MAHAVIR SINGH, J.M. ORDER This appeal of assessee is directed against order of CIT(A)-V, Chennai, dt. 12th Dec., 2003. relevant assessment year involved in this appeal is 2000-01. 2 . only issue in this appeal of assessee is whether creation of website would fall within ambit of s. 80-O of IT Act, 1961 and can it be considered as design within definition of this section ? 3. briefly stated facts are that assessee is engaged in business of computer maintenance and services. assessee claimed deduction under s. 80-O of Act on foreign exchange earned at US $ 10,000 equivalent to sum of Rs. 4,32,500. For designing websites, amounts received and nature of work done by assessee are as under : Person Amount Date Nature of from whom received of receipt service rendered received US$ 4-6- Astral 1999 Development Systems Inc., 5,000 of website California 11- city4u.com 8-1999 31- Itouchu 1-2000 Designing Corporation, 5,000 and programming Tokya 21- services 2-2000 AO has disallowed claim of assessee holding that consulting work done by assessee in earning foreign exchange does not constitute design within meaning of s. 80-O of Act as amended by Finance Act, 1997 w.e.f. 1st April, 1998. Aggrieved, assessee preferred appeal before CIT(A). CIT(A) confirmed action of AO. Aggrieved, assessee is in appeal before us. 4 . Before us, learned counsel for assessee argued that assessee is engaged in business of computer maintenance and services and deduction is allowable in respect of patent, design, invention and registered trademark as prescribed under s. 80-O of Act. learned counsel for assessee has drawn our attention to copy of agreement with Astral Holdings for providing consultancy work for website www.city 4u.com and setting up news desk and news coverage for city4u.com. He argued that development of site is design to originate something new and this development is creative work and definitely has value addition. He referred to opinion from Mr. W. Gowri Shankar, technical consultant, who certified that work carried out for development of website is highly creative job involving graphical user interface design, image editing, text editing etc. He further argued that prior to 1st April, 1998 also words in s. 80-O were "for use of outside India" which are exactly same words as are there in asst. yr. 2000-01. only difference is that list and activities have been curtailed. In earlier section, words used cannot be said to be controlled by rule of "ejusdem generis" even though same words were there. Therefore, when list is reduced also, this rule cannot be made applicable. In any event rule is used only to specify character of gene of items made. Ownership is not character relevant for application of rule. Further, he argued that term "use" is very general word. In this case website has been designed (web- designing is very big profession) and it has been used outside India. That is all section requires and assessee has satisfied all requirements. It is further argued that work of designing web portals and development of same and also designing and programming services were highly creative and technical work as opined and certified by technical consultant, Mr. W. Gowri Shankar, after careful study of web portal www.city4u.com. He has drawn our attention to meaning of term "design" and argued that in present technologically advancing modern world, purpose of s. 80-O of Act, should not be defeated by superficial and narrow interpretation. In modern growing world, term "design" cannot be meant narrowly. assessee as web designer, its work of development of web portal requires multi-specialization skills like state of art programming, technical writing, imaging, animation skill, etc., which in fact fall under term "designing" and therefore it is entitled to relief under s. 80-O of Act. Finally, he argued that principles of construction will not apply in present circumstances as words used in section referred to different matters and introduction of words "invention and design" in between these words clearly show that these words did not constitute class of their own and all words used therein were words having individual meaning and that no class of same nature was determinable therefrom. 5 . On other hand, learned Departmental Representative relied on orders of lower authorities. 6 . We have heard rival contentions and perused material placed before us. First of all, we have gone through provisions of s. 80-O as amended by Finance Act, 1997 w.e.f. 1st April, 1998 which reads as under : "80-O. Deduction in respect of royalties, etc., from certain foreign enterprises. Where gross total income of assessee, being Indian company or person (other than company) who is resident to India, includes any income received by assessee from Government of foreign State or foreign enterprise in consideration for use outside India of any patent, invention, design or registered trademark and such income is received in convertible foreign exchange in India, or having been received in convertible foreign exchange outside India, is brought into India, by or on behalf of assessee in accordance with any law for time being in force for regulating payments and dealings in foreign exchange, there shall be allowed, in accordance with and subject to provisions of this section, deduction of amount