E IN INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI C. N. PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER I.T.A. No.8864/Mum/2010 (Assessment Year : 2001-02) Mrs. Superna R. Motwane, Dy. Commissioner of Gn yanghar, 14 t h Road , Income Tax, v. Khar (We st), Circle 19(1 ), Mumbai -40 0 052. 3 r d Floor, Piramal Chambe rs, Lalb aug, Parel, Mumbai. PAN : AABPK5356 G (Appellant) ( Respondent) Assessee by Shri Shekhar Gupta Revenue by : Shri Sanjeev Kashyap,DR Date of Hearing : 01-08-2016 Date of Pronouncement : 05-10-2016 O R D E R PER RAMIT KOCHAR, Accountant Member This appeal, filed by assessee, being ITA No. 8864/Mum/2010, is directed against appellate order dated 22nd October, 2010 passed by learned Commissioner of Income Tax (Appeals)- 30, Mumbai (hereinafter called CIT(A) ), for assessment year 2001-02, appellate proceedings before learned CIT(A) arising from assessment order dated 30th December, 2009 passed by learned Assessing Officer (hereinafter called AO ) u/s 143(3) r.w.s. 254 of Income Tax Act,1961 (Hereinafter called Act ). This is second round of litigation. 2 ITA 8864/Mum/2010 2. grounds of appeal raised by assessee in memo of appeal filed with Income Tax Appellate Tribunal, Mumbai (hereinafter called Tribunal ) read as under:- 1. learned CIT (Appeals) has erred in law and on facts of case in sustaining disallowance of consultancy fees paid of Rs. 18,00,000/-. 2. learned (Appeals) has erred in law and on facts of case in sustaining disallowance of deduction u/s 80 HHE of Income Tax Act, 1961. 3. brief facts of case are that assessee is individual deriving income from salary, income from profession, capital gain and other sources. return of income was filed by assessee on 31-10-2001 which was supported by tax audit report. assessment was originally framed u/s 143(3) of Act on 24th October, 2003 on total income of Rs. 33,08,658/- against returned income of Rs. 12,60,610/- whereby following additions were made by Revenue while framing original assessment vide orders dated 24.10.2003:- 1. Consultancy fees paid to husband Rs. 18,00,000/- 2. Business promotion expenses Rs. 75,000/- 3. Travelling expenses Rs. 1,01,138/- Rs. 19,76,138/- ============ assessee filed appeal before ld. CIT(A) in first round of litigation and ld. CIT(A) , inter-alia, upheld order of A.O. in respect of consultancy charges of Rs. 18 lakhs paid by assessee to her husband whereby disallowance was confirmed by learned CIT(A). During course of appellate proceedings before learned CIT(A) in first round of litigation, ld. CIT(A) admitted new claim raised by assessee u/s 80HHE of Act which was not raised by assessee in return of income filed 3 ITA 8864/Mum/2010 with Revenue and also same was not raised during course of assessment proceedings before AO in original assessment proceedings. A.O., however, objected admission of new claim in remand report proceedings but ld. CIT(A) overruled objection of A.O. and allowed claim in favour of assessee. matter went before Tribunal via second appeal in first round of litigation whereby assessee and Revenue filed cross appeal against appellate order passed by ld. CIT(A) in first round of litigation. Tribunal set aside issue back to file of A.O. in ITA No. 1470/M/2005 and ITA No. 1731/M/2005 dated 26.05.2008 and directed AO to decide following issues afresh:- 1. Hon'ble ITAT restored matter of payment of software consultancy charges of Rs.18 lakhs to Shri Gaurav Motwane to file of assessing officer to examine claim of assessee with reference to amount paid / payable to Shri Gaurav Motwane. 2. Hon'ble ITAT also restored matter to file of assessing officer with reference to claim of deduction u/s.80HHE. 3. Hon'ble ITAT also restored issue regarding foreign travel to file of assessing officer to consider afresh nature of foreign travel and to allow claim as per law. 4. During relevant previous year , assessee is stated to be engaged as consultant for MAZAA Media, Inc., New York. assessee in second round of litigation submitted before AO that consultancy fees was paid by assessee to husband Shri Gaurav Motwane , proprietor of M/s Pixel Multimedia for developing complete web strategy. It was submitted that Mr. Gaurav Motwane is MBA graduate from USA who had helped assessee in developing brand strategy and development services on various 4 ITA 8864/Mum/2010 communication tools. It was submitted that M/s Pixel Multimedia was in said business for 5 years and had also rendered services to various clients. It was submitted that M/s Pixel Multimedia i.e. proprietary concern of husband of assessee, Mr Gaurav Motwane has also shown income of Rs. 15 lakhs being received from assessee during assessment year 2002-03 on receipt basis in return of income filed with Revenue as he was following cash system of accounting and it was submitted that payments have been made by assessee for purposes of business. assessee also submitted letter dated 24.12.2009 signed by Mr. Gaurav Motwane stating that amount has been duly received by him and same has been reflected in his return of income filed with Revenue. A.O. observed that additions have been made after detailed and comprehensive letter was issued to Mr. Gaurav Motwane so as to examine nature and extent of services rendered by him. A.O. held that disallowance was made after investigation of matter and also after it was admitted by Shri Gaurav Motwane that there was no agreement between him and assessee and also that there was no correspondence with assessee with particular reference to services rendered. No records were produced during assessment proceedings and also in appellant proceedings or even during set aside proceedings. It was observed by AO