TaxTMI 
TaxTMI 
2015 (1) TMI 773
X X X X Extracts X X X X
X X X X Extracts X X X X
....the international transaction was referred to the Transfer Pricing Officer (TPO) u/s 92CA of the Act. The TPO determined the arms' length adjustment at Rs. 1,55,10,077/-. In consonance with the order of the TPO, the AO proposed the addition of Rs. 1,55,10,077/- and also made certain disallowances while computing deduction u/s 10A of the Act in the draft assessment order. Against the said draft assessment order, the assessee preferred objections before the Disputes Resolution Panel (DRP) and vide order dated 17/09/2010, the DRP confirmed the draft assessment order pursuant to which the final assessment order was passed. Against the said final assessment order, the assessee is in appeal before us. 3. In the grounds of appeal raised by the assessee, the first ground is relating to the transfer pricing adjustment while ground Nos.2 to 4 relate to disallowances in computation of deduction u/s 10A of the Act and ground Nos.5, 6 and 7 are relating to addition of various amounts as 'income from other sources'. 4. As regards the issue of computation of deduction u/s 10A is concerned; we find the brief facts of the case to be as under: 4.1 The assessee-company is engaged in the business o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Hon'ble High Court in the case of Yokogawa India Ltd.(supra) and hence the contrary decision in the said case. Thus, according to him, the order of the AO is justified. 4.4 Having regard to the rival contentions and the material on record, we find that it is not clear from the record as to whether brought forward losses and depreciation loss pertain entirely to non-STPI unit only or part of it also pertains to STPI unit. The Hon'ble Karnataka High Court in the case of Himatsingika Siede (supra) was considering the case of an assessee which was 100% export oriented unit in terms of sec.10B of the Act and was claiming exemption u/s 10B. In the case of the said assessee, unabsorbed depreciation available to the assessee in the assessment year 1988-89 was carried forward to the assessment year 1994-95 (relevant assessment year) and was claimed by the assessee to be adjusted against income from other sources, thereby reducing the assessee's income for assessment purposes at 'nil'. The AO accepted the said claim of the assessee and assessed the total income at 'nil'. However, the Commissioner of Income-tax (CIT) revised the order u/s 263 stating that the order passed by the AO was e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....filed appeal before the Hon'ble High Court and the High Court framed the following question for determination: "Whether the Tribunal was correct in holding that the deduction u/s 10A or 10B of the Act during the current assessment year has to be allowed without setting off brought forward unabsorbed losses and the depreciation from earlier assessment year or current assessment year either in the case of non-STP units or in the case of the very same undertaking?" The Hon'ble High court has considered the issue at length and at para 31 of its order has held that as deduction u/s 10A has to be excluded from the total income of the assessee, the question of unabsorbed business loss being set off against such profits and gains of undertaking would not arise and in that view of the matter, the approach of the AO was quite contrary to the aforesaid provision and the appellate Commissioner as well as the Tribunal were fully justified in setting aside the said assessment order and granting the benefit of sec.10A to the assessee. Thus, the question of law was answered in favour of the assessee. Thus, there are two judgments of the Hon'ble Karnataka High Court contrary to each other. When t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the decision of the jurisdictional High Court in the case of CIT vs. Tata Elxsi (349 ITR 98) wherein it was held that where an expenditure is excluded from the export turnover then the same has to be excluded from the total turnover also for the purpose of deduction u/s 10A of the Act which arises as ground of appeal No.4B. Upon hearing of both the parties, we find that the issue of reducing expenditure incurred on telecommunication, insurance and in foreign currency both from the export turnover as well as total turnover is covered by the decision of the jurisdictional High Court in the case of Tata Elexsi (cited supra). In view of the same, ground of appeal bearing No.4(B) is allowed and 4(A) is rejected as not pressed. 7. As regards ground Nos.5, 6 and 7, brief facts are that the AO, while computing profits of the business undertaking, has considered a sum of Rs. 8,80,883/- as 'other income' and has reduced it from the 'profit' and treated it as 'income from other sources' not eligible for deduction us 10A of the Act, against which the assessee is in appeal by raising ground Nos.5, 6 and 7. 7.1 Learned counsel for the assessee submitted that these are : (i) interest on depos....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the assessee and have to be considered for computation of deduction u/s 10A of the Act. The AO is directed accordingly. Ground Nos.5, 6 and 7 are thus allowed. 8. Coming to ground No.1 relating to transfer pricing adjustment, brief facts of the case are that it is observed by the TPO in his order u/s 92CA of the Act that the assessee has paid management fee of Rs. 1,55,10,767/- to its AE. After considering the assessee's contentions at length, the TPO came to the conclusion the assessee has failed to produce any evidence regarding expenditure incurred by the AE on behalf of the tax-payer and the commensurate tangible benefits thereof and also that the assessee has not shown whether such services were rendered except producing invoice copy and describing the nature of services. The TPO was of the opinion that the tax payer did not pay any management fee in the preceding financial year 2004-05 or in the earlier year but has paid the same only in the financial year 2005-06 and that the assessee has not shown tangible and substantial commercial benefit derived by such payment of Rs. 1.55 crore when compared to Nil payment made during the earlier assessment year. He, therefore, hel....