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2014 (2) TMI 1288 - AT - Income TaxDeduction under section 80 HHC computation - reduction of 90% of the gross interest from the profit of the business - Held that:- The issue is now covered in favour of the assessee by the decision of Hon’ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. vs. CIT (2012 (2) TMI 101 - SUPREME COURT OF INDIA), wherein it has been held that 90% of not the gross rent or gross interest but only net interest or net rent, which had been included in the profits of the business of the assessee as computed under the head “profit and gain of business or profession” was to be deducted under clause (1) of Explanation (baa) to section 80 HHC of the Income Tax Act,1961 (the Act) for determining the profits of the business. In the said decision the decision of Hon’ble Bombay High Court in the case of CIT vs. Asian Star Company Ltd. [2010 (3) TMI 455 - BOMBAY HIGH COURT ] was impliedly overruled. Accordingly, we restore this matter to the file of AO with a direction to re-compute the deduction under section 80 HHC of the Act on the issue of interest as per aforementioned decision of Hon’ble Supreme Court. TP adjustment - expenses of advertisement reimbursed by the assessee to its AE - Held that:- The expenses of advertisement reimbursed by the assessee to its AE belongs to the export activity of the assessee. To all the three AEs to whom the assessee has reimbursed advertisement expenditure huge export sales are made. It is the case of the assessee that its operating margin on its export activity is 47.17% as against similar margin of comparables of 8.08%. If the case of the assessee is examine in the light of these facts, then we are of the opinion that Ld. CIT(A) was right in deleting the adjustment as though the transaction of sharing the advertisement expenditure may be an independent transaction but it relates to the activity of export. Even if the total expenditure made by the assessee on sharing of advertisement expenses is reduced from operating margin of exports then also the operating margin of the assessee will be much more than the operating margin of the comparables and operating margin of assessee on export activity has been held to be at arms length by the TPO. It is not the case of TPO that the comparables selected by the assessee were not appropriate or some other comparables were also required to be included. In the light of these facts, we do not find any infirmity in the relief granted by Ld. CIT(A) and we decline to interfere in the deletion of addition.
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