TaxTMI 
TaxTMI 
2021 (4) TMI 581
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....y erred in excluding Infosys Ltd., M/s. KALS Information Systems Ltd., Persistent Systems Ltd., M/s. Tata Elxsi Ltd., Sasken Communication Tech. Ltd., R.S.Software India Ltd. as comparables without appreciating the fact that the TPO had discussed regarding comparables and included the companies as rule 1OB(3) requires that not only the transactions but the enterprises should also be comparable in TNMM. 3. On the facts and in the circumstances of the case the Dispute Resolution Panel erred in appreciating that the directions issued are beyond the mandate of the provisions of Sec. 144C of the IT Act. 4. On the facts and in the circumstances of the case the Dispute Resolution Panel erred in super imposing the decision of other benches of FIAT in the case of assessee to reject these comparables when selection of comparables in a case depends in transfer pricing on assessee specific FAR analysis. 5. On the facts and in the circumstances of the case the Dispute Resolution Panel erred in relying on decision of other benches of FIAT and ought to have decided the comparability of these companies on the basis of specific facts brought on record by the TPO in the ca....
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....er of Income-tax (Transfer Pricing-IV), Bangalore ("Transfer Pricing Officer" or "learned TPO") grossly erred in determining an adjustment u/s 92CA of the Income-tax Act, 1961 to the Arm's Length Price ('ALP') of the international transactions entered into by the Appellant with its Associated Enterprises ("AEs") with respect to the software development services. 2. The Appellant aggrieved by the TPO order further appealed before the Honorable Dispute Resolution Panel ("DRP") against the TPO order and subsequently, the learned Assessing Officer ("learned AO") issued the final assessment order with a transfer pricing ("TP") adjustment of INR 4,77,30,553/-. 3. The learned AO/learned TPO/ Hon'ble DRP erred in not acknowledging the voluntary payment of true-up adjustment offered suo-moto for tax by the assessee. 4. The learned AO / learned TPO / Hon'ble DRP erred in rejecting the TP documentation maintained by the Appellant on invoking provisions of sub-section (3) of 92C of the Act contending that the information or data used in the computation of the ALP is not reliable or correct. In doing so, the learned AO/ learned TPO has grossly erre....
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....2. Set off of loss under the head 'Income from other Sources 2.1 Without prejudice to the above, the learned AU has further allowing set off of loss under the head 'Income from other Sources' amounting to Rs. 2,16,0 17 against the income chargeable to tax under the head 'Profits and Gains from Business'. 2.2 In case your Honour allows the loss of the Noida unit to be set off against the income chargeable to tax under the head 'Profits and Gains from Business' after claim of deduction under section 1 OA for the Bangalore and Pune units., the learned AO be directed to allow carry forward of the loss under the head 'Income from other Sources' amounting to Rs. 2, 16,017 for set off against income in subsequent years. 3. Interest under section 234B The learned AO has erred in levying interest under section 234B of the Act amounting to Rs. 8,802,484. 4. Interest under section 234C The learned AO has erred in levying interest under section 234C of the Act amounting to Rs. 60,382. The appellant craves to leave/ to add to ! to alter/ to amend/ to rescind/ to modify the grounds herein above or ....
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.... ITR (T) 606. Placing reliance on the ratio of this decision, the Ld.Counsel submitted that, assesee seek exclusion of a comparables selected by it in its TP study as not being comparable, even of such plea is raised for the 1st time before this Tribunal. She also submitted that the decision of Chandigarh Special Bench in case of Quark Systems Pvt.Ltd.(supra) has been affirmed by Hon'able Punjab and Haryana High Court reported in 244 CTR 542. 4. The next issue raised in the additional ground is regarding computation of negative working capital adjustment. She submitted that the Ld.TPO computed negative working capital adjustment for the comparable companies by using the standard template of computation, without appreciating the fact that assessee is a captive service provider funded by its associated enterprises. She submitted that, this issue was not contested before the DRP, however several subsequent rulings of various benches of this Tribunal has held that negative working capital cannot be effected and therefore assessee wishes to raise this issue by way of additional ground. 5. The next issue raised in the additional ground is regarding the expenditure not disallowed by....