that assessee has also vide letter dated 22nd October, 2003 withdrawn claim of expense and agreed to addition in first round of litigation. A.O. referred to decision of Hon ble Bombay High Court reported in Rameshchandra & Co. v. CIT (1987) 168 ITR 375(Bom.HC) , and observed that assessee cannot be aggrieved party, when she herself has agreed to additions. During set aside proceedings no further details were filed by assessee to show that withdrawal of consultancy fees paid to Mr. Gaurav Motwane was erroneous. assessee filed only letter from Mr. Gaurav Motwane stating that amount has been received and to this effect 5 ITA 8864/Mum/2010 no affidavit or any other evidence has been filed by assessee to state that withdrawal of consultancy charges payment to her husband was erroneous. assessment order framed on basis of revised computation of income filed by assessee, wherein it was observed by AO there is no scope for allowing said expenses. It was further observed by AO that assessee does not have any direct client and had done work for various customers on behalf of MAZZA Media Inc. , USA . In set aside proceedings in second round of litigation , it was observed by AO that assessee did not filed copy of bills raised, copy of agreement, copy of correspondence or details of any terms and conditions for said payment. Under these circumstances as claim of assessee was not supported by any new evidence in second round of litigation, Rs. 18 lacs paid to Mr. Gaurav Motwane as consultancy charges was disallowed by A.O. vide assessment order dated 30.12.2009 passed by AO u/s. 143(3) read with section 254 of Act. 5. With respect to claim of assessee u/s 80HHE of Act, A.O. observed that assessee has never made claim in return of income nor in revised computation of income filed during original assessment proceedings. claim was first made before ld. CIT(A) in first round of litigation and ld. CIT(A) accordingly called for remand report of A.O. with respect to claim u/s 80HHE of Act. AO vide remand report concluded that assessee was not entitled for claim u/s.80HHE of Act. During set aside proceedings, assessee was issued show cause notice and relevant portion of reply of assessee is as under:- assessee had entered into agreement with M/s. MAZZA Media Inc., USA for conceptualization and designing of content for their website, planning features and news events on Websites and development of content for other media. 6 ITA 8864/Mum/2010 Pursuant to same, assessee developed contents of website and for which remuneration had been paid in foreign exchange. We are attaching certificates of foreign inward remittances along with audit report, in Form 10CCAF as required u/s. 80HHE(4) of Income Tax Act. Since assessee has complied with requirements of section 80HHE, we shall request you kindly to allow deduction in respect of same. From reply, A.O. observed that assessee has not filed any fresh evidence in support of her claim u/s. 80HHE of Act, hence AO rejected same in second round of litigation. A.O. observed that appointment of assessee by MAZZA Media Inc.,USA specifically mentions that assessee is only consultant in India and appointment letter dated 24th November, 2003 is document which was produced after completion of assessment on 24th October , 2003. said letter does not mention export of software done by assessee. assessee did not file any appointment letter or other document showing any transaction showing export of software neither during assessment proceedings nor during set aside proceedings. assessee was only appointed as Editor-in-Chief and Creative Head of MAZZA Media and various activities carried out by her were on behalf of MAZZA Media Inc.,USA . It was observed by AO that assessee work profile with MAZZA Media Inc. involve recruiting strong and creative team on behalf of said company, and assessee rendered only services in India and web designing and production was one of services which were under control of assessee. assessee has received income as Editor-in-Chief in India for creative activities but there was no export of software involved. No claim of deduction u/s 80HHE of Act was filed by assessee while filing return of income. Form No. 10CCAF was not filed along with return of income as required under Section 80HHE(4) of Act which is filed in set aside proceedings. claim was made for first time before learned CIT(A) in first round of litigation. assessee has not filed details of certificates of foreign inward remittances along with audit report in 7 ITA 8864/Mum/2010 Form No. 10CCAF as required u/s 80HHE(4) of Act which are filed during set aside proceedings in second round of litigation. certificate is dated 16th December, 2003 whereas assessment proceedings have been completed on 24th October, 2003 in first round of litigation and thus Form No. 10CCAF claim under audit report which was dated after finalization of assessment u/s 143(3) of Act was not admissible as was observed by AO. Even during course of set aside proceedings, assessee has not filed required certificate of foreign inward remittances on plea that since issue is old , certificate were not available. Thus A.O. observed that claim of assessee u/s 80HHE of Act is not supported by any evidence. A.O. accordingly concluded that claim u/s 80HHE of Act for only assessment year 2001-02 is attempt to avoid tax, as no such claim has been made in subsequent year . A.O. also held that in remand proceedings in first round of litigation, A.O objected to admission of additional ground stating that assessee has not claimed said relief in return of income and, therefore, conditions laid down u/s 80HHE of Act were not fulfilled for claiming relief u/s 80HHE of