Television news software produced was eligible for deduction 80HHE as customized electronic data which is transmitted from India to a place outside India.
ABCAUS Case Law Citation:
ABCAUS 2049 (2017) (08) HC
The appellant Revenue was aggrieved by the order of the ITAT in allowing deduction u/s 80HHE for Television news software produced.
The Substantial Question of Law framed for determination:
Whether the ITAT was correct in law in holding that the television news software produced and exported by the Respondent/Assessee outside the country was customised electronic data eligible for deduction under Section 80 HHE of the Income Tax Act, 1961?”
Assessment Year : 1999-2000
Important Case Laws Cited/relied upon by the parties:
Regional Director, Employees’ State Insurance Corporation v. High Land Coffee Works of P.F.X. Saldanha and Sons (1991) 3 SCC 617
Brief Facts of the Case:
The respondent assessee, (NDTV) was engaged inter alia in the production of news software television programmes. The return of the assessee for the relevant year was selected for scrutiny and notice u/s 143(2) of the Act was served by the Assessing Officer (AO) . Also a notice u/s 142(1) along with a questionnaire was also issued.
The assessee had claimed a deduction under Section 80HHE of the Act. It was explained to the AO that the production process involved collection of news by receiving inputs by way of audio/video footage of various news stories, editing/processing the same and conversion of machine signals into images.
The AO noted that in terms of clause (b) of the Explanation to Section 80HHE, deduction can be allowed only if “export of computer software is made” Accordingly, the AO disallowed the deduction under Section 80HHE on the ground that the assessee company was not engaged in the production and export of computer software..
Another ground on which the deduction was refused was that according to the AO, the agreement between NDTV and NTVI and the MoU dated 21st March 1998 between the Assessee and STAR TV/NTVI showed that the Assessee was not an exporter of computer software. It was only engaged in the production of news programmes which were being handed over to NTVI for uplinking and onward transmission. The Assessee had taken on lease satellite space from VSNL and had sub-leased it to NDTVI. Accordingly, it was concluded by the AO that the assessee was not involved in the export of television programmes.
Observations made by the High Court:
The Hon’ble High Court observed that Explanation (b) to Section 80HHE, as it stood during the AY, in question read as under:
‘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 customized electronic data which is transmitted from India to a place outside India by any means.’
The above clause (b) was substituted with effect from 1st April 2001 by the FA 2000, as under:
“(b) ‘computer software’ means – (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 the Board. which is transmitted or exported from India to a place outside India by any means.”
It was noted that there are two parts to the definition ‘computer software’. First is the exhaustive definition where the word “computer software” is used and this is followed by ‘any computer programme recorded on any disc, tape, perforated media’. Then there was the inclusive part of the definition where the word included any such programme or any customized electronic data. The expression ‘any customized electronic data’ was preceded by the disjunctive ‘or’ which clearly indicated that any customized electronic data would also be considered to be ‘computer software’ under the inclusive part of the definition. The principle of ejusdem generis will not apply in the instant case particularly in the context under which this provision was introduced.
The Hon’ble High Court noted that the CBDT Circular No. 772 dated 23rd December 1998 explained the rationale behind introduction of these words. It acknowledged that “software exports have grown exponentially in recent years” and there was need to increase India’s market share in the international arena. Therefore, the expression ‘any customized electronic data’ requires a liberal interpretation. The amendment to clause (b) of the Explanation made it more explicit.
The Hon’ble High Court thus observed that section 80HHF(1) now envisages computer software including television news software. Therefore, the position for the AY 2000-01 onwards was not in doubt.
The Court found that the assessee had been able to demonstrate that the television news software produced by it for the AY in question was indeed ‘customized electronic data’ which was exported from India to a place outside India. The Court opined that the entire process of making the programmes was to meet the requirement of STAR TV during the AY in question and the use of several software programmes for such production was sufficient to enable the ITAT to conclude in favour of the Assessee.
The conclusion reached by the ITAT was affirmed but for the reasons different from that given by it.