TaxTMI 
TaxTMI 
2022 (10) TMI 1
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....o.25/PUN/2019 for A.Y. 2010-11 for adjudication. 4. Briefly, the facts of the case are that the assessee is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of development and sale of software development services and IT solutions to HSBC group of companies. The return of income for the assessment year 2010-11 was filed on 05.10.2010 declaring total income of Rs.36,01,71,190/- after claiming exemption under the provisions of section 10B of the Income Tax Act, 1961 ('the Act'). Against the said return of income, the assessment was completed by the Dy. Commissioner of Income Tax, Circle-1(2), Pune ('the Assessing Officer') vide order dated 28.03.2014 passed u/s 143(3) r.w.s. 144C of the Act at total income of Rs.121,42,56,739/-. While doing so, the Assessing Officer made a disallowance under the provisions of section 10A(7) read with section 80IA(10) of Rs.85,40,85,549/-. The factual matrix of the above addition, is as under : During the previous year relevant to the assessment year under consideration, the assessee company made a claim for exemption on profits of Rs.358,95,85,650/- under the provisions of section 10B of the Act....
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....as not approved as 100% export oriented unit as required under Explanation to section 10B of the Act. However, the ld. CIT(A) granted relief to the assessee under the provisions of section 10A of the Act. As regards to the disallowance of Rs.85,40,85,549/-, the ld. CIT(A) after examining the sample copies of invoices, employee cost charged by the assessee company on the basis of hours spent by employee in the project on sample basis, observed that there was no abnormality in the billing pattern followed by the assessee company, accordingly held that there is no arrangement as alleged by the Assessing Officer between the assessee company and its AEs leading to the abnormal profits. The ld. CIT(A) held that mere close connection between the assessee company and its AE is not sufficient, onus lies on the Assessing Officer to demonstrate that extraordinary profits had been earned by the assessee company by virtue of arrangement between the assessee company and its AEs. In the absence of such arrangement, the Assessing Officer cannot invoke the provisions of section 10B(7) r.w.s. 80IA(10) of the Act. Accordingly, the ld. CIT(A) directed the Assessing Officer to delete the addition u/s ....
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.... of the ld. CIT(A) denying the benefit of deduction u/s 10B of the Act. 11. It is contended before us that the ld. CIT(A) had seriously fell in error in denying the claim for deduction u/s 10B by holding that the assessee is a merely registered as 100% EOU under STPI scheme, on the ground that there is no approval by the Board appointed by the Central Government u/s 14 of Industrial Development and Regulations Act, 1951. It is also contended that the registration under the STPI is sufficient compliance to enable the assessee company to claim deduction u/s 10B, as all approvals issued by the STPI director have authority of inter ministerial standing committee, the approval of STPI directors is same as Board's approval as required under the Explanation 2(iv) of section 10B of the Act. The ld. Counsel also placed reliance on the decision of the Ahmedabad Bench of the Tribunal in the case of DCIT vs. M/s Hitech Infosoft in ITA No.1625/Ahd/2016 for A.Y. 2007-08 order dated 03.10.2018 and the decision of the Pune Bench of the Tribunal in the case of ITO vs. Cat Labs Pvt. Ltd. in ITA No.131/PUN/2013 for A.Y. 2009-10 order dated 26.02.2014. 12. On the other hand, ld. Sr. DR placed relian....
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....herefore, deemed to be valid." 14. Thus, it is clarified that the approvals issued by STPI directors having Board of approvals satisfied the conditions of approval as envisaged under Explanation 2(iv) of section 10B of the Act. The decision of the Hon'ble Delhi High Court in the case of CIT vs. Regency Creations Ltd., 27 taxmann.com 322 (Delhi) was held to be incorrect by the Ahmedabad Bench of the Tribunal in the case of M/s Hitech Infosoft (supra) and the recently the Hon'ble Calcutta High Court in the case of PCIT vs. Wizard Enterprises (P.) Ltd., 136 taxmann.com 235 after referring to the CBDT's clarification dated 09.03.2009 had upheld the exemption u/s 10B even in the absence of approval from Board of Approvals u/s 14 of Industrial Development and Regulations Act, 1951. In the above circumstances, we are of the considered opinion that the assessee is entitled for deduction u/s 10B of the Act, on registration with STPI as 100% EOU. Accordingly, the order of the ld. CIT(A) on this issue is reversed. We allow the Cross Objection filed by the assessee company. 15. Now, we shall take up the Revenue's appeal in ITA No.1464/PUN/2017 for A.Y. 2010-11. ITA No.1464/PUN/2017 - By Rev....
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....een the assessee company and its AEs resulting in more than the ordinary profits and also by considering the sample copies of invoices of employees cost etc. gave a finding that there was no such arrangement as alleged by the Assessing Officer further held that mere close connection between the assessee company and its AEs is not sufficient enough, in the absence of any arrangement between the assessee company and its AEs, to invoke the provisions of section 10B(7) r.w.s. 80IA(10). Accordingly, directed the Assessing Officer to delete addition of Rs.85,40,85,549/-. 20. Being aggrieved, the Revenue is in appeal before us vide this ground of appeal no.7. 21. It is submitted that the ALP determined under the provisions of 92CA is best indicator determining the fair market value of any goods and services. The ld. Sr. DR further submits that the close connection between the assessee company and its AEs cannot be ruled out and the requirement of existence of arrangement should be found out by over all conduct of the assessee company and its AEs. Even in the absence of any agreement, placing reliance on the definition of section 102(1) of the Act, he submitted that the "arrangement" mea....
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....to re-compute the profits of eligible business, as defined under the provisions of section 80IA, in case where any goods and services of eligible business are transferred for any business carried on by the assessee and viceversa and the consideration recorded in the books of account of eligible business does not correspond to the market value of such goods or services as on the date of transfer, in such cases, it is open to the AO to substitute the consideration recorded in the books of account by market value of goods and services. The Finance Act, 2012 has substituted the Explanation to section 80IA(8) to clarify that the market value to be arm's length price determined under the provisions of section 92F(ii) as a consequence to transfer pricing rules for domestic transactions. It is worth noting that neither the provisions of section 80IA(8) and 80IA(10) have application to the international transactions nor the Explanation appended to section 80IA as amended by the Finance Act, 2012. In the present case, indisputably, the transactions between the assessee company and its AE are international transactions as defined u/s 92B of the Act. The provisions of section 80IA(8) and 8....
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....resent case, the AO had not brought any material indicating the existence of an arrangement between the assessee company and its foreign AE, as a result of which more profits than ordinarily have been produced to the assessee company and therefore, the provisions of section 10B(7) r.w.s. 80IA have no application to the present case. The CIT(A) has rightly deleted the addition of Rs.85,40,85,549/- made by the Assessing Officer, we do not find any illegality or perversity in the findings of CIT(A). Accordingly, the appeal filed by the Revenue stands dismissed. ITA No.2348/PUN/2017 25. The Revenue in ITA No.2348/PUN/2017 has raised the following grounds of appeal: "1. The order of Ld. Commissioner of Income Tax (Appeals) is contrary to the law and on facts and in the circumstances of the case. 2. The Ld Commissioner of Income Tax (Appeals) erred on the facts and in the circumstances of the case and in law in allowing alternate claim of the assessee for deduction u/s. 10A of the Act, once he had upheld the order of AO in denying deduction u/s. 10B. 3. The Ld Commissioner of Income Tax (Appeals) erred on the facts and in the circumstances of the case and in law in allowin....