Act. However, ld. CIT(A) did not accept objection of A.O. and directed A.O. to examine issue afresh and work out deduction u/s 80HHE of Act after examining claim of deduction in form 10CCAF. Thus A.O. observed that claim is not allowable since returned income tends to be lower than assessed income. assessee ought to have made claim in original return or in revised return but assessee has not done same. AO observed that this view is supported by decision in case of Goetze (India) Ltd. v. CIT, (2006) 284 ITR 323(SC) wherein it has been held that any change in stand by assessee should have been taken through filing revised return of income. A.O. accordingly disallowed claim u/s 80HHE of Act and income was assessed ignoring claim u/s. 80HHE of Act as claim is not legally allowable as held by AO vide assessment order dated 8 ITA 8864/Mum/2010 30-12-2009 passed u/s. 143(3) read with Section 254 of Act in second round of litigation. 6.Aggrieved by assessment order dated 30-12-2009 passed by A.O. u/s. 143(3) read with Section 254 of Act in second round of litigation, assessee filed first appeal before ld. CIT(A) in second round of litigation. 7. Before ld. CIT(A), assessee reiterated submissions what were made before A.O. assessee submitted that assessee has already submitted letter dated 15th March, 2004, 16th December, 2009 and 24th December, 2009 duly signed by Mr. Gaurav Motwane confirming work done by him for assessee and payments received by him from assessee. It was submitted that letter dated 15th March, 2004 also explains why there was no written agreement between assessee and Mr. Gaurav Motwane. It was submitted that agreement can be oral and need not be in writing. copy of invoice dated 11th April, 2002 of Pixel Multimedia , proprietor Mr. Gaurav Motwane was submitted at time of original assessment. It was submitted that Mr. Gaurav Motwane has shown income of Rs. 15 lakhs and also paid tax on said income and as such disallowance of Rs. 18 lakhs will amounts to double taxation. It was submitted by assessee that since all evidences have been submitted before A.O. and disallowance made by A.O is purely on conjectures and surmises hence disallowance should be deleted. ld. CIT (A) after considering submissions of assessee observed that impugned disallowance had been made after detailed and comprehensive letter was issued to Mr.Gaurav Motwane so as to examine nature and extent of services rendered by him. ld. CIT(A) observed that disallowance was made after investigation of matter and also after it was admitted by Mr. Gaurav Motwane that there were no agreement between 9 ITA 8864/Mum/2010 him and assessee and also that there was no correspondence with assessee with particular reference to services rendered. learned CIT(A) observed that assessee also could not produce any records maintained by her neither during assessment proceedings nor during appellate proceedings or during set aside proceedings. Further it was observed by learned CIT(A) that assessee has also withdrawn claim vide letter dated 22nd October, 2003. It was observed by learned CIT(A) that in view of decision of Hon ble Bombay High Court reported in Rameshchandra & Co. v. CIT (1987) 168 ITR 375(Bom.HC) , assessee cannot be aggrieved party, when she herself has agreed to additions. It was further observed by learned CIT(A) that during set aside proceedings no further details were filed by assessee to show that withdrawal of consultancy fees paid to Mr. Gaurav Motwane was erroneous or was taken back by her . It was observed by learned CIT(A) that assessee has done work for various customers on behalf of MAZZA Media Inc as assessee does not have direct clients. assessee has not utilized services of Mr. Gaurav Motwane on ground that he has not raised any bill during year or in subsequent financial year was observation of learned CIT(A). assessee has not made any payment during year to Mr. Gaurav Motwane but had merely made provision for consultancy fee of Rs. 18 lakhs which was reflected as liability in balance sheet. Mr. Gaurav Motwane has not declared any receipt from assessee in respect of consultancy charges. As per assessee, assessee was following mercantile system of accounting whereas Mr. Gaurav Motwane had followed cash system of accounting and had accounted Rs. 15 lakhs during assessment year 2002-03 when payments were made to Mr Gaurav Motwane and balance sum of Rs. 3 lakhs was not received by Mr. Gaurav Motwane and hence not shown as his income. learned CIT(A) observed that A.O. rejected contention of assessee on ground that Mr. Gaurav Motwane also followed mercantile system of accounting. A.O. came to this conclusion on 10 ITA 8864/Mum/2010 ground that Mr. Gaurav Motwane's balance sheet for assessment year 2001-02 disclosed current liability of Rs. 44,065/- and balance sheet for assessment year 2002-03 reflected current liability in respect of outstanding expenses of Rs. 93,857/-. In original appellate proceedings ld. CIT(A) held that assertion that Mr. Gaurav Motwane had technical competence and expertise for development of software program which has resulted in creation of website cannot be accepted in absence of any positive evidence produced during assessment proceedings. learned CIT(A) observed that statement given by assessee agreeing to addition was not voluntary and that she was advised by A.O to give such statement but no evidence has been furnished by assessee in this regard to suggest that assessee was either coerced or unduly influenced to agree to addition. assessee is well educated and thus aware of her rights and obligations. It was observed by learned CIT(A) that it cannot therefore be assumed that she was intimidated or