Per Ahmad Fareed, Accountant Member. - This appeal by the department is directed against the order of CIT(A) dated 30-3-2006 for assessment year 2001-02.

2. The only issue involved in this appeal is whether, on the facts of the case, the profits of the assessee-company would qualify for deduction under section 10A of the Act. The grounds raised by the department are as under :

1.The order of the learned CIT(A) is contrary to law and facts and circumstances of the case.

2.The learned CIT(A) has erred in directing the Assessing Officer to allow deduction under section 10A to the assessee as claimed by the assessee.

3.The learned CIT(A) has failed to note that the software technology parks of India has expressed its inability to certify the exports of the assessee in the absence of guidelines.

4.The learned CIT(A) failed to consider the fact that the magnitude or scale of operation carried out by the assessee had not resulted in actual exports out of India and export out of India is the primary and sine qua non criterion for allowing deduction under section 10A.

5.The learned CIT(A) has failed to consider the fact that the assessee has shifted its operations from H.R. services to software development in the subsequent assessment year thereby the possibility of recruiting and sending further candidates abroad is ruled out.

6.The learned CIT(A) ought to have seen that many of the candidates allegedly recruited had denied having been trained or offered employment abroad. Out of 54 allegedly recruited, 23 were absorbed by the assessee. The learned CIT(A) ought to have appreciated that the turnover disclosed had no correlation to either the amount receivable as per agreement or actual services rendered.

7.For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer restored.

3. The assessee, a private limited company, was incorporated on 20-6-2000 in the name of Pinnacle Info Solutions Private Limited. Its name was subsequently changed to Accurum India Private Limited on 9-6-2004. The assessee-company was promoted by a US-based corporate entity, Pinnacle Systems Inc., New Jersey, USA as a 100 per cent subsidiary.

3.1 Pinnacle Systems Inc., the parent company, was incorporated in USA in 1995 and was doing business in the areas of software consultancy (providing recruitment and placement of qualified/trained software professional for performing assigned tasks at different client locations) and software application development. The equity shares of this company are held by three persons as under :

4. The objects of the assessee-company, as per the Memorandum of Association were, inter alia, to perform Information Technology human resource talent search and technical orientation services, and to establish, set-up, maintain, and conduct training schools, courses and programmes in connection with purchase and sale of software The assessee-company was registered as 100 per cent EoU under the Software Technology Parks Scheme with STPI, Chennai.

5. A copy of letter dated 31-10-2001, written by The Software Technology Parks of India, an autonomous society under the Government of India, Ministry of Information Technology, to the RBI, Chennai, has been filed at page 16 of the paper book, and it reads as under :

"M/s. Pinnacle Info Solutions (P.) Ltd., is an 100 per cent EOU, registered under STP Scheme approved vide No STPIC/IMSC/2091, dated 31-10-2000. The unit is into Software Development and Sourcing of Technical Talent (Recruitment) and Training. The unit has requested for the No Objection Certificate for Sourcing of Technical Talent (Recruitment) and Training. This office is unable to certify the invoices raised by the unit for the above job, due to the non-availability of suitable