Agreement term Work Product means any deliverable items and other products of consulting services, whether or not... and all related intellectual property rights, know-how,... mask works, trademarks, formulae, procession, manufacturing techniques, trade secrets, ideas, artwork, software or other copyrightable or patentable work. Y2K Compliant shall mean with respect of software, systems, consulting services and deliverables that same shall not be affected adversely by occurrence of use of dates before, on or after 1st Jan., 2001 A.D. including dates and leap years between twentieth and twenty-first centuries ( Millennial Dates ) Any Software and deliverables provided by Consultant (including any software, hardware or firmware product(s) delivery by Consultant to Customer) will without error or omission, create, receive, store, process and output (collectively, Compute ) information related to Millennial Dates. This warranty includes without limitation, that deliverables and Software provided by Consultant will accurately, and without performance degradation, compute Millennial Dates, date-dependent date, date-related interfaces, or other date- related functions (including without limitation, calculating, comparing and sequencing such functions). Article 11 Consulting services (a) Consultant shall provide consulting services to customer in accordance with terms and conditions of this Agreement, together with SOW attached hereto as Exhibit . specific scope of any work and details of particular consulting services including proposed time and materials cost estimates, fixed price, or not to exceed amounts, shall be set forth in statement of work or any other document that references appropriate statement of work to be jointly prepared by customer and consultant and approved by customer prior to start of any work. Consultant shall not be bound to perform and customer shall not be required to pay for, any consulting services not contained in statement of work or associated documents, unless accompanied by change order as set forth in s. 2.2. (b) Consultant will ensure that all personnel assigned shall have skills necessary to complete tasks set forth in statement of work. (c) Any work request shall be via statement of work issued in accordance with this s. 2.1. Nothing in this agreement shall preclude Customer from obtaining same or similar services from any other source at any time. Nothing in this agreement shall preclude consultant from providing similar services to another company, provided consultant maintains confidentiality of customer s proprietary information." In this agreement it is provided that assessee had expertise in area related to business of customer and for business of providing professional services with regard to those areas of expertise. details of this agreement in form of work statement are placed at p. 45 of paper book for following services : "This is work statement under master consulting services agreement between customer and consultant. 1. Period of work Date of commencement of work 15th July, 1999 statement 31st December, Date of completion of work statement 2000 2. Description and/or Specifications of services to be performed and Deliverables to be delivered to customer To develop helpdesk/call centre product that can be developed either as fully licensed product or using ASP delivery mode. Phase one Research and Development of visualize and conceptualize best of breed product for Cresere Inc. By studying other competing products available in market for their features, functionality, architecture. Phase two Product development Phase three Product release and installation 3. Deliverables : Product requirements document High level design document Detailed design document Test plan data and test results Application sources, libraries, executables Installation version of product User manual Installation guide 4. Period of work and schedule of fees : Milestone Projected end Date Fixed Fee Phase one October 31, 1999 US $ 1,115,000 Phase two August 31, 1999 US $ 435,000 Phase three December 31, 2000 US $ 50,000 Going through above agreement also it cannot be said that assessee is rendering just recruitment service or training service as made out by Revenue. assessee, in our opinion, having regard to nature of work mentioned in this agreement, is engaged in manufacture or production of computer programme which falls within scheme of 10B r/w s. 10BB of Act. assessee s claim for relied under s. 10B of Act is therefore, directed to be allowed. 11. In relation to agreement No. 3 with CTE-BNP, CIT(A) has granted 100 per cent deduction under s. 80HHE of Act in earlier years and that has become final. only ground on which relief under s. 10B was denied is that assessee s export to this client did not exceed 7 5 per cent of assessee s total sales. In light of discussions elsewhere in this order, we do not agree with stand of Revenue that assessee is not entitled for relief under s. 10B of Act in respect of exports made to this client. Accordingly, we direct AO to allow relief under s. 10B of Act in respect of profits and gains derived as admittedly agreement is old agreement and on which Revenue has already granted relief under s. 80HHE of Act, which is directed to be withdrawn. 