coerced by A.O to agree to addition of this nature. Thus, ld. CIT(A) confirmed addition of Rs. 18 lakhs made by A.O. in second round of litigation vide appellate order dated 22.10.2010. With regard to denial of claim of deduction u/s 80HHE of Act, assessee submitted before learned CIT(A) that A.O has rejected claim of assessee since assessee has not made claim in original return of income or in revised return of income. In support, A.O. has relied on decision of Hon ble Supreme Court in case of Goetze India Ltd. v. CIT (2006) 284 ITR 323(SC). assessee submitted that action of A.O. was not proper. ITAT in case of Chicago Pneumatic India Ltd. (2007) 15 SOT 252 (Mum) wherein Tribunal relied on decision of Hon ble Supreme Court in case of Goetze India Ltd. (supra) and held in said order that learned CIT(A) has powers coterminous with powers of A.O and appellate proceedings are continuation of 11 ITA 8864/Mum/2010 original proceedings and learned CIT(A) have entertained claim of assessee and allowed it if other provisions of law are satisfied. Tribunal has entertained claim and had directed A.O to examine claim of assessee and hence issue is stale , was contention of assessee before learned CIT(A). It was submitted that during course of reassessment set aside proceedings, assessee had filed foreign inward remittance certificate to extent of Rs. 18,43,937/-, hence, A.O. was wrong that foreign inward remittance certificates were not filed during course of reassessment. It was submitted that as per A.O. assessee had rendered services in India and assessee had not exported software so as to qualify for deduction u/s 80 HHE of Act. In this regard assessee referred to ld. CIT(A) s order wherein assessee had submitted her exhaustive objections to A.O and CIT(A) , and after going through same , ld. CIT(A) had considered same and directed that deduction u/s 80HHE of Act was allowable in principle in first round of litigation. assessee contended that A.O. has not brought on record anything fresh so as to disallow claim u/s 80HHE of Act. ld. CIT(A) in second round of litigation after considering submissions of assessee, rejected same on ground that assessee should have made claim in return of income or in revised return but assessee did not do same. ld. CIT(A) observed that even during set aside proceedings, assessee has not filed any supporting certificates of foreign inward remittances and simply stated that since issue is old, certificates were not available, hence, claim of assessee u/s 80HHE of Act is not supported by evidence. assessee is only consultant in India. appointment letter dated 24th November, 2003 is document which is produced after completion of assessment on 24th October, 2003. There is no mention of export of computer software. assessee has not filed any appointment letter or other 12 ITA 8864/Mum/2010 document showing any transaction of export of computer software during assessment proceedings or during set aside proceedings. There was not any evidence to show that assessee had exported computer software out of India, hence, learned CIT(A) held that assessee is not entitled for deduction u/s 80HHE of Act vide appellate orders dated 22.10.2010. 8.Aggrieved by appellate order dated 22.10.2010 passed by ld. CIT(A), assessee carried matter before Tribunal in second round of litigation. 9. ld. Counsel for assessee submitted that Revenue has disallowed consultancy expenses of Rs. 18 lakhs and also denied deduction u/s 80HHE of Act. ld. Counsel submitted that this is second round of litigation and ld. CIT(A) dismissed appeal of assessee on both grounds. In first round, Tribunal has set aside matter to file of A.O. in ITA No. 1470/Mum/2005 and ITA No. 1731/Mum/2005 vide orders dated 26th May, 2008. It was submitted that assessee got contract from MAZZA Media Inc., USA for conceptualization and designing for their website, planning features and news events on website and development of content for other media for MAZZA Media Inc., USA. It was submitted that out of total receipt from MAZZA Media Inc., USA, assessee had incurred expenditure of Rs. 18 lacs for services rendered by Mr. Gaurav Motwane. Provision for consultancy expenses were made for Rs. 18 lacs during relevant assessment year with respect to consultancy services rendered by Mr. Gaurav Motwane for which payment of Rs. 15 lacs was made to Mr. Gaurav Motwane in immediately subsequent year i.e. assessment year 2002-03 which has been offered to tax by said Mr. Gaurav Motwane by declaring said income of Rs.15 lacs received in previous year relevant to assessment year 2002-03 as income of assessment year 2002-03 and paid due taxes on these 13 ITA 8864/Mum/2010 income to Revenue. It was submitted by learned counsel for assessee that assessee agreed for additions before AO in first round of litigation under insistence from AO. ld. Counsel relied on decision of Hon ble Bombay High Court reported in Rameshchandra & Co. v. CIT (1987) 168 ITR 375(Bom.HC) and submitted that retraction was filed by way of affidavit before learned CIT(A) as A.O. insisted assessee to surrender amount. Mr. Gaurav Motwane had given letter to A.O. dated 24th December, 2009 stating that he has rendered services and said amount was offered to tax in return of income filed by said Mr Gaurav Motwane with Revenue in assessment year 2002-03. Mr. Gaurav Motwane has duly paid taxes on said amount of Rs. 15 lacs received by him during assessment year 2002-03 and hence there is no evasion of taxes. It was submitted that A.O. could have summoned Mr. Gaurav Motwane u/s 131 of Act in set aside proceedings and cross examined him. ld. Counsel also relied on following case laws and contended that where there is no tax evasion and hence no disallowance is called for :- 1. Ashish Plastic Industries v. ACIT, (2015)373 ITR 45 (SC) 2. CIT v. Indo Saudi Services (Travel) P. Ltd., 310 ITR 306 (Bom) 3. ACIT v. Malhar Information Services, 307 ITR (AT) 29 (Mumbai It was submitted by learned counsel for assessee that if there is no tax evasion , Section 40A(2) of Act cannot be invoked. With respect to denial of deduction u/s 80 HHE of Act by A.O. on ground that assessee has not claimed same in original return of income nor filed revised return of income. claim is filed with ld. CIT(A) for first time in original proceedings. ld. Counsel for assessee submitted that there is computer software export through internet. 