TaxTMI 
TaxTMI 
2019 (1) TMI 1707
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.... the facts and circumstances of the case and in law, the Ld. CIT(A) was erred in deleting the addition made on account of unbilled software income which is not eligible for deduction u/s 10A of the I.T. Act. 3. Ground raised in assessee's appeal read as under: On the facts and circumstances of the case and in law the Ld. CIT(A) erred in upholding the contention of the AO in making an upward adjustment of Rs. 57,82,500/- on account of transfer pricing adjustment in respect of Arm's Length Price of redemption of preference shares of its associated enterprise. Assessee's Appeal 4. Brief facts of the case are as under: 4. The appellant (Sonata Software Ltd. or SSL in short) is a company incorporated in India, engaged in the business of software development. It offers software development and IT consulting services, specialising in area of eCommerce, business intelligence, enterprise application integration, ECRM for financial services, insurance and healthcare sectors. Assessee has set up several undertakings which are recognised by software technology parks of India as undertakings set up under the software technology park (STP) scheme and accordingly eligible for deduction u/s ....
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....res was US$ 1.05 as per valuation report submitted by the appellant itself, redeeming the shares at face value of $1 did not represent at arm's length transaction. The TPO proceeded to make an adjustment based on the arm's length value of $1.05. He also held that since there was only one price available, the appellant was not entitled to be benefits allowable in second proviso to section 92C(2) of the Act. 5. Upon assessee's appeal, Ld. CIT(A) considered the submission of the assessee. However, we upheld the action of the Transfer Pricing Officer by holding as under: "5.4 It is seen that in the present case there is no dispute that the transaction constitutes an international transaction. Further, in the present case, the CUP used by the TPO is not exactly a comparable uncontrolled price but the price (value) of the share itself determined by an Independent Valuer. The independent valuer has determined the price of transaction itself rather than price of a comparable instance. In light of the fact that the independent valuer has determined the price of the very same transaction, there is no reason to deviate from this price in terms of second proviso to section 92C9(2) of the Ac....
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....s by an independent valuer. Once such a price is determined, as held in Vipin Enterprises, there is no question of allowing benefit of safe harbour under second proviso. 5.9 The value of share sought to be used as an arm's length price of the transaction of purchase of share by the appellant is the 'fair price' of share determined by an independent valuer and has been determined at the instance of the appellant itself. Hence, this price determined by the assessee is the price of the transaction itself and not a comparable instance. It is not that this price so determined is being compared to a similar third party transaction. The price represents the fair price of the transaction being undertaken by the appellant. If the appellant is to adopting the fair price determined by itself (through an independent valuer mandated by it) then it has to come up with a reason for doing so. No such reason has been advanced to me. Once he has determined a fair price for the transaction itself without resorting to a non-AE CUP, he is bound to adopt the same without the benefit of the second proviso to section 92C(2) of the Act. 5.10 In the light of the fact that the transaction in ....
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.... vs. Begadiya Brothers Pvt. Ltd. (ITA No. 387/BIL/2014 dated 11.10.2018) "Thus the CIT(A) after verifying all the aspects and also that of the evidences come to the conclusion that the transaction in two vessels, namely "THEOSKEPASTI" and "GOA'' are within deviation of (+/-) 5%, and therefore, the transaction is within ALP. Accordingly, the upward adjustment of Rs. 81,44,959/- is rightly deleted by the CIT(A). The case of the assessee is also supported by another reason that prices quoted by Steel Index are available in public domain and assessee filed price data of relevant dates during proceedings before TPO. The TPO has accepted the TSI prices in TP Study for determining ALP. Therefore, the comment of TPO in his report that Trade Steel Index is arithmetical which was not explained by the assessee was rightly rejected by the CIT(A) and held that the assessee has sufficiently demonstrated the same. Therefore, there is no need to interfere with the order of the CIT(A)." From the above case laws from the tribunal in our considered opinion the submission of the assessee is cogent. In these cases variation of (+/-) 5% have been accepted by the ITAT for the single rate used for benc....
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....of the assessment order, which is reproduced below: "6.1 In this case the deduction u/s. 10A was disallowed in AY 1998-99 and 99-00 on the ground that undertaking was formed by splitting or reconstruction of business already in existence and the undertaking has been carrying on its activities prior to A.Y. 1995-96. The ITAT decided the issue in favour of assessee against which the department is in appeal before the Hon'ble Supreme Court. In subsequent years the assessment orders of AY 1998-99 and 99-00 were followed by A.O. and ITAT also followed its order of AY 98-99 and 1999-00. Therefore, following the orders of earlier years the deduction u/s 10A is not allowed to the assessee.." "6.2 As per assessee's submission a company viz. IOCL had set up a division, Sonata Software Division (SSD) in 1980. In A.Y. 95-96 this division was demerged and became the assessee company i.e. Sonata Software Ltd. As per assessment order for A.Y. 2000-01 the assessee claimed deduction u/s. 80-0 for A. Y. 95-96, 96-97 & 9798 and exercised option not to claim deduction u/s. 10A in view of provisions of Sec. 10A(7). Alternatively, deduction u/s. 80HHE was also claimed. The assessee's cla....