TaxTMI 
TaxTMI 
2026 (9) TMI 1975
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....e voluntary transfer pricing adjustment made in the return. As against the tax liability, the assessee adjusted MAT credit, TDS, advance tax and foreign tax credit and finally sought for the refund. The return was processed u/s. 143(1) of the Act. 3. Thereafter the AO selected the case of the assessee for scrutiny and statutory notice u/s. 143(2) was issued. Further notice u/s. 142(1) was issued calling for the details. The assessee appeared and furnished the details called for by the AO. Thereafter the AO has referred the case to the transfer pricing officer for determining the arms length price for the international transaction of back office support services provided by the company. The assessee also appeared and furnished the details sought for by the Ld.TPO. The Ld.TPO passed an order u/s. 92CA(3) of the Act proposing a TP adjustment of Rs. 15,67,95,769/-. The assessee based on the mistakes in the said order, filed a rectification application u/s. 154 of the Act and thereafter, the Ld.TPO had reduced the TP adjustment to Rs. 14,26,47,994/- before the voluntary transfer pricing adjustment of Rs. 8,54,00,000/-. After considering the voluntary transfer pricing adjustment, the ....
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....sheet which does not mean that the assessee did not incur any expenditure with respect to exempt income. 3. The Ld. CIT(A) has not considered the fact that the assessee has employed man powers for making the decision related to investment. The Assessee has availed the market related skill of the employees for earning the exempt income. 4. That the Ld. CIT(A) has erred in deleting the addition made by the AO on account of foreign exchange loss by placing on the decision quoted without discussing the facts of the case. 5. Whether the Ld. CIT (A) erred in law as well as on facts in seeking exact comparability under TNMM and whether the objection to the selection of comparable is legally sustainable? 6. Whether the Ld. CIT (A) erred in law as well as on facts in ignoring the parameters of analysis prescribed under Rule 10B, which are exhaustive and if so, whether it is legally permissible to bypass the same partially or by implication? 7. Whether the Ld. CIT (A) was right in fact and in law in rejecting M/s BNR Udyog Ltd, as comparable based on the decision of the Hon'ble Tribunal in the case of Zyme Solutions Pvt. Ltd, which applied RPT....
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....mitted that the Ld.CIT(A) had correctly followed the precedence on each and every issue and therefore, unless and until, there are judgments contrary to the view taken by the Tribunal, it could not be ignored by any of the authorities. The Ld.AR also filed a paper book enclosing the documents and also filed a case law compilation in respect of the issues which are in dispute and which are followed by the Ld.CIT(A) and prayed that the order of the Ld.CIT(A) may be confirmed. The Ld.AR also took us through the findings given by the Ld.CIT(A) in respect of the several issues decided by him and also brought to our notice that the issues are covered in favour of the assessee by various orders and judgments and therefore, submitted that there is no error in the order and prayed to confirm the same. The Ld.AR also filed a synopsis and also explained the functional differences between the assessee and the companies relied on by the AO. Along with the said synopsis, a detailed chart has also been filed by the assessee to show that the said comparables are liable to be rejected on the ground of functional difference and RPT. 9. We have heard the arguments of both sides and perused the mat....
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....ringing the above said amount in foreign exchange within the period prescribed in sec. 10AA of the Act, which is one of the mandatory conditions for allowing deduction under that section. The Ld DRP also noticed that the eligible unit has actually incurred loss and hence the assessee is not eligible to claim deduction u/s. 10AA of the Act. However, the assessee, by making voluntary Transfer pricing adjustment, is attempting to avail deduction u/s. 10AA of the Act and the same should not be permitted. The Ld DRP also held that the Transfer pricing adjustment determined by the TPO is added to the total income for tax purposes, irrespective of the profits/loss of 10A/10AA units and whether they are eligible for deduction under those sections or not. Further the Ld DRP also proceeded on the ground that the assessee did not determine the voluntary T.P adjustment in its Transfer Pricing Study. Accordingly, the Ld DRP held that the decision rendered by the co-ordinate bench in the case of I-Gate Global Solutions Ltd (2007)(112 TTJ 1002) is distinguishable. Accordingly, the Ld DRP directed the AO to disallow the deduction claimed u/s10AA in respect of Voluntary Transfer pricing adjustment.....