14 ITA 8864/Mum/2010 money has come in form of convertible foreign exchange. auditors certificate was also given in form no 10CCAF. assessee relied on following decisions:- 1. Nirmala L. Mehta v. CIT 269 ITR 1 (Bombay HC) 2. Rachana S. Talreja v. DCIT 16 ITR (Trib) 53 (Mumbai) On being asked by Bench, assessee submitted that assessee did not filed any Softex form with government authorities as mandated under law for exporting computer software. assessee submitted that assessee was assigned job of designing website by Maaza Media Inc, USA and assessee was Editor-in-Chief of Maaza Entertainment India Private Limited , company promoted by Maaza Media Inc., USA in India and they are two different assignments. 10. ld. D.R. submitted that there is no documentary evidence submitted by assessee with respect to consultancy expenses of Rs. 18 lacs paid by her to her husband Mr. Gaurav Motwane. No copy of agreement was submitted by assessee. No document has been furnished to prove that husband of assessee Mr. Gaurav Motwane has rendered services to assessee. It is also not brought on record that Sh. Gaurav Motwane is computer software professional. There is no proof that her husband Mr Gaurav Motwane has paid taxes on Rs. 15 lacs received by him from assessee in immediately succeeding assessment year which is not emanating from record. learned DR drew our attention to para 3.1 of appellate orders of learned CIT(A) dated 22.10.2010. ld. D.R. drew our attention to paper book page 20 & 21 whereby balance sheet of assessee is placed and also drew our attention to P&L account vide paper book page 29 to 39 of Mr. Gaurav Motwane is placed. With respect to second issue of claim under Section 80HHE of Act, ld. D.R also drew 15 ITA 8864/Mum/2010 our attention to paper book page 51 to 56 whereby purpose of remittance received in convertible foreign exchange as mentioned in FIRC is consultancy fees and not export of computer software. It was submitted that no claim for deductions u/s. 80HHE of Act was made by assessee in original return of income and hence assessee is now not entitled to deduction u/s. 80HHE of Act as no revised return of income has been filed by relying on decision of Hon ble Supreme Court in case of Goetze India Limited(supra). Further no such claim for deduction u/s 80HHE of Act was made in subsequent years by assesssee. It is submitted by learned DR before Tribunal that this is second round of litigation and even in set aside proceedings , no evidences were filed by assessee to prove her claim of deduction u/s 80HHE of Act. assessee did not submitted FIRC even in second round of litigations and now copies of FIRC are filed before Tribunal and genuineness and authenticity of FIRC cannot be determined. 11. In rejoinder, ld. Counsel for assessee submitted that decision in case of Goetze India Limited(supra) does not apply in this case as claim can always be lodged with appellate authorities. It was submitted that Tribunal has power to consider new claim during appellate proceedings and in any case in first round of litigation Tribunal set aside issue and directed AO to verify claim of assessee which itself indicate that claim with respect to allowability of deduction u/s. 80HHE of Act was admitted by Tribunal in first round of litigation itself. In nutshell ld. Counsel submitted that claim of assessee may be accepted. 12. We have considered rival contentions and also perused material available on record including case laws relied upon by rival parties. We have observed that assessee rendered services to overseas client MAZZA Media 16 ITA 8864/Mum/2010 Inc., USA for which assessee has received income in foreign exchange against which assessee has submitted copies of FIRC wherein purpose of foreign remittance mentioned in FIRC is consultancy fees , copies of FIRC are placed at page 51-66/paper book. assessee has also submitted certificate from MAZZA Media Inc., USA that assessee is assigned overall responsibility of developing website, providing content and site development activities for said concern. said letter is placed at paper book page 44. assessee has also placed certificate from her husband Mr. Gaurav Motwane with respect to services rendered by him to assessee , which certificate is placed at paper book page 45 wherein Gaurav Motwane has stated that he rendered consultancy services to assessee relating to developing brand strategy through internet and development of various communication tools during previous year relevant to assessment year 2001-02 . said Gaurav Motwane has also raised invoice on assessee dated 11-04-2002 for Rs.20,06,000/- against which assessee made provision of Rs. 18 lacs towards consultancy expenses in instant assessment year 2001-02 which is placed in paper book /page 41-43 and professional and educational profile of Mr. Gaurav Motwane was also placed vide paper book pages 40 to contend capabilities of Mr Gaurav Motwane to perform job undertaken by him. It is say of ld. Counsel for