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....dditional income of Rs. 1,20,30,165/- was offered as adjustment voluntarily. The return was processed under section 143(1) of the Act, and notice under section 143(2) of the Act was issued to the assessee. In response to statutory notices, representative of assessee appeared before the Ld.AO and filed requisite details as called for. 10. While going through the details, the Ld.AO found that assessee has entered into international transaction that exceeded Rs. 15 crores, and accordingly, a reference was made to the Transfer Pricing officer to determine the arm's length price of such international transaction. 11. Upon receipt of reference, the Ld.TPO called for economic details of the international transaction in Form 3 CEB. The Ld.TPO observed that assessee had following international transaction with its associated enterprises: Particulars Amount in Rs. Outcome of TP Order Software Development Services (Core US) 33,90,53,318 Adjustment of Rs. 6,04,40,428/-. Software Development Services (CoreObjects UK Ltd.) 3,11,05,603 Accepted to be at arm's length Advances (receipt) 10,29,02,306 Accepted to be at arm's length Reimbursement (r....
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....nies having peculiar economic circumstances - excluded 15. After applying the above filters, the Ld.TPO retained 3 comparables that was selected by assessee being RS Software India Ltd. Tata Elxsi Ltd., and Thinksoft Global Services Ltd., and added 8 new comparables with average margin of 22.71%. The details of which are as under: SI. No. Name of the Company Mark-up on Total Costs (WC-unadj) (in °A)) Mark-up on Total Costs (WC - adj) (in %) 1 ICRA Techno Analytics Ltd. (seg) 24.94 26.79 2 lnfosys Ltd 44.98 41.07 3 Kals Information Systems Ltd. (seg) 34.41 32.55 4 Larsen & Toubro lnfotech Ltd. 19.33 21.55 5 Mindtree Ltd. (seg) 14.83 14.89 16. The Ld.TPO thus computed the proposed adjustment at Rs. 6,04,40,428/- being shortfall in arms length price. The Ld.TPO also worked out working capital adjustment at (-)0.61% to the average margin of the comparables. It has been submitted that the Ld.TPO while computing the shortfall did not consider the additional income voluntarily offered by assessee. 17. On receipt of the Transfer Pricing order with the proposed adjustment, the Ld.AO passed draft assessment order on 24/03/201....
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.... called upon assessee to file various details. In compliance assessee filed all relevant details to the Ld.AO, however the same was not considered in accordance with the directions of DRP. Aggrieved by the orders of the Ld.AO, assessee as well as revenue are in appeal before us. 21. Main issues alleged by assessee as well as revenue under Transfer Pricing grounds are relating to the comparables included/excluded by the Ld.AO/TPO. 21. Before we undertake comparability analysis it is (sine qua non) to understand the functions performed, assets owned and risks assumed by assessee. Functions: 22. It has been submitted in the trans-apprising study that, assessee provides software and support services to its associated enterprises in U.S. and UK. As per transfer pricing report, assessee has entered into Master Consulting Agreement with the USA associated enterprises regarding the services rendered. The report also states that the functions performed by assessee during financial years 2001-0 to 2 2008-09 are similar and identical. At page 4 to 8 of the paper book assessee has been characterised as you routine contract service provider undertaking software development and su....
