TaxTMI 
TaxTMI 
2015 (12) TMI 296
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....income of the assessee company by re-computing the arm's length price of the assessee's international transaction in respect of Information Technology Enables Services ('ITES') provided by it. It has been submitted by the Ld. Counsel at the outset that this is primarily a concluded issue. During the course of hearing, he submitted copy of petition dated 30th June 2015 seeking revision of grounds of appeal on conclusion of Mutual Agreement Procedure (MAP). It has been submitted that its Associated Enterprise (i.e. AE), JP Morgan Chase & Co., US ('JPMC') had initiated MAP proceedings under Article 27 of the India-USA agreement for avoidance of double taxation of income under the transfer pricing regulations (towards US related international transactions) made during the subject assessment year. The Assessee has received a letter dated 29th April, 2015 (attached as Annexure A) from the Deputy Commissioner of Income-tax 10(2)(1) ('AU'), stating that the MAP has been concluded in case of the Assessee for the year under consideration. Consequently, in view of Rule 44H (4) of the Income-tax Rules 1962, the Assessee has accepted the MAP conclusion. Accordingly, the Assessee....
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.... initiated, if any. Our attention has been drawn to the annual accounts of the company and orders of the lower authorities to show that no distinction has been made between the '96%' and '4%' transactions. 3.5. On the other hand, Ld. CIT-DR, vehemently opposing the arguments of the Ld. Counsel, submitted that there is no concept of determination of ALP under the Mutual Agreement Procedure. The rules and regulations of transfer pricing as prescribed u/s. 92C Chapter X of the Income Tax Act are not applicable under MAP, and therefore, no ALP was determined under MAP, and therefore, assessee cannot claim to take any benefit of the mark-up reached under MAP i.e. @ of 14.38%. Accordingly to him, the ALP should be computed freshly and independently for the remaining 4% transactions, and for this purpose this issue can be sent back to the lower authorities. 3.6 We have gone through the arguments made by both the sides and also the material placed before us for our consideration. It is noted that letter dated 9th April 2015 in Fno. 480/13/2010-FTD-1 has been issued in the case of the assessee company under MAP proceedings for A.Y.2006-07 to 2010-111 by the DCIT(OSD), APA-I on behalf of t....
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....ession" deduction u/s. 10A should be allowed before setting off of brought forward business loss and unabsorbed depreciation and the same should be set off of against the balance taxable income if any. 13. The Ld. Counsel for the assessee submitted that these issues are now well settled in favour of the assessee by the decision of the Hon'ble Bombay High Court in the case of CIT VS Black And Veatch Consulting Pvt. Ltd. (2012) 348 ITR 72 (Bom). 14. The Ld. Departmental Representative fairly conceded that the issue stands covered in favour of the assessee. 15. We have carefully perused the facts of the vase vis-avis decision of the Hon'ble Jurisdictional High Court (supra). The question before the Hon'ble Jurisdictional High Court was - "whether on the facts and in the circumstances of the case and in law, the Income Tax Appellate Tribunal was correct in holding that the brought forward unabsorbed depreciation and losses of the unit the income which is not eligible for deduction u/s.10A of the Act cannot be set off against the current profit of the eligible unit for computing the deduction u/s. 10A of the I.T. Act." 16. The Hon'ble High Court thus held as under: "Se....
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....aken together is allowed." 4.3. It is noted that none of the parties have disputed that facts of both the years are similar. There is no change in the position of law. The Ld. CIT-DR has also not made any distinction in the facts or legal position of these two years. Therefore, respectfully following the judgment of coordinate Bench in assessee's own case and that of Hon'ble Jurisdictional High Court, as has been relied by the Coordinate Bench, we direct the AO to allow deduction u/s 10A before setting off of the brought forward unabsorbed depreciation. Thus, Ground no.2 is allowed in terms of the above directions. 5. Ground No.3: In this ground, the assessee has challenged the action of Ld. AO in treating the interest income on deposits with banks, amounting to Rs. 2,05,03,390/-as chargeable to income tax under the head 'Income from other Sources' as against the assessee's claim that such interest income is chargeable to tax under the head "profit and gains of business of profession", and the assessee is further aggrieved with the action of lower authorities in holding that such interest income is not 'derived from' the eligible undertakings u/s 10A and thus, not eligible for d....