assessee that assessee is following mercantile system of accounting which is supported by tax audit report u/s 44AB of Act issued by chartered accountant which is filed by assessee and also balance sheet, which are placed at paper book pages 18 to 28 whereby it is mentioned that she is following mercantile system of accounting in tax audit report(page 22/pb) issued by chartered accountant to justify making provision for consultancy expenses of Rs 18 lacs in books of accounts for instant assessment year. Further it is say of learned counsel for assessee that her husband Mr. Gaurav Motwane is following cash system of accounting which contention is 17 ITA 8864/Mum/2010 supported by audited accounts and tax audit report u/s 44AB of Act issued by chartered accountant of Sh Gaurav Motwane , which are placed at paper book pages 29 to 39 whereby it is mentioned in tax audit report issued by chartered accountant in case of Mr Gaurav Motwane that said Mr Gaurav Motwane is in business of website development and consultancy as well following cash basis of accounting(pb/page 33) , to justify offering of income of Rs. 15 lacs by Gaurav Motwane to tax in succeeding assessment year i.e. 2002-03 on receipt basis as assessee made payment of Rs. 15 lacs in previous year 2001-02 relevant to assessment year 2002-03 against provisions of consultancy expenses of Rs 18lacs in her books of accounts in previous year 2000-01 relevant to assessment year 2001-02 . ld. Counsel for assessee had submitted that assessee made provision for consultancy expenses of Rs. 18 lacs towards consultancy fee payable to Mr. Gaurav Motwane in her books of account during previous year relevant to assessment year 2001-02 on accrual basis against which assessee has made payment of Rs. 15 lacs to Mr. Gaurav Motwane in succeeding previous year relevant to assessment year i.e. 2002-03 which are stated to be included by Mr. Gaurav Motwane in his return of income filed with Revenue and due taxes are stated to have been paid to Revenue , on receipt basis. assessee has also filed affidavit explaining manner in which assessee surrendered amount at insistence of assessee, which is placed at paper book page 48 to 50 and its retraction thereof. In our considered view keeping in view facts and circumstance of case and also in interest of substantial justice , assessee has duly discharged primary onus cast on her and has brought on record sufficient material to substantiate her contention that assessee has received consultation fee for website development from MAZZA Media Inc.,USA and also with respect to her claim for deduction of expenses towards consultancy fee of Rs. 18 lacs payable to Mr. Gaurav Motwane subject to verification of claim and contentions of 18 ITA 8864/Mum/2010 assessee that Mr. Gaurav Motwane has included income of Rs.15 lacs received from assessee in return of income filed by him with Revenue for assessment year 2002-03 and due taxes are paid to Revenue, as from records before us aforesaid contention of assessee could not be verified. Thus, we are setting aside and restoring this matter to file of AO for purposes of limited verification whether said Mr. Gaurav Motwane has included Rs. 15 lacs received from assessee as income in his return of income for assessment year 2002-03 filed with Revenue and paid due taxes to Revenue and with respect to balance Rs. 3 lacs similar verification be carried out by AO on same lines. In our considered view, claim of assessee for deduction of Rs 18 lacs as consultancy fee payable to her husband Mr Gaurav Motwane is allowable subject to necessary limited verification by A.O. as indicated by us above.We order accordingly. 16. With respect to claim of deduction u/s 80 HHE of Act, we have observed that said claim was raised for first time before ld. CIT(A) in first round of litigation and same was not raised by assessee vide return of income filed with Revenue nor vide revised return filed with Revenue. Tribunal has directed A.O. to verify same and observation of Tribunal are as under:- We have considered issues and submissions. As seen from file assessee earned software consultancy charges/fee from M/s Mazaa Media, INC and claimed amount of Rs. 18,00,000/- payable to M/s Pixel Multimedia, owned, by her husband Shri Gaurav Motwane. It is also fact that only Amount of Rs. 15,00,000/- was paid in later year which was offered to tax. As different methodology of accounting is followed by husband and wife Assessing Officer considered amount 19 ITA 8864/Mum/2010 and did not allow as same was not offered by husband in assessment year. It is submission of assessee that Mr. Gaurav Motwane is also qualified software person and amount is payable to him for developing web services and there are evidences that services were utilized by assessee. As nature of services and expenditure on services has not been examined by Assessing Officer in detail and further as claim of 80 HHE has been made for first time before CIT(A) and both assessee and Department are aggrieved, in interest of justice, we restore matter back to file of Assessing Officer for fresh consideration. Assessing Officer is free to examine claim of assessee with reference to amount paid or payable to Mr. Gaurav Motwane and also with reference to claim of 80 HHE. issue is to be decided afresh on facts and as per law. To that extent grounds are considered partly allowed in both appeals. In second round of litigation, authorities rejected claim of assessee with respect to deduction u/s 80HHE of Act. claim has been rejected on ground that same has not been filed in return of income filed with Revenue as well not filed vide revised return of income with Revenue while said claim