2013 (10) TMI 293 - BOMBAY HIGH COURT

Whether on the facts and circumstances of the case and in law, the Tribunal did not err in failing to appreciate that as per the provisions of Section 80HHE, profits of any branch, office, warehouse or any other establishment of the assessee situated outside India are to be reduced from 'export turnover of the business' and not from 'total turnover? - Appeal admitted on this issue.

International transaction or not - Consultancy charges - Held that:- dispute relates to allocation of consultancy charges paid by the respondent-assessee to M/s. McKinsey & Co. on the ground that there was an arrangement between the respondent-assessee and its Associated Enterprises and on that basis, the Revenue sought to justify the inclusion of consultancy charges paid to M/s. McKinsey & Co. as an international transaction. The Tribunal held that there was no material to support the conclusion that there was an arrangement between the respondent-assessee and its Associated Enterprises and the entire case is based on mere presumption. Therefore, the Tribunal concluded that the order of the Transfer Pricing Officer (TPO) is without any evidence. The Tribunal further held that even if any benefit accrued to the Associated Enterprises, it was merely incidental to the consultancy obtained by the respondent-assessee from M/s. Mc Kinsey & Co. Besides, the Tribunal held that even if it is assumed that certain benefit accrued to the Associated Enterprises and they were to compensate the respondent-assessee, the ALP would have to be determined. This can only be determined on finding out the consultancy charges paid by similarly situated and comparable independent entities. In the absence of any comparison, the Tribunal held that the action of the TPO cannot be upheld - Decided in against the Revenue.

Deduction u/s 10A - Held that:- respondent-assessee established three units at Chinchwad, Ackruti and Millennium. The Revenue denied the benefit of Section 10A of the said Act in respect of three units on the basis of the approval letter issued by Software Technology Park in India that the three units are to be considered as part of the existing unit. The Tribunal has recorded a finding of fact that all the three units fulfil the conditions prescribed under Section 10A(2) of the Act. The three units were separate and independent production units and the same cannot treated as mere expansion of the existing units. Thus, the respondent-assessee is entitled to its claim for deduction under Section 10A of the Act - Decided against the revenue.