TaxTMI 
TaxTMI 
2023 (9) TMI 1307
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....Relief granted in respect of transfer pricing adjustment in respect of revenue received. d) Relief granted in respect of notional interest charged on delayed receivable by way of transfer pricing adjustment. e) Transfer pricing adjustment in respect of interest undercharged on the loan given to AEs. 4. The assessee company is engaged in the business of providing information technology solutions to banks and financial institutions worldwide. 5. Certain common issues are urged in these appeals. We shall first take up the common issues urged by both the parties. The first common issue urged by the parties relates to deduction under section 10A of the Act. 5.1 The assessee is aggrieved on the decision of tax authorities in denying deduction u/s 10A of the Act in respect of interest income earned by the assessee. 5.2 We heard the parties and perused the record. We noticed that the identical issue has been considered by the Tribunal in the assessee's own case in A.Y. 2003-04 in ITA No. 5023/Mum/2007 and the Tribunal vide its order dated 12.10.2021 has held that the assessee is eligible for deduction under section 10A in respect of interest income earned on temporary parking of su....
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....l undertaking and resultantly flows to the assessee. This is also more than clear from the contemporaneous Circular No. 794 dated 9.8.2000 which states in paragraph 15.6 that, "The export turnover and the total turnover for the purposes of sections 10A and 10B shall be of the undertaking located in specified zones or 100% Export Oriented Undertakings, as the case may be, and this shall not have any material relationship with the other business of the assessee outside these zones or units for the purposes of this provision." Accordingly, we are of the view that the Ld CIT(A) was justified in holding that the losses incurred in other eligible units are not required to be set off against the profits of the undertaking against which the deduction u/s 10A was allowed. 5.5 One more issue urged by the revenue with regard to the computation of deduction u/s 10A is whether the telecommunication charges are required to be deducted from the "Export turnover" while computing deduction u/s 10A of the Act or not?. 5.6 While the AO held that the telecommunication charges are required to be deducted from the "Export turnover", the Ld CIT(A) reversed the same. Before us, the Ld A.R submitted t....
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....rties". The TPO selected 3 Indian companies for the purpose of bench marking. It is pertinent to note that the TPO did not disclose the names of those companies either to the assessee or in the order passed by him. The said three companies was mentioned as "X Ltd", "Y Ltd" and "Z Ltd" by the TPO in his order. Based on the margins of the above said three unknown companies, the TPO held that the Associated Enterprises (AEs) should have been remunerated by the assessee @ cost plus 10% margin only. We noticed that the overseas subsidiaries retained earning of 15%/20%. Accordingly, the TPO proposed transfer pricing adjustment of Rs. 31.93 crores. 6.3 Before Ld CIT(A), the assessee made detailed submissions and hence the Ld CIT(A) called for a remand report. However, the TPO did not furnish the report despite several reminders issued by Ld CIT(A). Hence the Ld CIT(A) proceeded to decide the issue on the basis of available materials. The ld CIT(A) rejected the approach of the TPO in selecting foreign AEs as tested parties. The Ld CIT(A) examined the comparable companies selected by the assessee and held that only 11 companies (out of 43 companies) selected by the assessee are comparable ....
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....tion of expenditure needs to be disallowed in terms of section 14A of the Act. The Hon'ble Bombay High Court has upheld the disallowance of 2% of exempt income in the case of Godrej Agrovet Limited (ITA No.934/2011). Following the same, we direct the Assessing Officer to restrict the disallowance under section 14A to 2% of the exempt income. The order of the learned CIT(A) would stands modify accordingly. 8. We shall take up the individual issues urged in the appeal filed by the Revenue. 9. First individual issue contested by the Revenue relates to transfer pricing adjustment made in respect of delayed receivable from the AEs. The Transfer Pricing Officer (TPO) noticed that the assessee has received money from its AEs with considerable delay and accordingly made transfer pricing adjustment of Rs. 3.80 crores on account of delayed receivable by adopting interest at 6.87% on average quarterly balance due from AEs. The learned CIT(A) deleted the same following the decision rendered by him in AY 2005- 06. He also further held that the AEs are not charging interests from their customers and the delay is on account of delayed collection by AEs from their customers. 9.1 The learned....
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....the light of discussions made supra. 10. Next individual issue contested by the revenue relates to transfer pricing adjustment made in respect of loan given to AEs. The assessee had given loans to two of its AEs namely, i-flex, America and ISE Mauritius Company, Mauritius. The assessee had received interest from the above said AEs. However, the TPO took the view that the assessee has undercharged interest and accordingly made transfer pricing adjustment of Rs. 2.29 crores. The learned CIT(A) however deleted the addition by following the decision rendered by the Tribunal in assessee's own case in A.Y. 2004-05 in ITA No. 5078/Mum/2010. 11. We heard the parties and perused the record. We noticed that the TPO has arrived at ALP rate of interest for i flex America at 8.37% and for ISE Mauritius Company Mauritius at 11.75%. For this purpose, the TPO had adopted prime lending rate at which AEs could have obtained loan in respective jurisdiction and then added 1.75%, being the rate charged for giving bank guarantee. The TPO added the bank guarantee rate on the reasoning that the AEs could be able to obtain loan, only if the assessee gives corporate guarantee to the financial institutions....