Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2010 (7) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2010 (7) TMI 843 - AT - Income TaxMethod of accounting - Expenses on software development/up-gradation - deduction u/s 37(1) - disallowed as revenue expenditure - HELD THAT:- In the present case, the business of the assessee was development of software for its clients. The business carried on by the assessee cannot itself be considered as research and development. It is not the purpose of section 35(1)(iv) to allow such deduction. The allowability of such expenses will be governed by the provisions of section 37(1) because there is no other provision under Chapter-IV sections 28 to 44 under which the allowability of the aforesaid expenditure can be considered. we dismiss ground raised by the assessee. claim of the assessee for deduction u/s 80HHE - computation of total income - the assessee had filed its return of income declaring a loss of Rs. 46,96,990. HELD THAT:- The assessee specifically made the claim for deduction u/s 80HHE in the note No. 1 to the computation of total income and note No. 11 in the tax audit report. The certificate in Form No. 10CCAF was given by the auditors but they certified the income eligible for deduction u/s 80HHE as Nil because the computation of total income as per return of income was loss. That does not preclude the AO from allowing the deduction u/s 80HHE, if otherwise the claim can be allowed. Even according to the AO, the assessee is otherwise entitled to claim deduction u/s 80HHE. In respect of export turnover brought into India in convertible foreign exchange - HELD THAT:- the assessee should be allowed deduction u/s 80HHE. Such deduction has been computed by the assessee at Rs. 8,22,68,736 in the submissions filed before CIT(A). The AO is directed to verify the claim of the assessee and allow relief u/s 80HHE. In respect of export turnover of Rs. 5,50,91,092 - HELD THAT:- the AO shall verify nexus between the expenditure incurred abroad and the business of export of computer software which yielded the income on which deduction is claimed u/s 80HHE as also the nexus between the outstanding payable by the assessee to ICICI Infotech Inc., USA and the export of computer software business which yielded income on which deduction u/s 80HHE is claimed by the assessee. If such nexus is found to exist then the deduction u/s 80HHE as claimed by the assessee is directed to be allowed to the extent such nexus exists. computation of arm’s length price - TPO transactions - In the present case, the determination of ALP in respect of the transaction by which the assessee deputed three of its employees to ICICI Infotech, USA, by the TPO is, therefore, non est to that extent and cannot form the basis for making an addition to the total income. HELD THAT:- on the facts and circumstances of the present case, there was no necessity to have determined ALP of the transaction in question. We also agree with the learned counsel for the assessee that the TPO has proceeded to determine ALP of the transaction on the basis of assumptions not supported by any evidence. We also agree with his submission that CUP method could not be applied under the facts of the case as the assessee has not transferred/seconded employees to any other independent enterprises. To test the arm’s length pricing in the case of transfer/seconding of the employees, it may be possible to use the CUP method where the same entity has undertaken similar transaction under comparable circumstances to independent enterprises. In the present case, the similar transaction on the basis of which the TPO determined ALP was not with an independent enterprise and the said transaction was also with an Associated enterprise. In such circumstances, even the determination of ALP by the TPO was not proper. We, therefore, delete the addition made by the AO. Ground of the appeal of the assessee is also allowed.
|