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....ction (3). There is no requirement, as stipulated under the section, to bring any other receipts in the form of foreign exchange to the country. Thus argument of Ld. CIT-DR was misplaced. Lastly, Ld. Counsel has relied upon the judgment of Hon'ble Karnataka High Court in the case of CIT vs. Motorola India Electronics (P) Ltd.(265 CTR 94), wherein Hon'ble High Court has considered the judgment of Hon'ble Supreme Court in the case of Liberty India Ltd. (supra) as well as Pandian Chemicals Ltd.(supra). After considering all these judgments it was held by the Hon'ble High Court that the assessee company was eligible for deduction u/s 10B in respect of interest income derived from inter-corporate loans and deposit in EEFC accounts. It was further submitted by the Ld. Counsel since this judgment has taken into account all the judgments of Hon'ble Supreme Court and all the arguments made by the revenue and after considering entire law available the deduction was allowed therefore, as on date the issue of the assessee is covered not only by the orders of the Tribunal in assessee's own case on earlier years but also the judgment of Hon'ble Karnataka High Court. 5.3. We have gone through th....
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....erefore, we are inclined to allow the claim of the assessee for treating the interest from fixed deposit of Rs. 7,96,233/- and interest on staff loan Rs. 1,377/- as income falling under the head 'profits and gains from business or profession' eligible for deduction u/s.10A of the Act. As far as the contention of the learned DR that section 10A was an exemption provision whereas section 80HHC is a deduction provision, we find that section 10A as substituted by Finance Act 2000, w.e.f 1.4.2000 clearly mentions it to be a deduction from profits and gains derived by an undertaking from export of articles of things or computer software. Therefore, it cannot be deemed as an exemption provision for the impugned assessment year. Ground no.2 of the assessee is therefore, partly allowed. 5.4. Further this issue again came up for consideration before the Tribunal in assessment year 2005-06, wherein in ITA No.5547/M/2009 the Tribunal vide its order dated 23.4.2013 held that under: The second issue relates to the interest on deposits which the lower authorities have taxed under the head "Income from other Sources" rejecting assessee's contention that interest on deposits is chargeable to ta....
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....tion (4) has provided mechanism to compute the amount of profit eligible for deduction u/s 10A. For the sake of ready reference sub-section (4) is reproduced herein: "(4) For the purpose of [sub-sections (1) and (1A)], the profits derived from export of articles or things or computer software shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking." 5.7. In our considered view, since the income from interest has been treated as part of business income, it shall be included for determining the amount of total turnover of the business and accordingly the benefit of deduction u/s 10A shall be provided on the amount of interest income proportionately, in terms of mechanism provided in subsection (4). In other words the amount of profit eligible for deduction u/s 10A shall be the amount which bears to the profits of the business of undertaking, the same proportion as export turnover bears to the total turnover the business of the undertaking of the assessee. The AO is directed to gra....
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....pply and by increasing the amounts of expenditure debited to Profit and loss account relatable to any income to which Sec. 10A apply in terms of Caluse (ii) and clause (f) to Explanation to Sec. 115JB of the Act. 4. At the very outset, the Ld. Counsel for the assessee submitted that the issue now stands covered in favour of the assessee. To substantiate his claim, the Ld. Counsel drew our attention to 3 decisions namely (i)Moser Baer India Ltd. Vs DCIT (2007) 17 SOT 510(Del), (ii) DCIT Vs Roxy Investments (P) ltd (2008) 24 SOT 227 (Del) and (iii) the decision of the Hon'ble Supreme Court in the case of Ajanta Pharma Ltd Vs CIT (2010) 327 ITR 305. 5. The Ld. Departmental Representative fairly conceded that the issue stands covered in favour of the assessee. 6. We have carefully perused the orders referred to by the Ld. Counsel for the assessee in the case of Moser Baer India Ltd (Supra) in which it has been held that for determining of Book Profit any mode and manner of computation of total income under Act has not to be applied and reference is to be made only to profit and loss account prepared in accordance with provisions of Parts II and III of Schedule VI of Companies ....
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....otionally, for the year under consideration. It was further submitted that DRP has already given requisite directions to the AO in this regard, but the same has not been followed by the AO, and therefore, the Tribunal should reinforce the direction of the DRP. 7.2 We have gone through the orders of the DRP and submissions made by both the sides on this issue. For the sake of ready reference, the relevant Para of the DRP order on this issue is reproduced below: "The ground of objection no.7 related to claim of expenditure disallowed in A.Y. 2007-08 as prior period expenditure. The prior period expenditure is disallowed on the basis of matching concept that it is to be allowed in the year to which it relates. No specific mention of the nature of expenditure or period of its accrual has been indicated. Therefore, the AO is directed to examine this issue and any expenditure which relates to the current assessment year and qualified to the allowed u/s.37 of the I.T. Act should be allowed in the current year. This ground of objection is disposed off accordingly." 7.3. It is noted, from the above, that DRP has already issued requisite directions in this regard. Keeping in view reques....