equal to " In view of above provision, first of all, we have to determine whether creation of website falls within purview of s. 80-O of Act or not. AO has gone through Oxford Advanced Learner s Dictionary meaning of design wherein word "design" means "general arrangement or planning of building, book, machine system or procedure". Further, he has given meaning of word "design" in his assessment order as under : "The word design is appearing in conjunction with patent, invention and trademark. It is intention of legislature to understand and interpret meaning of design with reference to patent, invention and trademark. Hence, design means outlining, arranging or planning thing or process over which designer has exclusive right." AO has held that assessee is not owner of design or development and consultancy work which it claims to have created. He further held that as per terms of agreement with M/s Astral Holdings, all software specifications, statements of work, deliverables and all intellectual property rights therein will be sole and exclusive property of company. He further found that assessee only developed website using commonly accessible hypertext market language (html) and internet protocols. Accordingly, he put things as under : "To put things in perspective, considering Pentium IV, example microprocessor chip designed by Intel. Intel used its own research efforts to design and develop microprocessor chip called Pentium IV which has its unique design. Intel is absolute owner of design that went into making o f Pentium IV. Intel services revenues by licensing or sub-licensing is not absolute owner of chip but only has right to use it. In assessee s case, result of its development and consulting work is website called "city4u.com". M/s Astra Holdings, LLC and M/s Igotechu Corporation are absolute owners of software and content developed by assessee. After consulting work is over, assessee has no right over websites it created. Assessee performed contract and developed software/website, assessee s job as consultant/contractor ends there. At no point of time assessee is owner of alleged designs . Assessee s consultancy and development work involves design, at most, to extent of general planning or arrangement of work which cannot be equated with design as appearing in s. 80-O. It is pertinent to note that every jobwork involves some kind of design i.e., of general planning, thinking and creativity. Hence, it cannot be held that every job which generates foreign exchange is eligible for deduction under s. 80- O, since it involves some kind of design." 7. First of all, we have gone through meaning of word design as per Concise Oxford English Dictionary which reads as under : "design 1. plan or drawing produced to show look and function or workings of something before it is built or made.> art or action of conceiving of and producing such plan or drawing.> purpose or planning that exists behind action or object. 2. decorative pattern. V. decide upon look and functioning of (something), especially by making detailed drawing of it.> do or plan (something) with specific purpose in mind." Further, exact meaning of HTML which is taken from www.Google.com reads as under : "HTML : (Hypertext Markup Language) is set of markup symbols of codes inserted in file intended for display on World Wide Web. markup tells web browser how to display web page for user. Each individual m r k u p code is referred to as element or tag. HTML is formal recommendation by World Wide Web Consortium (W3C) and is generally adhered to by major browsers. Microsoft s Internet Explorer and Netscape s Navigator, which also provide some additional non-standard codes. current version of HTML is HTML 4.0. However, both internet explorer and Netscape implement some features differently and provide non-standard extensions. This makes building web-site very challenging, even for professional." Further, meanings of words "web design", "webmaster", "web page" and website" taken from www.Google.com read as under : "Web design : arrangement and creation of web pages that in turn make up website. There are many aspects to this process, and due to rapid development of Internet, new aspects are continually being added. As far as business-oriented websites go, basics currently consist of (in order of importance) : (a) "visibility" of site on Internet, particularly within mahor Search Engines. (b) informational value of site, from its target public s point of view. (c) aesthetic/professional appearance of page. Webmaster : Webmaster is person who either : (a) Creates and manages information content and organization of web site (b) Manages computer server and technical programming aspects of website. (c) Or does both. Companies vary in their use of term. In smaller company, Webmaster typically "does it all". In larger company, Webmaster tends to be someone with either writing and/or graphics design background who has acquired website creation skills (mainly knowledge and experience with HTML) or more technical person with some programming skills. Webpage : On World Wide Web, page is singly file written with Hypertext Markup Language (HTML). Usually, it contains text and specifications about where images or other files are to be placed when page is displayed by browser. web page (also