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....sfer Pricing "3.1.1 The learned TPO and the learned AO have erred, in making at Rs. 604,40,428/- by considering incorrect price received by the assessee of Rs. 3701r58,923/ as against the correct price received of Rs. 38,21,89,088/-. As per the submission of assessee, the Assessing Officer/TPO should have considered the correct price received of Rs,3821,89,088/- since the assessee has voluntarily offered Rs. 12030,165/- as additional income while' filing the revised return, and the same was brought to the notice of TPO vide submission dated 17.12.2013. Therefore the TP adjustment by the Assessing Officer/TPO should have been Rs. 484,10,25310440,428/- 120,30,165/-) 3.1.1.2 Having heard the assessee, we have examined the TP study, and the revised computation of income filed in respect of revised return, and perused the submission before the TPO dated 20.11.2013, filed in Vol.2 of the objections filed on 24.04.2014. In the submission dated 20.11.2013, it has been stated that, "Based on the above Bench marking approach, the assessee did search for external companies that are comparable to the FAR profile of the Assessee in prowess and Capitaline databases....
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....tent of Rs. 12046446/- subject to appropriate reliefs." In our view, this observation in the TP study is misleading and not in accordance with the law, and the offer of additional income to tax 'subject to relief' is without legal sanction. Second Proviso to Section 92C(2) clearly provides that "if the variation between the arm's length p1-ice so determined and the price at which the international transaction has actually been taken does not exceed five percent of latter, the price at which the international transaction has actually been taken shall be deemed to be at arm 's length price." It is clear that the mean margin of comparables was found in the TP study to be which was within the range of +1- 5% of the operating margin of the assessee company (6.01%), and hence the actual international transactions of the assessee was at arm's length price. The alleged offer of additional income to tax is without any legal sanctity, within the meaning of Rule 10D of IT Rule r.w.section 92C, 920 and 92E of the IT Act 1961. More so, in view of the anent to proviso to Section 92C by Finance Act2009 which has taken aw the option earlier available to the as....
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....med/allowed on such adjustment. We are in agreement that the TP adjustment cannot be allocated to STP undertaking to inflate the profits of such units for claiming deduction. It is a settled position of law that for the benchmarking of international transactions of a particular nature (as listed in Col,8 -13 of Part B of Form 3CEB) with the AEs, the aggregated profit margins and aggregated value of transactions at the entity level only could be taken, and it is not permissible to benchmark each of the SIP units on a standalone basis. In case of DCIT Vs Birla Soft India Ltd (2014) 150 ITD 378 (Delhi), Hon'ble [TAT Delhi held where the assessee had three STP units that since profits of each of the STP units of the assessee company could not be evaluated independently of one another, and they could not be segregated for the purpose of determining the ALP relating to assessee's international transactions, where the assessee was being remunerated by the AE on cost plus mark-up basis. 3.1.1.52 It is relevant to refer to clause (I) of sub-Rule IOD(1) reproduced as under: "(1) Every person who has entered into an international transaction shall keep and maintain the f....
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....d in the revised return, which included voluntary addition of Rs. 1,20,30,165/- for computing ALP of the transaction, thereby the operating profit markup of 9.46% was earned by assessee . 33. The Ld.Counsel further submitted that, the voluntary adjustment was allocated as expenditure among the 3 STPI units at Bangalore, Noida and Pune, against which deduction under section 10A was claimed, which is not questioned by the Ld.AO. She submitted that the 10A deduction is also available to assessee on the voluntary adjustment offered by assessee. 34. She submitted that, it is a settled legal position that, section 10A deduction is allowed in respect of voluntary TP adjustment made by assessee. The bar is in respect of adjustment made by the Ld.TPO under section 92C(4). In support of this claim she relied on following decisions: * Decision of Hon'ble Karnataka High Court in case of CIT vs.iGate Global Solutions Ltd in ITA no.453 of 2008 dated 17/06/2014; * Decision of coordinate bench of this Tribunal in case of DCIT vs. EYBGS India (P) Ltd reported in (2020) 117 taxmann.com 294 * Decision of Hon'ble Delhi Tribunal in case of DCIT vs. G.S.Engineering & ....
