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2016 (4) TMI 1316 - AT - Income TaxDeduction u/s 35(2AB) denied - claim @ 150% of the expenditure incurred - assessee has failed to furnish copy of agreement with the prescribed authority - Held that:- As decided in own case in assessment year 2002–03assessee has made requisite compliance as has been required by the prescribed competent authority and compliance of all the procedural requirements has been examined by the competent authority while granting approval. In our considered view, we should look substantive compliance of the provisions. Documentation in any particular format and its approval in a particular manner is not object of this action. - Decided in favour of assessee Disallowance of interest on the ground of advance made to Indian subsidiary - two of the companies to whom advances were made by the assessee are 100% subsidiary of the assessee - Held that:- Following decision of CIT v/s S.A. Builders, [2006 (12) TMI 82 - SUPREME COURT] as the advance made to the subsidiary are on account of commercial business / business expediency, proportionate disallowance out of interest expenditure cannot be made. Ground no.2, is allowed Disallowance on account of PF and ESIC - paid beyond the prescribed date under the relevant statute but before the due date of filing of return of income under the Income Tax Act - Held that:- As decided in assessee's own case for the assessment year 2002–03 [2016 (1) TMI 752 - ITAT MUMBAI] as held the amount of employees contribution etc. deposited before the filing of return, cannot be disallowed u/s 43B - we allow assessee’s claim of deduction in respect of payment made towards PF contribution and ESIC. Decided in favour of assessee Deduction in respect of DEPB credit un/s 80HHC - Held that:- There is no income to the assessee in terms of section 28(iiid) having considered the submissions of the assessee in the light of the relevant statutory provisions and the decision of the Hon'ble Supreme Court in Topman Exports [2012 (2) TMI 100 - SUPREME COURT OF INDIA], we find force in the submissions of the assessee. Moreover, it is seen, similar issue arose in assessee’s own case for assessment year 2001–02 restore the matter back to the file of the Assessing Officer to allow assessee’s claim in terms of principle laid down by the Hon'ble Supreme Court. Addition on account of transfer pricing adjustment - disallowance of interest on the advances made to overseas subsidiaries - interest free advances to the overseas subsidiary on account of reimbursement of expenditure - Held that:- Such type of international transaction, domestic PLR rate cannot be applied and the rate of interest has to be quantified either with reference to LIBOR or EURIBOR depending upon the country and currency in which the transaction has taken place. Considering the facts of the present case, we are of the considered opinion that LIBOR rate of 1.698% plus 300 basis point would be the appropriate interest rate applicable to the international transactions relating to advancement of interest free loan / extended credit facility to the overseas A.E. Accordingly, we direct the Assessing Officer / Transfer Pricing Officer to compute the interest on the interest free advances paid to the A.E Disallowance of interest expenditure - advances given to overseas subsidiary - Held that:- there is a business / trade relationship between the assessee and overseas subsidiary. That being the case, it cannot be said that investments made are not wholly and exclusively for the purpose of business. - commercial expediency has to be seen through the position of a prudent businessman and the Assessing Officer cannot step into the shoes of a businessman to find out the necessity or reasonableness of expenditure incurred - no disallowance out of interest expenditure can be made. As far as the findings of the Commissioner (Appeals) that assessee is eligible for deduction under section 57(iii), only because the assessee accepted the decision of the learned Commissioner (Appeals) in assessment year 2002–03, for whatever may be the reason that will not deprive the assessee from claiming deduction of interest expenditure under section 36(1)(iii). - Decided in favour of assessee Rejection of indirect cost by 10% of the export incentives for computing profits under section - Held that:- Tribunal for assessment year 2002–03, in assessee’s own case, [2016 (1) TMI 752 - ITAT MUMBAI], it is noticed that while upholding the order of the learned Commissioner (Appeals) in assessee’s own case claim of reduction in indirect cost by 10% of the export incentives the Tribunal followed its own order for assessment year 2001–02 in assessee’s own case wherein the Tribunal had decided the issue by following the decision of the Hon'ble Supreme Court in Hero Export v/s CIT [2007 (11) TMI 13 - SUPREME COURT OF INDIA] as held principle of attribution is applicable to cases falling u/s 80HHC(3)(b) and therefore, part of indirect cost has to be apportioned to expenses incurred for earning export incentives. 10% of total income has been held as fair estimate in this case Treatment of foreign exchange fluctuation gain as business income for grant of deduction under section 80HHC - Held that:- There is no dispute to the fact that foreign exchange gain was directly as a result of export made by the assessee. As observed from the order of the learned Commissioner (Appeals) similar relief was also granted to the assessee in the preceding assessment year. In view of the above, we do not find any infirmity in the order of the learned Commissioner (Appeals) Netting of interest expenditure against interest income for computation of deduction under section 80HHC - Held that:- In assessment year 2002–03, it is noticed that while dealing with identical issue, the Tribunal followed its earlier decision in assessee’s own case for assessment year 2001–02, wherein the Tribunal has allowed assessee’s claim on the basis of ratio laid down by the Hon'ble Supreme Court in ACG Associate Capsules P. Ltd. v/s CIT [2012 (2) TMI 101 - SUPREME COURT OF INDIA] by holding that netting of interest is permissible. Exclude excise duty and sales tax from the total turnover for computation of deduction under section 80HHC - Held that:- As in assessee’s own case for the assessment year 2002–03 ollowing the decision of the Hon'ble Supreme Court in CIT v/s Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME COURT] as held that excise duty should be excluded from the total turnover for the purposes of section 80HHC Transfer pricing adjustment in respect of sale of finished goods - MAM selection - comparability - Held that:- Restore the matter back to the file of the Assessing Officer with a direction to make a fresh analysis relating to most appropriate method which could be adopted for bench marking the international transaction and, thereafter, undertake a comparably analysis. Not to reduce the deduction computed under section 80HHC, while computing book profit under section 115JB - MAT - Held that:- This issue is directly covered in favour of the assessee by the judgment of the Hon’ble Supreme Court in the case of Ajanta Pharma Ltd. v. CIT [2010 (9) TMI 8 - SUPREME COURT] in which it has been held that clause (iv) of the Explanation to section 115JB covers full export profits of 100% as ₹eligible profits’ and the same cannot be reduced to 80% by relying on section 80HHC(1B) Claim of deduction u/s 80HHC in respect of sales effected to SEZ unit Mission Pharma Logistic Pvt. Ltd. - Held that:- Conclusion drawn by the Assessing Officer being merely on conjecture and surmises without substantiated by positive evidence cannot be accepted. More so, when he does not dispute the fact that Mission Pharma Logistic Pvt. Ltd. is an SEZ unit. In the aforesaid facts and circumstances, department has failed to establish / demonstrate with cogent material that Mission Pharma Logistic Pvt. Ltd. is not eligible for deduction under section 10A, we are not able to interfere with the findings of the learned Commissioner (Appeals). Accordingly, upholding the order of the learned Commissioner (Appeals) on this issue,
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