was raised in appellate proceedings for first time before learned CIT(A) in first round of litigation. other ground of rejection was that claim of assessee is not supported by any evidence. Section 80 HHE of Act as was applicable for assessment year 2001-02 stood as under:- Section 80 HHE of Act read as under: [Deduction in respect of profits from export of computer software, etc. 20 ITA 8864/Mum/2010 80HHE. (1) Where assessee, being Indian company or person (other than company) resident in India, is engaged in business of, (i) export out of India of computer software or its transmission from India to place outside India by any means; (ii) providing technical services outside India in connection with development or production of computer software, there shall, in accordance with and subject to provisions of this section, be allowed, in computing total income of assessee, [a deduction of profits] derived by assessee from such business. [***] [Provided that if assessee, being company, engaged in export out of India of computer software, issues certificate referred to in clause (b) of sub-section (4A), that in respect of amount of export specified therein, deduction under this sub-section is to be allowed to supporting software developer, then amount of deduction in case of assessee shall be reduced by such amount which bears to total profits derived by assessee from export, same proportion as amount of export turnover specified in such certificate bears to total export turnover of assessee. (1A) Where assessee, being supporting software developer, has during previous year, developed and sold computer software to exporting company in respect of which said company has issued certificate under proviso to sub- section (1), there shall, in accordance with and subject to provisions of this section, be allowed in computing total income of assessee deduction of profits derived by assessee from developing and selling of computer software to exporting company in respect of which certificate has been issued by said company [to such extent and for such years as specified in sub-section (1B)].] following sub-section (1B) shall be inserted after sub-section (1A) of section 80HHE by Finance Act, 2000, w.e.f. 1-4-2001: (1B) For purposes of sub-sections (1) and (1A), extent of deduction of profits shall be amount equal to (i) eighty per cent of such profits for assessment year beginning on 1st day of April, 2001; (ii) sixty per cent of such profits for assessment year beginning on 1st day of April, 2002; 21 ITA 8864/Mum/2010 (iii) forty per cent of such profits for assessment year beginning on 1st day of April, 2003; (iv) twenty per cent of such profits for assessment year beginning on 1st day of April, 2004, and no deduction shall be allowed in respect of assessment year beginning on 1st day of April, 2005 and any subsequent assessment year. (2)The deduction specified in sub-section (1) shall be allowed only if consideration in respect of computer software referred to in that sub-section is received in, or brought into, India by assessee in convertible foreign exchange, within period of six months from end of previous year or, [within such further period as competent authority may allow in this behalf]. Explanation [1]. said consideration shall be deemed to have been received in India where it is credited to separate account maintained for purpose by assessee with any bank outside India with approval of Reserve Bank of India. [Explanation 2. For purposes of this sub-section, expression competent authority means Reserve Bank of India or such other authority as is authorised under any law for time being in force for regulating payments and dealings in foreign exchange.] (3) For purposes of sub-section (1), profits derived from business referred to in that sub-section shall be amount which bears to profits of business, same proportion as export turnover bears to total turnover of business carried on by assessee. [(3A) For purposes of sub-section (1A), profits derived by supporting software developer shall be, (i) in case where business carried on by supporting software developer consists exclusively of developing and selling of computer software to one or more exporting companies solely engaged in exports, profits of such business; (ii) in case where business carried on by supporting software developer does not consist exclusively of developing and selling of computer software to one or more exporting companies, amount which bears to profits of business, same proportion as turnover in respect of sale to respective exporting company bears to total turnover of business carried on by assessee.] 22 ITA 8864/Mum/2010 (4)The deduction under sub-section (1) shall not be admissible unless assessee furnishes in prescribed form, along with return of income, report of accountant, as defined in Explanation below sub-section (2) of section 288, certifying that deduction has been correctly claimed in accordance with provisions of this section. [(4A) deduction under sub-section (1A) shall not be admissible unless supporting software developer furnishes in prescribed form along with his return of income, * (i) report of accountant, as defined in Explanation below sub- section (2) of section 288, certifying that deduction has been correctly claimed on basis of profits of supporting software developer in respect of sale of com- puter software to exporting company; and (ii) certificate from exporting company containing such particulars as may be prescribed and verified in manner prescribed that in respect of export turnover mentioned in certificate, exporting company has not claimed deduction under this section : Provided that certificate specified