2014 (7) TMI 798

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....come of assessee." 2. The assessee is an export oriented unit seeking exemption u/s.10B. During the course of assessment proceedings AO noted that during the year assessee reimbursed an amount of Rs. 45,30,492/- to its group concern (not eligible under section 10B) namely Pyramid Consulting Engineering Pvt. Ltd. (PCEPL) This amount was paid for cost of employees of PCEPL which were hired by assessee (PEPL) for doing the work. The assessee has shown this as professional fee given to sister concern. The AO was of the view that provisions of section 10B(7) r.w.s. 80IA (10) are applicable in the case of the assessee and held that the profit of the assessee to the extent of Rs. 20,33,505/- are more than ordinary profits because of transactions ....

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....he AO for the purpose of allowing deduction u/s 10B may take the amount of profit as may be reasonably deemed to have been earned by the assessee. In this case the assessee which is engaged in the business of export had hired some employees from the sister concern which had been reimbursed at cost. The AO, therefore, has concluded that the assessee has produced more than ordinary profit corresponding to the revenue earned in relation to the hired employees which has been computed on proportionate basis at Rs. 757068/- . AO had treated the entire revenue as profit earned after deducting the cost of employees hired. The approach adopted by the AO is prima facie incorrect. For applying the provisions of section 10 B(7) read with section 80IA(1....

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....ther the CIT(A)-1, Thane was justified in restricting the amount of disallowance u/s. 40(a)(ia) to the extent of the amount of expenditure payable as on 31.03.2009." 6. The AO also disallowed a sum of Rs. 45,30,492/- under section 40(a)(ia) of the Income tax Act as the assessee did not deduct the TDS on the professional charges paid to its sister concern. The assessee contended before CIT(A) that this amount was paid to the sister concern as re-imbursement of cost of employees and, therefore, there was no element of profit and consequentially no tax was required to be deducted under section 194J/192 of the Act. The assessee also relied upon the decision of the Special Bench of the Tribunal in the case of Merlyn Shipping & Transports vs. Ad....

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....9;ble Jurisdictional High Court has held in para-12 as under :-            "12. By reason of the judgment of the Supreme Court in CIT v. Alom Extrusions Ltd. [2009] 319 ITR 306 the employer's contribution was liable to be allowed, since it was deposited by the due date for the filing of the return. The peculiar position, however, as it obtains in the present case arises out of the fact that the disallowance which was effected by the Assessing Officer has not, the Court is informed, been challenged by the assessee. As a matter of fact the question of law which is formulated by the revenue proceeds on the basis that the assessed income was enhanced due to the disallowance of the employer&....