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2021 (11) TMI 1076 - ITAT BANGALORETP Adjustment - contention of the assessee that the TPO conducted transfer pricing analysis on erroneous understanding of the business model of the assessee - HELD THAT:- This issue was there in the appeal for the assessment year 2014-2015, wherein the Tribunal in [2020 (2) TMI 1642 - ITAT BANGALORE] after examining the facts of the case, had accepted the contention of the assessee that the TPO conducted transfer pricing analysis on erroneous understanding of the business model of the assessee. Accordingly, the entire transfer pricing issue was set aside to the TPO with a direction that the transfer pricing analysis may be carried out having regard to the business model of the assessee Since the facts for the assessment year 2015-2016 is identical to the facts considered by the Tribunal for assessment year 2014-2015, we restore the entire transfer pricing analysis for de novo consideration to the AO / TPO. It is ordered accordingly. Interest on outstanding receivables - TPO computed the delayed trade receivables under the weighted average method. TPO by adopting the net interest rate of 4.38%, on average net receivables that is outstanding for the period exceeding 60 days, computed the interest adjustment on outstanding receivables - HELD THAT:- DRP has directed the TPO to re-work the interest computation based on the delay of individual invoices. However, the DRP has not complied with the directions of DRP. TPO was wrong in stating that the assessee did not furnish the invoice wise details of trade receivables. These details are furnished by the assessee vide its letter dated 24.10.2018 and are placed on record Volume-II. The assessee had given detailed submissions on the issue and the same has not been considered by the TPO. TPO is directed to re-work the interest computation based on the delay of individual invoice as per the directions of the DRP. It is ordered accordingly. In the result, grounds are allowed for statistical purposes. Disallowance u/s 14A - HELD THAT:- It is settled position of law that if the assessee is not in receipt of any exempt income in the relevant assessment year, no disallowance u/s 14A can be resorted to. In this context, we rely on the judgment in the case of CIT v. Chettinad Logistics Pvt. Ltd. [2018 (7) TMI 567 - SC ORDER]. In light of the above judicial pronouncements, we hold that since the assessee was not in receipt of any exempt income during the relevant assessment year, the A.O. has erred in making disallowance u/s 14A . Non-deduction of TDS on software expenses - AO disallowed software expenses u/s 40(a)(ia) by treating the same as “royalty”, hence liable for TDS - HELD THAT:- In view of the latest judgment in the case of Engineering Analysis Centre of Excellence Private Limited v.CIT & Anr. [2021 (3) TMI 138 - SUPREME COURT] we restore the issue to the files of the A.O. The A.O. is directed the examine whether expenses incurred for purchase of software is “royalty” and liable for deduction - A.O. is directed to follow the dictum laid down by the Hon’ble Apex Court in the case of Engineering Analysis Centre of Excellence Private Limited v.CIT & Anr. (supra). Deduction u/s 10AA is to be allowed as assessed income - HELD THAT:- The Hon’ble jurisdictional High Court in the case of M Pact Technology Services Pvt. Ltd. [2018 (8) TMI 202 - KARNATAKA HIGH COURT] had held that deduction u/s 10AA of the I.T.Act should be computed on the assessed income and not on the returned income - we direct the A.O. to grant deduction u/s 10AA of the I.T.Act on the assessed income and not on the returned income. It is ordered accordingly.
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