TaxTMI 
TaxTMI 
2020 (1) TMI 969
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....h CBDT for A.Y. 2009-10 to 2017-18 and had filed the copies of the same to determine Arms Length Price (ALP) of international transactions. He has noted that APA agreement is applicable for F.Y's 2013-14 to F.Y. 2017-18 (APA years) and FY 2009-10 to 2012-13 (Rollback years). AO noted that as per the provisions of Sec.92CD(1) of the Act as per the APA agreement entered into by the assessee, the assessee was required to file modified return of income which was filed on 29.02.2016 declaring total income at Rs. 7,02,970/-. The case was selected for scrutiny and thereafter assessment was framed u/s 143(3) r.w.s 92CD of the Act vide order dated 30.03.2017 and the total taxable income was determined at Rs. 17,36,650/-. Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), who vide consolidated order for A.Ys.2010-11 and 2011- 12 order dated 22.07.2019 (in appeal No.PN/CIT(A)-1/DCIT, Cir.1(2)/Pn/32 & 33/17-18) granted partial relief to the assessee. Aggrieved by the order of Ld.CIT(A), assessee is now in appeal and has raised the following grounds : "Ground 1. On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) erred in confirming....
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....ed that incremental invoicing as per APA agreement of Rs. 10,33,675/- was added to the net profit arrived as per Profit and Loss account and on the enhanced amount equivalent amount of Rs. 10,33,675/-, deduction u/s 10A of the Act was claimed. The assessee was asked to show cause as to why the deduction u/s 10A of the Act should be allowed on the incremental invoicing amount of Rs. 10,33,675/- as per the APA agreement. In response to the query, the assessee made the submissions which were not found acceptable to the AO as he was of the view that modifications to be done by the assessee in the return of income to be furnished u/s 92CD(1) of the Act are limited only to the issues as agreed for in the APA agreement. 5. In the present case, AO noted that while filing the modified return of income u/s 92CD(1) of the Act, assessee has also modified its claim of deduction u/s 10A of the Act by claiming higher deduction vis-à-vis the deduction claimed by it in the original return of income. AO was of the view that assessee is not empowered to claim for deduction u/s 10A of the Act of the additional amount. He was further of the view that the claim of the enhancement of deduction wa....
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....Whether proviso to 92C(4) debars deduction u/s 10A on additional income in assessment u/s 92CD? ii. If no, whether assessment u/s 92CD provides for granting deduction u/s 10A? iii. If yes, whether the assessee has satisfied the conditions of deduction u/s 10A? i. Whether proviso to 92C(4) debars deduction u/s10A on additional income in assessment u/s 92CD? 8. The case of the AO is that the assessee cannot be allowed deduction u/s 10A in respect of the incremental income offered in the modified return, which as per the AO, is eloquently proscribed by the proviso to sub-section (4) of sections 92C/92CA of the Act. In this regard, it is seen that section 92C deals with the computation of ALP by the AO. Sub-section (4) provides that where an ALP is determined by the AO under sub-section (3): "the Assessing Officer may compute the total income of the assessee having regard to the arm's length price so determined". Proviso to this sub-section, which is the bedrock for the denial of the assessee's claim, states that ".... no deduction u/s.10A . . . . . . shall be allowed in respect of the amount of income by which the total income of the assessee is enhanced after computation of i....
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....n the original return of income. In that case also, deduction u/s 10A, if otherwise permissible, would be allowed and not curtailed as it will not be a case of transfer pricing addition made by the AO. In the same manner, deduction u/s 10A cannot be disallowed in respect of additional income offered in the modified return as it is not a transfer pricing addition made by the AO but the additional transfer pricing income offered by the assessee in consonance with the APA with the CBDT. 10. The second component for magnetizing the proviso is that the `total income of the assessee is enhanced'. An enhancement of income in this context pre-supposes some action of the authorities after the filing of the return of income by the assessee, which has the consequence of increasing the total income from the one declared by the assessee. Filing of the modified return u/s 92CD of the Act with the income as agreed between the assessee and the CBDT under the APA is an act of the assessee in offering the additional income and not an act of the AO in making the enhancement of the total income. 11. Instantly, we are dealing with a situation in which the assessee itself has filed a modified return....
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....s of deduction u/s 10A? 14. Now we turn to the view canvassed by the AO that the assessee failed to comply with the mandate of sub-section (3) of section 10A, which provides that: "This section applies to the undertaking, if the sale proceeds of articles or things or computer software exported out of India are received in, or brought into India, by the assessee in convertible foreign exchange, within a period of six months from the end of the previous year or within such further period as the competent authority may allow in this behalf". A perusal of sub-section (3) of section 10A transpires that the condition for bringing into India the requisite convertible foreign exchange within a period of six months from the end of the previous year is not be all end all of the issue. It also extends to "such further period as the competent authority may allow in this behalf". In other words, if the competent authority has allowed further period for bringing into India the convertible foreign exchange, the assessee will be entitled to deduction u/s.10A. Explanation 1 to section 10A(3) states that: `For the purposes of this sub-section, the expression "competent authority" means the Reserve....
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.... To put it simply, the CBDT not only stipulated for raising of the invoice for the additional income but also for the realization of the additional amount within the month following the month in which the Agreement is signed. Thus, it is overt that the APA contains a clause for realizing the amount or bringing into India convertible foreign exchange for the additional amount of invoice within one month's period. There can be no other reason for mandating in the APA for bringing into India convertible foreign exchange within one month following the month in which the APA is signed except for the granting the consequential benefits of such realization, even though sub-section (1) of section 92CD gives time of three months for filing the modified return. The sequitur is that the APA has made it mandatory for the assessee to bring in convertible foreign exchange in India within one month. But for granting the relevant deductions connected with the realization of convertible foreign exchange in India, there was no purpose to stipulate it in the APA. This stipulation is, thus, a direction to grant deduction u/s 10A only if the assessee succeeds in bringing in convertible foreign exchan....