TaxTMI 
TaxTMI 
TaxTMI 
2024 (10) TMI 1681
X X X X Extracts X X X X
X X X X Extracts X X X X
....riefly the facts are, the assessee is a resident corporate entity stated to be engaged in the business of providing Information Technology Enabled Servies (ITES). For the assessment under dispute, the assessee had filed its return of income originally on 04.10.2010. Subsequently, on 27.12.2011, the assessee filed a revised return of income declaring income of Rs. 4,938,767,156/-. In course of assessment proceedings, the Assessing Officer noticed that the assessee has computed deduction under section 10A and 10AA of the Act, including interest on fixed deposits, interest on inter corporate deposits and interest on employees' loans as part of its profits and gains of business and profession. Being of the view that such incomes are not derived from the business undertaking eligible for deduction under section 10A, the Assessing Officer excluded them from the purview of profits and gains of business and profession while computing deduction under section 10A. The assessee contested the aforesaid disallowances before learned first appellate authority. Relying upon the decision taken in assessee's own case, the first appellate authority deleted such disallowance. 4. Before us, learned co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dered rival submissions and perused the materials on record. As could be seen from the observations of learned first appellate authority in paragraph 9.2.1 of the impugned order, in the computation of income, the foreign exchange gain of non-eligible undertaking amounting to Rs. 2,45,02,481/- was netted off against similar loss of eligible undertaking amounting to Rs. 8,23,34,697/- and net loss of Rs. 5,78,32,216/- was debited to the profit and loss account, which, in other words, means that the assessee has offered the foreign fluctuation gain of Rs. 2,45,02,481/- to tax. 9. Having verified the aforesaid factual position, learned first appellate authority has given a categorical finding that the Assessing Officer has wrongly added exchange gain even after the assessee has offered it to tax. The Revenue has failed to bring on record any material to controvert the aforesaid factual finding of learned first appellate authority. In view of the aforesaid, we uphold the decision of learned first appellate authority by dismissing the ground. 10. In ground no. 5, the Revenue has challenged the decision of learned first appellate authority in allowing 95% of the cost recoveries to be set....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e, the argument advanced by the ld. CIT(DR) on the aspect of applicability of provisions of section 40(a)(ia) of the Act stands dismissed. 6.7 We find from the order of the ld. CIT(A) for A.Y. 2002-03, reproduced supra, which has been followed by the ld. CIT(A) in successive years and which, in turn, has been followed by the ld. CIT(A) for the year under consideration, that the cost recoveries made by the assessee represent pure cost recovery only without any element of profit in it. We find that ld. CIT(DR) before us had sought to argue that the order of the ld. CIT(A) for A.Y. 2002-03 is perverse. This, in our considered opinion, is completely an absurd argument in view of the fact that if there is any grievance for the Revenue against the observations made by the ld. CIT(A) for A.Y. 2002-03, the Revenue should have contested before the appropriate forum for A.Y. 2002-03. We find that the observations of ld. CIT(A) for A.Y. 2002-03 had been followed successively by all the ld. CIT(A) in assessee's own case up to A.Y. 2011-12, which is the year under consideration before us. If that be the case, then entire order of ld. CIT(A) for A.Y. 2011-12 also would become perverse, accordi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....order of ld. CIT(A), in holding 5% of cost recoveries as not eligible for deduction u/s 10A of the Act, is to be sustained. Accordingly, ground no. 7 raised by the Revenue is dismissed and ground no. 4 raised by the assessee is partly allowed." 14. Facts being identical, respectfully following the decision of the Coordinate Bench, we uphold the finding of learned first appellate authority. Ground raised is dismissed. 15. In ground no. 6, the Revenue has raised the issue of allowance of customer discount amounting to Rs. 1,94,92,305/-. 16. Briefly the facts are, during the year under consideration, the assessee and its customers have mutually agreed that discount is to be provided by the assessee to its customers based on the revenue earned by the assessee from its respective customers. Accordingly, the assessee made a provision of Rs. 5,77,32,259/- towards discount to its customers as per the prevailing industrial practice and debited it to the profit and loss account. Out of the amount of Rs. 5,77,32,259/- Rs. 1,94,92,305/- pertained to undertakings eligible for deduction under section 10 of the Act. While completing the assessment, the Assessing Officer disallowed entire claim....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... reported in 320 ITR 322 (Del.) 9.6 The ld. AR before us relied on the CBDT Circular no. 12 of 2022 dated 16.06.2022 wherein vide question no. 4 in response to a specific query raised, the CBDT had replied that discounts allowed to customers would only represent lesser realization of sale price. Though the Circular has been issued in the context of applicability of deduction of TDS u/s 194R of the Act pursuant to the amendment brought in by the Finance Act, 2022 w.e.f. 01.07.2022, the analogy that discount is only a lesser realization of sale price has been accepted and agreed by the CBDT. Drawing support from this Circular and considering the fact that the export sale price declared by the assessee has been accepted to be at arm's length price (ALP) by the ld. TPO in the order passed by him u/s 92CA(3) of the Act dated 27.01.2015 and also considering the fact that the provision of discount has been made on a rational basis as detailed supra, we do not find any infirmity in the order of ld. CIT(A) deleting the disallowance made thereof by the ld. AO. Accordingly, ground no. 8 raised by the Revenue is dismissed." 18. Facts being identical, respectfully following the aforesaid dec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on-deduction of tax at source on payment made to Genpact Mauritius Bhopal SEZ, Genpact Mauritius Kolkata SEZ and Genpact Mauritius Hyderabad SEZ. 24. Briefly the facts are, during the year under consideration the assessee had acquired shares of the Genpact Infrastructure (Bhopal) Private Limited, Genpact Infrastructure (Kolkata) Private Limited and Genpact Infrastructure (Hyderabad) Private Limited from the entities noted in the ground raised by the Revenue. 25. Being of the view that while making the payments, the assessee was required to deduct tax at source under section 195 of the Act, the Assessing Officer made the disallowance under section 40(a)(i) of the Act. The assessee contested the disallowance before learned first appellate authority. Being of the view that the assessee is not required to withhold tax because of the non-taxability of capital gain under Article 13(4) of the India - Mauritius DTAA, there was no requirement for deduction on tax under section 195 of the Act. Accordingly, he deleted the disallowance. 26. Before us, learned Departmental Representative relied upon the observations of the Assessing Officer. Whereas, learned counsel for the assessee reiterat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ideration, the assessee incurred telecommunication expenses in foreign currency amounting to Rs. 23,19,55,704/-. Out of this, the amount pertaining to undertakings eligible for claiming deduction under Section 10A and 10AA of the Act was Rs. 6,20,38,757/- and Rs. 3,24,95,309/- respectively. The above amount included expenses paid to various service providers for landline, mobile connectivity, dial com connectivity, payments made for mail server and various other charges. During the year under consideration, assessee has been reimbursed a sum of Rs 42,61,89,516/- and Rs 60,25,09,242/- on account of migration / onthe-job-training activities relating to undertakings claiming deduction under Section 10A and 10AA of the Act respectively. It is submitted that under the overall ambit of IT/IT Enabled Services, assessee also provides business process outsourcing services to customers located outside India as well as customers located in India. Provision of business process outsourcing services involve carrying out certain back-office operations of the customers through employees employed and operating out of the STPI and SEZ units of the assessee in India. For carrying out back-office oper....