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....not be applicable in this case as the transfer pricing adjustment has been made voluntarily by the assessee and once the income has been offered to tax, it forms part of the profit of the business and the deduction u/s 10A cannot be denied. The Ld.Counsel relied on decisions referred to herein above in support of this contention. 39.1 The facts leading to this controversy are that, while filing its income tax return, the assessee compared its operating margin with the comparable companies. Since the operating margin earned by the assessee was lower than the operating margin earned by the comparable companies, the assessee made a voluntary transfer pricing adjustment amounting to Rs. Rs. 1,20,30,165/-. A revised return was therefore filed which included the voluntary adjustment made by the assessee. DRP noticed that, Assessee in From 56(report filed by auditor for computation of deduction under section 10A), allocated the voluntary TP adjustment to various STPI units as 'inadmissible expenses", for which there is no basis. DRP noticed that though the voluntary TP adjustment has been treated as profits of the business of the undertaking, the same has been reduced from export turno....
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....ddition to the gross total income of the assessee." 40. The DRP thus following decision of Hon'able Karnataka High Court in case of Yokogawa reported in (2012) 341 ITR 385 and the decision of Mumbai Tribunal in case of Deloitte Consulting India Pvt. Ltd., reported in (2014) 151 ITD 454, held that, no TP adjustment would enter the computation of deduction under section 10A/10AA/10B etc. 41. We have perused the submissions advanced by both sides in light of records placed before us. 42. In case of I-Gate Global Solutions Ltd. vs. ACIT (supra), came up for hearing before the Coordinate Bench of this Tribunal, this Tribunal took the view that the assessee was entitled to deduction u/s 10A in respect of income declared in the return of income on the basis of computation of ALP. The relevant portion of the ITAT's order narrating the facts and the observation is reproduced here in under:- "The last grievance is in respect of not allowing deduction under s. 10A on the adjustment made by the assessee to the arm's length price. In the instant case, the assessee company entered into transaction with associated enterprise. The assessee company determined arm's length ....
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....stion of Law no.4 against the revenue and in favour of the assessee. We further note that, view taken by coordinate bench of this Tribunal in case of I-Gate Global Solutions Ltd. Vs ACIT (supra) has been followed in following cases by various benches of this Tribunal, and had accordingly allowed the deduction u/s.10A of the Act on the voluntary TP adjustments made by the assessee: (i) G.S. Engineering & Construction India of the ITAT Delhi Bench reported in 93 taxmann.com 154 (Delhi Tribunal) (ii) QX KPO Services Pvt. Ltd. vs. ITO of the Ahmedabad Tribunal in ITA No.2043/AHD/2014 (iii) Approva Systems Pvt. Ltd. vs DCIT of the Pune Bench of ITAT in ITA No.1051/Pune/2015 (iv) Sumtotal Systems India (P) Ltd. vs DCIT of the Hyderabad Tribunal reported in 88 taxmann.com 897 44. The ratio of the aforesaid orders of the Tribunal, which we are bound to follow, is that; the first proviso to section 92C(4) of the Act is evidently applicable only to situations where adjustment to the ALP is made by the Assessing Officer/TPO/Ld. DRP and not to the voluntary adjustment made by the assessee itself. We note that, various Hon'ble High Courts and the coordinat....
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.... act, even though assessee has located it as 'inadmissible expenses' to the respective STPI units. 47.1 In the event assessee is able to establish the foreign exchange having received in India to the extent of voluntary TP adjustment made by assessee, the deduction cannot be denied on such voluntary adjustment. In support we rely on the decision of Hon'ble Supreme Court in case of CIT vs Yokogawa, (supra) and decision of Hon'ble Karnataka High Court in case of Karle International Pvt.Ltd., vs ACIT (supra) and to grant deduction in accordance with law having regard to the ratio laid down by various (High Courts) and coordinate benches of this Tribunal in the decisions relied on hereinabove. Assessee is directed to file all relevant information/details in support of its claim based on which the Ld.AO shall carry out necessary verification. Needless to say that assessee shall be granted proper opportunity of being heard in accordance with law. Accordingly this issues No.2 alleged by assessee stands allowed for statistical purposes. 48. Ground 4 (b) and Additional ground 1 is seeking exclusion of Larsen and Toubro Infotech Ltd. and ICRA Techno Analytics Ltd. Larsen and T....
