TaxTMI 
TaxTMI 
2017 (1) TMI 1865
X X X X Extracts X X X X
X X X X Extracts X X X X
....Enabled Services ('ITES') as per the instructions, guidance, training and standard operating procedures of group entities in India and overseas and wrongly characterising the Appellant as a Knowledge Process outsourcing ('KPO') company; 2. The reference to the Additional Commissioner of Income Tax, Transfer Pricing-I(5), Mumbai ('TPO') under Section 92CA by the DCIT was bad in law, in excess of jurisdiction and / void in law. 2.1. The Appellant prays that the book value of the international transactions of provision of ITES, be held to be the arm's length price of the said transactions as per the Appellant's Transfer Pricing documentation, and therefore the aforesaid addition made by the DCIT be deleted. 3. On the facts, in law and in circumstances of the case, the DCIT erred in treating the interest income on deposits with banks and other receipts, amounting to Rs. 23,70,66,206, as chargeable to income-tax under the head 'Income from Other Sources' as against the Appellant's claim that such interest income and other receipts is chargeable to tax under the head "Profit and Gains of Business or Profession" and eligible for d....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Tax Rules, 1962, assessee was withdrawing the dispute pertaining to transfer pricing addition covered under the MAP proceedings. As a consequence, by way of a communication dated 30.6.2015, the appellant-company has filed revised Grounds of appeal, which we have reproduced above. As a consequence, in the context of Grounds of appeal no. 1 to 2.1, the dispute pertains to residual addition of Rs. 10,39,57,880/- as against the original transfer pricing adjustment of Rs. 257,95,72,448/-. 5. In the above background, rival submissions have made their submissions and the relevant material has been perused. Insofar as the dispute in Grounds of appeal no. 1 to 2.1 is concerned, the same arises from the action of income-tax authorities in holding that the stated value of international transactions of rendering of ITE services to non-U.S associated enterprises is not at an arm's length price and that an adjustment of Rs. 10,39,57,880/- is required to bring such values to their arm's length price. Notably, assessee had selected the Transactional Net Margin Method (TNMM) as the most appropriate method and the Profit Level Indicator (PLI) is canvassed at 15.07% based on the ratio of Operatin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r dated 9th April 2015 in F-no. 480/13/2010-FTD-1 has been issued in the case of the assessee company under MAP proceedings for A.Y. 2006-07 to 2010-111 by the DCIT(OSD), APA-I on behalf of the Foreign Tax and Tax Research Division -I, Central Board of Direct Taxes, New Delhi wherein it has been confirmed that for A.Y. 2006-07, for US related transactions, the margin has been determined at 14.38% as against margin of 21.58%, as was determined by the Transfer pricing officer (TPO). It has been further clarified by way of note in the said letter that apportionment between 'US' and 'non-US' ALP and TP adjustment had been margined out by the APA section (of FT and TR Division) on the basis of 'US' and 'non-US' revenue. It is further noted from the perusal of the annual accounts of the assessee company that aggregate turnover has been shown at Rs. 47,30,521/-, and no distinction has been made between the 'US' and 'non-US' transactions. Similarly in the orders passed by the lower authorities also no such distinction as ever been made by any of the authorities. Under these circumstances, in our considered view, whatever margin has been determined for the 96% of the transactions, same marg....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pose of computation of deduction u/s 10A of the Act. 11. In this context, the relevant facts are that during the year under consideration assessee earned interest income on fixed deposits, which was considered as a part of income eligible for deduction u/s 10A of the Act. Notably, assessee had claimed deduction with respect to the profits from the business of its undertaking set-up under the Software Technology Park of India Scheme (STPI) unit engaged in the export of computer software and IT-Enabled services in terms of Sec. 10A of the Act. The stand of the assessee was that interest income earned on deposits had arisen in the ordinary course of business of STPI unit and hence entitled for deduction u/s 10A of the Act. The income-tax authorities have denied the claim on the ground that interest income on fixed deposits is taxable under the head 'income from other sources' and further that even if the same is to be taxed as 'business income', the same is not 'derived' from Sec. 10A entitled unit and, therefore, such income is not eligible for deduction u/s 10A of the Act. 12. Against the aforesaid, the learned representative for the assessee pointed out that the said issue ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the section itself. 15. We have carefully considered the rival submissions. A perusal of the precedents relied upon by the assessee clearly bear out that the arguments sought to be set-up by the ld. CIT-DR have already been considered by the Tribunal. In fact, in the lead order dated 26.6.2009 (supra) for Assessment Year 2004-05, the distinction between the operating mechanics of Sec. 10A and 80HHC of the Act have been duly noted. In this context, the following discussion in the order of Tribunal dated 26.6.2009 (supra) is relevant :- "11. Coming to the next grievance regarding interest income not being considered as income from business, Learned counsel for the assessee fairly admitted that sum of Rs. 3,63,042/- being interest on income-tax refund, relating to software technology Park Unit I would not be eligible for deduction u/s.10A of the Act. Hence, we are required to decide on interest on fixed deposit Rs. 7,96,223/- and interest on staff loan of Rs. 1,377/-. There is no dispute that assessee was a hundred per cent exporter. No doubt the Learned Departmental Representative has relied on the decision of the Kerala High Court in the case of CIT v. Jose Thomas (supra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tions of subsection (4) of Sec. 10A of the Act in the manner of computing the benefits available under Sec. 10A of the Act. The following discussion in this context is relevant :- "5.6. Having decided the interest income as income from business, the next step is to compute the amount of deduction available u/s 10A on the amount of aforesaid interest income. It is noted that this aspect has not been decided in earlier years. Therefore, this issue needs to be decided by us, as per provisions of section 10A. It is further noted that it is a case of 100% exporter. There are no other local sales done by the assessee. It has been rightly contended by the Ld. Counsel that sub-section (4) has provided mechanism to compute the amount of profit eligible for deduction u/s 10A. For the sake of ready reference sub-section (4) is reproduced herein: "(4) For the purpose of [sub-sections (1) and (1A)], the profits derived from export of articles or things or computer software shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total tur....