in clause (b) shall be duly certified by auditor auditing accounts of exporting assessee under provisions of this Act or under any other law.] (5) Where deduction under this section is claimed and allowed in respect of profits of business referred to in sub-section (1) for any assessment year, no deduction shall be allowed in relation to such profits under any other provision of this Act for same or any other assessment year. Explanation. For purposes of this section, (a) convertible foreign exchange shall have meaning assigned to it in clause (a) of Explanation to section 80HHC; (b) computer software means any computer programme recorded on any disc, tape, perforated media or other information storage device and includes any such programme [or any customised electronic data] which is transmitted from India to place outside India by any means; following item (b) shall be substituted for existing item (b) in Explanation below sub-section (5) of section 80HHE by Finance Act, 2000,w.e.f. 1-4-2001 : (b) computer software means, 23 ITA 8864/Mum/2010 (i) any computer programme recorded on any disc, tape, perforated media or other information storage device; or (ii) any customised electronic data or any product or service of similar nature as may be notified by Board, which is transmitted or exported from India to place outside India by any means; (c) export turnover means consideration in respect of computer software received in, or brought into, India by assessee in convertible foreign exchange in accordance with sub-section (2), but does not include freight, telecommunication charges or insurance attributable to delivery of computer software outside India or expenses, if any, incurred in foreign exchange in providing technical services outside India; [(ca) exporting company means company referred to in sub-section (1) making actual export of computer software;] (d) profits of business means profits of business as computed under head Profits and gains of business or profession as reduced by (1) ninety per cent of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of similar nature included in such profits; and (2) profits of any branch, office, warehouse or any other establishment of assessee situate outside India; (e) total turnover shall not include (i) any sum referred to in clauses (iiia), (iiib) and (iiic) of section 28; (ii) any freight, telecommunication charges or insurance attributable to delivery of computer software outside India; and (iii) expenses, if any, incurred in foreign exchange in providing technical services outside India.] [(ea) supporting software developer means Indian company or person (other than company) resident in India, developing and selling computer software to exporting company for purposes of export.] 24 ITA 8864/Mum/2010 As could be seen above that said section is beneficial provisions and hence said provisions is to be strictly construed at first initial stage to determine eligibility of tax-payer for grant of relief and once eligibility and entitlement of tax-payer for deduction u/s. 80HHE of Act is established , then full effect is to be given to beneficial provision by liberally construing same so that intended objective of beneficial provision is achieved . assessee has stated to have received payment from MAZZA Media Inc.,USA towards consultancy fees for designing website and content development as per records before us. We have observed that assessee is not able to substantiate and prove by cogent evidences that assessee exported any computer software which falls within four corners of definition of computer software mandated by provisions of said section. On being asked by Bench to bring on record evidences of actual export of computer software, assessee could not bring same on record such as filing of softex form etc . and other cogent evidences to substantiate actual export of computer software to become eligible for claim u/s 80HHE of Act. In our considered view, assessee could not bring on record cogent evidences of having actually exported any computer software within mandate of Section 80HHE of Act to be eligible for deduction u/s 80HHE of Act. assessee has also not produced any certificate such as softex form etc regarding declaration of export of computer software with Government Authorities which is mandatory requirement stipulated by Government of India for declaration of export of computer software. In absence of any evidence on record, claim of assessee for deduction u/s 80HHE of Act cannot be allowed as assessee is consultant providing website designing and content development for web site of Maaza Media, Inc , USA, whereby based on material on record it cannot be said that assessee has actually exported any computer software as mandated u/s 80HHE of Act in absence of cogent evidences on record. As such claim of deduction u/s 80 HHE of Act as filed by assessee 25 ITA 8864/Mum/2010 cannot be allowed to assessee and hence in our considered view deduction u/s 80 HHE of Act cannot be granted to assessee on merits itself as claimed by assessee based on material on record.We order accordingly. 17. In result, appeal filed by assessee in ITA No. 8864/Mum/2010 for assessment year 2001-02 is partly allowed as indicated above. Order pronounced in open court on 5th October, 2016. 05-10-2016 Sd/- sd/- (C.N. PRASAD) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 05-10-2016 R.K., Ex. Sr. PS Copy of Order forwarded to : 1. Appellant 2. Respondent. 3. CIT(A)- concerned, Mumbai 4. CIT- Concerned, Mumbai 5. DR, ITAT, Mumbai E Bench 6. Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, Mumbai Superna R. Motwane v. Dy. Commissioner of Income Tax, Circle – 19(1), Mumbai