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....n orders passed by authorities below. 53. We have perused submissions advanced by both sides in light of records placed before us. 54. Decision of coordinate bench of this Tribunal in case of Autodesk India Pvt. Ltd., vs DCIT reported in (2018) 96 Taxmann.com 263 has analysed every conflict in view and concluded that the law laid down in case of Genesis Integrating Systems India Pvt. Ltd., (supra) has to be followed. The relevant observations of this Tribunal are as under: "17.8 In view of the above conclusion, there may not be any necessity to examine as to whether the decision rendered in the case of Genisys Integrating Systems (I) (P.) Ltd. (supra) by the ITAT Bangalore Bench should continue to be followed. Since arguments were advanced on the correctness of the decisions rendered by the ITAT Mumbai and Bangalore Benches taking a view contrary to that taken in the case of Genisys Integrating Systems (I) (P.) Ltd. (supra), we proceed to examine the said issue also. On this issue, the first aspect which we notice is that the decision rendered in the case of Genisys Integrating Systems (I) (P.) Ltd. (supra) was the earliest decision rendered on the issue of comparabi....
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....ent year 2010-11 where this comparable has been excluded as not comparable with a captive service provider like assessee. 57. On the contrary, Ld.CIT.DR placed reliance on observations of orders passed by authorities below. 58. We have perused submissions advanced by both sides in light of records placed before us. 59. Coordinate bench of this tribunal in case of Electronics for Imaging India Pvt.Ltd., (supra) has analysed the objections raised by assessee before us having regards to the annual report of this comparable as under: (1) ICRA Techno Analytics Ltd. (seg) 14. At the outset, we note that apart from having the related party revenue at 20.94% of the total revenue, this company was also found to be functionally not comparable with software development services segment of the assessee. The DRP has given its finding at pages 13 to 14 as under:- "Having heard the contention, on perusal of the annual report, it is noticed by us that the segmental information is available for two segments i.e., services and sales. However, it is evident from the annual report that the service segment comprises of software development, software consulta....
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.... Ld. counsel submitted that TPO rate rejected this comparable by applying RPT filter however as per the audit report this company do not have any related party transactions. She submitted that DRP upheld exclusion by applying on-site revenue filter. 64. The Ld.Counsel submitted that DRP has applied filter which has not been considered by the Ld.TPO. She submitted that this comparable has not been rejected for functional dissimilarities by TPO/DRP. It has been submitted that this company is functionally comparable with that of assessee and satisfies the employee cost filter. 65. On the contrary, the Ld.CIT DR placed reliance on observations of authorities below. 66. We have perused submissions advanced by both sides in light of records placed before us. 67. We note that admittedly these comparables have not been objected by authorities below for functional dissimilarities. DRP has applied on-site revenue filter suo moto which has not been applied by the Ld.TPO and hence cannot be considered for purposes of upholding the exclusion. As regards the RPT filter, in our opinion this needs verification by the Ld.TPO. 68. Accordingly, we remand these comparables back to the L....
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....10 & Additional Ground no.2 raised by assessee stands allowed for statistical purposes. Corporate tax issues (assessee's appeal) 73. Ground 1-2 is raised by assessee as the Ld.AO did not grant setting off of business loss amounting to Rs. 5,14,01,852/- pertaining to Noida unit against income chargeable to tax under the head profits and gains from business and profession after the claim of deduction under section 10 A for Bangalore and Pune units. 74. In regards to set-off of losses, the Ld.AO followed the decision of Hon'ble Karnataka in case of Yokogava, India Ltd. reported in 341 ITR 385 which is sequentially reversed by Hon'ble Supreme Court. The Ld.Counsel submitted that Hon'ble Supreme Court in case of CIT vs Yokogawa, reported in (2017) 77 Taxmann.com 41, has held that section 10 A the deduction provision and the deduction being at the stage of computation of business profits inter-unit set of is allowable. 75. The Ld.Sr.DR placed reliance on orders passed by authorities below. 76. We have perused submissions advanced by both sides in light of records placed before us. 77. Admittedly, the units are eligible units under section 10A of the Act. Ld.AO disallowe....
