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2021 (7) TMI 53 - ITAT MUMBAITP Adjustment - Comparable selection - HELD THAT:- Assessee continued to carry on the business of provision of ITES earlier carried on by Vodafone India Services Pvt Ltd and provided such services to the AE. The aforesaid finding of fact has been very clearly recorded by the Tribunal while deciding assessee’s appeal in Assessment Year 2008-09 in the order referred to earlier. On a perusal of the aforesaid order of the Tribunal, we find that while considering the issue of comparability of Acropetal Technologies Ltd and eClerx Services Ltd in case of Vodafone India Services Ltd, learned DRP had directed to excluded these two comparables along with some other comparables. The exclusion of these two comparables was also upheld by the Tribunal while deciding the appeal [2014 (12) TMI 563 - ITAT MUMBAI]. We are of the view that both Acropetal Technologies Ltd and eClerx Services Ltd cannot be treated as comparables to the assessee. Accordingly, we direct the assessing officer to exclude them from the list of comparables and determine the ALP. As discussed earlier in the order, in course of hearing, learned senior counsel for the assessee has specifically submitted before us that with the exclusion of Acropetal Technologies Ltd and eClerx Services Ltd, the arithmetic mean of the rest of the comparables will work out to 13.91% as against the margin shown by the assessee of 14.9%, requiring no further adjustment. Disallowance of deduction claimed under section 10A in respect of interest income and foreign exchange gain - HELD THAT:- Undisputedly, the assessee has earned the interest income from the deposit made towards bank guarantee and temporary parking of surplus funds. It is evident, the assessee has no other activity of earning income except export of ITES through its 10A unit. Thus, it can be safely concluded that the deposits on which the assessee had earned interest income were on account of its business activity. There cannot be any doubt that deposits made towards bank guarantee is purely in connection with its business activity. As far as the interest on fixed deposit is concerned, it is an accepted factual position that the surplus fund available with the assessee and not immediately required for business was temporarily invested in fixed deposit. Thus, this activity of parking surplus funds in the fixed deposit has to be construed to be in the course of its regular business activity. Our aforesaid view is fully supported by the Full Bench decision of the Hon’ble Karnataka High Court in the case of CIT vs Hewlett Packard Global Soft. Ltd [2017 (11) TMI 205 - KARNATAKA HIGH COURT] wherein, it is held that all profits and gains including incidental income of an export oriented unit even in the nature of interest on bank deposits or soft loans would be entitled for deduction under section 10A or 10B -Keeping in view the ratio laid down in the aforesaid decisions, we hold that the assessee is eligible to claim deduction under section 10A of the Act in respect of the interest income. Deduction claimed in respect of foreign exchange gain - Taking note of the difference in the language used in both the provisions, the Hon’ble Karnataka High Court in CIT vs Motorola India Electronics (P) Ltd [2014 (1) TMI 1235 - KARNATAKA HIGH COURT] has held that unlike section 80HHC of the Act, which expressly excluded certain types of income such as foreign exchange gain in EEFC account, etc; however, no such express provision is there in sections 10A / 10B of the Act. The Hon’ble Court has held, what is exempted is not merely the profits and gains of the export of articles, but also the income from the business of the undertaking. Proceeding further, the Hon’ble Court has observed that since the export proceeds kept in the EEFC account are the income of the business undertaking; hence, the claim of deduction would be allowable. In our considered opinion, the aforesaid decision of the Hon’ble Karnataka High Court clinches the issue in favour of the assessee. Hence, we direct the assessing officer to allow assessee’s claim of deduction on the foreign exchange gain. Deduction of education cess paid on income-tax - HELD THAT:- Having considered rival submissions, we find that this issue is squarely covered by the decision of the hon’ble jurisdictional High Court in case of Sesa Goa Ltd vs JCIT [2020 (3) TMI 347 - BOMBAY HIGH COURT] Respectfully following the aforesaid decision, we direct the assessing officer to allow deduction of education cess while computing the income under the head “Profits and gains of business or profession”. Additional ground is allowed.
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