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....s, which arises before us is whether the assessee is entitled to claim 10A deduction on the additional TP adjustment offered by the assessee on its own motion in the return of income. The assessee was 100% Export Oriented Unit which was captive service provider to its associated enterprises. The total exports were to the associated enterprises and the plea of assessee in this regard is that foreign exchange due on exports has been received in India in time. In order to adjudicate the issue, we need to take into consideration the provisions of section starting with section 92(1) of the Act. The Chapter X of the Act lays down the special provisions relating to avoidance of tax. Under section 92 of the Act, any income arising from international transactions shall be computed having regard to the arm's length price. In other words, section provides computation of income from international transactions having regard to the arm's length price. The income which is so computed in respect of international transactions entered into by the assessee is notional income in the hands of assessee. This is the basic point which has to be kept in mind while adjudicating the issue raised in t....
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....he case of assessee under section 10A of the Act. In this regard, there is need to look at the computation provisions provided in sub-section (4) to section 10A of the Act. The said sub-section reads as under: - "10(A)(1).. (2) & (3) ** ** ** (4) For the purposes 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 turnover of the business carried on by the undertaking." 19. As per said sub-section, the profits derived from the export of articles or things or computer software, shall be the amount which bears to the profits of 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 turnover of business carried on by the undertaking. Thus, the first step we have to look at the profits derived from export of articles or things of computer software and the profits of business of undertaking. The additional income is on the....
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....puting the total income of the undertaking for any assessment year, its profits and gains had not been included by application of the provisions of this section as it stood immediately before its substitution by the Finance Act, 2000, the undertaking shall be entitled to deduction referred to in this sub-section only for the unexpired period of the aforesaid ten consecutive assessment years: Provided further that where an undertaking initially located in any free trade zone or export processing zone is subsequently located in a special economic zone, by reason of conversion of such free trade zone export processing zone into a special economic zone, the period of ten. consecutive assessment years referred to in this sub-section shall be reckoned from the assessment year relevant to the previous year in which the (undertaking began to. manufacture or produce such articles or things or computer software) in such free trade zone or export processing zone : Provided also that for the assessment year beginning on the 1-4-2003, the deduction under this sub-section shall be ninety per cent of the profits and gains derived by an undertaking from the export of such articles or thin....
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....been clarified that Pune unit is an independent unit and is in no way related with the activities carried out at Bangalore or Chennai unit. In absence of the facts, it is not possible to say that Pune unit was an independent undertaking engaged in the business of software development, which was in no way related to the software development done at Bangalore or Chennai unit. In case, the Pune unit is found to be independent, then loss from such unit is to be independently calculated. In case such unit is associated with the activities, which are carried out at Bangalore or Chennai unit, then Pune unit will be considered as part of that undertaking. Hence, the issue of ascertaining as to whether Pune unit was an independent unit or a unit associated with activities of other two units is restored back on the file of the Assessing Officer. In case it is found that it is part of the other two units and is associated with the activities done in other two units, then it will be considered as part of the same undertaking and loss will be adjusted. However, in case, if it is found, it is an independent unit, then it will be treated as independent undertaking and the assessee cannot be force....
