Limited remand scope and transfer pricing adjustments barred deduction under sections 10A and 10B

The Tribunal held that the Commissioner (Appeals) exceeded the limited scope of remand by allowing deduction under section 10B when the earlier appellate direction was confined to verification of the alternative claim under section 10A. Since deduction under section 10B had already been negatived, that issue was not open for reconsideration. The Tribunal also noted that, because the addition arose from a transfer pricing adjustment under section 92CA(3), the resulting income was not eligible for deduction under sections 10A or 10B in view of section 92CA(4). The order granting relief was reversed and the Revenue's appeal succeeded.

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Issues: Whether the assessee was entitled to deduction under section 10B of the Income-tax Act, 1961 in the remand proceedings, and whether the Commissioner (Appeals) could direct such allowance when the earlier appellate order had confined the matter to deduction under section 10A.

Analysis: The matter had earlier been remanded only for verification of the assessee's alternative claim for deduction under section 10A. The Tribunal had already held that the assessee was not entitled to deduction under section 10B, and that issue was no longer open. The Commissioner (Appeals), by relying on a judgment dealing with a different factual context, allowed deduction under section 10B instead of examining the limited remand issue. The Tribunal held that this exceeded the scope of remand and amounted to ignoring its earlier direction. It also noted that, in the presence of an adjustment under section 92CA(3), the resultant addition was not eligible for deduction under either section 10A or section 10B in view of section 92CA(4).

Conclusion: The claim for deduction under section 10B could not be allowed, and the Commissioner (Appeals) was wrong in directing such relief.

Final Conclusion: The order granting deduction was reversed and the Revenue's appeal succeeded.

Ratio Decidendi: An appellate authority cannot travel beyond the limited scope of remand or grant a deduction already negatived in earlier proceedings, and additions arising from transfer pricing adjustment are not eligible profits for deduction under sections 10A or 10B.

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