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....e assessee" in Section 10A as 'total income of the undertaking'. 18. For the aforesaid reasons we answer the appeals and the questions arising therein, as formulated at the outset of this order, by holding that though Section 10A, as amended, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI. All the appeals shall stand disposed of accordingly." 79. The Ld.Counsel submitted that subsequent decision of Hon'ble Karnataka High Court in case of Karle International Pvt.Ltd., vs ACIT reported in (2020) 120 Taxmann.com 264, following the above decision by Hon'ble Supreme Court has held as under: "6. We have considered the submissions made by the learned counsel for the parties and have perused the record. Before proceeding further, it is apposite to take note of the relevant statutory provisions namely section 10B(i), 10B(5), 10B(6)(ii), and section 70 as well as the para 5.2 of the Circular issued by the Central Board of Direct Taxes Section 10B(1) Subject to the provisions....
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....year under sections 48 to 55 in respect of any capital asset (other than a short-term capital Asset) is a loss, the assessee shall be entitled to have the amount of such loss set off against the income, if any, as arrived at under a similar computation made for the assessment year in respect of any other capital asset not being a short-term capital asset. Para 5.2 of Circular dated 10-7-2013 The income computed under various heads of income in accordance with the provisions of Chapter IV of the IT Act shall be aggregated in accordance with the provisions of Chapter VI of the IT Act, 1961. This means that first the income/loss from various sources i.e., eligible and ineligible units, under the same head are aggregated in accordance with the provisions of section 70 of the Act. Thereafter, the income from one ahead is aggregated with the income or loss of the other head in accordance with the provisions of section 71 of the Act. If after giving effect to the provisions of Sections 70 and 71 of the Act there is any income (where there is no brought forward loss to be set off in accordance with the provisions of section 72 of the Act) and the same is eligible....
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....claimed any deduction under section 10B of the Act in respect of any of the three units of the assessee. It is pertinent to mention here that section 10B(5) read with Rule 16E mandates that the assessee has to file audit report in Form-56G for claiming deduction under section 10B of the Act. Admittedly, in the instant case, the assessee has not filed any audit report in Form-56G which is a mandatory requirement for claiming deduction under section 10B of the Act. Therefore, the deduction under section 10B of the Act cannot be thirst upon the assessee. 9. Admittedly, in the instant case, two units of the assessee namely unit No. II and unit No. III were export oriented units and were eligible for exemption. The assessee had sustained loss in respect of unit No. I and therefore, the assessee had claimed set off, as permissible under section 70 of the Act and had offered the balance as income taxable under the head income from business of Rs. 12,89,762/- which has been declared in the return. The provisions of section 70 of the Act have to be given effect to. It is pertinent to mention here that Income-tax Appellate Tribunal had taken a similar view in Mindtree Consu....
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....by us in the paragraphs hereinabove are applicable for these comparables as these comparables have turnover more than 200 crores and therefore cannot be considered with a captive service provider like assessee that works on cost plus basis. 86. Further it is also observed by us that functionally this comparable is are not similar with that of assessee as it has huge intangibles, and carries out services in diversified, areas which is not akin to the services rendered by assessee to its AE. 87. We therefore uphold the observation of DRP in excluding Infosys Ltd., Kals Information Systems Ltd. (SEG), Persistent Systems Ltd. and Tata Elxi Ltd. (seg), Sask and communications technology Ltd, from the finalist. R.S Software India Ltd.: 88. It is submitted that assessee do not have any objection for this company to be included in the final list of comparable. It has been submitted that, this company is functionally comparable and qualifies all filters. 89. We accordingly direct this comparable to be included in the finalist. Accordingly Ground No. 2-5 raised by revenue stands partly allowed. 90. Ground No. 6 is in respect of disallowance deleted made under section 40(....
