Assessee's appeal allowed for statistical purposes, Revenue's appeal dismissed.

The Tribunal allowed the assessee's appeal for statistical purposes, remitting various issues for fresh examination, and dismissed the Revenue's appeal. The order was pronounced on October 21, 2016.

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Issues Involved:
1. Transfer Pricing Adjustment on Interest Earned on Loans to Associated Enterprises (AEs)
2. Disallowance under Section 14A of the Income Tax Act
3. Excess Deduction under Section 10A / 10AA of the Income Tax Act
4. Short Credit of Tax Deducted at Source (TDS)
5. Levy of Interest under Section 234B of the Income Tax Act
6. Revenue's Appeal on Exclusion of Items from Export Turnover for Section 10A Deduction

Issue-wise Detailed Analysis:

1. Transfer Pricing Adjustment on Interest Earned on Loans to Associated Enterprises (AEs):
The assessee, Sasken Communication Technologies Ltd, benchmarked its interest transactions against the LIBOR using the CUP method, receiving higher interest rates of 4.61% and 3.24% compared to the 0.79% LIBOR rate. However, the TPO compared the interest rate to corporate bonds in India, considering the loans to be high-risk and assigning them a BB grade with a 14.74% interest rate, resulting in an addition of Rs. 2,67,68,300 to the assessee's ALP. The DRP confirmed this addition. The assessee filed a rectification petition, arguing errors in the TPO's computation, but the TPO rejected it. The Tribunal remitted the issue to the TPO for fresh examination in light of the new materials and ratios.

2. Disallowance under Section 14A of the Income Tax Act:
The AO disallowed Rs. 1,28,29,387 under Section 14A, invoking Rule 8D, as the assessee had not maintained separate accounts for investments yielding exempt income. The DRP upheld this disallowance, stating that investment decisions are complex and require administrative expenses. The AR argued that the disallowance was made without demonstrating the incorrectness of the assessee's claim and cited the Finance Minister's Budget Speech and subsequent amendments to Rule 8D. The Tribunal remitted the issue to the AO for fresh examination in light of the amendments.

3. Excess Deduction under Section 10A / 10AA of the Income Tax Act:
The AO added Rs. 16,43,07,085 under the caption 'Excess deduction u/s.10A / 10AA', excluding royalty income and certain expenses from export turnover. The DRP did not give specific directions on these exclusions despite the assessee's objections. The Tribunal noted that the AO and DRP had not properly examined these issues and remitted them to the AO for fresh adjudication in light of relevant case laws.

4. Short Credit of Tax Deducted at Source (TDS):
The assessee claimed a shortfall in TDS credit of Rs. 14,08,748. The DRP directed the AO to verify and give credit accordingly. The Tribunal upheld this direction, instructing the AO to allow the TDS credit as claimed by the assessee.

5. Levy of Interest under Section 234B of the Income Tax Act:
The assessee challenged the levy of interest under Section 234B, which the Tribunal noted as consequential. The AO was directed to provide consequential relief.

6. Revenue's Appeal on Exclusion of Items from Export Turnover for Section 10A Deduction:
The Revenue appealed against the DRP's direction to exclude items deducted from export turnover from total turnover for Section 10A deduction, following the jurisdictional High Court's judgment in Tata Elxsi Ltd v. CIT. The Tribunal dismissed the Revenue's appeal, stating that the DRP's order was in line with the High Court's judgment.

Conclusion:
The Tribunal allowed the assessee's appeal for statistical purposes, remitting several issues for fresh examination, and dismissed the Revenue's appeal. The order was pronounced in open court on October 21, 2016.

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