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2016 (11) TMI 1482 - AT - Income TaxTDS u/s 195 - withholding of tax - Disallowance u/s 40(a)(i) - expenditure incurred by the assessee as Management services fees on the ground that the assessee failed to deduct tax at source in terms of section 195 - Held that:- Hon’ble Delhi High Court in assessee own case [2016 (8) TMI 166 - DELHI HIGH COURT] has held on the last page that: (i) the payment made by the assessee to Steria France for the management services provided by the latter cannot be taxed as ‘Fees for technical services; and (ii) the said payments are not liable to withholding of tax u/s 195 of the Act. By rendering this judgment, a copy of which has been placed on record, the Hon’ble High court has vacated the Ruling of the AAR on this issue. In the given circumstances, we are of the considered opinion that the ends of justice would meet adequately if the impugned order on this issue is set aside and the matter is restored to the file of AO. We order accordingly and direct him to decide this issue afresh in consonance with the judgment of the Hon’ble Delhi High Court passed in the assessee’s own case. Deduction u/s 10A computation - AO excluding the three items of expenses claimed by the assessee from `Export turnover’ alone - Held that:- AO computed deduction u/s 10A by reducing the three expenses from the figure of `Export turnover’ without correspondingly reducing such amounts from the figure of ‘total turnover’ in the formula given for computing the amount of deduction. This approach, in our considered opinion, is not right. When a particular amount is excluded from the numerator of `Export turnover’, it has, naturally, to be excluded from the denominator of `Total turnover’ as well in the computation of deduction u/s 10A. It is so for the reason that `Total turnover’ always includes `export turnover’ and if a particular item is not a part of export turnover, that cannot partake the character of total turnover as well. Excluding proportionate amount of interest income from the total profits in the re-computation of deduction u/s 10A - Held that:- In computing the Income under the head `Profit and gains of business or profession’ (before/ after apportionment of interest income to the Noida Unit-IV), the assessee started with Profit before tax as per P& L account at ₹ 15,66,85,756 / ₹ 19,39,06,979 including interest income of ₹ 62,481 / ₹ 3,72,83,704. Thereafter, such Interest income of ₹ 62,481 / ₹ 3,72,83,704 has been reduced to arrive at income under the head `Profits and gains of business or profession’ at ₹ 26,37,50,768 / ₹ 26,37,50,768. It is this figure of ₹ 26,37,50,768, which has been taken by the AO before reducing, inter alia, the amount of interest income of ₹ 3,72,83,704. Once the interest income of ₹ 3,72,83,704 does not form part of the business profits eligible for deduction u/s 10A, there can be no question of once again reducing such interest income from the amount of eligible business profits. We, therefore, overturn the impugned order to this extent and direct that the interest income apportioned to the eligible unit be not separately reduced since the Business profits eligible for deduction u/s 10A were already exclusive of the same. This ground is allowed. Transfer pricing adjustment in the 'Software development services’ - selection of comparable - Held that:- The assessee provides both software and BPO services to its customers. It reported, inter alia, an international transaction of `Provision of software services’ with the transacted value of ₹ 3,31,67,83,807/-, thus companies functionally dissimilar with that of assessee need to be deselected from final list of comparable.
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