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....f section 40(a)(i) of the Act. The Tribunal held that since the assessee has not claimed the entire amount as revenue expenditure; but has capitalized the same and claimed only depreciation u/s 32(1)(ii); therefore, provisions of sec. 40(a)((i) shall not apply. Section 40(a)(i) contemplates that any interest, royalty, fee for technical services or other sum chargeable under this act, which is payable outside India as it is relevant for the case in hand on which tax is deductible at source under Chapter XVII -B and such tax has not been deducted or, after deduction, has not been paid, the amount of interest, royalty, fee for technical services and other sum shall not be deducted in computing the income chargeable under the head 'profits & gains of business or profession". This condition of deductibility has been stipulated u/s 40 notwithstanding anything to the contrary in section 30 to 38 of the Act. Sec. 40 begins with non-obstante clause; therefore, it has an overriding effect to the provisions of sec. 30 to 38 of the I.T. Act. The question arises is whether any amount paid outside India or to the Non Resident without deduction of tax at source and the assessee has c....
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....XVIIB of the Act, by disallowing an expenditure which is otherwise allowable under the provisions of the Act. Therefore, the question of disallowance under Section 40(a) arises only when an expenditure is claimed by the assessee without deducting the tax at source as per the provisions of Chapter-XVIIB of the Act, 1961. In the case on hand, when the assessee has not claimed, the said payment as an expenditure then the question of disallowance under Section 40(a)(1) does not arise. The only remedy which might have been resorted to by the Assessing Officer is the action under Section 201 and 201A of the Act. Following the earlier orders of this Tribunal, we are of the considered once the assessee has capitalized the payment in question, then even the assessee has not deducted tax at source on such payment, the provisions of section 40(ia) cannot be invoked for disallowance of the claim of depreciation." 93. It has been submitted that factually there is no change for year under consideration as compared to assessment year 2009- 10. 94. Respectfully following the view taken hereinabove, we do not find any infirmity in the action of the Ld.AO in deleting the disa....
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.... submitted that the sublease expenditure was incurred in relation to the premises occupied by assessee from assessee, which rental income was earned, and therefore is directly related to the income derived from such property. She submitted that, the same was allowable deduction under section 57 (iii) of the Act, under the head, Income from Other Sources. She also submitted that in assessee's own case for assessment year 2009-10 such expenses has been allowed against the rental income. 103. We have perused submissions advanced by both sides in light of records placed before us. 104. It has been submitted that part of the space in the leased building of STPI unit at Bangalore remained unutilised by assessee and therefore was sub leased, against which income of Rs. 21,73,081/-was received. Assessee adjusted this income against the rent paid on the leased premises amounting to Rs. 24,73,405/- thereby incurring loss of Rs. 3,00,324/- under the head, Income from House Property. Ld.Counsel do not object to the said income to be considered under the head income from other sources however it was contended that the same has to be allowed as deduction under section 57 (iii) of the Ac....
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....erred the present appeal before the Tribunal. 27. The Id. counsel for the assessee relied on the decision of the Hon'ble High Court of Karnataka in the case of East West Hotels Ltd. V. DCIT [2011] 13 taxmann.com 167 (Kar) wherein the facts were identical to the facts in the assessee's case and the question before the Hon'ble High Court was, whether the assessee was entitled to claim deduction u/s. 57(iii) of the Act on the rents paid to the lessor against the income derived from subletting? The Hon'ble High Court held that deduction was admissible u/s. 57(iii) of the Act. The Id. DR, however, submitted that the case of the AO is that the sum claimed as deduction would go to reduce the profits on which deduction u/s. 10A of the Act is claimed by the assessee and therefore the question whether this sum was claimed as a deduction while computing the business of STPI unit also needs to be looked into. 28. We have considered the rival submissions. We are of the view that in the light of the decision of the Hon'ble High Court of Karnataka in the case of East West Hotels Ltd. (supra), the deduction claimed by the assessee has to be allowed. W....