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2015 (1) TMI 1363 - AT - Income TaxTPA - comparable selection technique - Held that:- The Assessee focuses on delivering semiconductor solutions for communications to the home, enterprise and mobile markets. Their product portfolio includes: Bluetooth, short-range wireless products for PC, Mobile phones, PDAs, Keyboards, mice and automotive electronics, thus companies functinally dissimilar with that of assessee need to be deselected from final list of comparability. Computation of deduction u/s.10A - telecommunication charges, consultancy charges, repairs and maintenance and certain other expenses incurred by the Assessee (including expenses incurred in foreign currency) are to be excluded from export turnover on the ground that these expenses (except telecommunication charges) are not incurred in rendering technical services rendered to clients outside India - Held that:- It would be just and appropriate to direct the Assessing Officer to exclude telecommunication charges, consultancy charges, repairs and maintenance and certain other expenses incurred by the Assessee (including expenses incurred in foreign currency), both from export turnover and total turnover, as has been prayed for by the assessee TDS u/s 195 - Disallowance of interest expenses invoking the provisions of Sec.40(a)(i) - non deduction of tds - DTAA between India and Singapore - Held that:- As rendered in the context of taxation of interest income in the hands of the non-resident and are not in the context of point of time at which obligation to deduct tax at source lies on the person making payment to a non-resident. We agree with the submission of the learned DR that the said decisions are therefore not relevant to the facts of the present case. We therefore hold that disallowance u/s.40(a)(i)of the Act, in the facts and circumstances of the case, is justified. The quantum of sum to be disallowed as we have already stated is to be decided by the AO afresh in view of the discussion on the issue raised in ground no.9 in the earlier part of this order. Provisions of section 40(a)(ia) - assessee failed to deduct at source and pay tax in respect of payments made to contractors for carrying out work u/s. 194C and in respect of payments for professional services rendered u/s. 194J - Held that:- The addition was made by the AO on the assumption that rate of tax for TDS on Fees for FTS is 10%. The AO grossed up tax deductible of ₹ 53,579 at 10 times and arrived at a figure of ₹ 5,35,790. After deducting this sum of ₹ 5,35,790 from ₹ 9,55,062, the AO arrived at a further disallowance of ₹ 4,22,867. This is shown in the chart given in the earlier part of this order in the last two columns. The AO thus proceeded on a wrong assumption that amount disallowed by the assessee in the return of income u/s. 40(a)(ia) was incorrect, whereas the amount disallowed by the Assessee was correct. It is this addition that is subject matter of dispute between the assessee and Revenue raised in concise ground No.10. According to the assessee, it is a double addition and the figure of ₹ 4,22,867 has been arrived at in the manner set out in the table given in the earlier paragraph of this order. We have seen the computation of total income in the return filed by the assessee as also in the order of assessment and are of the view that the further disallowance of ₹ 4,22,867 u/s. 40(a)(ia) is uncalled for, as the assessee has already in its computation of total income, disallowed the correct figure of ₹ 9,55,060 to be disallowed u/s. 40(a)(ia) and a further disallowance of ₹ 4,22,867 is without any basis. The said addition is therefore hereby deleted. Concise ground No.10 is allowed. Disallowance under section 40(a)(ia) & 40(a)(i) - Upholding the action of providing relief u/s 10A on the profits of business in returned income instead of assessed profits (i.e., after adjustments are made to the profit on account of short and non-deduction of TDS - Held that:- The action of the AO was not justified. The Tribunal held that under s. 80AB the income that is derived from the eligible business must be computed in accordance with the provisions of ss.30 to 43D, as provided in s. 29. Sec.29 provides that the income chargeable to tax under the head “Profits and gains of business” “shall be computed in accordance with the provisions contained in s.30 to 43D”. The Tribunal held that unquestionably, s. 40(a)(ia) is a section falling between ss. 30 to 43D and therefore effect must be given to the same in computing the profits and gains derived from the eligible business, which in that case was a housing project. The Tribunal further held that while giving effect to the computation provisions contained in ss. 30 43D one should not be bogged down by the theory that the disallowed expenditure cannot be considered as profits ‘derived” from the housing project or as “operational profits. The above ruling of the Tribunal, in our view, would squarely apply to the present case also. Similar is the ruling rendered by the Hon’ble Gujarat High Court in the case of Keval Construction (2013 (7) TMI 291 - GUJARAT HIGH COURT).
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