1 2 . Now we take up agreement No. 4 with CIC e-worker. This agreement is newly entered into during year under consideration. Although assessee was to recruit and train software professionals, but in that process it develops software of its own. Agreement in this case is entered into for development of e-worker software. copy of manual involving development and supply of software is placed at pp. 138 to 541 of paper book. It may be pointed out that Revenue authorities have considered only 10 per cent of profits as eligible for deduction under s. 80HHE of Act on reasoning that it was mainly in nature of recruitment and training contract. contract itself is placed at pp. 55 to 6 7 of paper book. contract also contains scope of work at p. 65 of paper book, which reads as under : "This is work statement under master consulting services agreement between customer and consultant. 1. Period of work Date of commencement of work 1st July, 1999 statement Date of completion of work statement 31st October, 2000 2. Description and/or specifications of services to be performed and Deliverables to be delivered to customer. To develop e-worker, commerce serve that enables both B-B (Business to Business) and B-C (Business to Customer) commerce. Phase one-Study various other leading products in market, to decide upon features, serviceability and technical architecture of product. Phase two Product development. Phase three Beta Product release Phase Four Final Product release and installation. 3. Deliverables : Deliverables at phase three of project. Product features and functionality High level design document Detailed design document Test plan and test records Product source code and executables Beta installation version of product Installation guide Deliverables at phase four of project User manual Finalized version of product 4. Period of work and schedule of fees : Milestone Projected end date Fixed fee Phase one 31st Oct., 1999 US $ 300,000 Phase two 31st Dec., 1999 US $ 540,000 Phase three 31st July, 2000 US $ 400,000 Phase four 31st Oct., 2000 US $ 250,000 In terms of contract user manual which was delivered to parties is also part of paper book and if one were to go through same it can definitely be seen that this is not contract pure and simple for recruitment and training of personnel. We, therefore, do not agree with stand of Revenue that assessee is entitled to relief under s. 80HHE at 10 per cent and not under s. 10B of Act. We, therefore, direct AO to allow deduction under s. 10B of Act for reasons that are already spelt out in para 8 hereinbefore. We may mention that scope of work as detailed in para 9 above does not show that payment of so much of contracted amount was just for recruitment of employees or for training them. In our opinion, having regard to terms of agreement, it was clearly for manufacture or production of articles or things within meaning of s. 10B and its extended meaning as spelt out in s. 10BB of Act. We may also mention that merely because payment is based on man-hour spent on job or employees provided, it does not mean that assessee was not engaged in activity of manufacture or production of articles or things within meaning of provisions stated above. complex and highly technical activities in field of computer software, in our opinion, truly is act of manufacture or production of articles or things as spelt out in aforesaid provision. 1 3 . Now coming to agreement with SAP Arabia, contract itself provides for carrying on work of software development relief/ processing/ maintenance of electronic data for which software professional were deputed to customers locations on-site. scope of work is clearly covered by provisions of s. 10B r/w s. 10BB as construed by Board vide its Circular No. 694, dt. 23rd Nov., 1994 [(1994) 122 CTR (St) 13 ]. This is not case where assessee has only to do recruitment or training of personnel, but assessee is engaged in on-site software development. In this contract with SAP-Arabia software professionals remained on payroll of assessee while they are deputed on-site for carrying out assignment of software development. relevant copies of agreement are also placed at pp. 10-15 of paper book. Having gone through details contained therein, we are of opinion that it cannot be said that assessee is not entitled to relief under s. 10B or under s. 80HHE of Act. Revenue authorities have denied both relief but, in our view, assessee is entitled to relief under s. 10B of Act in relation to income derived on export of software out of India to this client. 