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2022 (7) TMI 784 - ITAT DELHIDeduction u/s 10AA - assessee has arranged its business transaction with its associate concern so that more than ordinary profit could be shown to claim higher deduction - HELD THAT:- CIT(A) has given finding of an admitted fact of close connection between the assessee company and its associate enterprises - transaction between the assessee and its associate have been arranged in such a manner that the transactions have produced the assessee more than ordinary profits which might be expected to arise in such eligible business. On these two assumed admitted facts the Ld. CIT(A) has upheld the order of Ld. AO. Tribunal is of the considered opinion that there can be no assumption of an arrangement as an admitted fact. It is a matter of fact and initial burden is on the Revenue to indicate from some reliable evidence that the course of business has been arranged so as to inflate profits with intent to abuse tax concession u/s. 10A of the Act. Section 80IA(10) of the Act concluding phrase makes it mandatory that the Assessing officer on his part has to do some exercise of ascertaining what amount of profits may have been actually derived from the alleged arrangement. However, here is a case where based on assessee's own Report in Form 3CEB, whatever amount of Rs. 70,38,693/- was found received in excess of price determined at Arm's Length was considered to be undue benefit. The following observations of Tribunal in M/s. Honeywell Automation India Limited Case [2015 (3) TMI 494 - ITAT PUNE] are relevant to understand as to what is expected from Assessing officer to give finding of an abusive arrangement held that Even if it is accepted that the difference between the operating margins of the assessee and the comparables show existence of more than the ordinary profits in the hands of the assessee, so however, it was still imperative for the AO to establish on the basis of substantive evidence and corroborative material that qua section 10A r.w.s. 80-IA(10) of the Act, the course of business between the assessee and the associated enterprises is so arranged that the business transacted between them produces to the assessee more than the ordinary profits with the intent of abusing tax concession. Quite clearly, in the entire assessment order, there is no whisper of any material or evidence in this regard." Similar are the circumstances here when CIT(A) has proceeded to uphold the findings of Ld. AO on the basis of alleged admitted fact of arrangement, which had no foundation except the opinions of Ld. Tax Authorities below. Consequently these grounds are sustained. Interest on deposits from revenue generated by export sales consideration to be income from other sources and it should have been included as part of eligible profits for the purpose of Section 10A - As observed that Ld. CIT(A) order has observed that the assessee has failed to establish by evidence that the interest income has been earned out of funds which are part of total export proceeds received in convertible foreign exchange. The Bench is of considered opinion that when there is no dispute to the fact that assessee is a hundred percent export oriented unit registered as special economic zone unit then the entire turnover from international transactions must have been in convertible foreign exchange only. The incidental activity of parking surplus funds with any institution earning interest is an integral part of the export business activity and such incidental income cannot be delinked from profit and gains derived by the undertaking. Reliance in this regard can be placed on M/s. Hewlett Packard Global Soft Pvt. Ltd. [2017 (11) TMI 205 - KARNATAKA HIGH COURT] Thus these issues are also decided in favour of the assessee.
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