spelled Web page) is part of website. You can think of website like book that arrives page at time as you request each one. Each page of this book is individual HTML file with its own web address. first page you usually request at site is known as home page. (Most home pages have default name like "index html" that does not have to b e specified; you only need to enter domain name for site itself). With frames, multiple pages (HTML files) can be downloaded to browser and presented on designated sections of display screen at same time. Website : (also called site) website is collection of Web files on particular subject that includes beginning file called home page. For example, most companies, organizations, or individuals that own websites have single address that they given you. This is their home page address. From home page, you can get to all other pages on their site." 8. assessee is designing website for particular client according to its needs. As per provisions of s. 80-O of Act, deduction in respect of royalties etc., received from certain foreign enterprises are allowed as deduction if it is earned on account of designing, patent or trademark. This indicates that what is contemplated for deduction is royalties received or similar payments in that nature for use of any patent, technical know-how and trademark, invention, design by any foreign enterprise or person and its uses abroad they earning foreign exchange. This is incentive given for encouraging research and development activity in India. What is essential is to have appropriate right over such patent invention, design, registered trademark etc. It is fact that assessee is not owner of website but it is done on behalf of its clients and websites are designed differently for different clients depending on their requirements. 9 . Now, question that arises is whether creation of website is design or not. Before arriving at decision of this development work, which is highly creative job, requires team with multi-specialization skills which include state of art programming, technical writing, imaging and animation skills. Development of such portals is no doubt result of implementation of intuitive, artistic and original ideas. To design website, following is method and anybody has to go through these processes which are as under : 1. Graphical user interface design graphical user interface consists of mechanisms which allow users t o browse through content with ease, and provide convenient navigation mechanism to move from one point to another within portal. careful study of content s context, user s profile, ease of maintenance must be thought of before designing user interface [1]. graphical user interface design of such portals must not only be aesthetic but also easy, self-explanatory and convenient for users to navigate across entire content [2]. It is needless to say that only such highly user friendly portals have any chance of being successful in ever growing and dynamic domain of web content. 2. Image editing images portrayed in portals convey context of content at glance. Hence, careful selection of images including its positioning, color combination, and context sensitivity must be taken into account if portal has to be successful in creating interest among intended audience [3]. images have to be created with original ideas and then they have to be optimally engineered to give best response even for dial-up users [4]. This factor is very important because of large, unwieldy images, however attractive they may be, consume phenomenal bandwidth and result in slow downloading of content to users. Currently, if site does not download within seconds, users switch to other sites of similar interest. Thus, to retain user within site, images and other bandwidth consuming components must be designed in such way, that user response is fastest. Hence, greatest care has to shown for response times at different test conditions and only on satisfactory results site should be up. 3. Text editing text material found in portals must be crisp, convey point effectively using minimum words. separate branch of study, called technical writing focuses precisely on this aspect of conveying idea in simple, lucid, unambiguous and also stylish enough to retain interests of readers has evolved along with progress of Internet [5]. quality of technical writing in creating text content of this portal is excellent. 10. It is seen that this development work is highly specialized work which includes state of art programming, technical writing, imaging and animation skills having original ideas, artistic as well as intuitive. In view of above technical aspects, this development work involved in creation of web portal www.city4u.com is highly creative and challenging task and in no circumstances, same can be equated to data entry jobs, where prime focus is to digitize given content from paper into text/image format without introducing any changes to content. In view of this, we hold that creation of website is designing within definition of word design for purpose of claiming of deduction under s. 80-O of Act. Accordingly, we allow claim of assessee and orders of lower authorities are set aside. 11. In result, appeal of assessee is allowed. *** ONTRACK SYSTEMS LTD. v. ASSISTANT COMMISSIONER OF INCOME TAX