Appellant's Appeal Partly Allowed with Remand for Fresh Adjudication

The appellant's appeal was partly allowed, with specific issues remanded back to the Assessing Officer/TPO for fresh adjudication following earlier Tribunal orders. The Tribunal upheld internal benchmarking for determining the Arm's Length Price and treated notice period pay as income derived from the eligible undertaking for Section 10A deduction. The Tribunal directed the AO to determine interest expenses based on borrowing and asset use dates and allowed interest deduction accordingly. The general ground against levying interest under Section 234B and Section 234C was not specifically addressed by the Tribunal.

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Issues Involved:
1. Adjustment of Rs. 30,08,43,288 to the income of the appellant on account of the alleged difference in the arm's length price of international transactions.
2. Disallowance of miscellaneous income amounting to Rs. 30,76,102 by considering it as income from other sources.
3. Ad-hoc disallowance of interest expenses amounting to Rs. 1,58,70,000.
4. Levying of interest under Section 234B and Section 234C of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Adjustment of Rs. 30,08,43,288 to the Income of the Appellant:
The appellant contested the adjustment made by the Assessing Officer (AO) on account of the difference in Arm's Length Price (ALP) amounting to Rs. 30,08,43,288. The appellant argued that the issue was covered in their favor by earlier orders of the ITAT in their own case, with the latest order dated 28.07.2014 for the assessment year 2009-10. The Tribunal had previously held that the appellant was justified in undertaking internal benchmarking analysis on a standalone basis by placing on record the working of operating profit margin from international transactions with AEs and unrelated parties. The Tribunal directed the AO/TPO to determine the ALP by making an internal comparison of profitability from international transactions with AEs and unrelated parties after allocating respective revenues and expenses to both segments. The current facts being identical to those in the earlier years, the Tribunal set aside the issue to the file of the AO/TPO to be decided as directed for the assessment year 2009-10.

2. Disallowance of Miscellaneous Income Amounting to Rs. 30,76,102:
The AO treated the notice pay earned by the appellant as income from other sources and held that it did not form part of business income for the claim of exemption under Section 10A of the Income Tax Act. The appellant argued that this issue was covered by earlier orders of the Tribunal in their own case, where the Tribunal had held that the amount received towards notice period pay was to be treated as income derived from the eligible undertaking. The Tribunal, following its earlier orders, decided this issue in favor of the appellant, holding that the amount received towards notice period pay should be treated as income derived from the eligible undertaking and allowed the deduction under Section 10A accordingly.

3. Ad-hoc Disallowance of Interest Expenses Amounting to Rs. 1,58,70,000:
The AO disallowed interest expenses on the grounds that the interest paid on short-term loans, which were invested in the acquisition of fixed assets, should be capitalized along with the fixed assets. The appellant argued that this issue was also covered by the Tribunal's order dated 28.07.2014 for the assessment year 2009-10. The Tribunal noted that the AO had not undertaken the necessary exercise to find out the date on which the fund was borrowed for the acquisition of assets and the date on which the assets were put to use. The Tribunal remanded the issue back to the file of the AO with directions to determine these dates and capitalize the interest incurred for the period between the date of borrowing and the date the asset was put to use, and allow interest deduction from the date the asset was put to use.

4. Levying of Interest under Section 234B and Section 234C:
The appellant raised a general ground against the levying of interest under Section 234B and Section 234C of the Income Tax Act. The Tribunal did not provide specific comments on this ground as it was general in nature.

Conclusion:
The appeal of the appellant was partly allowed for statistical purposes, with specific issues being remanded back to the file of the AO/TPO for fresh adjudication in accordance with the directions provided in the Tribunal's earlier orders. The Tribunal consistently followed the principle of internal benchmarking for determining the ALP and treated notice period pay as income derived from the eligible undertaking for the purpose of Section 10A deduction.

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