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....he income on the basis of arm's length prices. It is not a case, where there is an enhancement of income due to determination of arm's length price. Hence, it is held that assessee was entitled to deduction under section 10A in respect of income declared in the return of income on the basis of computation of arm's length price.' 21. The Hon'ble High Court of Karnataka in its order in the case of iGate Global Solutions Ltd. (supra) considered the following substantial question of law raised by the Revenue. "(4) Whether the Tribunal was correct in holding that deduction u/s. 10A of the Act is allowable in respect of income computed on the arm's length price by ignoring the proviso to Section 92(4) of the Act" 22. The Hon'ble High Court in paras 5 and 6 of its order held as under:- "5. In so far as substantial question of law No.4 is concerned, the error committed by the Assessing Officer was relying on Section 92(C)(4) to a case where Arm's Length Price was determined by the assessee, whereas the said provision applies to a case where Arm's Length Price was determined by the IT(TP)A Nos.218 & 199/Bang/2015 Page 1....
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.... ground of appeal No.4 raised by the assessee is thus, allowed." Identical view has been expressed by the Delhi bench of Tribunal in the case of AT Kearney India P Ltd (ITA No.2623/Del/2015 dated 21.06.2019). Accordingly, we hold that the assessee is eligible for deduction u/s. 10AA of the Act in respect of voluntary Transfer Pricing adjustment made by it. We direct accordingly." 5.1.1 Respectfully following the above ITAT decision, it is held that deduction u/s. 10AA of the Act is allowed in respect of voluntary Transfer Pricing adjustment. The appellant succeeds in this ground." 11. The ground raised by the revenue is that the similar issue is pending before the Hon'ble Supreme Court and therefore the Ld.CIT(A) could not have decided the issue in favour of the assessee. We do not find any merit in the said contention since as on today, number of Tribunal orders are in favour of the assessee and also the Hon'ble Jurisdictional High Court also in favour of the assessee and in that circumstances, the mere pendency of the SLP would not be a bar to decide the issue by the Ld.CIT(A). Further, it is the case of the assessee that they have not signed any APA with CBD....
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....he revenue had accepted the deletion of such allowances made by the Ld.CIT(A) for the earlier assessment years and dismissed the appeals filed by the Revenue. 15. In view of the discussion made in the preceding paragraph, we are not inclined to accept the ground raised by the Revenue unless a contrary view taken by the higher forums are placed before us. We, therefore, dismiss the grounds nos. 2 and 3 raised by the Revenue. 16. Insofar as the ground no. 4 in which the Revenue had challenged the deletion made in respect of the foreign exchange loss as the Ld.CIT(A) had not discussed the facts involved in the cited case. 17. The Ld.CIT(A) in his order in paragraph number 5.6, had dealt with this issue and by relying on the judgment of the Hon'ble Supreme Court in the case of CIT vs. Woodward Governor India Pvt. Ltd. reported in 312 ITR 254 (SC) wherein it was held that the loss suffered by the assessee on account of the exchange difference as on the date of the balance sheet is an item of expenditure eligible for deduction u/s. 37(1) of the Act. The above said judgment was followed by the Hon'ble Jurisdictional High Court in its judgements dated 15/02/2021 in ITA No. 133/201....
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....e Ltd. and excluded the said company from the comparable companies. The Ld.CIT(A) also relied on the order of this Tribunal in the case of Dell International Services Pvt. Ltd. vs. JCIT wherein the Tribunal had considered the company TCS e-Serve Ltd. and excluded the same as comparables. From the reading of the order of the Ld.CIT(A), apart from considering the various factors, the Ld.CIT(A) had also relied on the orders of the Tribunal in which the company was excluded as a comparable company and therefore, we do not find any reason to interfere in the order of the Ld.CIT(A) which is based on the facts and also based on the orders of this Tribunal. The non-acceptance of the order of the Dell International Services Pvt. Ltd. vs. JCIT and the proposal to challenge it before the higher forum would not be a reason for treating the order of the Ld.CIT(A) as not correct. 21. Further, the revenue had challenged the exclusion of BNR Udyog Ltd. by the Ld.CIT(A) on the ground that the Ld.CIT(A) had relied on a decision of the Tribunal in the case of ZYME Solutions Pvt. Ltd. which speaks about the application of RPT filter of 15% when there are other Tribunal orders considering 25% RPT as....