1 4 . This takes us to agreement with Geotronics-UK and Veritema- Sweden. These agreements are of same nature as has been entered with SAF Arabia. In light of our decision in relation to agreement with SAF Arabia, we hold that assessee is entitled to relief under s. 10B of Act in respect to profits and gains derived by assessee under these agreements. 15. Now it leads us to agreement with CIC-ATC, which is completely new agreement dt. 1st July, 1999. agreement itself is placed at pp. 19 to 2 7 of paper book. agreement provides that assessee has expertise in following fields and scope of service is mentioned in cls. 1.1 and 1.2 of agreement : "(1) Installation, implementation, enhancements and maintenance of applications-SAP and SIEBEL (2) Design, content development, hosting and maintenance of corporate websites and portals (3) Developing sales and marketing collateral such as brochures, presentations, proposals, case studies, etc. (4) Developing documentation such as implementation methodology, project documentation etc. (5) Design of networking and internetworking systems architecture, estimations, networking diagrams, etc." assessee is obliged to grant patent right as provided in arts. 4.1 and 4.2 in relation to all software programme undertaken by virtue of agreement. Having regard to all these, it cannot be said that assessee is only recruiting and training agent while considering its claim for relief under s. 10B of Act. We, therefore, in light of all these discussions, accept claim of assessee for relief under s. 10B of Act. As result of this, Revenue may have to withdraw relief granted under s. 80HHE of Act as consequence of this order. 16. As regards claim of deduction under s. 10B on interest income, in light of fact that we have held that assessee is entitled to relief under s. 10B of Act, assessee is naturally entitled for relief under s. 10B of Act in respect of interest income also, which is admittedly part of business income. 1 7 . next ground relates to levy of interest under ss. 234C and 234D of Act. learned counsel for assessee submitted that Department has levied interest on excess refund under s. 234D of Act disregarding fact that said section itself has come into force on 1st June, 2003 by way of insertion by Finance Act, 2003. We agree with contention of learned counsel for assessee and hold that assessee is not liable to pay any interest under s. 234D of Act, which has admittedly come into to pay any interest under s. 234D of Act, which has admittedly come into force on 1st June, 2003 and is not applicable to assessment year under consideration, as interpreted by Delhi Bench of Tribunal in its decision reported atGlaxo Smithkline Asia (P) Ltd. vs. Asstt. CIT (2005) 9 7 TTJ (Del) 108. As regard levy of interest under s. 234C of Act, we hold to be consequential. 18. next ground in assessee s appeal relates to allocation of 1 per cent of dividend receipts as expenses incurred for earning dividend income. We have heard both sides and direct AO to follow ratio laid down by Delhi Bench of Tribunal in case ofMaruti Udyog Ltd. vs. Dy. CIT (2005) 92 TTJ (Del) 98 7 : (2005) 92 ITD 119 (Del)at p. 121. It is ordered accordingly. 19. Revenue in its appeal has raised following ground : "On facts and in circumstances of case and in law CIT(A) erred in directing AO to take 10 per cent of various heads as expenditure on development of computer software and to allow deduction under s. 10B or 80HHE of Act without appreciating facts of case." above ground, as admitted by learned Departmental Representative, was not happily worded. But, however, he addressed us on issue relating to direction of CIT(A) to allow deduction either under s. 10B or under s. 80HHE of Act fully or partly on certain receipts without appreciating facts of case. learned Departmental Representative was directed to file amended grounds in light of argument advanced before us. He accordingly filed amended ground, which reads as under : "On facts and in circumstances of case and in law, CIT(A) erred in directing AO to allow deduction under s. 10B or under s. 80HHE of Act, fully or partially on certain receipts, without appreciating facts of case." We have already held above in para 5 that assessee is not entitled to deduction either under s. 10B or under s. 80HHE of Act in respect of profits and gains arising out of contract entered into with CIC-ATC (old agreement), various domestic, CIC-recruitment and training and CIT-others and has held that to this effect ground raised by Department is to be treated as allowed. We have also held that assessee is entitled to full deduction under s. 10B of Act in respect of profits and gains arising out of contracts entered into with other parties and as consequence directed AO to withdraw relief granted by CIT(A) under s. 80HHE of Act. To this effect also Revenue s ground is treated as allowed. Accordingly, Revenue s ground is partly allowed. 20. In result, both appeals are partly allowed. *** CYBERTECH SYSTEMS & SOFTWARE LTD. v. ASSISTANT COMMISSIONER OF INCOME TAX